A Sitdown With Brazil's Grain Export Leader
Our counterparts at Successful Farming-Brasil captured a one-on-one interview with Brazil's Sergio Mendes, a leading grain export director. Grab a cup of coffee and learn some very very interesting insights into that country's export market.
Sergio Mendes is director of the National Association of Grain Exporters (Associação Nacional dos Exportadores de Cereais - ANEC). The association celebrates 50 years in 2015, with a long history of work to expand Brazilian exports. Currently, ANEC has 40 members, including trading companies, cooperatives, producers and other companies linked to the export sector. Between January and October of 2015, these members exported more than 50 million tons of grain.
Successful Farming Brazil - Brazil is well positioned in the global market?
- Yes, Brazil is competitive. Brazil has a great advantage that is to able to produce two crops per year, while the United States has only one harvest. However, we travel huge distances with truck, this is the competitive disadvantage compared to the United States and Argentina.
SF - How can we compare the transportation of grains?
- In Argentina, the average distance between the production site and the shipment is 250 kilometers. Americans face a distance of about 1,100 kilometers, but about 60% of production is transported by waterway modal. In Brazil, the average distance from farm to the port is also about 1,100 kilometers and we use trucks.
SF - What is the financial disadvantage?
- For the Brazilian producer, the transportation costs from the farm to the port has an additional cost between 60 and 70 dollars per ton. If there were no exemption for exports, Brazil could not participate in the international market.
SF - The main problem for the brazilian grain production is logistics?
- Yes. Brazil is exporting this year 52 millions of tons of soybeans, 30 million tons of corn and 14 million tons of soybean meal. To transport all these volume we need 2.7 million trucks. Everyone who studies the grains chain knows that we have an inadequate grain transportation network. We have a good number of rivers such as Madeira River and the Tapajós River, which are not used. It seems that God has prepared everything for us, with the best conditions to have waterways and we despised this potential.
SF - The port investments made in recent years and the concessions for the construction of private terminals have not solved the problem?
- Ports have been improved, we can mention Itaqui and Barcarena ports, which grew a lot. If we add exports that came out of Itaqui (MA) and Barcarena (PA), were four million tons of grain more than in 2014, the partial results from January to October. This means taking 114,000 trucks from the highways of the South, which would transport the production to Santos (SP) and Paranaguá (PR). A good job was done, but that still does not solve the problem of the producer. The problem is to bring the production to the port.
SF - What the North region means to the flow of grain?
- This route is very interesting for the exporter. The trend is that exports leave from there by more ports. We could use the river Madeira, Tapajós, Tocantins, and Araguaia. In the basin of the Amazon river, we could dock super Panamax ships. If this route by the North works well, we can equalize our logistics costs with the cost of transportation in the USA.
SF - Why this route takes so long to be a reality?
- I have the impression that when it comes to the waterway, the project does not go ahead because it can pass through an indigenous area. This is a huge stupidity. The waterway is an intelligent occupation, which takes the road trucks, that reduces accidents and also reduces CO2 emissions. Where we don't have waterway, there is a pressure for the opening of roads. With the road, another person passes over and began to deforest. There's no way.
SF - The exporter also faces a problem in the port?
- Each importing country has different requirements. What disturbs us every day is the issuance of phytosanitary certificates, because there are often delays. This document is a quality certificate. The importer requires the certificate and without this the exporter doen't receive the payment.
SF - What is the damage?
- The average load of soybeans worth about 20 million dollars and each day's ship stopped at the port costs 30 million dollars. So, any delay in the issuance of a phytosanitary certificate means a delay in payment and damage. In addition, we are becoming major exporters of maize. Corn requires 9 to 10 times more licenses than soybeans because importers are smaller and this market has other requirements. Issuing the certificate is a big problem for us.
SF - What is the main reason for this delay?
- Just one laboratory is authorized to do the quarantine pest identification tests for the issue of the phytosanitary certificate for export to China. So imagine the queue to get the certificate. This is an unfortunate bottleneck. This laboratory is unable to deliver the exam on deadline.
SF - Is there a solution?
- It is necessary to automate this process. The government is evaluating the possibility of automatically generates an electronic ticket. And I believe that inspect the ship could be an easier process, with the work made by the supervisory companies.
SF - Besides these difficulties, Brazil can conquer new markets?
- There is no market that has not been explored. Exporters are very efficient and don't miss opportunities. On market movements, we anticipate that China can increase the business with us. Just over a decade, Brazil exported about 30% of soybeans to China. Now, 76.9% of Brazilian soybeans are imported by the Chinese. China is increasingly important for us. The trend is that this partnership will be strengthened.
SF - If the Chinese economy slows, it would not harm the Brazil immediately?
- People are confusing markets. When it comes to export commodities to China, we are referring to various products. So we must learn to distinguish iron from food. China can decrease the importation of ore, but the Chinese won't stop eating. They need Brazilian soybeans.
SF - This dependence of the Chinese market does not worry?
- How do we do to not depend on? We are really dependent on the Chinese market, that's a fact. On the other hand, Chinese also depend on us, because Brazil is a major producer of soybeans. Argentina could not provide all the demand from China. Brazil is the only country that has the ability to deliver soybean and may even triple what it produces, with the increase of productivity and recovery of degraded pastures.
SF - With the newly elected president, Mauricio Macri, Argentina will stand out in the international market?
- I do not know what will happen with Argentina. It is possible that the government reduce taxes and promote exports. Argentina can be stronger as a competitor of Brazil.
SF - What is the opinion of the exporter on the exchange in 2015?
- There's no way the exchange works against the exporter. The stronger dollar generates greater revenue. Part of this revenue goes to the producer and part of it goes to the exporter. The product is sold for a more valued dollar, but transportation costs are calculated in real, so logistics is relatively cheaper for the Brazilian. In this case, Brazil gets more competitive.
SF - The stronger dollar raises the profitability of the producer, but production costs have also increased. Will the producers be able to close the account in blue?
- For now, I can only say that we're having a record in exports in 2015. I believe it would be more advantageous if we have a stabilized dollar situation, but I still think that the exchange is not the big problem right now. I'm more afraid of El Niño, because this phenomenon can drop down the production and productivity. El Niño is worrying producers, especially in Mato Grosso State.
SF - What ANEC can be proud of these 50 years of existence?
- The main achievement of ANEC was having participated in the creation of the Kandir Law. There is no doubt that was the greatest achievement of the association. After the creation of the law, since 1996 we have a significant growth curve of Brazilian agribusiness, with record after record in production and exportation of commodities.
Now, it's your turn. What is your response?
Re: A Sitdown With Brazil's Grain Export Leader
it was mentioned that their is exemptions for export, otherwise and I quote "
If there were no exemption for exports, Brazil could not participate in the international market." Maybe this export "help" should be challenged at the WTO. I am not following what he is saying, for it doesn't seem to jive with what we are told in the media that we can't compete with Brazil in exporting. A clarification, please.