Archer-Daniels-Midland Co. (ADM:US), the largest exporter of soybean meal from Brazil, plans to double the size of its South American fleet of river barges to boost shipments of crops from a new port.
The new barges will mostly move soybeans and corn by river to ADM’s port at Belem in Para state in northern Brazil, said Matthew J. Jansen, president of the company’s oilseeds unit. ADM intends to raise annual volumes at Belem to about 6 million metric tons in five years from 1 million tons in 2014, he said.
“So much volume in Brazil moves on trucks for long distances,” Jansen said in a Dec. 17 telephone interview from the company’s headquarters in Decatur, Illinois. “When you can access barges and rivers, then that’s comparatively speaking a cheaper alternative to export the product.”
ADM is trying to avoid a repeat of the port congestion in Brazil earlier this year that led to record delays for vessels loading corn and soybeans. The new port and barges also are part of its effort to expand outside the U.S. ADM is expanding crop-buying and export networks in South America and Eastern Europe to boost deliveries to Asia and other growing markets.
That strategy was disrupted last month after the Australian government blocked its A$2.2 billion ($2 billion) offer for grain handler GrainCorp Ltd. ADM said Nov. 29 it will consider other takeovers. The company said Dec. 16 it’s raising its quarterly dividend to 24 cents a share from 19 cents and will buy back 18 million shares by the end of 2014.
ADM owns or leases about 2,400 barges globally, according to its website. It currently has about 260 in South America, according to Jansen, who said right now the company ships soybeans and other products from Brazil and more heavily from Paraguay to Uruguay and Argentina.
The port at Belem, which ADM bought in 2012, will help the company reach customers by shipments using the Panama Canal. It’s also intended as an alternative outlet for crops from Mato Grosso and other states in Brazil that usually head to southern ports in Santos and Paranagua, Jansen said.
ADM intends to replicate the barge network it already has in other parts of South America along the northern rivers in Brazil to feed Belem, as long as harvests expand.
“We are expecting a lot more volume to come through the ports if production keeps growing like we think,” he said.
Brazil’s soybean production will rise to 88 million tons in the 2013-2014 crop year from 82 million tons in the previous year, the U.S. Department of Agriculture said Dec. 10.
“One of the challenges Brazil has is typically all the product, soybean or soybean meal or corn, flows at the same time,” Jansen said. “That’s where you get the backlogs and problems.”
ADM also plans to improve storage facilities and other infrastructure in the country’s interior and to boost efficiency at its port in Santos. Among the challenges of moving crops north are rivers in Brazil in which water levels can fluctuate by 40 feet (12 meters), Jansen said.
“We are optimistic this year won’t be as bad as last year,” he said. “We are doing everything we can to plan in advance.”
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