The importance of the railroad in Brazilian agricultural exports

Brazilian Agriculture is one of the main bases of the Brazilian economy. In fact, the term brings together two fundamental economic activities: growing plants and raising animals. Both are especially important for the economy, as they fall within the primary sector, that is, they allow the production of raw materials and resources aimed at human consumption. Although these primary products can be destined to supply the domestic market, Brazilian agricultural exports are one of the protagonists of the country's economic development.

Currently, with the increasingly frequent technological advances in agricultural production, the sector has grown considerably. To better understand the importance of Brazilian agricultural activity, as well as its role in the international market, we have prepared an article with everything on the subject.

Main products of Brazilian agriculture 

Before understanding how Brazilian agricultural exports are carried out, let's get to know the main products generated by this economic activity.

Brazilian Soy is the flagship of Brazilian a agribusiness . According to a survey released by the Secretary of Commerce and International Relations (SCRI), the 2021 harvest reached the mark of 136 million tons, yielding about US$ 44.5 billion. It is worth remembering that soy production is not limited to the grain, but also includes bran and oil.

Another key agricultural product for the national trade balance is coffee. Between January and September 2021, more than 29 million 60kg bags were sold, generating revenue of US$ 4.17 billion.

Despite the decrease in corn production corn, due to droughts, around 20 million tons were still exported during the 2021 harvest, yielding US$ 7.34 billion.

Thinking specifically on the livestock side, beef reached a record US$ 7.4 billion in sales, and at the beginning of 2022, Brazil exported around 7 thousand tons per day. One of the reasons for the increase was the fact that China has returned to buy beef from Brazil.

Chicken meat was the 7th most exported product by the country in 2021, totaling 4.2 million tons, which generated around US$ 6.4 billion for Brazil.

Types of agricultural systems

In Brazil, there are producers in the agricultural area of ​​different sizes, so this activity can be carried out through three types of systems: extensive, intensive and labor intensive. 

First, extensive farming is carried out by family producers, and the technology is little used or almost non-existent. In this modality, production is low and the workforce is mostly familiar. This is an older system and uses more traditional techniques, and the main destination of the products is regional supply. 

On the other hand, intensive farming has higher productivity rates and replaces a large part of human labor with technological resources, such as agricultural machines, fertilizers, pesticides and livestock confinement. This system, due to its greater production capacity, is dedicated to Brazilian agricultural exports.

Finally, labor-intensive farming is a kind of middle ground between the two previous ones. In this case, human labor is the main one, however, it can also use some technological resources to boost production.

The importance of agricultural activity in Brazil

As mentioned in the introduction, agriculture is one of the foundations of the country's trade balance. According to a study carried out by the Center for Advanced Studies in Applied Economics (Cepea) in partnership with the Confederation of Agriculture and Livestock of Brazil (CNA), the share occupied by agriculture in the national GDP in 2021 is 28%, which reveals an increase compared to the value reached in 2020, of 26.6%.

In 2021, the Gross Value of Agricultural Production (GVP) reached the mark of R$ 1.129 trillion, which shows a 10% increase in the amount collected in the previous year. Agriculture constitutes the largest part, with 68%, totaling R$ 768.4 billion. While livestock makes up the rest of the value, yielding R$ 360.8 billion.

The VBP ranking among the regions is as follows, from the largest producer to the smallest: Midwest Region with R$ 365.8 billion; South Region with R$ 314 billion; Southeast Region with R$ 261.9 billion; Northeast Region with R$ 100.1 billion and the North Region with R$ 72.8 billion.

Regarding the main targets of Brazilian agricultural exports, China ranks first with 32.4%. The European Union is the second largest buyer, with 15%, and, in third place, the United States, with 7%.

The estimate for the year 2022 is optimistic. According to the survey released by the Ministry of Agriculture, Livestock and Supply, Mapa, the expected GVP is R$ 1.162 trillion, which would show an increase of 2.9% over the previous year. 

The role of railroads in Brazilian agricultural exports

According to a study carried out jointly by the Luiz de Queiroz Higher School of Agriculture (Esalq) and the United States Department of Agriculture (USDA), railroads have gained more and more space in Brazilian agricultural exports. For example, road transport of soybeans fell from 74.7% to 67.4% between 2010 and 2019. While the rail modal grew from 20.2% to 24% in the same period.

As we saw in the previous topic, most of the country's agricultural production is located in the Midwest. This coupled with the fact that most exports are carried out through ports bathed by the Atlantic Ocean – such as the Port of Santos, for example – indicates that there is a long way to go for products in the sector.

That said, the railroads managed by Rumo Logística, which connect producing areas from Mato Grosso to the Port of Santos, are one of the most used networks for the export of agricultural products, such as soy, corn and cotton, mainly.

In addition to Rumo, the network operated by MRS Logística is also one of the main outlets for corn and coffee, as it connects the states of São Paulo, Minas Gerais and Rio de Janeiro.

Conclusion

Recent investments by private initiative for the construction and expansion of the rail network have shown that the rail modal is in the interests of agribusiness.It was possible to conclude that the Brazilian agricultural export remains one of the foundations of the country's economy and can gain even more strength with the decrease in dependence on the road modal.