After returning from a two-week tour of the soybean and cattle growing meccas of Brazil, U.S. farmers would be wise to keep a watchful eye on that country's agriculture. The tour included 36 farmers and ranchers from around the U.S. and was sponsored by The Corn And Soybean Digest and sister publication, BEEF.
As part of the trip, we visited the almost-new “frontier” state of Mato Grosso, which encompasses about 10% of the land mass of Brazil. It's still booming by all accounts.
Located in the west central part of Brazil, Mato Grosso's major city, Cuiabá, is the geographic center of South America. It's also prominent on radar screens for foreign investors.
Recently, according to the agricultural group FAMATO, located in Cuiabá, the Chinese have shown interest in buying land in this lush agricultural state. Also, according to the organization's director, Rui Carlos Ottori Prado, about a dozen U.S. farmers have purchased land and started farming about 500 miles northeast of Cuiabá.
There's plenty of land to be had there, too. Seventy percent of Mato Grosso has not yet been touched. Mato Grosso is the country's largest producer of soybeans, cotton and cattle. With its continuing growth, this state claims the lowest unemployment rate in Brazil at 6.9%.
Since Governor Blairo Maggi took office in 2003, the inadequate infrastructure (roads and railways) has gotten a shot in the arm. In the past two years, more than 900 miles of new roads have been built. That trend will undoubtedly continue while Maggi has clout over government monies. He raises about 250,000 acres of soybeans.
Besides simply more acres going into production, farmers like Chris Ward from Rondonopolis also expect yields to increase. “We're getting about 50-55 bu./acre bean yields now,” he says. “In the next five years I expect us to hit 70 bu./acre.”
Rondonopolis, southeast of Cuiabá, has the largest soybean crushing capacity in South America. Most crushers are U.S. companies like ADM, Cargill and Bunge.
The biggest threat from Brazil for U.S. farmers comes in its ability to feed poultry and pork. At least that's what David Gillen, a farmer and tour participant from White Lake, SD, thinks.
“I'm worried they could produce more corn to feed their livestock industry,” he says. “Right now they're focused on beans, but that could change to a focus on corn.”
For the foreseeable future, however, corn will only be used as a second crop — for rotation purposes, says FAMATO's Prado. “We barely produce enough for swine and poultry, and not for the export market. But with more livestock, especially hogs, we'll need more corn.”
Usually corn yields only hit about 70 bu./acre in Mato Grosso. However, if the livestock industry continues to grow, corn will likely get more attention from researchers.
Currently, Smithfield Foods, a large integrated hog company based in North Carolina, has built a 20,500-sow unit northwest of Cuiabá. According to Ward, that unit is projected to grow to 50,000 sows.
So while Brazilian farmers struggle with low prices, just like you, and increasing production costs, especially for fungicides to combat rust, there's still no indication they'll pull back the reins on their powerhouse production.
Watch out. The frontier keeps booming.