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Primed For Growth

July 28, 2010
 
 


Brazil 625x250

TP Study Tour LogoDriving the two-lane asphalt road is treacherous. It’s humped in the middle from oversized trucks making the 683-mile trek with loads of soybeans, cotton, corn and meat to Porto Velho on the Black River. By U.S. standards, this is an out-of- shape county road that would be bypassed for an interstate highway. In Brazil, state highway BR-364 is a superhighway, and the fact it’s now paved is a major accomplishment.

Three miles from this newly asphalted superhighway outside the little town of Diamontino sits Brazil’s newest and largest beef packing plant. The JBS S.A. facility currently is operating at about half of its 3,000-head-per-day capacity.

What is to come, however, sparks the interest of Gustavo Weisheimer, a crop farmer with 20,000 acres about an hour away. It prompted him to help arrange the plant visit for the participants in this year’s Top Producer Frontier Study Tour. The tour was sponsored by United Soybean Board/Soybean Checkoff and co-sponsored by the Soy Transportation Coalition.

"I want to sell my corn to them when the feedlot opens," says Weisheimer, a vice president with Weisul Agricola. He’s eager to develop relationships that could lead to a market for his corn.

To Brazil, both the highway and the packing plant represent major milestones in the country’s quest to become more dominant in global agriculture production. Everything about this area, from the roads to the trucks moving in and out of the plant, are representative of what Brazilian agriculture is, and can be.

Expansion and Limitations. Brazil’s rapid agricultural growth through the 1980s and 1990s is well chronicled. Driven by the promise of fertile lands and ample rainfall, farmers from southern Brazil and across the globe came to Mato Grosso and other states in search of agriculture’s new frontier. Today the opportunity for farmland expansion, though likely not over, is slowed.

The state accounts for 8% of global soybean production and there is enough ground potentially suitable to double production, says Marcelo Monteiro, executive director of Aprosoja, the Mato Grosso soybean growers association. But a myriad of factors still stall expansion.

"If we convert just one-third of our total row-crop and pasture area, we could double the total production area," Monteiro says. "But that’s going to take a lot of investment, because we need lime, we need fertilizer. We need the infrastructure to bring this land into production." 

Transportation costs typically take up about 30% to 35% of the price received by farmers in Mato Grosso. Yet as more roads, waterways and railroads are developed, this cost drops significantly.

"The roads are a little bit better," says Ricardo Silva, who farms next to Weisheimer and is Aprosoja’s associate director. "We have a state tax that soybean farmers pay and an agreement with the government that this tax will build new roads."

For now, railroads provide limited opportunity for moving agricultural products throughout the country.

In March, Mato Grosso Governor Blairo Maggi, the largest soybean grower in the world, announced an initiative to build a rail system from the state’s capital of Cuiabá to the Atlantic Ocean by 2014 in time for the World Cup soccer tournament, which Brazil is hosting.

"It will have a big impact," Monteiro says. "We have railroads going south, but they charge a lot. They charge truck prices because they are the only ones available."

While the government and farmers are pushing for these changes, progress has been slow. This leaves the ultimate success and its impact on the worldwide markets in question for U.S. producers, such as Bob Metz, a South Dakota farmer and United Soybean Board director.

"Yes, the state roads are getting better, but the rural roads are still very tough," says Metz, who participated in the Frontier Study Tour. "I’ve heard about the railroad being built since 1999. To be honest, I’ve traveled in Brazil seven times and I’ve crossed one set of railroad tracks in those seven times. There’s a lot of talk about modernizing the railroad, but I’ll believe it when I see it."

Growth Area.
Three years ago, Brazilian analyst Fabio Barros responded this way when asked how much more expansion Brazil will incur: "How much do you want?"

Today, the story is much the same, but there may actually be an end to the expansion horizon, says John Carroll, an Illinois farm boy now farming 28,000 acres in Luis Eduardo Magalhães, Bahia, in eastern Brazil. The cerrado areas, which are much like the U.S. Plains states, are far from tapped out.

"You hear these numbers of 250 million acres in Brazil, but I don’t believe it’s there," Carroll says. "In northern Mato Grosso, you’re into the rainforest area and now there’s a zero clearing policy. There is more land here than in the U.S., but not close to the numbers I hear."

Farmers like Silva are looking to a new kind of crop rotation to expand on their soybean fields.

"You use your machinery to grow crops, then you have a third crop of cattle in October and November," Silva says. "Then you spray the pasture and start with soybeans again."

From the pasture, the cattle move directly to a packing plant, such as the JBS facility in Diamontino. The cattle must be collected from the small herds across the state, making it an inefficient process for packers. However, that arrangement may change with a proposed feedlot at the Diamontino plant.

Wesley Batista, CEO and co-owner of JBS Swift USA, says the plant is the first of its kind in Brazil and can expand to 4,000 head per day.

TP Web Extra Icon"Brazilian meat production is definitely looking toward exports of meat," Metz says. "I’ve seen the poultry and swine buildings in past trips. All ultramodern, all environmentally friendly; they’re going to be a force to be reckoned with."

Click here for coverage on The Panama Canal Expansion Project.



Top Producer, Summer 2010

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FEATURED IN: Top Producer - Summer 2010

 
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