February 12, 2016

Proposed "Corn Railroad" would link Central and Southern Brazil

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

Livestock producers in southern Brazil are increasingly worried about the growing corn deficit in the region. In the state of Santa Catarina alone, approximately 3.5 million tons of corn need to be brought in annually in order to meet the needs of the poultry and hog producers.

Bringing the corn in this year has been especially difficult and expensive due to record large corn exports from Brazil. The record exports have forced livestock producers into a bidding war with exporters resulting in record high domestic corn prices in southern Brazil. The corn prices in the state of Santa Catarina are so high in fact that some poultry producers are considering suspending production, at least temporarily, while they wait for lower corn prices.

The root of the problem is the continued decline in full-season corn production in southern Brazil in favor of more soybeans. The corn that used to be produced in southern Brazil has now been shifted to safrinha production (planted after soybeans) especially in the state of Mato Grosso. There are no railroads or rivers connecting the states of Santa Catarina and Mato Grosso so all that corn must be brought in by tucks at a very high cost. To satisfy the needs of the state, it takes about 100,000 trucks carrying 30 tons each to move the corn approximately 2,200 kilometers from central Mato Grosso to western Santa Catarina.

If the grain is being moved less than 500 kilometers, it is better to move it by truck, but over 500 kilometers it is better to move it by rail or barge, but barge is not an option, so livestock producers in southern Brazil are looking for rail as the answer.

Livestock producers in southern Brazil have long promoted the building of what has been called the "Corn Railroad" linking western Santa Catarina with the states of Mato Grosso and Mato Grosso do Sul. The idea of building a railroad in order to bring in more corn supplies has taken on more urgency because if something isn't done to either increase the corn production in southern Brazil or to reduce the cost of bringing corn into the region, the livestock industry will start to migrate to where the corn is being produced. Local and state officials are working hard to prevent that because meat production and exports are a mainstay of the state's economy.