ABC's of Brazilian Grain

Through day 6 of our journey we have seen a few levels of Brazilian agriculture. From the downstream activities of the Paranague Bay Port and famers market, to the upstream business of production agriculture at Witmarsum, as well as the middle marketing of FT Sementes, the scope of our studies has included several realizations of how agriculture operates in Parana and Brazil.

One great example of this first occured to several of us as we arrived in Ponta Grossa, a couple days ago. As we had just finished the tour of Witmarsum, our interest had peaked, and we began instensely studying our surroundings on our way to the next destination. A couple examples were mentioned earlier, the much hillier terrain that resembled Wisconsin and the difficulty of moving machinery over the land. But as we got into Ponta Grossa, on the very edge of town, were massive grain storage facilities. We have grown up in rural Illinois, and seen elevators inland and along rivers, but never had any of us seen so many places to store grain in one place. You see a set of bins, and shed containers, and then another and another, then you turn and look out the other side of the bus and can see an equal amount. Another thing that we noticed, not once, from Curitiba to Ponta Grossa (an hour and a half drive) did we see a single elevator in the country side. One last thing that we thought of, on our train ride down the mountains to the port, the tour guide mentioned that all rivers (execpt one) do not run to the ocean, but instead they flow inland to Iguassu Falls. So not only do we realize that there are no elevators that are easily accessable like in the United States, there is not an easy means of logistics for any corn or soybeans grown inland from the ocean. The director at the port told us, 50% of grain coming into the port was by truck and 20% was coming by train, a very inefficient means of logistics.

Where does all of this come together? Several places, the first one Mauricio let us in on, and it is the title of this post, the ABC's. And they are, ADM, Bunge, and Cargill. Together they make a good chunk of grain logistics in Brazil, and were the facilities that I described above as we entered Ponta Grossa. And the second has to do with a better understanding of the struggles Brazilian agriculture has. Often you hear of Americans coming to Brazil and managing large farm operations. This takes place in the west Cerrado region of Mota Grossa, a state in Brazil. Besides the different soil conditions, the region is an open plane, similiar to Illinois. It boasts some of the biggest soybean farms and farmers in the world. But when you take a look at the equation that I have laid out above, those soybeans, for the most part, make a 1400 mile journey to Paranagua Bay to the port. Still speaking on broad terms, when you sell soybeans in Mota Grossa, the price is based on the Chicago Board of Trade. For instance, say today's price is $10, when you go to the elevator in Mota Grossa, an ABC firm, you don't get a 15 cent, 20 cent, or 30 cent basis, but a $4 to $6 basis! This was yet another lesson that we have learned from Mauricio about the differences between America and Brazil in terms of production agriculture.

When we were discussing those massive grain bins as we entered Ponta Grossa, and thinking through what we had learned, we could only come to one conclusion; we are very fortunate in Illinois. Not only can we take our grain to an elevator 10 minutes away, but we can take it to several elevators in that amount of time, and even straight to the river. Our river system is something Brazil does not have, and it greatly increased transportation costs. We have a lot to be thankful for in Illinois.