Monday – February 5
Non-farm Commercial Stop #4
This morning we attended a meeting at the Mato Grosso government headquarters of agriculture. The governor, the vice-governor, secretary of agricultural, secretary of industry and other high level political people attended.
Another group of about 30 soybean "tourists" met up with us for the meeting. Ag Day had their TV camera there and several major newspapers were on hand as well as local TV stations. The next day a major article covered the front pages of both newspapers. The headline was essentially "United States investors meet with the governor to look at and study the possibility of investing in Mato Grosso soybean land. The other group was headed for the frontier for 3 days of intensive examination of land clearing and production, so perhaps the governor’s time was well spent.
The governor’s comments are as follows:
- The state is 960,000 square kilometers (370,656 square miles) or about the size of Illinois, Iowa, Minnesota, Nebraska, Wisconsin and Michigan combined.
- 11 million tons of grain are produced annually in Mato Grosso
- The state of Mato Grosso is Brazil’s largest soybean producer.
- Mato Grosso produces 54% of Brazil’s cotton.
- They are the 4th largest state in cattle production with 17_ million heads.
- There is no foot and mouth disease.
- 90% of the cattle are grown and finished on pasture.
- Smithfield is making an $100 million investment in hog production in the state.
- They are improving and brining more energy to the state by natural gas and hydro.
- The government is looking for investors and investment in Mato Grosso.
- For any new land brought into production, 50% of total hectares purchased must be retained into a reserve. No farming is allowed on the reserve.
- We were later told that up to 80% is require closer to the rainforest.
- Some of the older lands already in production have reserve requirement of 20%.
- The north part of the state is the beginning of the rainforest
- The south part of the state is the Pantanal and the savanna area. This is the largest wetland in the world.
- The middle of the state is agriculture.
- This means the state has three ecological systems, 1.) the north Amazon, 2.)the agriculture middle and 3.) the Savannah.
- The rainy season is from October to April with flooding in the low areas.
- Dry season is May to September.
- The state has more than 1,500 species of animals, 650 species of birds, 300 species of fish, and 250 species of plants.
- There are several national parks in the Pantanal covering more than 100,000 hectares.
- tTwo parks in the Pantanal are 200,000 square kilometers in size.
- He said they have sun 365 days per year.
- Good agriculture production was started 25 years ago.
- The government has made a partnership for agriculture research.
- They have one of the best soya qualities because it is high in oil and high in protein.
- They are trying to get better quality cotton.
- They are now investing in a program for timber. They provide incentives for reforestation and proper management of the forest.
- Next year they expect the railroad to go all the way to Sao Paulo from Rondonopolis.
- They are only using 14% of the area that can be planted.
- They created tax incentives for Smithfield to invest.
Question and Answer period:
Q: How many hectares not in agriculture can be brought into production in the next 5 to 10 years.
A: 40 million hectares (98 million acres). 50% of the acreage must be in reserve. In the Amazon area, 80% must be left in reserve.
Q: Will there be enough demand for oil and meal if production is increased?
A: We will have 5 million tons extra to sell. We understand capacity to produce is very large. We understand market costs are very important. With mad cow problem, Brazil soya is very well sold and consumed. Now we have 2 advantages, soya and cattle with no animal protein being fed. With mad cow, we have a large market for soya.
Q: What is Brazil’s biotech position?
A: Right now, discussions by the Brazilian federal government say there won’t be any for this. He understands biotech is the way we have to go. So we have research going on.
Q: Budget in Mato Grosso for agriculture is not very big.
A: We have tax incentives for investment. We have the largest research program in Brazil. $300 million each year and we cooperate with private companies. We have a foundation that works with private companies on research.
Q: Is there a central office for land sales.
A: The central office registers buyers and handles land titles. The state does not sell land. Private Real Estate Brokers of agriculture are available to assist in the purchase.
Q: If you are favorable to biotech, how soon will Roundup seed and Roundup chemical be allowed.
A: He doesn’t know but thinks the market and cultural methods will set the pace to get there. They still have law restrictions. The agriculture secretary said the world market will determine whether they wait or proceed.
Q: If the reserve requirements are 80% in the Amazon areas and 50% in other areas, are taxes paid on the reserve.
A: No taxes on reserve part. Old farms have 20% reserve, new 50%. The law changed about 1-year-ago.
Q: With the use of genetics, how fast will Brazil come at the U.S.
A: If any adoption will produce more corn or soybeans, - no restriction to produce – but we have no goals for world market - only for interior use. There are no plans for export of corn in Mato Grosso – maybe some in the south of Brazil. Costs very high for fertilizer, and now is not the best thing to do.
Q: About two years ago, 50% of corn grown in Brazil was open pollinated. If you go to 100% hybrid, will you grow it here or other places?
A: It is just a matter of time until the entire country gets hybrids. We have 135-day hybrids, but we will see 85-day hybrids for two crops. We are already 95% hybrid corn in Mato Grosso. Most of the corn produced now is for animal feeding such as poultry and hogs. Most of corn produced is used inside the state.
Q: One of your biggest problems is cost of getting the crop to the elevator. You have many dirt roads.
