“Soyz is King”

A Minnesota farmer’s perspective on Brazil, one of the most developing hot spots for agriculture in the world today -- and how the U.S. might be able to compete.

By Tim Dufault

Venture into the Brazilian countryside, and one fact is very evident.  While South America’s largest country in terms of both population and land area can raise a whole seed catalog full of crops, one in particular has exploded.  As one Brazilian farmer summed it up in a bumper-sticker slogan: “Soyz is King.”

In February of this year, I traveled to Brazil on behalf of the Red River Farm Network. The tour was partially sponsored by Pioneer Hybrid International. Pioneer had cooperated with the National Association of Farm Broadcasters to bring the U.S. ag press to Brazil to get a firsthand look at what was going on down there.  So, along with a tape recorder, some farm broadcasters and about 30 U.S. farmers, myself included, I headed south to Brazil.  It would be a chance to check out our fast-growing agricultural competition— and a good opportunity to shed the winter parka for awhile.

Portuguese is the official language, (so much for that year of high school Spanish) and Brazil is the only Portuguese-speaking country in the Americas. Geographically, Brazil ranks as about the seventh largest country in the world, just a little smaller than the continental U.S.  It has the second largest population in the Americas: Its population is 170 million compared to the U.S. at about 250 million. Most of Brazil’s population is concentrated along its eastern coast—which leaves a lot of wide-open space in the interior of the country.

With a country that large, it is hard to see it all in a two-week tour.  However, our veteran tour guide, Larry Rupiper, owner of Rupiper Travel, Yankton, S.D., has led many ag tours of Brazil, so he knows what farmers want to see.

We spent some time in the northeast portion of Brazil, in the states of Bahia, Goias, and Tocantins.  However, the majority of our tour was in Mato Grosso in the western portion of the country.  Mato Grosso is a large state, roughly the size of Minnesota and both Dakotas.

In Mato Grosso, the crop rotation is pretty much beans, beans and beans. Contrary to what I believed going down there, the land isn’t all double-cropped.  With lower returns from corn production and dry winters, only about 20% of Mato Grosso’s land is double-cropped.  These acres are planted with a short-season soybean variety, followed with a short-season corn variety. The rest of the crop is planted to a full-season variety and left until next spring.

When I say short season, that is a relative term.  The farms we were on planted Group 7 and 8. When I told them I planted a Group 00 or 0 soybeans on my farm, I just got blank stares of disbelief.

A field of non-irrigated sugar cane in Brazil. About half of the country’s sugarcane production is used to make gasohol.  Most cars in Brazil run on this fuel, while most of the farm machinery burns diesel. Crookston, MN farmer Tim Dufault stands second from the right.

Rice, corn, cotton and sugar cane were other crops that accounted for large acres. In the northeast, the elevation was a little higher and cooler.  So growers there also planted a lot of their farms to fruits and coffee. 

I didn’t see any wheat fields; the majority of Brazil’s wheat production is in the cooler climate of the southern half of the country; we were further north in their “Soy Belt.” In 2001/02, Brazil produced about 110 million bushels of wheat on 3.9 million acres, and imported about 239 million bushels, according to USDA. Since then, however, the country’s wheat acreage and production has been on the upswing, and is expected to continue through 2005/06. Brazil is still expected to remain a major wheat importer, however, and is the world’s second largest wheat importer. Brazil imports the vast majority of its wheat (over 90%) from Argentina, and that should not be surprising given the freight and trade advantages between the two countries. The U.S. does export a small amount of winter wheat to Brazil.

Average soybeans yields in Brazil are between 50 - 60 bushels an acre. Anytime we counted pods on a bean plant, we always got over 100 pods per plant.

Corn yields on average aren’t very impressive. Only about 125 bushels an acre.  I never really learned why they don’t yield more. It could be that it is too hot for corn.  Or with 60-80 inches of rain every year, maybe nutrients can’t stay in the root zone.

It is hard figuring out their crop input prices and comparing them to back home.  With the exchange rate of their Real (pronounced ray-all) to our dollar and figuring hectares to acres, trying to compare our costs to theirs was difficult to do in a quick conversation. Looking at government data, however, Brazil does hold a slight advantage to the U.S. in raising cheaper beans.

Fuel is a bit more expensive down there, I would guess about 30% more at the time we were there.  They make more trips around the field with pesticide applications (one farmer we talked with sprays his beans about nine times and corn, 13 times during the course of a season for various pests).  On the other hand, their land costs are cheaper.  One farmer we talked to had property taxes of $1,100 for 15,000 acres (which helps explain why they have a poor road infrastructure).

