Egton de Paiva Oliveira wants to get back to working some cattle. After all, the ethanol boom that's driven the value of his land sky-high may not last forever.
One acre on his home farm can buy four acres farther north, he says. That is why this 42-year-old farmer from Brazil's Minas Gerais state hopes to expand northward.
Sugarcane for ethanol production has overtaken the region that includes the 10,600 acres on three farms he and his brothers work. They have just returned from a trip to look at land in Goias and Tocantins, two states to the north of their sugarcane, 2,100 acres of soybeans and 2,500 acres of pinto beans/corn under center pivots.
Egton and his brothers are thinking of selling off some of their sugarcane land and using the proceeds to buy a lot more cattle land farther north, away from the sugarcane expansion that has driven land costs in this area to up to $2,500/acre.
“Up there (in Goias and Tocantins) it's like this,” says Egton, leaning forward. “There's some good cattle ground we looked at and they're asking $625/acre.”
Egton and his brothers have had numerous offers for their sugarcane land from farmers in Sao Paulo state, where more than half of Brazil's cane is grown, and from mills and distilleries looking to expand holdings. And the best land is close to mills and distilleries. “The farthest you want to be from a distillery,” he says, “is 30 miles. That's the most.”
His land is no more than 21 miles from three distilleries, meaning he had five offers to buy some or all of it “just in July.”
Sugarcane delivers better profits than soybeans, he says. But at the moment, the price has stabilized. “But that's why I want to trade one of our three farms for some land that can be used for either cattle or crop production, farther north,” he says.
Egton takes the risk of growing the sugarcane and selling it on the market. But many risk-averse farmers prefer to rent their land out to the distillery or mill. A recent study by research company Scot Consultoria is reported to have revealed that in the next state to the north of Egton, farmers can get about US$86.75/acre profit for such rents. The form of payment — cash, bushels of soybeans or tons of sugarcane — varies.
With land values shooting up, Egton has seen cattle practically disappear from the region. “Land worth $1,500-2,500/acre is just too expensive to mess with cattle,” he says. “We want to sell a little piece here, and buy something cheaper in order to diversify.”
Egton and his brothers have made an offer on nearly 6,000 acres in Goias state. They're waiting to see if the deal goes through. If so, Egton says, they won't be the only farmers in the sugarcane area cashing in on land values. The real estate agent who arranged for them to fly north to look at farms has told the brothers he's been busy lately.
Egton de Paiva Oliveira says his sugarcane production costs are R$3,099/hectare. That includes labor, tractor costs, inputs, cost of transplanting rootstock, freight and everything he spends. Most sugarcane producers aim to get six harvests from one planting before planting a rotation crop, like soybeans. The yield of sugarcane decreases a bit with each cutting.