Challenges for the corn supply chain in Brazil: from investments in

logistics infrastructure to regulation of biotechnology

Profa. Dra. Andréa Leda R. OliveiraAgribusiness ManagementScholol of Applied SciencesUniversity of Campinasandrealeda@fca.unicamp.br

Prof. Dr. José Maria F.J. SilveiraInstitute of EconomicsUniversity of Campinasjmsilv@eco.unicamp.br

University of Campinas

Scholol of Applied Sciences

Laboratory of Agribusiness

Ravello, ItalyJune 18-21, 2013

• How the new logistics projects in Brazil will be affected by

segregation between GM and nonGM crops? What are the

main impacts?

• How these impacts would affect the competitiveness of

maize in the international market?

Questio

ns

Challenges

Methodolog

y

Results

Conclusion

s

Questions

Agricultural Areas: frontier regions booming

Adoption of GM crops in Brazil: rapid growth

10 years: GMO areas increased approximately 12 times

2002: 3.0 million ha 2012: 36.6 million ha

GM maize: 53% of maize area in 2010.

Challenge

s

Territorial extension and load transport, selected countries. Notes: 1) Total territorial extension minus areas covered by water 2) Does not consider air and pipeline transportation.  Source: CIA World Factbook (2010) for territorial extension; Bureau of Transportation Statistics (2010), International Transport Forum (2010) and CNT (2013) for transport matrix apud OLIVEIRA, 2011.

17.0

9.2

8.5

9.2

7.6

Territorial extension — land1

(million km2)

Russia

Australia

Canada

USA

Brazil

88%

49%

21%

48%

41%

61%

2%

11%

11%

50%

4%

13%

Rail Road Waterway

Russia (2009)

Australia (2008)

Canada (2006)

USA (2008)

Brazil (2012)

Transport matrix2

55% 35%

9%

Challenge

s

Transportation in Brazil

Logistical Challenges in Brazil Challenge

s

• The capacity to offer differentiated products (traceability and

segregation grains) with greater efficiency and lower costs will be a

significant competitive factor between grain producing countries.

• Brazilian Logistics System: attempts to arrange transportation of

standardized product and big volumes.

• New challenges: meeting the demand for differentiated products that

require adjustments in the current logistics system.

Challenge

s

Spatial Equilibrium Model Methodolog

y

MCP Methodolog

y

Model Flowchart

Tests for non GMO

Supply Regions

DemandRegions

International Demand

Export Ports

Transhipment

waterway port

roadway

railway

waterway

maritime

Methodolog

y

Roadway

Railway

Waterway

Sea Port

Water Port

Corn production

Map Legend

SUPPLY REGIONS

• Scenario 0: trade flows are made based only on transportation costs.

• Scenario 1 (Full Segregation): Costs of strip and PCR (Polymerase

Chain Reaction) tests were added. The strip tests varied according to

the quantity of transfers/transhipment points according to the

transportation route. PCR tests were made in the storage before

shipment, at the port of shipping for export and also on the ship, total

3 PCRs. The costs of testing and storage were obtained through interviews with

the main traders and laboratories in Brazil.

Methodolog

y

• The “full segregation system” generated a negative impact of 4.5% on

trade.

• Analyze the losses U.S. dollars, reaching almost US$718 million.

This amount represents 28% of foreign exchange generated by

exports of Brazilian corn in 2011.

Tests and storage expenses: US$506 million

International trade reductions: US$212 million

• Scenario 0: 100% of exports were made by intermodal routes.

• Scenario 1:

• only 29% of corn destined for foreign markets were made by

intermodal options.

• 71% of intermodal routes are no longer competitive, giving

priority to highways and increasing the transportation costs.

• >>>> impacts in the new projects >>>>

Results

Conclusions

• Using the MCP model proposed for the transfer of Brazilian corn, it was

possible to verify the effects of the implementation of the Cartagena

Protocol.

• With segregated storage and tests to identify the GMO´s throughout the

routes there is an increase of the cost of transport.

This causes a reduction in production, resulting in a fall in

commercialization, especially of the international market that

demanded the largest number of tests, reflecting a decrease in

competitiveness of Brazilian corn.

Also, another deficiency identified was the reduced numbers of

laboratories to perform the tests.

Conclusions

• The Cartagena Protocol also imposed an increase in the opportunity

cost by adopting a new technology.

• At the present time, Brazil faces the challenge of reducing its deficit in

storage and transportation capacity, a process which is being based on

increased efficiency from agility and taking advantage of scale

economies and scope.

• The imposition of identity conservation systems on a large scale would

not only mean diverting the resources necessary to accompany the

Brazil’s agricultural production growth rate, but also create uncertainties

as to the type of investment that should be made.

Challenges for the corn supply chain in Brazil: from investments in

logistics infrastructure to regulation of biotechnology

Profa. Dra. Andréa Leda R. OliveiraAgribusiness ManagementScholol of Applied SciencesUniversity of Campinasandrealeda@fca.unicamp.br

Prof. Dr. José Maria F.J. SilveiraInstitute of EconomicsUniversity of Campinasjmsilv@eco.unicamp.br

University of Campinas

Scholol of Applied Sciences

Laboratory of Agribusiness

Ravello, ItalyJune 18-21, 2013

THANK YOU...

Results