Top
Reference

Brazil agriculture

This page is about trend growth in the agricultural sector, and possible places to invest.

Summary

14 Dec 2012.

Farming in and of itself is impressive. Agricultural research and education is top notch, there is plenty of land, almost all of which is cultivated without irrigation, and global demand is high and growing. So productivity, production and exports have all seen high growth over the last decade. However Brazil's roads and ports are among the worst in the world, and this is a major bottleneck for further growth as well as a big negative for global competitiveness.

Highlights

  • Fertilizer companies are one possible area to invest. Their results probably swing a little less than those of the farms themselves, and the prevalence of fertilizer use is still growing. Here is a list of some of the main companies: ADM, Archer Daniels Midland, Bunge fertilizantes, Cargill, Cibrafertil, Copebras, Fertipar, Fospar, Galvani, Heringer, Louis Dreyfus Commodities, MBAC Fertilizer Corp, Mosaic, Petrobras (N from natural gas), Proquigel, Timac, Vale Fertilizantes, Yara do Brasil

Sources

  • ANDA Association of Fertilizer Companies that gathers statistics, performs experiments, and advocates proper use of fertilizers. Latest data on imports vs domestic production.

See also

Selected commentary

Clippings below were used in the construction of this page

FAO hydrology overview

2000. UN FAO.

http://www.fao.org/nr/water/aquastat/countries_regions/BRA/index.stm

“Aquastat: Brazil (Version: 2000)”

“The internal surface water resources, understood as the average water production within Brazil, is 5 323 km3/y. The inflow of the Amazon to Brazil is 2 807 km3/y, so that the total surface water resources in the country reach, on average, 8 172 km3/y. The outflow from Brazil into the Plata River is 518 km3/y. …

The annual recharge of groundwater is estimated at 95 km3/y. The volume of stored groundwater in Brazil less than 1 000 m deep and with good quality for human uses is estimated at 112 000 km3, with very variable extraction rates. … There are around 200 000 wells being exploited, with drilling of about 10 000 wells a year. Approximately 61 percent of the Brazilian population is supplied for domestic purposes from subsurface water. …

Theoretically, the country has ample water resources in six of its eight major water basins to supply all foreseeable long-term irrigation requirements. In 1996, the average consumption of irrigation water was 12 629 m3/ha per year. Only in the northeast and in the eastern tributaries of the São Francisco basin is irrigation development constrained by water availability. …

The irrigation potential of Brazil is estimated at 29.3 million ha (see following table). This includes only areas where irrigation can be developed and excludes the areas of high ecological value in the northern region (Amazonas and Tocantins basin). In the savanna areas (cerrados) of the centre-west region, the potential for irrigation has expanded substantially in recent years, following recent advances in soil management and irrigation techniques applicable in that region. The irrigated area in 1998 was 2.8 million ha, which represents 5.7 percent of the cultivated area.”

[Very useful, even if far out of date, overview on the hydrology of the whole country.]

Complex ownership patterns in fertilizer

Undated (maybe 2001, from URL)

According to an undated presentation for an unnamed context, Fosfertil was a government company that is now privatized, and which is responsible for the majority of phosphate production in central Brazil, where transportation costs make imports unfeasible. When Fosfertil was privatized (and became Fertifos?), Bunge, an international conglomerate that sells agricultural supplies, trades grain, and makes and sells vegetable oils, among other activities, managed to get a controlling interest (53%).

Overview of fertilizer use

2004. Food and Agricultural Organization of the United Nations

ftp://ftp.fao.org/agl/agll/docs/fertusebrazil.pdf

“Fertilizer use by crop in Brazil”

“There is a close relationship between the consumption of fertilizers and crop production in Brazil. Between 1970 and 2001 agricultural production in Brazil, represented by the sixteen most important crops, increased by 3.4 times and the consumption of fertilizers increased by 4.4 times. During this period the cropped area increased only 1.5 times, rising from 36.4 million ha to 56.2 million ha.

On the one hand advanced production technologies are widely used for the production of export crops (coffee, sugar cane, citrus and soybeans). These technologies include not only appropriate rates of fertilization but also the implementation of a series of other agronomic recommendations.

On the other hand, the average yields of food crops for domestic consumption compare unfavourably with those of countries with advanced agricultural technology, although some farmers achieve yields that are substantially higher than the average. The problem of low average yields is therefore due not to a lack of agricultural technologies but to the poor implementation of these technologies, including inappropriate mineral fertilizer application. …

Since the 1970s the government has promoted the settling of the Centre West region, known as the Cerrado, whose total area amounts to 207 million ha. This area was once considered to be marginal for agricultural production. However, today the Cerrado accounts for 43 percent of the Brazilian production of beef cattle, 23 percent of the coffee, 34 percent of the rice, 59 percent of the soybeans and 29 percent of the maize. This has been made possible by research in different agronomic science disciplines, including the development of appropriate fertilization and soil amendment systems. …

In general, the fertilizer nutrient balance in the Brazilian agriculture is unsatisfactory. The quantities of nutrients removed are higher than the quantities supplied. Thus soils are being progressively depleted of nutrients. This represents a threat to long-term agricultural sustainability. As regards the ratio between the nutrients, by international standards the use of nitrogen is low in relation to phosphate and potash. Concerning the types of fertilizers, Brazil has an unusually high proportion of nutrients, over 80 percent, applied in the form of compound fertilizers. It is also one of the few countries where the use of single superphosphate has increased in recent years, partly due to the demand for this fertilizer for use on soybeans, owing to its sulphur content.”

