Welcome to the Southern View blog featuring fresh information about grains and cotton production in Brazil, along with information about Argentina's and Paraguay's crops.
Soybean “Field Invasion”
Nov 18, 2009
Being a rural producer in Brazil has many challenges: high logistic costs, low storage capability, climate risks, poor port infrastructure, expensive money, unfavorable currency valorization, strictest environmental rules in the world – for producers, to name a few.
Of course, all countries have their own weakness as well. And of course there are a lot of good reasons to grow in Brazil. We have internal demand, low land prices, and the social benefits agriculture brings to our country as motivating issues. But sometimes it’s hard for a local producer to understand why a foreign comes to grow in Brazil!
Argentina also has all kinds of risks in their agricultural chain. In one hand, they have excellent soil and an exchange model favorable for exports. On the other hand, they have a historical conflict between government and producers and high taxes for commodities export! Lately a new property tax, for crop land rental, is increasing the production costs in Argentina. It’s making some Argie’s agribiz groups (like Los Grobos, MSU, El Tejar) expand in even 80% their activities in Brazil.
Here in Brazil, we are used with Argies “invasion.” Every year, during summer, they come to enjoy our tropical weather, and then they go back home, happy with the Brazilian joy and natural resources. And we enjoy the profits of tourism, and get happy on making fun on them about our superiority of soccer skills!! It’s a friendly and healthy relationship trough many years.
But in this “field invasion” – I don’t like the term, but press is saying like that - there are many risks for both sides. It’s great for Brazil to receive their investments, know how they are growing and trading, and all social benefits the foreign long-term investments. But once the major motivating reason is the growing costs in their country, and as these high costs are due to internal taxes…what if their government changes strategy and cuts off those taxes?! Will it still be a good choice to stay in Brazilian fields? If so, it’s a good deal for both sides. If not, there will be losses for both sides.
There are investors from many other countries coming to Brazilian fields have already many years. It’s changing the agriculture model from “familiar farms” to large scale farms. In a way, it comes against some government farm policy of land distribution and subsidies to familiar agriculture.
Large farms results in more employment and better work conditions than familiar one. Foreign direct investments are welcome, but for long term.
Times have changed, and farm policy needs to catch up.