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Brazil farmers could invest in northern railway project -industry group

By Ana Mano

SAO PAULO, Dec 6 (Reuters) - Soybean growers in Brazil are willing to make equity investments in a project to build a 933-kilometer (580-mile) railway connecting farms in the country's center-west and ports in the north, as they seek to better compete with U.S. and Argentine rivals.

Farmers in Brazil's largest grain state, Mato Grosso, are very efficient but lack adequate infrastructure to move grains to market, Antonio Galvan, president of the state's soy growers association Aprosoja-MT, said in an interview on Thursday.

The Brazilian government estimates the rail project, called Ferrograo, will cost 12.7 billion reais ($3.24 billion). Bidding rules and an auction to award a 65-year operating license are expected in the first half of 2019.

"We have great interest in participating in the project and in taking part in the railway's board," Galvan said. The plan is to guarantee better terms for shipping commodities while doing away with risk associated with truck freight, he added.

Based on conversations with farmers in Mato Grosso, Galvan said producers could potentially raise 2.5 billion reais ($642 million) in equity capital. But the overall viability of the project depends on government backing and funding from multiple sources, he said.

"Eight in 10 farmers were interested in participating in the project, which is viable," he said.

Brazil, the world's largest soybean exporter, is at a disadvantage as both the United States and Argentina can more cheaply move grains to ports.

Mato Grosso's soy logistics costs are estimated at $2.34 per bushel, compared with $1.29 in Argentina and the U.S. cost of $0.93, according to consultancy Agroconsult.

The railway would be able to move 13 million tonnes of cargo in its first year of operation, with capacity reaching 42 million tonnes by 2050, according to a description of the project on a government website.

The railway would link the city of Sinop in Mato Grosso with the river port of Miritituba, built on an Amazon tributary called Tapajós. The plan is to move commodities including soybeans, corn, fertilizers, sugar, ethanol and oil-derivatives, Galvan said.

Farmers are concerned that the only existing connection between Brazil's center-west and northern ports is the BR-163 highway, which is incomplete and lacks capacity to handle the forecasted rise in the region's agricultural production, Galvan said.

Mato Grosso could raise soybean production by 1.5 times if pasture areas are converted into arable land, but poor infrastructure is a deterrent, he said.

($1 = 3.9223 reais) (Reporting by Ana Mano Editing by Bill Berkrot)

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