"Viable business?": Ag logistics in Brazil

AWB Limited (formerly the Australian Wheat Board, which was privatized in 1999 and featured prominently in the Iraq Oil-for-Food scandal) announced last week it would shut down its Brazil operations after sustaining losses:
AWB said the board reached its decision based on continuing credit issues, resulting from deteriorating market conditions in Brazil, which had required increased provisioning. Other factors included reduced trading margins, ongoing interest and overhead costs, and poor commercial decisions made locally. The company replaced local management earlier in the year.
This earned AWB a negative credit watch from S&P.

AWB's Brazilian business was primarily ag logistics:
The main Brazil operations, a $US200 million investment, are buying soybeans from upcountry farmers, transporting them to the port and selling them to global traders. Corn, oilseed and meal were added two years ago.
The most optimistic way to read this would be that the local managers were incompetent. But there are at least two more pessimistic potential takeaways. One is short-term: that Brazilian farmers are still severely credit-constrained from the financial crisis, impairing their ability to buy important inputs like fertilizer up front and thus hurting their eventual output (making the short-term outlook for the transportation and logistics business poor). The other is longer-term: that for whatever reason (poor infrastructure likely being one), agricultural transportation and logistics in Brazil is still structurally a crappy business. This would challenge for the view that the inland Brazilian cerrado can become the world's new breadbasket for the 21st century. And it drives home the importance of infrastructure for agriculture, however it gets built.

Update: A Brazilian colleague of mine suggested another explanation - maybe ag logistics is not a bad business in Brazil, but the ABCD players (ADM, Bunge, Cargill, Dreyfus) are too dominant for a new player to gain a strong foothold.

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