Industry

Brazil Southern Ports Improving to Meet Northern Arc Challenge

The northern arc of ports is allowing Brazil to increase its grain export capacity without the traditional long delays in getting the grain to the southern ports or long lines of vessels waiting to load. ADM, Bunge, Cargill, Louis Dreyfus and others have invested billions of dollars in barging and port facilities to move soybeans and corn produced in Mato Grosso down the Amazon River to export facilities. Brazil is also investing in road and rail projects that will help expand exports in the “Northern Arc.” The U.S. Department of Agriculture (USDA) Foreign Agricultural Service (FAS) defines Brazil’s “Northern Arc” as an area that consists of ports primarily located along the Amazon River, Tapajós River, and the Atlantic coast. It also includes ocean ports in the cities of Bacarena/Belem, São Luis, Recife, and Salvador, and river ports in the cities of Porto Velho, Manaus, Santarem, and Miritituba.

According to the National Grain Exporters Association (Anec), the amount of grain exported out of Brazil’s northern arc of ports could reach 35 million tons in 2019. Over the last five years, the amount of grain exported from Brazil’s traditional southern ports increased 16% while exports out of Brazil’s northern ports increased more than 300%. Like U.S. ports, Southern Brazil ports are feeling the pressure to stem the loss of market share to the northern arc of ports.

The Port of Paranagua maintains a draft depth of 40.3 feet. The very deep northern arc ports result in a big cost advantage when shipping soybeans to China. China can handle the larger Capesize vessels that require 50 feet or more depth to fully load.  Every metric ton added effectively lowers the ocean freight cost on a metric ton basis.  For bulk commodities that have low profit margins, such as soybeans, the saving of $5 per metric ton is extremely important to the bottom line.

In part to compete with the northern arc ports, the Port of Paranagua is deepening and improving the channel to enable the port to service larger vessels. The lower Mississippi River has approval for deepening from 45 feet to 50 feet for the same reason. According to Portos Do Parana:

“The work to remove rock formations that are obstacles to navigation at the entrance to the port of Paranagua was hired in May 2019. The planned investment is almost R $32 million with own resources from the Ports of Paraná.

The rocks are in the maneuvering area of the ships and limit the depth at the inlet of the bay. With the removal, along with the dredging investments, the port will have effective operating gains.

In the work, considered emergency, six rock masses will be removed, totaling 22.3 thousand cubic meters. The smallest of them is 361 cubic meters and the largest 8,000. The formations are part of a complex known as Pedra da Palangana, with over 200,000 cubic meters, and is located on the main access channel to Paranagua Port, just in front of the Container Terminal.”  

Along with being able to service deeper ports, the port has authorized three new piers with ten new berths that will be able to load eight thousand metric tons per hour, according to Portos Do Parana.

The Port of Paranagua, like all of Brazil’s ports, is benefiting from the trade dispute between the U.S. and China. The port is expected to receive over six million tons of grain, soybean meal, and sugar during the last three months of 2019. Assuming these are Panamax size vessels, that represents approximately 100 vessels. Port authorities estimate that during the last three months of 2019, they will receive 6.12 million tons for export, which would be 14% more than the 5.26 million tons received during the same period last year.  The primary transportation mode of delivery split is approximately 70% by truck and 30% by rail.

The importance of deepening the lower Mississippi River to 50 feet has shifted from increasing profitability and increased market share for U.S. farmers to preventing the U.S. farmer from losing profitability and market share. Global supply chains have a definite impact on the average American.

Alan Barrett
Alan Barrett

Director of Consulting

Farm Journal

Alan Barrett is Doane’s project consultant and accomplished commodity economist with more than 25 years of experience in futures and cash markets with a focus on cotton, commodity projects, non-traditional agricultural products, transportation and supply chain studies. Alan spent six years as a commodity futures broker. His expertise encompasses feasibility studies of oilseed crushing plants (soybean canola, and cottonseed), grain elevators, export elevators, shuttle elevators, grain container operations, flourmills and other processing facilities. Alan also has conducted transportation supply chain studies for grains, oilseeds, fertilizer, coal, natural gas, crude oil, and petroleum products. Alan has considerable experience in non-traditional agricultural products such as coal, coke, natural gas, chemicals, hydraulic fracturing fluid, hydraulic fracturing proppants, glycerin, fertilizer, micronutrients, salt, limestone, cement, iron ore, pig iron, and steel, especially feed ingredients. Mr. Barrett has a BS and MS in Agricultural Economics from the University of Tennessee.