This is the main road that stretches through the Brazilian state of Mato Grosso, roughly the same geographic size as the Dakotas and Minnesota. One Brazilian bean buyer says that when a problem holds up traffic on the road, “it becomes the world’s longest parking lot.” 

There is no crop insurance in Brazil, or federal price support.  We didn’t see any bulldozers in the act of clearing land, although we did see windrowed trees and other debris from cleared land at the edges of some fields.  It isn’t all “slash and burn,” here, however. Environmentalists do have a presence, and there are laws in place ensuring that a certain percentage of land stays as natural habitat. For example, if you buy 10,000 acres of land, you might only be able to clear 7,000 acres of it for farming, with the rest protected. The amount of protected land can vary, depending on where you farm.

Soybeans are sold in Brazil based on the price of soybeans on the Chicago Board of Trade.  Their basis’ swings would give an American producer a good case of heartburn.  Where my basis in northwest Minnesota maybe swings $.35, the basis is southeast Mato Grosso goes from a -$1.25 to $.75 over the CBOT price.  How do you put that in a marketing plan?

Like the U.S., most of Brazil’s ag products are exported.  The major players in the world grain trade have a large presence here: Cargill, ADM, Bunge. There are also many Brazilian elevators and processors.

Average Farm Size: 10,000 Acres
The average farm in Brazil is 10,000 acres.  On our tour stops, the farms ranged from 15,000 to 80,000 acres.  The large farm size is typical in new production areas in the north, but farms are smaller in the older production areas further south. Every farm was family owned except a rubber tree farm we visited that was owned by the Michelin Tire Corporation.

An aerial photo of a typical farmyard in the state of Mato Grosso, Brazil.t

Brazilian crop production practices are similar to the U.S.  Seed is developed for their climate, and some of the same companies here such as Syngenta and Pioneer also have a presence down there.  Most of the corn and beans we saw were no-tilled. The crops are sprayed with ground sprayers or spray planes.  We saw beans being harvested: combines with typical flex heads dumped newly harvested beans into semi trucks.  The trucks then left for the local elevator or straight to the rail port, ocean port or crusher.  There isn’t much on-farm storage: soybeans are tough to keep in condition in a jungle climate.

Labor was used extensively on these farms. With large farms, there is a lot to do and labor is cheap and plentiful.  At peak times during the year, these farms employed 100-300 people.

Most of the farms are owned and operated by Brazilians.  There are some immigrant farmers here from other parts of the world, including Americans, Canadians, Japanese, Dutch and Australians who have come to Brazil to farm.  Brazilians are glad to see other people come to farm, who bring much needed investment capital to the rural areas and keep the local economy going.

This John Deere dealership in the Brazilian state of Bahia has sold about 1,000 combines in the last four years.

The equipment looks much the same as it does in the U.S. Case International, New Holland, John Deere, and Massey Ferguson are all over Brazilians farms.  We stopped at a John Deere dealer in one small town that looked like any John Deere dealership in the U.S.  But in the last four years, that dealer had sold 1,000 combines.  I don’t think there are too many U.S. dealers who could say that.

Soybean harvesting in Brazil.  “The 1175 must be a Brazilian model, because (none of the farmers in the group) had heard of it,” says Tim Dufault. “We figured it might be somewhere in size to the 7700 and 8820.”

They use modern equipment but it is small. Eight row planters, 18-foot combine headers and I never saw a four wheel drive tractor.

One morning we went past a field that had 9 eight-row corn planters going. The field was probably 1,000 acres.  Every farmer on that bus was scratching his head wondering why he or she doesn’t weld two or three of those planters together. But to ask the Brazilian farmer why, he just says labor is cheaper than bigger equipment.

We did see some livestock production, including cattle, chickens, and catfish. I see great potential for livestock feeding down here, and 20 years from now, Brazil could very well become a large-scale livestock production juggernaut.  It makes sense, since they’re producing the feed anyway, and there’s lots of elbow room for building livestock facilities, which may be attractive for some U.S. feedlot owners who tire of fighting environmental laws and complaints about smell near urban areas.  As one Brazilian farmer said: “I could put up a barn at the edge of town, and no one would complain about it.”

