Logistics fails to serve agro – 07/13/2023 – Market

The banks of the BR-163 are golden. On the highway where much of the country’s grain harvest passes, in Mato Grosso, the waste is visible from the corn that falls from trucks that travel along the road, full of holes and maintenance problems — the same reality in various parts of the country .

Brazil reached the superharvest of grains earlier than expected. The one for 2022/23 is projected at 316 million tons by Conab (Companhia Nacional do Abastecimento), something forecast for 2028. Ten years ago the country produced less than 190 million tons.

If there were already difficulties for storage, distribution and export, the scenario became even more complicated. The greater growth in production than the improvement in logistical conditions gives new weight to road transport, raises costs and increases the need for the country to use increasingly distant and less prepared roads.

In the first half of this year, exports of soy, bran, corn and wheat totaled 88 million tons, 19% more than in the first six months of 2022, according to Anec (National Association of Cereal Exporters).

In the second half, the pressure will continue because Brazil, for the first time in history, should place a volume of corn in excess of 50 million tons on the foreign market.

For Thiago Péra, coordinator of the Esalq-Log group, at USP, the challenges increase. The federal government and the private sector invest only 0.4% to 0.6% of GDP (Gross Domestic Product) in transport. Countries like China and the United States have rates above 2%.

As a result, even with the advancement of the rail network, the current road network has a greater share in the transport system than in 2010.

This need for grain disposal grows even more because the country has a low static storage capacity. In 2021, it was 75% to 80%. That of the United States is 150% of production capacity.

This has repercussions on transportation. Since the producer is harvesting more, there is a greater demand for trucks, the cost of freight increases and the queue for loading and unloading products increases. The final bill goes into the pockets of the producer and consumers.

A good part of the soy, currently the product with the highest volume of national production (156 million tons this year), leaves the farm for the warehouse. From the warehouse it goes to a railway terminal, and from there to the port of Santos. This triple movement of cargo far exceeds the volume produced.

If the cost of bad logistics is already heavy, it could get even worse. The drop in the exchange rate will make the Brazilian product more expensive for the importer, and the country will lose competitiveness.

Péra claims that the costs of a road-based transport network are very expensive, since trucks have low efficiency.

When diesel was priced at R$ 3.50 per liter, the cost of transporting a ton of soy from Sorriso (MT) to Santos (SP) was R$ 94. With diesel at R$ 7, it rose to R$ 200.

“We are not doing well on highways. Quality is precarious, especially when leaving São Paulo. Paving is inadequate, and this generates inefficiency and increased costs”, says the Esalq coordinator.

According to the CNT (Confederação Nacional do Transporte), in Mato Grosso, the largest grain producer in the country, only 21% of the roads can be considered excellent or good. In Rio Grande do Sul, 33.9%; in Paraná, 37.9%.

Even with toll sections, the BR-163 is considered just regular for the most part. According to Bruno Batista, executive director of the CNT, the road “was born underestimated”. “There is a need for investment throughout the country, and the government should be open to increasing private participation,” he says.

On a daily basis, those who use these highways suffer. “It’s sad. Many call it the road of death. It has no shoulder and there is a very high side slope. If there is a problem when overtaking and we need to leave the road, the truck overturns or crashes head-on”, says José Martins, 55, that transports loads on the BR-163 daily.

Another truck driver, who declined to be identified, told the report that he had been robbed the day before. He spent 12 hours with bandits, who took the truck and the cargo.

“Were it not for the cost of infrastructure, we would be even more competitive. Getting soy out of Mato Grosso and taking it to Paranaguá or Santos is increasingly difficult. There is a historical failure to invest in railroads and ports, with the participation of the private sector. Thinking that the State would do everything was always a huge problem”, says Sérgio Vale, chief economist at MB Associados.

“Until the 1970s, agriculture was coastal, but the “gauchada” went to the Midwest and pulled the rest of Brazil, like a locomotive pulling wagons of people from other states to the region. But the railroad, the warehouse and the port weren’t”, says Roberto Rodrigues, former Minister of Agriculture in the Lula 1 government.

According to Péra, however, some points improve. Transport by waterway is gaining ground, due to the increase in the volume of grains being exported through Arco Norte —in São Luís/Itaqui/PDM (MA), Belém/Barcarena and Santarém (PA). In 2010, they accounted for 10% of grain exports. Today, they add up to 30%.

Private sector companies are also moving to increase participation in agro-oriented logistics. In March, the giant JSL acquired IC Transportes, expanding its operations in the transport of fertilizers, grains and ethanol. With the business, revenue from the segment increased from 20% to 25%

According to Ramon Alcaraz, CEO of JSL, the prospects for growth in the area are very positive. But, mostly dependent on highways, Alcaraz says that public and private investments in the modal need to be expanded to cope with the ever-increasing transported volume.

On the other hand, railway projects are also seen with good eyes. “But a railroad takes ten years to be built. The lack of definitions in the sector and possible changes in the rules halfway through keep foreign investment away”, says Péra.

“Without new transport options and readjustment of ports, we can once again talk about a logistical blackout, in view of the rapid evolution of agricultural production in the country.”

Elisângela Pereira Lopes, coordinator of Strategic Affairs at the CNA, highlights the increased interest in new railroads, but says that legal guarantees are necessary. “In this sector, there is much to be done, since only 17% of their movement is with grain.”

In cabotage, in addition to regulating the legal framework, ports need to carry out the necessary works to receive new ships. “In waterway transport, there is still no regulatory framework and, on the roads, I do not see significant changes. They are getting worse and worse, due to the lack of resources for maintenance”, he says.

“Brazilian agriculture is only competent from the gate inwards. Outwardly, it bears very high costs”, summarizes Fernando Camargo, from the Inter-American Institute for Cooperation on Agriculture.