[Overview of regions of the country and soil types.]

[Overview history of land ownership regimes from colonial times.]

“Irrigation is little used in Brazil. In the Northeast region, which includes a large area with a semi-arid climate, irrigation is used on only 4.9 percent of the farms. …

Most of the potential farmland of Brazil (550 million ha) is under pasture (178 million ha), with some 78 million ha of natural pastures and 100 million ha of improved pastures, mainly in the Centre West, Southeast and South regions. Of the current total agricultural area (50 million hectares), the cultivation of grains (rice, maize, soybean, common beans, sorghum, and wheat) occupies 38 million ha, representing 76.7 percent of the cropped area. Sugar cane with 5.1 million ha, coffee with 2.3 million, cassava with 1.7 million and citrus with 0.8 million ha are other important crops.

At first Brazilian agriculture was concentrated on the most fertile soils along the Atlantic coast and in the South and Southeast regions of the country, notably with the production of coffee, sugar cane and some cereals. This situation prevailed until the end of the 1960s and the beginning of the 1970s, when governmental incentives promoted the settling of the Centre West region, known as the Cerrado (a savannah type vegetation), whose total area amounts to 207 million ha. With highly weathered, acid soils of very low natural fertility, … the area was once considered to be marginal for agricultural production. However, it is in this area that the greatest revolution in the Brazilian agriculture is taking place.

… strategies have been developed for building-up soil fertility by the use of lime and mineral fertilizers, especially phosphorus, potassium and micronutrients. The estimated production potential of the Cerrado region is 252 million annual tonnes of grains, 12 million tonnes of meat and 90 million tonnes of perennial crop produce, on an area of 136 million hectares with 71 million hectares available for environmental conservation (Macedo, 1995). …

Starting in 1971, the demand for fertilizers increased considerably, mainly as a consequence of agricultural development in the Cerrado in Central Brazil. … This increasing demand, associated with high prices on the international market as a consequence of the conflict in the Near East and other factors, resulted, in 1974, in the development of the National Program for Fertilizers and Agricultural Limestone (PNFCA), whose main objective was the expansion and modernization of the fertilizer and agricultural limestone industry in Brazil. …

In the early 1990s, the fertilizer sector in Brazil underwent an intense privatization process …”

[Table of mines and fertilizer component production.]

[Table of fertilizer imports and exports. As of 2002, 61% of N was imported, 43% of P was imported, and 86% of K was imported.]

“Reliable statistics concerning the consumption of organic fertilizers, especially manure, are not available. … In the case of grain crops, except in the case of small subsistence or family farming systems or of large farms that integrate crop and animal production in confined systems, the use of organic fertilizers is uncommon. …”

[very specific numbers on particular crops, soil types, and fertilizers.]

“in spite of the substantial increases in the consumption of fertilizers in Brazil in recent decades, Brazilian agriculture is removing from the soil a substantial quantity of nutrients that should be replenished by fertilization, especially with nitrogen. This situation can lead, in the long term, to consequences that are very detrimental to the sustainability of Brazilian agriculture.”

Brazil may see much less rainfall due to climate change

Nov 2007. World Bank.

http://siteresources.worldbank.org/INTLAC/Resources/SDWP_Future_Climate.pdf

“Latin America and Caribbean Region Sustainable Development Working Paper 30: Visualizing Future Climate in Latin America: Results from the application of the Earth Simulator”

“The Earth Simulator has been used as part of efforts of the IPCC and continues to play a central role in the modeling of future climate scenarios. The results summarized here represent the culmination of activities undertaken under a pioneering partnership with the Earth Simulator, involving the Meteorological Research Institute of Japan (MRI), the Instituto Nacional de Ecología of Mexico (INE), the Instituto Colombiano de Estudios Ambientales y Meteorología (IDEAM) of Colombia, the Servicio Nacional de Meteorología e Hidrología (SENAMHI) of Peru, the Instituto Nacional de Meteorología e Hidrología (INAMHI) of Ecuador, and the Instituto de Hidráulica e Hidrología (IHH) of Bolivia, in collaboration with the World Bank. Under the agreement, the MRI provided the data produced by the fastest available computing tool dedicated to climate modeling today to be used by leading scientists and climate modelers in the region. …

One of the most profound predicted impacts of climate change into the 21st century is the effect on ecosystem integrity of the large Amazon Basin. Temperature increases and disruption in precipitation cycles have the potential to seriously hamper the workings of the Amazon as a forest ecosystem, reducing its capacity to retain carbon, increasing its soil temperature, and eventually forcing the Amazon through a gradual process of “savannization”. The issue of Amazonian dieback evolved from computer predictions to global environmental concern with the unexpected Amazonian drought of 2005.