While genetically-modified crops are legal to grow in Argentina, they are illegal to grow in Brazil—at least on paper, anyway. The trade estimate is that 10 - 30% of Brazil’s entire soybean crop is GMO.  In the southern regions, closer to Argentina, where it is not too difficult to haul a load of GMO seed across the border, it’s more like 80%. Brazil is hoping to make GM crops legal in the next year. In the meantime, foreign buyers will continue to discount U.S. soybeans to those produced in Brazil, a “non-GMO country,” wink wink….

U.S. Production Advantages
I see two large problems for Brazilian ag production: Monoculture and transportation.

With such a heavy rotation of soybeans, the day has got to come where this will really hurt yields. A disease or insect, I think, is looming somewhere on their horizon. Asian rust, for example, has become a problem in some fields.

I think transportation is Brazil’s Achilles Heel, however. Brazil is beginning to develop its water resources, but there is virtually no railroad in the interior of the soybean regions.  Central Mato Grosso is 600 miles from the end of the rail line. To reach that rail, trucks travel on a two-lane highway that brings the entire product into Mato Grosso and the entire product out of Mato Grosso. This highway reminded me of a county highway at best.

One bean buyer told us when there is a problem on that road, “it becomes the world’s longest parking lot.”  In late March 2003, reports were that grain trucks were backed up 60 miles waiting to unload at the port of Santos.  There are lots of plans in the works for more railroad lines, more roads, better ports. But as some farmers said, “we have heard that for years.”

Brazilian grain production from1996 to 2003

* Estimated by Feb 03   Source: CONAB   Graphic: Roger Borges, Univ of Wisconsin

So, with South American soybean production surpassing the United States for the first time this year, how do we compete with these guys? A couple of thoughts from this average Joe soybean farmer:

Grow identity-preserved soybeans or specific trait varieties. I don’t get the sense from this trip that Brazil will break from its trend toward bulk supplying of a raw commodity. When you’ve got 20,000 acres of beans to harvest with a dozen machines, you aren’t going to stop everything to vacuum out the sieves when you change varieties. So I think we have an advantage when it comes to clear hylem, food grade or organic soybeans.

We need to continue to find new uses and new markets. Production has boomed worldwide this past decade, but worldwide carryout is still very low.  Incredible consumption of soybeans globally is keeping up with the incredible supplies.

We need to manage our costs.   One of the biggest input costs for U.S. producers is land cost, and if Brazil’s Achilles Heel is transportation, higher land prices are probably ours. Brazilian land goes from $100 to $1,100/acre. Prime Iowa/Illinois land is around $3,000 an acre. With Brazil’s cost of production at about $4/bushel and about 100+ million acres of land reportedly ready to come into production, I don’t see “beans in the teens” for prices anytime soon.  We need to manage our farms accordingly.

The bottom line is that Brazilian beans are here to stay.  “Soyz is King” in Brazil.  They are now the world’s leading soybean producer, and we are the second leading producer. We need to learn how to deal and thrive despite that, just like Avis, Burger King, Pepsi, Kmart, Ford, and other “number twos” who strive to be “number ones” in the business world.  And we have to remember that production agriculture has a world market. So when we listen to the farm news on our tractor radios, we should pay just as much attention to crop progress and weather in Mato Grosso as in Minnesota.

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ASA Leader: “Brazil No Ag Utopia”

Much has been written about the explosion of agriculture in Brazil, but there are caveats that shouldn’t be overlooked, says Ron Heck, vice president of the American Soybean Association, who farms near Perry, Iowa, and has visited Brazil a number of times over the past few years to gather facts on the country’s developing agricultural system.

Organized agricultural tours of Brazil have become a business in itself, Heck points out, with each tour group typically taking the same route and visiting the same sites as other tours. The farms and agribusinesses showcased tend to be those that are newer, larger, and more successful.

Large parts of the country are still frontier, from the land itself to its services and infrastructure. He points out that Brazil has the second highest murder rate in South America, behind Columbia.  “It can be a dangerous country,” he says.

Foreigners need a Brazilian partner to invest, and cannot own a majority stake in Brazilian land. Close to 45% of the land in Brazil is farmed by 1% of farmers, and from 1986 to 1996, about 42% of Brazilian farmers left the business. 

Brazil may have cheap land and cheap labor, but its agricultural infrastructure does not match that of the U.S. in terms of transportation infrastructure, erosion/environmental protection, financial and market stability/choices, government support and risk management, off-farm and alternative income opportunities, soil productivity, research, inputs and technology.

“Brazil is no agricultural utopia,” Heck says.