A: The state and federal government is working on this right now with the railroad coming from Sao Paulo. It will cross Mato Grosso soon. Right now it is coming to Rondonopolis. American company, ACDL constructing the railroad. It will be there next year, and this is important for freight reduction.
We have waterways in the northeast of Mato Grosso. The Amazons waterways provide 1 million tons now. The country is discussing two more waterways. The Parana River and the Paraguay Rivers, but we have some problems with environmentalists. Until political discussions are completed, no need to build in the river. Government wants to use the river for people. So transport now is railroad.
Q: Can the land required for reserves be grazed with cattle?
A: Yes, this is possible, but not allowed to cut forest.
Q: Any difficulties from environmental groups in developing the rivers.
A: Yes, many, many large groups against.
After the meeting was adjourned, I visited with David Decker, a land broker. He said buyer must beware that they are getting full surveyed hectares. Original government surveys were not correct and some buyers thought they were buying 10,000 hectares but only got 7,000. He said $200 to $300 per hectare ($80 to $121 per acre) for rough land and $70 to $100 per hectare ($30 to $40 per acre) to clear light forested land. Reserve of 50% required and can pasture the reserve. He said there are three kinds of leases, 5 year with a percent of the production such as 15% to 30%. No cash leases in his area. As previously stated, I got a wide variation in prices for purchase and clearing land among the various individuals I talked to.
We then had a huge Brazilian barbecue lunch that took about 2 hours.
Non-farm Commercial Stop #5
We went to the headquarter offices of the Federation of Farmers of Mato Grosso. This group appears to be similar to some of the U.S. groups like the American Farm Bureau Federation. We received lots more statistics on Brazil and Mato Grosso. Some of this information is in the literature I am sending to you. They said the biggest problem for their farmers is obtaining enough capital. The federal government wants to put the money to the small farmers. Federal politics are a big percentage of the total problem. So, what’s new!
They don’t like our subsidies. They said the price of transporting grain to the port runs $60 per ton. Soybeans prices are about $8.50 per 60 kilogram ($3.86 per bushel). Estimated transportation costs are already 10% less because of the railroad. Estimated freight at Rondonopolis will be $30 per ton or of current costs once the rail is completed. This group’s e-mail address is: email@example.com. A request for more detailed figures may be made through this address.
They said the new frontier is 300 kilometers (186 miles) from Mato Grosso. They said a person is able to buy land for $250 per hectare ($100 per acre). There are taxes on the land, but none on the reserve. To clear non-cropland might run $250 per hectare ($100 per acre) if you own or rent the clearing equipment. In the last 20 years, 39 new towns have started.
Next, the mayor of the town where Smithfield is locating was introduced. The town is about 200 kilometers northwest of Cuiaba. The Paraguay River starts in his county and runs all the way to Argentina. Last year his county grew 5,000 hectares of cotton and this year it has 40,000 hectares. Land that is ready to farm is $750 per hectare ($303 per acre).
This farmer’s organization had lined up enough speakers to keep us until midnight. We had to ask to be excused because we were scheduled to meet at and tour a crushing plant at the edge of Cuiaba.
Non-farm Commercial Stop #6
We arrived at the crushing plant around 5 p.m. This is a group called ENCOMIND. They crush 1,000 tons per day. They buy soybeans from 300 to 400 kilometers (186 to 250 miles). The company also raises 5,000 heads of cattle 200 kilometers from here. They have 16,000 tons storage in the north and buy from farmers. They only have 3 to 4 months to buy soybeans from the farmers. They crush until December, and they need a lot of money for inventory. They have another plant, and they have access to 5 ports, 4 on the Atlantic Ocean and one on the Amazon River. Sao Paulo is the largest port they use and it is about 2,000 kilometers (1,250 miles) from Cuiaba. They load ships from 20,000 tons to 100,000 tons. They expect the railroad in another 3 years. They said there are no plans on building the rail past Cuiaba.
A road is being built to the Pacific Ocean through the country of Bolivia. 2,000 kilometers are completed with 500 kilometers yet to finish. The rainforest is 400 kilometers north of Cuiaba. 75% of their sales to Europe goes through Rotterdam. Freight may run $200 per ton to Rotterdam. Freight to Cuiaba is about $40 per ton. Today, into the ship f.o.b. the port is $200 per ton. Buyer pays freight. Prices are determined off CBOT. Soybeans are about $8.50 per 60 kilogram bag ($3.86 per bushel) f.o.b. the farm. Freight can run $1.00 per 60 kilograms bag (45¢ per bushel). All trucks are private owners. The crusher does not own any trucks. Most farmers sell in advance and receive money in advance. This crusher receives soybeans at 13% to 14% moisture, and then they dry to 10%. They clean out 1% to 2% trash. If the soya is over 14% moisture, there is a discount. They produce meal with 46% protein. They said each U.S. person may buy up to 10,000 hectares. They said there is 67 million acres to develop.
We got back to the hotel at 7:45 p.m. Weather was very hot and humid. Most of us showered and cleaned up before eating. The best thing that evening was going across the street from the hotel and getting some really big dishes of ice cream for $2.50. The same amount in Lafayette would have cost over $6.00.
This online exclusive is brought to you by Soybean Digest
For 2002 Travel Plans to South America see: www.kitt-travel.com