The Amazon is critical to global climate because it helps regulate the amount of carbon dioxide in the global atmosphere by locking away vast quantities of carbon. It also contributes to the global atmospheric circulation that widely affects rainfall patterns. Through the recycling of rainwater back into the atmosphere, the Amazon rainforests also influence their own unique regional climate, which provides a home to a quarter of the world’s biodiversity and many indigenous peoples. Moisture injected by the Amazon ecosystem into the atmosphere plays a critical role in South America’s precipitation patterns. Serious disruptions in the volumes of moisture coming from the Amazon Basin could also trigger a process of desertification over vast areas. …

This could be the most serious climate change impact in Latin America, but its prospects and consequences are still poorly understood. An assessment of the likely prospects and impacts of these changes is under way.”

Swiss Re defines the major risks to farmers in Brazil

29 Sep 2009. Swiss Re press release.

http://www.swissre.com/media/news_releases/new_swiss_re_focus_report_explores_agricultural_risks_in_brazil.html

“New Swiss Re Focus report explores agricultural risks in Brazil”

“Brazilian farmers are exposed to a few primary risks including the weather and volatile commodity market prices for the inputs they need and for the crops they produce. For the future, they cite climate change and extreme weather as major risks.”

Green revolution in Brazil

5 Nov 2009. FT Investing in Brazil p4.

“Superpower is ready to feed the world. Jonathan Wheatley”

“Malthusians worried about the world's ability to feed itself might like to listen to Roberto Rodrigues, an agribusiness consultant and former Brazilian agriculture minister.

“The idea that there will be a shortage of food is just plain wrong,” he says. “Production in Brazil is growing in all areas.”

From a middling agricultural country, it has grown into a superpower in the past two decades, becoming the world's biggest exporter of beef, chicken, orange juice, green coffee, sugar, ethanol, tobacco and the “soya complex” of beans, meal and oil, as well as fourth biggest exporter of maize and pork.

Unlike much of Brazil's economy, where productivity gains have been less than spectacular, agriculture has achieved its new status almost entirely on the basis of more efficient management and the development and application of technology.

Between the harvests of 1990-91 and 2008-09, for example, production of grains rose from 58m to 144m tonnes. Over the same period, the amount of land planted with grains increased by just 26 per cent, from 37.9m hectares to 47.7m ha. Productivity, measured in tonnes per hectare, almost doubled.

Between 1980 and 2008, the number of diary cows rose from 16.5m to 21.5m, while production of milk increased from 11.2bn to 27.1bn litres - a productivity gain of 86 per cent. Between 1994 and 2009, production of beef rose 77 per cent, of pork by 133 per cent and of chicken, by 217 per cent.

Yet Brazil's importance as a global supplier lies more in its potential than past performance. Of its total territory of 851m ha, some 340m are suitable for agriculture. Of those, 72m are under crops and 172m under pasture. That leaves 96m ha of available agricultural land, without touching a tree in the Amazon forest or encroaching on other sensitive areas.

Yet farmers and ranchers have nevertheless been cutting down Brazil's forests at an alarming rate. Although the rate of deforestation in the Amazon slowed from 27,000 sq km in 2004 to 11,200 sq km in 2007, it has since risen somewhat.

The government says the overall decline was caused by better monitoring and control, although many scientists say fluctuating commodity prices played a bigger role in the fall and subsequent increase.

Much available agricultural land is in parts of the country where land title is relatively well established and the law relatively well enforced. In most of the Amazon, neither is the case. It is easy for small ranchers, for example, to clear an area of forest, use it for low-intensity ranching for a few years until its nutrients are exhausted, and move on.

Better monitoring and market-led initiatives hold out some hope that the rate of deforestation will slow. Meanwhile, farmers are concentrating on raising productivity.

The number of cattle has increased from 78.6m in 1970 to 169.9m today, while land under pasture has risen by much less, from 154.1m ha to 172m ha.

In Sao Paulo state, there are 1.55 head of cattle a hectare of pasture: if that ratio, itself low by international standards, were repeated nationwide, another 62m hectares would become available for crops.

Higher-density ranching is one advance made possible by scientists at agricultural research centres in the country, who have developed better strains of grass, for example. Brazil is also helped by its tropical climate, with generally predictable amounts of sunshine and rainfall.

Greater efficiency has led to monocropping, especially of sugar cane and soya. Huge areas are covered with vast seas of crops, dotted with irrigation circles.

Mr Rodrigues, who is from a long line of farmers, says he recently visited his son's farm in the northern state of Maranhao.

When he asked for some fresh eggs and some salad from the vegetable garden, his son told him he could get those from the supermarket.

“That's the way it has to be today,” he says. “Concentration on the most efficient means of production.” Farmers' expertise has advanced enormously, but they still face external problems. Bad roads and other logistical problems add greatly to the cost of getting produce to market.

