Brazil's Agricultural Export Bottleneck Challenge / by Mark Langevin

The U.S. Foreign Agricultural Service (FAS) recently released a two part report that takes stock of Brazil’s growing productive capacity as well as the emerging bottlenecks to agricultural export growth. FAS reports,


“Brazilian exports continue to surge and provide growing competition for U.S. farm products. There are significant constraints to this growth, however, including Brazil’s booming domestic consumption, strong currency, restrictions on foreign investment, and poor infrastructure. Though Brazil is expected to expand production, these constraints may limit the rate of growth and affect exports to top markets where the United States and Brazil battle for market share.”


FAS lists Brazil’s strong currency and booming national consumption as the two principal factors curbing export growth.  Indeed, FAS sources Brazil’s own Ministry of Agriculture to conclude that increased domestic consumption of rice, wheat, dry bean and oilseeds over the next decade may even lead to imports.  In addition to these structural trends, Brazil’s bottlenecks also pose significant obstacles to increasing imports. FAS reports,

“Domestic storage capacity is believed by sources in Brazil to be significantly less than half of production for most bulk crops such as soybeans, corn, and wheat. This places a great burden on the transportation system to handle crops at harvest even though the transportation infrastructure is considered by many to be the biggest roadblock to Brazilian agriculture.”


Certainly Brazil’s successive programs to accelerate growth (known as PAC and PAC II) may partially resolve the transportation crunch, but storage capacity is largely controlled by the private sector and producer cooperatives. The Brazilian Agricultural Producers Association calculates that the nation’s shipping costs reduce profits by some 20% and the Brazilian Institute of Logistics suggests that the government budget for road construction is much less than required. No question that transportation costs will continue to be above world averages (see comparison between US and Brazil soybean production and logistics costs below). While transportation is largely a public goods issue; storage relies on much more private investment. The storage issue needs further attention by both producer representatives, banks, and the government to ultimately resolve to increase storage capacity to strengthen the nation’s export capacity.


Brazil’s comparable advantages, including lower labor costs and land values coupled to a climate that provides for multiple annual harvests in many regions of the country will provide the nation’s producers with many of the conditions for increasing production in the coming years. Yet, such increases in production may fall short of satisfying national demand, especially if higher logistics costs impede further investments in productivity.


Brazil’s national commercial accounts and foreign reserves are experiencing favorable positions, in some part due to the success of Brazilian agriculture in export markets. Unfortunately a growing number of Brazilians live in the cities and do not understand the significant connection between their welfare the rural development and production.