Brazil, known for its huge increase in soybean production in the last decade, is now our main competitor in the global meat export market. In the last decade, Brazilian soybean production has jumped from 24.7 million metric tons (MMT) to a projected 66 MMT in 2005.
This 267% growth in production is small compared to the 1,310% growth in pork exports. And since 1995, broiler exports are up a staggering 444%.
Brazil's population has increased 13% in the last 10 years and domestic demand is improving for pork and beef. The Brazilian GDP is increasing by 3.5-4.3%.
Brazilian President Luis Inacio Lula da Silva was elected on a populist platform and is working hard to improve the quality of life in Brazil. For many low income Brazilians, that means providing better living conditions, better housing and more food in a nation that grows a lot of everything.
Major policy changes are responsible for the rapid growth in Brazilian agriculture and its exports of ag products. In the 1980s Brazil's economy suffered under an industrialization policy that diverted ag profits and government funds to ill-fated government-owned manufacturing plants.
In the early 1990s Brazil changed its development policy to one of encouraging increased ag production, ag exports and increased employment in rural areas. Meat exports, in particular, were seen as a way of adding to the value-added export menu of products.
This policy change has been a spectacular success. Brazil has developed into a huge, dominant force in the global markets of soybeans, cotton, coffee, pork and broilers.
Inflation is now under control, the GDP is up and the country's currency, the real, is stable. The real has improved significantly even in the last 12 months, which may limit the growth of Brazilian soybean production in 2005.
The growth in the meat sector in the last decade has been in the southern provinces. The states of Parana', Santa Caterina, Rio Grande do Sul and Saão Paulo represent less than 10% of the Brazilian land mass. That area accounts for 37% of the population and provides for 70% of the nation's poultry production, 49% of pork production and 26% of beef production.
The problems Brazilian farmers are experiencing now sound familiar to those of U.S. farmers.
First, the strong currency this year has taken away much of Brazil's initial export advantage in global markets. Second, higher price inputs and rising interest rates are reducing bottom line profits and third, environmental concerns are making expansion of livestock facilities more difficult.