Unlike many other agricultural nations, Brazil has almost no rural insurance to protect farmers from factors beyond their control; apart from the weather, they are also at the mercy of interest rates, foreign exchange rates, trade negotiations and more.

Mr Rodrigues says it is not true, as many in the sector complain, that Brazil has no agricultural policy. What it lacks, he says, is an overall strategy for the sector, co-ordinated by more than one ministry.

In spite of such problems, Mr Rodrigues says Brazil's status as an agricultural superpower can only grow. He says he knows of 22 foreign investment funds looking for opportunities.

“If I were an investor, I would put my money in logistics and fertiliser,” he says. “The opportunities are fantastic. And people are coming without our doing anything to invite them.””

The role of low-income consumers is clearest in the services sector, the only one not to have entered recession during the crisis. Consumers appeared to put some buying decisions on hold when the crisis hit late last year but are now returning to the market as the perception spreads that the worst is over.”

Poor infrastructure for farm produce transport in Brazil

16 Nov 2009. FTUSA p6.

“Poor transport infrastructure hampers Brazil's booming farms. Jonathan Wheatley”

“A lack of rail and water transport means almost all production travels up to 2,000km on poorly maintained roads to port at a cost of about $100 a tonne, compared with about $30 in the US.”

Brazil likely to keep importing fertilizer

20 Jul 2010. Rabobank.

http://www.rabobank.com/content/news/news_archive/044-RetailopportunitiesrisinginBrazilfertilisersector.jsp

“Retail opportunities rising in Brazil fertiliser sector”

“Despite a 6 billion dollar government injection to develop its home industry, the Brazilian fertiliser sector will remain dependent on imports, according to a new Rabobank report ‘Changes in Brazil’s Fertiliser Industry’. “Plans to increase fertiliser production in Brazil will not eliminate the country’s fertiliser imports. Instead, they will open a new window of opportunity for retailers,” says Rabobank analyst Erin Fitzpatrick.

Agriculture represents 25 percent of Brazil’s GDP, a figure which is set to grow since Brazil is also home to 13 per cent of the world’s untapped arable land. And the growing agricultural sector brings with it a strong demand for fertiliser. Despite the country’s own large reserves of phosphate rock and potash, today more than 70 percent of Brazil’s fertiliser use is imported, making it the world’s second largest importer of phosphate and potash fertilisers.

In early 2010, the Brazilian government announced new incentives to encourage the expansion of its domestic fertiliser industry, to reduce this import dependency and the related exposure of its farmers to international price volatility. The government has allocated $6.2 billion to the sector, as part of an $880 billion programme focused on infrastructure investments to boost economic and social development.

“No details are available of how the money will be spent, but the government is likely to focus on developing the private sector, in contrast with previous announcements that it might nationalize privately owned reserves,” says Erin Fitzpatrick, Rabobank Food & Agribusiness Research and Advisory (FAR) Farm Inputs Analyst.

“Brazil’s economic reserves of phosphate rock and potash place them sixth and fifth in the world, respectively. While phosphate rock reserves are sufficient to meet the country’s demand through capacity expansions, potash reserves can be further developed in Brazil, but will not be enough to meet long-term demand in the country.”

Expansion plans could double Brazil’s phosphate rock production and triple potash production by 2015. At least half of phosphate and all of potash expansion will come from reserves controlled by Vale, a Brazilian company that is now the country’s biggest producer of these two nutrients.

“Vale is putting production into the hands of fewer companies, which represents a change in Brazil’s fertiliser chain,” says Priscila Richetti, a FAR fertliser analyst based in Brazil, and co-author of the report. “This leaves less integration between upstream and downstream players in the value chain causing retailers to seek new strategies. Which, in turn, opens the door for new market entrants at the retail level, which could interest international or regional companies.””

Brazilian farmland

28 Aug 2010. Economist p58.

http://www.economist.com/node/16886442?story_id=16886442

“The miracle of the cerrado”

“Brazil has more spare farmland than any other country (see chart 3). The FAO puts its total potential arable land at over 400m hectares; only 50m is being used. Brazilian official figures put the available land somewhat lower, at 300m hectares. Either way, it is a vast amount. On the FAO’s figures, Brazil has as much spare farmland as the next two countries together (Russia and America). It is often accused of levelling the rainforest to create its farms, but hardly any of this new land lies in Amazonia; most is cerrado.

Brazil also has more water. According to the UN’s World Water Assessment Report of 2009, Brazil has more than 8,000 billion cubic kilometres of renewable water each year, easily more than any other country. Brazil alone (population: 190m) has as much renewable water as the whole of Asia (population: 4 billion). And again, this is not mainly because of the Amazon. Piauí is one of the country’s driest areas but still gets a third more water than America’s corn belt.

Of course, having spare water and spare land is not much good if they are in different places (a problem in much of Africa). But according to BrasilAgro, Brazil has almost as much farmland with more than 975 millimetres of rain each year as the whole of Africa and more than a quarter of all such land in the world.

