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December 3, 2018

"Grain Railroad" could lower Cost out of Mato Grosso by 30%

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

Of all the proposed new railroads in Brazil (there are at least eight), the one most likely to be built first is the proposed "Grain Railroad" linking northern Mato Grosso with barge-loading operations on the Amazon River. The railroad would connect the city of Sinop in northern Mato Grosso with the Port of Miritituba on the Tapajos River, which is a southern tributary of the Amazon located just south of the city of Santarem.

According to one study, the railroad would fundamentally transform how grain flows out of the state of Mato Grosso, which is Brazil's number one producer of soybeans, corn, cotton, and cattle. Without the new railroad, by the year 2030, 46% of the grain exports out of Mato Grosso would move by rail and 54% by truck. The study estimates that with a fully operational Grain Railroad, by the year 2030, 87% of the grain exports out of Mato Grosso would move by rail and 13% by truck. It is estimated that the savings on transportation costs would amount to 30%.

The Grail Railroad would transport grain produced in central and northern Mato Grosso north to the Amazon River, while the existing Ferronorte Railroad would transport grain produced in southern Mato Grosso to the Port of Santos in southeastern Brazil.

The R$ 12.7 billion dollar project is being pushed by a consortium of grain companies led by Cargill with the backing of numerous commodity groups in the state. The primary source of funding would come from Brazil's National Economic Development Bank (BANDES).

The proposed railroad would parallel highway BR-163 which already connects Sinop and Maritituba. Construction would start on the northern end and work its way south. There would be two grain terminals, one in Maritituba in conjunction with the barge-loading operations and one in Sinop. Construction is expected to take 5-6 years. After the initial line is operational, a second phase might extend the line 150 kilometers further south to the city of Lucas do Rio Verde.

Backers of the project still have a major hurdle to overcome, which is environmental licensing. The proposed route of the railroad would pass through a national park and an indigenous reserve. Getting permission to pass through these sensitive areas is yet to be resolved. The railroad backers hope to resolve these issues and start bidding on the project in 2019.