Cargill says new port law to hurt Brazil meal exports
By Gustavo Bonato
SAO PAULO, Oct 29 (Reuters) - The port reform law that Brazil's President Dilma Rousseff pushed through Congress in May favors the export of soybeans over soy meal, Paulo Sousa, the head of grain crushing in Brazil for U.S. commodities trader Cargill said.
Brazil is expected to remain the world's largest soybean exporter, having surpassed the United States last year, as the Latin American country sows what is expected to become a record crop of 89 million tonnes.
Brazil's tax structure has favored the export of whole beans over meal for a decade, unlike neighboring Argentina where the tax code favors soy product exports such as meal and oil.
Sousa said the government's new port terminal concession model, which will emphasize the movement of volume at the lowest cost though the ports, "is anti-industry".
The government's push to revamp the country's struggling port infrastructure will prioritize concession holders or groups that want to open new terminals which move the most product by weight. This may put terminal operators that move higher value products at a disadvantage because their volumes may be lower even though the value of the goods is higher.
Sousa said terminal operators at the ports will favor beans because meal, since it is a value-added product, is more expensive per tonne than whole beans to move. It takes twice as long 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 in animal feeds, and oil used for cooking.
As part of the port reform plans, the government will re-auction the concession rights to several terminals -- including one run by Cargill now for nearly 40 years -- in the port of Paranagua, one of Brazil's two main grain ports.
Souza said the company is confident that it will present a proposal with good chances of being awarded the new operating concession.
"The good part of the Ports Law is that it favors those that have volume. And this we have a lot of. We are highly competitive," Souza said about the criteria determining which of the current concession holders would be favored for renewal.
The terminal ships meal and oil processed at its crusher in Ponta Grossa 200 km (130 miles) inland from the port in Parana state. Cargill operates six crushing plants in Brazil.
Brazil's vegetable oils industry association Abiove said there are 107 soy crushing plants in Brazil -- 89 are active and 18 idle. Cargill has not announced any plans to build new crushers in Brazil despite the growing size of the crop.
Brazilian soybean crushing for meal and oil is at its lowest level since 2009 despite a record harvest of 81.6 million tonnes that finished in May, industry specialists said.
Souza said labor and energy costs were high in Brazil making grain processing a tight-margin business compared with other countries. Still, the company is expanding capacity at a couple of its plants.
"Production is growing much faster than our capacity for processing," he said. "Generally, we depend on the bad luck of others, such as drought, for Brazilian soy products to be competitive."