Since 1996 Brazilian farmers have increased the amount of land under cultivation by a third, mostly in the cerrado. That is quite different from other big farm producers, whose amount of land under the plough has either been flat or (in Europe) falling. And it has increased production by ten times that amount. But the availability of farmland is in fact only a secondary reason for the extraordinary growth in Brazilian agriculture. If you want the primary reason in three words, they are Embrapa, Embrapa, Embrapa.”

The farm revolution in Brazil

11 Sep 2010. Economist pi5.

http://www.economist.com/node/16964094?story_id=16964094

“It's only natural”

“Brazil has the most impressive record of agricultural innovation. In 1973, when the country was still a net food importer, its military government set up Embrapa, an agricultural-research institute. Within six months it had sent 1,200 young Brazilian graduates abroad to obtain further qualifications. When they came back, they adapted plant and animal varieties so that they could thrive in the tropics and especially in the acid soil of the cerrado, the vast, largely flat savannah of the interior. This green revolution hugely increased productivity: over the past 30 years only 20% more land has come into agricultural use but production has risen by 150%, says Pedro Antonio Pereira, Embrapa’s director.

Brazil is now the world’s biggest exporter not only of coffee, sugar, orange juice and tobacco but also of ethanol, beef and chicken, and the second-biggest source of soya products. It is exporting fruit and wine from the São Francisco river region, close to the equator. Its goal, says Mr Pereira, is to become the world’s leading food exporter by 2025, displacing the United States, without inflicting damage on the environment. That means pushing up productivity further, and in particular putting some 70m hectares (173m acres) of degraded pasture to better use. Much of that pasture supports just one cow for every two hectares. With better breeding and improved techniques, each hectare could accommodate three cows as well as some grain and trees.

In São Carlos, in São Paulo state, Embrapa has the world’s only laboratory deploying nanotechnology for agriculture, creating plant varieties that absorb fertiliser more efficiently. Embrapa has a research centre in Central America and is planning to open one in Peru. ”

Another overview of growth

6 Mar 2011. FT.

http://www.ft.com/intl/cms/s/0/01d622fc-481b-11e0-b323-00144feab49a.html

“Brazil in quest to seize farming opportunity. Joe Leahy”

“Wagner Rossi, Brazil’s agriculture minister …

Grain output over the past 20 years has risen 152 per cent while the planted area has grown only 25 per cent.

Much of these productivity gains have been due to domestic innovations in technology and farming practices but they are also partly thanks to increased foreign investment in crops, such as soyabeans.

Today, Brazil stands on the brink of becoming an agricultural superpower.

It is one of the few countries in the world with the climate, technology, farming practices and the sheer quantity of land to be able to satisfy the surging global appetite for food in the coming decades.

“We have a unique opportunity as a country – it’s our time,” says André Pessoa, director of Agroconsult, a consultancy.

Mr Rossi says the country has 120m hectares of degraded land that could be converted to agriculture, which would triple the total area under cultivation.

Expanding into new areas will be necessary to achieve the government’s target of increasing grain yields by more than one-quarter to 190m tonnes per year in the next decade.

Beyond crops, the government also has plans to improve productivity in the beef industry. Brazil is already the world’s biggest exporter of beef with a herd of 205m head of cattle. …

Brazil’s overall exports in agribusiness have grown an average of 14 per cent a year over the past decade to $76.4bn, with growth this year expected at 10 per cent, Mr Rossi says.

Not everyone accepts the government’s figures, particularly on the land available for cultivation.

Agroconsult’s Mr Pessoa says that in reality, the amount of additional degraded land that could be successfully commercially farmed for crops in Brazil is probably closer to 20m hectares. And this would require some deforestation of Brazil’s cerrado savannah forests. Although less well-known than the Amazon, these have rich ecosystems.

“My guess is that we have less than 20m hectares [of land available for cultivation] but that’s still enough to cover what the world will need in the next decade,” he says.

Given this potential, foreign interest in Brazilian agriculture is hardly surprising.

A study commissioned by the Organisation for Economic Co-operation and Development last year estimated global private sector investment in agriculture would reach $14bn in 2010 and could triple over the next five years.

Consultants say much of that was bound for Brazil until the foreign ownership restrictions were introduced last year, which in effect cap land ownership at 12,350 acres (5,000 hectares) by a company that is more than 50 per cent foreign-owned.”

Stages of development

21 Nov 2011. Renaissance Capital.

http://www.fastestbillion.com/res/Research/This_other_Eden-211111.pdf

“African agriculture: This other Eden”

“The modern evolution of the Brazilian agricultural sector can be divided into three distinct phases. …

The geographic expansion phase (1945-early 1970s)

Brazilian agriculture remained primitive during this phase. Yields were consistently low and there were few policy initiatives to modernise the sector. It was characterised by an export sector that relied primarily on coffee, cotton, sugar and a few minor commodities and a semi-subsistence sector that produced for the domestic market. In common with neighbouring Argentina the government ensured that it was the urban-industrial constituency which was favoured at the expense of the rural sector and the agriculture sector. In tandem with the Perónist government next door, the Brazilian government implemented an import-substitution strategy to promote domestic economic growth while limiting foreign debt and foreign exchange. Brazil‘s agricultural exports were heavily taxed, using both direct and indirect policies in an effort to supply the urban sector with cheap agricultural products. Export quotas and licences, as well as prohibitions on trade, were applied sporadically, and often combined with direct export taxes on Brazil‘s major agricultural commodities.

