March 11, 2019 / 2:43 PM / 6 months ago

Brazil's Amaggi and Big 4 grain traders mull road, railway venture

SAO PAULO, March 11 (Reuters) - The world’s big four agriculture traders and Brazilian rival Amaggi could make a joint bid to operate a road connecting the country’s grain belt to northern ports, while also considering an investment in a parallel railway, the firm that conducted a study on the potential venture said on Monday.

Archer Daniels Midland Co (ADM), Bunge Ltd, Cargill Inc, Louis Dreyfus Co (LDC) and Amaggi have commissioned a study on operating a 968-kilometer stretch of the BR-163 highway for 10 years, according to infrastructure and logistics business development firm EDLP.

That highway is the leading grain artery to northern ports that were responsible for 28 percent of Brazil’s soy and corn exports in 2018, doubling their share in the last eight years.

ADM, Bunge, LDC and Amaggi did not immediately respond to requests for comment. Cargill referred questions to EDLP.

Roberto Meira, a director at São Paulo-based EDLP, said the plan with a proposed model for handing over the roadway to private investors will be submitted to the government later this week. The plan would involve convincing the government to offer a 10-year concession on the road, far shorter than the typical 20- to 30-year tenure on projects currently approaching auction.

Brazil’s infrastructure ministry previously said it intends to put a concession to operate the BR-163 highway up for bid. Details have yet to be announced.

The shorter tenure would account for the fact that grains shipped by truck would gradually be migrated to the proposed Ferrograo rail line that runs a similar route to BR-163 starting in 2025 until eventually the road concession expired, Meira said.

The government’s privatization secretary said in January that the Ferrograo rail project could be ready for bidding this year or early in 2020.

Meira said the grain traders could invest equity capital in both the road and the rail projects, although the bidding could attract other investors.

He said the companies hope making logistical investments will cut costs and remove the uncertainty of trying to move grains up north without a railroad.

Every year, long lines of trucks form at certain towns in Mato Grosso and Pará state because of BR-163’s poor condition.

Last week, two riverside ports in Pará state nearly ran out of soybeans due to closures on the BR-163 highway after rains and heavy traffic blocked sections of the road, underscoring infrastructure woes in the world’s top soybeans exporter. (Reporting by Ana Mano Editing by Jake Spring and David Gregorio)

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