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September 14, 2018

Farmers may fund Rail link between Mato Grosso and the Amazon

Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.

The new mandated higher truck freight rates in Brazil could cost Brazilian farmers as much as 10% of their revenue. As a result, there is a movement by farmers in the state of Mato Grosso to help fund the construction of the proposed Grain Railroad (Ferrograos) that would link the city of Sinop in northern Mato Grosso with the Port of Miritituba on a tributary of the Amazon River.

Officials from the Soybean and Corn Producers Association of Mato Grosso (Aprosoja MT) met with the Minister of Agriculture, Blario Maggi, on Wednesday to discuss their proposal and the Minister seemed receptive to the idea. Aprosoja MT indicated that the railroad would lower the cost of transportation, increase the price of land, and result in social benefits for the region.

The cost of transportation has come front and center for Brazilian farmers after the Brazilian Congress passed legislation mandating higher freight rates all across Brazil. As a result, there is currently an impasse on forward contracting of grain due to the uncertainty concerning freight cost. The cost of transporting corn out of Mato Grosso is more than the actual price of the corn, so the future cost of freight is of utmost importance to farmers in the state.

The fate of the mandated freight rates in Brazil is in the hands of the Brazilian Supreme Court and on Tuesday, September 18th, Judge Dias Toffoli will assume the head of the court replacing Judge Luiz Fux. It was Judge Fux that held three hearings on the constitutionally of the mandated higher freight rates.

The Soybean and Corn Producers Association of Brazil (Aprosoja Brasil) recently sent a petition to Judge Toffoli requesting an expedited decision concerning the freight rates. Aprosoja along with the Agriculture and Livestock Confederation of Brazil (CNA), the Highway Transport Association of Brazil (ATR Brasil), and the National Confederation of Industries (CNI), are the groups trying to overturn the law authorizing the new rates.

In their petition, they stated that the Supreme Court is the only institution that can decide the constitutionally of the law and not the federal government or the Brazilian Congress. Therefore, they indicated that the Supreme Court should not wait for the outcome of the presidential elections next month before they make a decision.

A lack of a decision concerning the new freight rates has led to lack of forward contracting of the anticipated 2018/19 crop production.