Incredibly, the overall performance of the agriculture sector during the period was reasonable, due to horizontal (i.e., geographic) expansion. No doubt, import substitution and industrialisation policies were major disincentives to investment by landowners and farmers. However, these were circumvented through the maintenance of adequate land access on concessionary terms. Geographic expansion, through the incorporation of new land and aggressive road construction policies, resulted in an annual crop output growth of 4.3% over the period between 1949 and 1963. Yields remained ghastly, however. While the region witnessed a mere 17% yield increase from 1949 until 1969, the total cultivated area increased by almost 83%, to over 39m ha, in the same period.

The intervention/modernisation phase (early 1970s-late 1980s)

As horizontal growth reached its natural limits by the end of the 1960s, the agriculture sector underwent a phase of modernisation driven by capital inputs and strong government intervention. The increased emphasis on capital intensity was aimed at the bigger agri-businesses and ensured that access equipment and chemicals were more readily available. The government introduced a far-reaching reformulation of agricultural strategy which included some key initiatives outlined below.

  • The establishment of a rural credit system in 1965 providing financing on easy terms to commercial agriculture.
  • The implementation of a broad-based research body focusing on agriculture in 1973 – the EMBRAPA system.
  • An improvement in the instruments used in, and the administration of, minimum price policies.
  • Inducements for the formation and expansion of agribusiness complexes.

The availability of subsidised credit expanded markedly and, until the mid-1980s, it had a remarkable impact on both production and productivity. However, in the 1980s, the effectiveness of agricultural credit in expanding output began to weaken as the debt crisis took hold and the rural credit system became increasingly regarded as wasteful and distorted. In the second half of the 1980s the incentives and subsidies of the credit policy were replaced with those provided by the minimum price policy. The minimum price policy, together with the currency devaluations of the 1980s, brought about a considerable expansion and diversification of agricultural exports.

The output of grains and oilseeds increased from 22mnt in 1965, to 58mnt in 1985 and 72mnt in 1989. Exports increased from $1.3bn in 1965, to $5bn in 1975. In a span of about 20 years, Brazilian agro-industrial exports became increasingly diversified, going beyond a small group of tropical commodities (mainly coffee, sugar and cocoa) and incorporating new products such as soybeans, meat, ethanol and fruit. However, agricultural exports increased at a much slower pace than the country‘s total exports. While in 1965 agricultural exports represented 83% of the country‘s total exports, their share declined to 39% in 1985 and to 30% in 1990.

The free-market period (early 1990s-present)

The agriculture sector expanded rapidly in the mid-1980s when the policies, which had diverted resources from agriculture towards the industrial and services sectors, were dropped. Economic reforms in 1985 eliminated domestic and export taxes on agricultural products. Export restrictions on soybeans, cotton and meat were also removed, as was the requirement for corn import licences. During the early 1990s, government intervention and support measures were reduced; some state-owned enterprises were sold, minimum support prices were abolished, government purchases of wheat and milk were removed and the marketing boards for coffee, sugar and wheat were abolished.

However, possibly the most significant economic factor affecting agricultural output in Brazil since the mid-1990s was macroeconomic: the introduction of the Real Economic Stabilisation Plan. With inflation levels in excess of 1,000% before 1994, the government introduced the Real, which stabilised the economy, reduced inflation to approximately 5% per year and ignited a consumption boom which lasted five years. However, in early- 1999, Brazil adopted a floating exchange rate, which led to a significant devaluation of the currency. Being a low-cost industry with a propensity to export, this devaluation had a positive effect on the country‘s agriculture sector – especially soybean and meat production. As a result, production of major crops (soybeans, corn, rice, edible beans, and wheat) rose to 54mnt in 1990, double the 1970 level.

It might seem unusual for a sector to perform well under two seemingly contrasting economic environments. In retrospect, the reason is probably quite simple. The introduction of the real (in conjunction with the microeconomic reforms of that time) helped to promote a more benign investment and domestic consumption environment so that when currency devaluation came, export growth gained prominence.

The reforms of the 1990s have proved enduring. Crop production in Brazil reached an all-time high in 2008, more than a fourfold increase from 1970 and double that of 1990. Exports witnessed a sharp increase in the period 1990-2009, with total export value increasing sixfold in the period.”

Most fertilizer still imported

Undated; probably summer 2012. Kory Melby's Consulting.

http://www.brazilintl.com/agsectors/fertilizer/menu-fertilizer.htm#.UJXBJoXKOHk

“Fertilizer”

” CNA reports that Brazil consumes 24.6 million MT of fertilizer per year. It produces 8.8 million MT. The 15.8 million MT imported costs R$14 billion. Since 1990, Brazil consumption of fertilizers has increased an average of 7% p/yr, while the two largest consumers (China & India) have had a rate of 5%.

