Editor's Note: During the early stages of harvest in South America (Jan. 26-Feb. 11), a group of U.S. producers toured the greater agricultural regions of Brazil and Argentina. Allen Cummins, at left, has worked in agriculture most of his life and has 20 years of experience as a farm manager in Lafayette, IN. He agreed to share his insight as he traveled on this trip. His viewpoints offer a wonderful perspective into our global competitors in the Southern Hemisphere.
For a complete diary of his trip, visit SoybeanDigest.com. Here, Cummins gives a unique synopsis of what he saw and the impressions he brought home from the two-week adventure.
Tour group sees South American competition up close.
We are in a truly global market, and I saw it firsthand. I highly recommend that other U.S. farmers go on tours like this, if at all possible. They need to see their real competition on a global scale. If you think your competition is your neighbor who keeps bidding up the cash rent, think again. It's the producers in Argentina and Brazil.
Most South American farmers, businesses and government officials have e-mail and Internet access. They have access to commodity, weather, financial and agricultural information the same as U.S. farmers. Top-notch farmers in both Argentina and Brazil are just as good at production as U.S. farmers.
The most impressive area of ag production we saw was in the central Brazilian state of Mato Grosso. It's a plateau of what I believe to be absolutely unbelievable farm country. I've been to most of the major agricultural areas in California, Washington, Iowa, Illinois and several other states. But I've never seen anything like we saw during our six days in Mato Grosso.
There are similar small pockets in the U.S. But to drive for mile after mile with nothing but gently rolling fields of excellent-looking soybeans and cotton for as far as we could see was almost more than we could grasp. It was like seeing the northeastern Arkansas Delta, Iowa farm country and Illinois prairie farms all wrapped into one package.
Interesting Mato Grosso facts:
Brazil's largest soybean producing state, Mato Grosso is 370,656 square miles, or about the size of Illinois, Iowa, Minnesota, Nebraska, Wisconsin and Michigan combined.
Eleven million tons of grain are produced annually in the state.
For any new land brought into production, 50% of total acres purchased must be retained in a reserve. No farming is allowed on the reserve.
Advanced ag production started 25 years ago.
Only 14% of the farmable land is being used.
Here's how Brazil and Argentina stack up in important soybean production and marketing areas:
Land And Labor
In many areas of both South American countries, you can buy and clear soybean-producing land for $500-700/acre. Before you consider a purchase, you should be just as prudent as you'd be in the U.S. Soil types vary, and practically all crop acreage is no-tilled. In addition, there are reputable and not-so-reputable brokers ready to help you invest. I think I would want to live there through the planting and harvesting seasons before I'd put any money into land.
A typical range of land prices in central Argentina is $1,416 to $1,618 per acre. The local farmer we visited said prices got as high as $2,832 per acre when soybean prices were high.
The price of land in one area of east-central Brazil we visited was about $485/acre. Some land may get as high as $1,214/acre. One of the local farmers we visited, who owns 61,775 acres and employs 115 full- and part-time employees, says he's able to buy raw land for about $141/acre and then it costs about $202/acre to put it into production.
Labor is cheap. Most tractor drivers and laborers are paid $200-400 per month. Thus, we saw labor being substituted for capital and equipment, in some cases, in both countries. Farm equipment is smaller than on typical U.S. farms. There are more planters and combines driven by less-expensive laborers.
South American farmers have many of the same insect and weed problems as us. But their chemical costs are considerably lower.
Ninety percent of the soybeans produced in Argentina are Roundup Ready. In one location, a farmer told us his Roundup cost is $11.36/gallon. In Brazil, no Roundup Ready soybeans are planted due to restrictions.
Most Brazilian and Argentine farmers test for soil pH about the same as U.S. farmers. One soybean grower in Argentina said he typically applies 110-132 lbs of nitrogen and 154-220 lbs of phosphorus per acre. Another said his ranges are 35-44 and 62-70 lbs/acre of nitrogen and phosphorus, respectively. This farmer also utilizes sulfur and other micronutrients, but no potassium.
When transporting commodities from the farm to the terminal, Argentine and Brazilian farmers face more difficult and costly options than do U.S. growers. Their main highways are similar to ours and as good. But once you leave the main highways, every road is dirt. The roads are solid enough to handle heavy trucks, but the trucks have to be driven far and slowly from fields to paved highways.
One farmer we talked with in central Argentina said it costs him the same amount to transport a ton of soybeans to the grain terminal in Rosario as it costs to ship a ton of soybeans from Rosario to China. It costs him 8¢/bu to truck to Venado Tuerto, his nearest town, then an additional 30¢/bu to haul 100 miles to Rosario, a city of one million people. Rosario is about 240 miles upstream from the coast and is settled on a major river where ocean-going grain vessels can load and navigate.
In talking with the many Argentine and Brazilian farmers we met, it was very evident that they don't like U.S. government subsidies.
In my opinion, it would be a grave mistake to go back to set-aside acreage reductions in the U.S. because Argentina and Brazil would benefit. They would increase production and total supplies wouldn't be reduced.
I think the South Americans would be happy if we implemented some acreage reduction program because it would also benefit them.
One thing that really hit me was the fact that I could sit in an Argentine or Brazilian hotel and read the Chicago Board of Trade prices, the hometown weather and the same ag Web sites that I read in Lafayette, IN.
For anyone who thinks isolationism is the way to go, all I can say is the World Wide Web will never allow it.
Overall, it was very evident that our travel group felt the wages and lower chemical prices allow these farmers to stay very competitive with U.S. farmers. Neither Argentina nor Brazil has any government farm subsidies. But when you get to the bottom line, because of those two factors, they can compete.
To read Soybean Digest's online exclusive of Allen Cummins' complete journal of the 17-day South American tour that featured 11 on-farm visits and 12 ag related business tours click here