Pro Farmer Washington Bureau Chief Jim Wiesemeyer led a group of 40 Pro Farmer members through Brazil and Argentina in mid-February. The potential to expand soybean production left many of the tour participants wide-eyed. Here's a summary of Jim's observations.
The buzzword among innovative Brazilian farmers is, "Go center-west, young man." That means heading out into the undeveloped, but fertile lands of Brazil's central and western states. This huge area is the Cerrado, or savannah. It is loosely referred to as "the Cerrados" because it's a series of regional areas, not just one contiguous place.
Jim quickly learned the Portuguese word, majior, which means bigger. That's the common goal among these farmers: bigger tractors, bigger acreages, bigger total soybean production. Among crops, the "soyabean" is king. One trip participant marveled that, down there, they fertilize soybeans and not corn - the reverse of most U.S. farmers.
The loosely defined Cerrados region of Brazil includes parts of several states. It's a siren call, much like the U.S. in the mid-1800s when the entire Midwest and Plains beckoned eastern farmers. The soybean producers who move out there get big acreage for lower land prices and lower production costs.
We visited with one grower, Ricardo, who relayed this episode to us: Five years ago, he watched 35 other farmers team up and buy 60,000 hectares (2.5 acres per hectare equals 150,000 acres) for $12 per hectare ($4.80 per acre). They cleared the land, which was no big deal because the Cerrado is fairly flat and the cover is mostly light prairie grass and brush. These 35 farmers are having the crops of a lifetime in 1998.
Some regulatory changes have reduced taxes on this land, and rail lines as well as new roads are making this huge region more usable for heavy semis to haul in fertilizer.
The Cerrados region, in general, has 207 million hectares. Of that, 136 million are considered suitable for agriculture. Of the total, the Brazilian government will preserve 71 million for the future - there's a strong preservation ethic in Brazil. Currently, only 47 million hectares of the region are in production, including 10 million in cultivated crops.
But here's the potential to come in: 89 million hectares of cropland, which is more than current U.S. corn and soybean acreage (assuming 33 million hectares of corn and 28.25 million hectares of soybeans in 1998). Of the potential use, Brazilian researchers project 60million hectares as potential cultivated cropland, plus 25 million for pasture and 4 million for other kinds of crops.
Further, the costs of inputs are drifting down a bit as shipping costs ease. Brazilian farmers say raising a bean crop takes about $200 per hectare in cash costs, or about $80 per acre. Yields look comparable to our western Corn Belt and are getting better with new varieties.
What our group marveled at is the North Dakota-like flat land in the Cerrado - as far as the eye can see. As you can imagine, major manufacturers are moving into Brazil with their biggest tractors. And researchers are learning to deal with soils that have aluminum toxicity.
So far, we've come up with these reasons for accelerated expansion of bean acreage in the "new lands":
1) Development of adapted varieties. Breeding stations can raise two bean crops a year.
2) Better summer rains, made to order for growing soybeans. Rains cut off about harvest time.
3) Chemicals suitable for soybean weed control.
4) Flat topography for big equipment, equipped with GPS capabilities. (John Deere has 46% of the market in combines.)
5) A growing infrastructure. Jim was impressed with the roads after spending six to 10 hours a day on buses in remote parts of these states.
6) Expanding shipping facilities at ports. This means inbound stuff, too - cheaper inputs.
7) Government incentives, such as financing.
8) Long-term vision of the leadership. Years ago, Brazil's capital was moved north to Brasilia in the interior, away from the cultural delights of Rio. Now that's helping the central-west states. One town, Londrina, was completely forest in 1967 and now has 600,000 people.
Bottom line: There's plenty of potential in Brazil. But at the growth pace of global demand, we'll need bigger crops from the U.S. and South America. Still, that doesn't change the fact that the growth potential in Brazil will be a limiting factor for U.S. bean prices.