Brazil imports 91 percent of its potash needs, 49 percent of the phosphates it uses and 75 percent of its nitrogen-based fertilizer raw materials, according to Joao Cesar de Freitas Pinheiro, fertilizer minerals chief at the South American country’s energy ministry.”

Fertilizer company list:

  • Bunge Fertilizantes
  • Cibrafertil
  • Heringer
  • Louis Dreyfus Commodities
  • MbAC Fertilizer Corp.
  • Vale Fertilizantes
  • Yara do Brasil

Custo Brasil in farming

24 Feb 2012. Farm Futures.

http://farmfutures.com/blogs.aspx/american-farmers-amazed-brazilian-agriculture-3044

“American Farmers ‘Amazed’ by Brazilian Agriculture”

“After ten days of touring Southern Brazil in early February, 34 U.S. farmers from 10 states came away very impressed with this country’s agricultural potential, despite the drought that withered crops on most of the farms we visited. …

Government challenges

If there was one uniform complaint we heard from Brazilians, it was taxes. Most of the local farmers complained that equipment and farm supplies cost a fourth more than in nearby countries due to taxes.

Brazilian farmers are also challenged by tighter government controls, Rigdon notes. “Their financial infrastructure for loans is much more restrictive than ours, and interest rates are too high,” he adds. “It seems a lot of the money is in the hands of a very few. It’s hard to start farming on any scale in the U.S., but here it seems it would be even more difficult.”

Sullivan agrees. They were pretty modern compared to what we expected,” he says. “The only thing they need is money. If they can’t get it from their own government, then China or Japan or corporate investors will provide it.”

Dan Duval, a farmer and precision dealer in Green Valley, Ill., noted that Brazil is a young country full of optimism but frustrated by infrastructure. “They have vast resources and they seem to have a long-term plan,” he says. “They seem more focused on sustainability than we are. We came to appreciate conservation much later in the history of our production, and here they have embraced it more quickly.”

About three-fourths of Brazil’s soybeans are planted to no-till, a fact we learned earlier in the tour when we met with the “pioneer” of Brazilian no-till, Herbert Bartz. ”

Small but increasing use of irrigation

24 Apr 2012. Wikipedia.

http://en.wikipedia.org/wiki/Irrigation_in_Brazil

“Irrigation in Brazil”

“Irrigation in Brazil has been developed through the use of different models. Public involvement in irrigation is relatively new while private investment has traditionally been responsible for irrigation development. Private irrigation predominates in the populated South, Southeast, and Center-West regions with most of the country’s agricultural and industrial development. In the Northeast region, investments made by the public sector seek to stimulate regional development in an area prone to droughts and with serious social problems. These different approaches have resulted in diverse outcomes. Of the 120 million hectares (ha) that are potentially available for agriculture, only about 3.5 million ha are currently under irrigation, although estimates show that 29 million ha are suitable for this practice. …

In 1970 there were fewer than 800,000 hectares (ha) of irrigated land, used mainly as rice paddies in the state of Rio Grande do Sul, and less intensively in some public irrigation areas in the Northeast. Irrigation has really only taken off since then, with the implementation of public investment policies in infrastructure for irrigation, energy transmission and distribution, and finance for equipment and day-to-day expenses through programs such as the Northeast Irrigation Program (PROINE) and the National Irrigation Program (PRONI).

Today about 3.5 million ha are currently under irrigation, although 29 million ha are estimated to be suitable for irrigation by the National Water Agency (ANA). Irrigation is developing through different models. In the South, Southeast, and Center-West regions, private irrigation predominates. with emphasis on planting rice and grain crops. In these areas investment depends on the return obtained from the sale of the irrigated crops. Investment in the Northeast has traditionally been focused on crops such as corn or beans, and has moved recently to irrigated fruit production.[4] …

Global climate change will affect the climate of Northeast Brazil. According to an assessment by Krol and Van Oel for the State of Ceara, the direction of precipitation changes cannot be determined with certainty. Both very significant precipitation losses and moderate precipitation increases should be considered plausible. The impacts of precipitation losses would cause large-scale reductions in the availability of stored surface water, leading to an increasing imbalance between water demand and water supply after 2025. Agricultural production would show negative tendencies after 2025 due to insufficiency of water supply to meet irrigation water demands.[9]”

Risks to Brazilian agriculture

23 May 2012. The Progressive Farmer.

link

“Brazil must rid itself of this notion that it has a captive market at its feet, leading figures told an agribusiness conference in Sao Paulo.

“I have no doubt that China will continue to consume more soybeans and chicken; my doubt is who will produce these soybeans and this chicken,” Anderson Galvao Gomes, CEO at the Celeres farm consultancy declared.

At the heart of the issue is the country's inability to resolve infrastructure problems and reduce the regulatory risks, particularly in relation to foreign investments.

