Brazilian agriculture has several cost advantages over the U.S., beginning with land, says Mark Waller, agricultural economist with Texas A&M University.

“The land in southern Brazil isn’t cheap by any standards, with land going for $1,500-3,000/acre. But as you move into that central-western region where development currently is occurring, land is selling for $100-250/acre.”

The price of the land in that region depends not on whether or not it already has been cleared, he says, but on how near it is to a hard road.

“There aren’t that many paved roads in Brazil. When you get to a paved road, land prices can be $800/acre at the road and $200/acre several miles from the road. Once you move away from the main road, it’s up to each producer to build and maintain the road that gets him back to the hard road. Many of the dirt roads are maintained by producers. And, to a large extent, a lot of those dirt roads are in better condition than the hard paved roads.”

Many producers from the U.S. and from other parts of the world were moving in and developing that land, says Waller, but most of the people who are there now moved from south Brazil.

“People from south Brazil sold their land in five to one or 10 to one acreage swaps, and they kept moving north. In doing swaps such as this, you don’t see anyone who’s renting land. The only rental arrangements were from people renting land to the sugar mills, or someone who was renting land from a relative.”

Labor also is cheap in Brazil, says Waller, with unskilled help going for $3-4/day in most locations.

“There’s a lot of labor available, and many of these large operations can have labor for little or nothing — and they don’t have to provide the labor with much in the way of high-tech machinery. They do a lot of the operations by hand.”

Machinery and seed costs also are less expensive in Brazil, he adds. These costs typically are about one-half to two-thirds of the same costs in the United States, he says.

“You can find many of the multi-national companies exhibiting at the farm shows in Brazil. They say they can sell machinery for less in Brazil because it was produced in south Brazil by $3-4/day labor. That works for machinery, but I couldn’t figure out why seed was being sold for about one-half of the U.S. cost. How can they have so much labor in seed that they can sell it so much cheaper in Brazil?”

Most major banks are in attendance at the Brazilian farm shows, says Waller, and producers can be seen taking out loans at the shows.

As producers in Brazil moved north, they struggled for several years trying to find varieties that would work in a tropical climate, he says, but they appear to have solved that problem.

Brazil’s version of U.S. agriculture’s research and Extension is Embrapa, he says. “It’s similar to our USDA, and it has a presence, but it isn’t large, and you don’t see a lot of facilities. We visited some of their facilities in different parts of the country, and researchers were doing applied research, but their budgets came from check-off and agribusiness money. They didn’t have a lot of administrators, and there wasn’t so much infrastructure because it was privatized.”

For years, says Waller, the U.S. led Brazil in soybean yields. But over the past five to six years, as varieties were developed that do well in tropical areas, Brazil’s soybean yields have surpassed those in the United States.

“And they’ll probably continue to surpass our yields even further, which has implications for where soybean production goes in the future. And this isn’t the case with just soybeans. Brazil also has made a huge change in their cotton yields in the past five to six years. Some of that is due to varieties — they continue to adapt varieties to the central-western region.

“Instead of having a fixed six-month production season where they worry about having a crop that’s going to get big enough and open before the first freeze, they have a tropical environment, with production periods of nine to 10 months.”

Growers in this part of Brazil get 60-70 in. of rainfall per year, but this is followed by several dry months, says Waller. This works well for farmers because the dry period corresponds with harvest time.

Corn yields in Brazil are still lagging behind, but they’ve picked up in recent years, he says. Corn production also has been aided by the development of tropical varieties. “It’s an area where they can export, and I think it will expand in the future and cause us some problems.”

As Brazilians have expanded their soybean acreage along with their yields, production has skyrocketed, says Waller, and their exports have increased. USDA numbers show that most of the recent soybean export growth has come from Brazil.

“So much of these export numbers are built on the assumption that China is going to take it all. But the folks in Brazil are worried about what will happen if China decides to do as it did in the mid-1990s, when they began to work down stocks and increase production.

“If China doesn’t take a lot of these soybeans, South America knows that they’ll start to flood the soybean market. If that happens, they’ll start looking for other things to produce. Therein lies part of the U.S. problem with feed grains and cotton.”

Twenty to 25 years ago, people generally didn’t worry about Brazil as being a threat to U.S. agriculture, says Waller. “They thought Brazilians would tear down the rain forests, and in three or four years everything would turn hard as a rock and they’d have to abandon the land and move on.

“But they’ve spent a lot of time working on soil fertility, and they’ve moved to almost no-till production in most of the country. Once they put a field into production, they don’t want to run a disk or a field cultivator through it. They do as little as possible in the way of tillage to maintain the soil structure.”

Brazilians have production concerns, says Waller, and they understand that they’ll eventually have disease and insect problems. “They’re trying to work on those issues as they present themselves. Their researchers say that soybean rust isn’t curable, but that it can be controlled. In fact, in some of the areas where they’ve had soybean rust problems, yields actually have increased because they used fungicides. They controlled soybean rust along with other problems that they were not aware of.”

Brazil continues to have problems in the trade and marketing arena, says Waller, and the growers lack storage facilities and other types of infrastructure.

“More producer storage is being built, and major companies such as Cargill are building processing facilities. It makes more sense for them to build a new facility where they are certain acreage will expand. But transportation still is the big problem, and a lot of that won’t change. Part of the problem is that most transportation still is done by truck.”

Railroads in Brazil have been de-regulated, says Waller, but ownership is fragmented, and it isn’t a reliable system of transportation. Water has potential because Brazil has a lot of navigable waterways that could be used for transportation, he adds.

“Barter is the main method of exchange in Brazil. When they forward contract this crop, it’s usually a barter deal. They barter for inputs, and there’s no cash transaction. The government subsidizes some of the credit, and producers play currency games. They’ll buy their inputs with the local currency and sell outputs in dollars. But this hasn’t worked over the last year or so, and it has caused real problems because many producers try to default on contracts.”

From an environmental standpoint, there are concerns throughout the world about Brazil destroying the rain forests, he says. “Brazil also is concerned, and they have serious environmental rules. But there are too many ways to cheat.”

Looking at the future of Brazilian agriculture, Waller says the crop area will continue to expand, not just in soybeans but also in cotton and corn. The livestock and livestock feed segments also will continue to grow, he says.

“The marketing system will improve, but it’s going to be slow. And they’ll continue to try and address the environmental concerns, but there could be some difficulties there.

“In the final analysis, the U.S. will continue to lose market share to Brazil as the country continues to produce better varieties in the tropical region.”