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Supply Lines: Fast lane to China

Supply Lines
Bloomberg

Brazil's breadbasket wants to jump in the fast lane.

The state responsible for the largest output of soybean, corn, cotton and beef will auction more than 500 kilometers (311 miles) in road construction and investment in a push to cheapen and speed up exports to China.

Mauro Mendes, the governor of Mato Grosso, said the plan to upgrade and expand roads is expected to generate 6 billion reais ($1.1 billion) in investments and are part of a statewide plan to connect farms to ports. The private investment can free the government to spend on other infrastructure works, he said.

All of the roads will connect to the BR-163, a major transit artery that cuts Brazil from north to south, and could ease access to the northern ports. Imea, a think tank sponsored by Mato Grosso oilseed growers, estimates that this move could reduce producers' costs by 16%. The Santos port, Brazil's biggest and busiest, is at least 1,000 kilometers away from Mato Grosso's farms. Using the northern gateways could also shorten the time toreach China through the Panama Canal.

"There will be bigger competition for two of the lots of roads auctioned as the proposals have been sent, and this means lower toll rates for the trucks, as this is the main focus of the bidding," said Camillo Fraga, business director of Houer, a consulting firm responsible for modeling the auction. "The roads will run through soybean-producing areas, so they won't have competing traffic from leisure cars."

With the completion of around 1,400 kilometers of roads by 2022, Mato Grosso will be second only to the richest state in Brazil, Sao Paulo, in built-road mileage. A state with an area the size of Venezuela and where 62% of the territory is covered in either native rain forest, wetlands or savannas, Mato Grosso still has the largest planted area in the country.

As Chinese demand keeps soaring, the producers need to find easier ways to maximize their gains, Mendes said. "Before being a politician I was a businessman; we learned that the client is always right, even if they aren't, so we need to meet their demands," he said.

Mario Sergio Lima in Brasilia

Charted Territory

You likely won't be partaking in a 10-person Thanksgiving dinner this year. But with the average cost of such a feast falling $2.01 to a 10-year low of $46.90, according to the American Farm Bureau Federation, seconds and thirds  and ample leftovers  may be in your future. The group's annual survey found that retail turkey prices are down 7% from last year, also the lowest since 2010. "Pricing whole turkeys as 'loss leaders' to entice shoppers and move product is a strategy we're seeing retailers use that's increasingly common the closer we get to the holiday," said John Newton, chief economist for the AFBF. 

Today's Must Reads

  • Maize runner | China surpassed for the first time ever an annual corn-import quota set by the World Trade Organization as the second-largest economy continues to buy grain to feed a growing hog population.
  • Pork pile | Germany, the European Union's leading pork producer, has been shut out of top markets across Asia since a deadly pig-virus outbreak started in wild boar in September. That's leaving a surplus on the continent just as the latest raft of Covid-19 lockdowns means restaurants are hawking less schnitzel and sausage.
  • Cheddar challenge | The pandemic is forcing U.S. officials to yet again tighten their grip on eating out, and that's cutting into prices for cheese and other dairy products across the U.S. As a result, some wholesale cheddar prices have fallen more than 40% this month.
  • Cold comfort | U.K. food companies are growing tired of stockpiling extra produce in cold storage just weeks before the country leaves the EU's single market.
  • Peas be mine | A shortage of containers at Vancouver's port is slowing Canada's exports of lentils and peas, the latest ripple in a phenomenon that has roiled trade.
  • Broccoli ice cream | The dairy industry is working hard to make milk cool again and turn around years of weak sales. The latest effort to appeal to younger consumers: ice cream infused with vegetables.
  • Out of water | Roughly 40% of the world's people live in farming areas facing large water shortages, and scarce supplies pose an increasing risk to food security as populations swell and the climate changes, the United Nations said.
  • Stephanomics podcast | The hard reality of the Covid-19 pandemic is that while those at greatest risk of dying are retirement age or older, the economic disaster and its consequences fall disproportionately on the shoulders of the young.

On the Bloomberg Terminal

  • Sweeter bet | Rising at-home consumption of healthier dark chocolate (at least 70% cocoa content) may counterbalance the demand drag in cafes and other venues, as social-distancing rules may persist until the third quarter of 2021, Bloomberg Intelligence says.
  • Keeping momentum | North American packaged-food companies will have to use innovation and product differentiation to sustain organic sales growth in 2021 since they're starting to lap gains from the pandemic and a vaccine appears likely, Bloomberg Intelligence says. 
  • Use the AHOY function to track global commodities trade flows.
  • Click HERE for automated stories about supply chains.
  • See BNEF for BloombergNEF's analysis of clean energy, advanced transport, digital industry, innovative materials, and commodities.
  • Click VRUS on the terminal for news and data on the coronavirus and here for maps and charts.

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