Cargill says new port law to hurt Brazil meal exports

Reuters

By Gustavo Bonato

SAO PAULO, Oct 29 (Reuters) - The port reform law thatBrazil's President Dilma Rousseff pushed through Congress in Mayfavors the export of soybeans over soy meal, Paulo Sousa, thehead of grain crushing in Brazil for U.S. commodities traderCargill said.

Brazil is expected to remain the world's largest soybeanexporter, having surpassed the United States last year, as theLatin American country sows what is expected to become a recordcrop of 89 million tonnes.

Brazil's tax structure has favored the export of whole beansover meal for a decade, unlike neighboring Argentina where thetax code favors soy product exports such as meal and oil.

Sousa said the government's new port terminal concessionmodel, which will emphasize the movement of volume at the lowestcost though the ports, "is anti-industry".

The government's push to revamp the country's strugglingport infrastructure will prioritize concession holders or groupsthat want to open new terminals which move the most product byweight. This may put terminal operators that move higher valueproducts at a disadvantage because their volumes may be lowereven though the value of the goods is higher.

Sousa said terminal operators at the ports will favor beansbecause meal, since it is a value-added product, is moreexpensive per tonne than whole beans to move. It takes twice aslong to load meal as it does beans as well.

"A port that moves meal will earn less," Souza said.

By crushing beans, grain processors such as Cargill, Bunge,ADM and Louis Dreyfus produce meal, which is widely used inanimal feeds, and oil used for cooking.

As part of the port reform plans, the government willre-auction the concession rights to several terminals --including one run by Cargill now for nearly 40 years -- in theport of Paranagua, one of Brazil's two main grain ports.

Souza said the company is confident that it will present aproposal with good chances of being awarded the new operatingconcession.

"The good part of the Ports Law is that it favors those thathave volume. And this we have a lot of. We are highlycompetitive," Souza said about the criteria determining which ofthe current concession holders would be favored for renewal.

The terminal ships meal and oil processed at its crusher inPonta Grossa 200 km (130 miles) inland from the port in Paranastate. Cargill operates six crushing plants in Brazil.

Brazil's vegetable oils industry association Abiove saidthere are 107 soy crushing plants in Brazil -- 89 are active and18 idle. Cargill has not announced any plans to build newcrushers in Brazil despite the growing size of the crop.

Brazilian soybean crushing for meal and oil is at its lowestlevel since 2009 despite a record harvest of 81.6 million tonnesthat finished in May, industry specialists said.

Souza said labor and energy costs were high in Brazil makinggrain processing a tight-margin business compared with othercountries. Still, the company is expanding capacity at a coupleof its plants.

"Production is growing much faster than our capacity forprocessing," he said. "Generally, we depend on the bad luck ofothers, such as drought, for Brazilian soy products to becompetitive."

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