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7-Business: Brazil challenges US soy export supremacy

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TITLE:  FEATURE - Brazil challenges US soy export supremacy
SOURCE: Reuters, by Peter Blackburn
DATE:   Feb 25, 2003

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FEATURE - Brazil challenges US soy export supremacy

NOVA MUTUM, Brazil - Blessed with abundant farmland, sunshine and water,
Brazilian farmers prepare to harvest another record soybean crop. If the
trend continues, Brazil could soon overtake the United States as the
world's No.1 soy exporter.

Brazil's soy area is expanding 10 percent annually as enormous areas of
savannah, known as cerrado, are cleared of scrub in Mato Grosso and other
states in the Center-West region and planted with soybeans to satisfy
voracious world demand for the animal feed.

"Mato Grosso could produce as much food as the whole of Brazil - without
cutting down a single tree," claimed Homero Alves Pereira, agriculture
secretary of Mato Grosso state.

Speaking in the state capital Cuiaba, Pereira said that only about 20
percent of potential farmland in Mato Grosso had so far been exploited.

However, as farmers push above 13 degrees latitude, or north of Sorriso,
they run into transitional rainforest even though they are still hundreds
of kilometers (miles) from the Amazon rainforest proper.

"We protect national parks, Indian reserves, the Pantanal (wetlands) and
the Amazon region," Mato Grosso state Governor Blairo Maggi told visiting
U.S. soybean farmers this week.

The government's environmental protection agency IBAMA, which controls
land usage, usually limits planting to between 20 and 50 percent of the
farm area in the Querencia "frontier" farming area, farmers said.

"It took 24 months to get IBAMA's approval and then only to plant 20
percent of the land," said U.S. farmer Howard Wright, who bought 1,000
hectares (2,471 acres) in Querencia 3-1/2 years ago.


Despite environmental curbs, Mato Grosso is already Brazil's No.1 soy
producer with output forecast at some 12.8 million tonnes in 2002/03
(Oct/Sept), or about 25 percent of Brazil's forecast record crop of up to
51 million tonnes.

It's also a major cotton, rice, corn and livestock producer.

The U.S. Department of Agriculture's (USDA) Foreign Agricultural Service
estimates that there are some 160 million acres (65 million hectares) of
virgin cerrado, plus up to 222 million acres (90 million hectares) of
pasture in the Center-West that could be converted into grain and
oilseeds fields.

It estimates that Brazil could expand its farmland fivefold and bring up
to 420 million acres (170 million hectares) into production - roughly
equal to total U.S. farmland.

Soybeans could gobble up more than half the expansion, some 247 million
acres (100 million hectares) given favorable markets and improvement in
transport. The area is now about 39.5 million acres (16 million hectares).

"Brazilian soy production is growing 10 percent a year and should
overtake the U.S. within 10 years," said Amado de Oliveira Filho,
director of the Cuiaba-based Mato Grosso Institute of Agricultural
Economics (IMEA).

In the Center-North Lucas do Rio Verde area, celebrated for its early
premium-priced soybean crop, farmers are looking for extra land further north.

"There's no room to expand in Lucas so we're looking further north in the
transitional forest zone between the 13th and 14th parallels," said
Guerino Ferrarin, who farms 81,000 acres (33,000 hectares) of soy in the
Lucas area.

Ferrarin, who like many others came from southern Brazil, used his own
resources and that of international trade houses to whom he sells his
crop, to build an industrial-scale enterprise.

"Official subsidies wouldn't feed the farm workers," he said.

On one of his five farms, which skirts the highway for 19 miles (30 kms),
10 combine harvesters were operating in a single field, while 12 tractors
pulling disc sowers were directly planting corn where there was soy the
day before.


In neighboring Nova Mutum, agronomist Francisco Alenolli said that land
prices were rising.

Alenolli, of crop inputs supplier Agroverde, said that land ready for
planting could be bought for $1,390 (5,000 reais) per hectare with prime
plots fetching up to $2,500 (9,000 reais). It compares with up to $10,000
(36,000 reais) in the U.S. Midwest.

"Cheap land is usually risky - it either has to be cleared, the documents
are dodgy or it's targeted for invasion by landless peasants," he said.

Crop diseases, notably Asian rust fungus, climate change or collapse in
global commodity prices could also stop Brazil's spectacular soybean
expansion, a recent USDA report said.

Insufficient crop rotation, despite efforts to promote interchange
between crops and livestock, would also put soybean crops at increasing
risk to disease.

But the industry's main concern is transport - from the fields to local
warehouses owned by international trade houses and then by crater-scarred
roads and railway to southern ports some 1,243 miles (2,000 km) from Lucas.

"The government could do much more. Transport must keep pace with
production," said Celio Vilani, vice president of the Primavera do Leste
Rural Employers Union.