Livestock producers in the U.S. have pointed out that higher corn and soybean prices may be putting a squeeze on their profits. And they're not alone.

While lots of Brazilians are benefiting from the ethanol boom, some towns that depend on livestock production have taken steps to limit sugarcane planting. “Agricultural zoning” has been discussed in a number of states and local governments nationwide, as some regions move to limit the planting of sugarcane — the basic feedstock in Brazil for ethanol production. Will U.S. officials seek curbs on corn production for ethanol?

WHILE YOU WERE gathering your harvest last fall, some Brazilian farmers were reaping rather more bitter fruits of this country's ethanol boom. Goias state sits roughly in the middle of Brazil, and, as soybean production migrated northward, pork and poultry production followed. This made the state a center of meat production, with rations drawn from corn and soybeans grown on cheap land.

But then petroleum prices shot up. Flex-fuel cars able to burn any blend of gasoline and ethanol became available. And Brazil, which already had vast experience with ethanol (there's at least one 100% ethanol pump in every gas station nationwide, and all gasoline is sold as a blend of up to 25% ethanol), announced foreign investments to build ethanol pipelines from remote fields to ports. And more Goias farmers switched to sugarcane.

That caused a few problems in the municipality of Rio Verde, the state's second-largest poultry- and pork-production center. The meat business is directly responsible for 7,000 jobs, according to a city government spokesman. The multinational crusher and the big meat processing plant there need lots of soybeans and corn.

So, back in November, Mayor Paulo Roberto Cunha signed a bill restricting sugarcane production to no more than 10% of the total area of any farm in the municipality (in Brazil, a municipality functions much like a county does in the U.S.). Dozens of agricultural associations came out in support.

“Besides saving jobs and its grain (and oilseed) production,” says Vonivar Campos, an aide to the mayor, “the municipality won't end up with a sugarcane monoculture.”

THAT WOULD AMOUNT to a “green tsunami,” said the municipality's Secretary for Industry and Commerce, Alevar Macedo.

The tidal wave of distilleries in Goias may look familiar to Iowa and Illinois producers. There are currently 20 distilleries and sugar mills in Goias state, says Campos. “But in May 2007, there were already 86 approved plans (for projects) to build facilities in the state. These would amount to $5.2 billion, and would generate 59,000 jobs.”

Campos points out that five or six of those planned plants are scheduled to start operations in the next 15 months.

He adds that the state has given up around $18 billion a year — for the next 10 years — in tax incentives used to draw the plants. But municipality officials think it would be better to grow the sugarcane in some other part of the state; a part less dependent on protein and energy to feed hogs and poultry.

The 10% maximum area for sugarcane would come to about 124,000 acres. And Rio Verde, with one distillery currently in operation, isn't there yet. But even with more room to plant, it's hard to imagine many new sugar mills and distilleries going up if farms have to dedicate 90% of their land to something other than sugarcane. If not, they could get fined more than $11,400/acre over the limit. And that's not chicken feed.

James Thompson is a writer and marketing consultant based in Uberaba, Brazil, a center of soybean, corn, cattle and sugarcane production. You can contact him at jamesth@terra.com.br.