These obstacles are prompting investors to look seriously at alternatives in Africa, Eastern Europe and further afield, leaders said. …

Strict environmental rules drain resources — farmers must reserve 20% or more of land –, while worker-friendly labor laws – an agronomist can't drive a tractor – and a European-level tax burden eats into revenues.

Despite all this, the use of advanced technology means Brazilian soybean farming is still competitive with the U.S. inside the farm gate.

It's outside the farm gate that the problems really start. With new farms at least 300 miles from port, you need efficient logistics.

Unfortunately, they are lousy, with 60% of soybeans still transported by road – the least efficient way of going about it.

New logistics are coming on line, specifically rail links, but a lack of competition on these routes means they will offer only slim cost savings for farmers.

“In Brazil, we only see a 5% to 10% cost saving on rail over road transport, whereas in the U.S. you are talking about a 30% saving,” said SLC's Moura.

Meanwhile, the addition of infrastructure capacity continues to run behind demand, leaders complain.

The transport of this summer's crop has been fairly efficient because of drought losses and heavy forward sales, which allowed exporters to organize better. However, a major expansion in planting area and increase winter corn production means a bumper 2012-13 crop would stretch infrastructure to the limit, analysts say.

That all feeds back into farm costs, which have averaged at more than double the U.S. for soybeans over the last decade, says Celeres' Galvao.

“Without control of these costs, Brazil will be in limited on how far it can expand,” he said.

RULES AND REGULATIONS

But the problem goes beyond costs.

Brazil has turned its back on foreign investment in farm production for the past two years.

Following the attorney general's May 2010 ruling banning anything but small farm purchases by foreigners, many investors have started scoping African, Asian and Eastern European farm options, according to local consultants.

The government has promised to adapt the rules to allow productive investments, but insiders say Congressional battles and legal challenges will likely delay any definition on the issue for some time, maybe years.

“Without clarity, international farm investors have to look elsewhere,” said Fernando Muraro, head of the AgRural farm consultancy.

Add to that the uncertainty over environmental regulations, and you’ve got a real issue.

The disorderly occupation of Brazil’s Cerrado and the subsequent tightening of environmental laws have spawned a sea of litigation against farmers.

These potential liabilities hang over those who acquire land in frontier regions, creating a barrier to investment.

President Dilma Rousseff will by the weekend sign a new Forestry Code, which is aimed at clearing these cases.

But Celeres’ Galvao notes that the new law will be fiercely challenged by prosecutors in the courts and the question is a long way from being settled.

In the meantime, the competition grows.

Ukraine now produces 2.7 mmt of soybeans when five years ago it produced just 700,000 mt. ”

””

Climate change effects could reduce water supply

21 Jun 2012. Wikipedia.

http://en.wikipedia.org/wiki/Water_resources_management_in_Brazil

“Water resources management in Brazil”

“Brazil’s Government considers that, despite many studies, there is still much uncertainty about the consequences of climate change and its links to worsening critical events.[8] On the other hand, the Technical Summary of the Fourth Assessment Report of the UNFCC, reflecting a consensus view, indicates a potential Amazon forest loss of between 20 and 80% as a result of climate impacts induced by a temperature increase in the basin of between 2.0 and 3.0 degrees Celsius. The IPCC is also indicating a likelihood of major biodiversity extinctions as a consequence. Specifically, according to the Earth Simulator, temperature increases and disruption in precipitation cycles (up to a 90% reduction by the end of the century) could seriously hamper the workings of the Amazon as a forest ecosystem, reducing its capacity to retain carbon, increasing its soil temperature, and eventually forcing the Amazon through a gradual process of savannization.[26] These predictions were reinforced in 2005, when large sections of southwestern Amazonia experienced one of the most intense droughts of the last hundred years. The drought severely affected human population along the main channel of the Amazon River and its western and southwestern tributaries.”

[see Nov 2007 entry above for one ref supporting this bleak view]

Government support for agriculture

28 Jun 2012. Brazil gov.

http://www.brasil.gov.br/para/press/press-releases/brazil-launches-agriculture-and-livestock-plan-for-the-2012-2013-crop/br_model1?set_language=en

[details of the latest “Agriculture and Livestock Plan for Brazil”]

Overview of the fertilizer industry in Brazil

6 Jul 2012. Heringer (one of the larger fertilizer companies).

http://www.heringer.com.br/heringer/web/conteudo_eni.asp?idioma=1&tipo=29544&conta=46&img=29529

“Brazilian Fertilizer Market”

“According to the National Fertilizer Association (ANDA), the fertilizers market in Brazil registered a volume of 24.5 million metric tons in 2010. Brazil is the world’s fourth largest consumer of nutrients used in fertilizer production, equal to nearly 5.7% of global consumption, behind only China, India and the United States.

Despite this fact, the application of the product to crops is still low in comparison to countries with developed agriculture. Nonetheless, the rate at which Brazilian demand is growing has surpassed global growth, even though this growth in demand has been met by increased imports as the industry is unable to meet the domestic demand that has grown at such high rates.

… Increasing the domestic production’s share of total sales will require investments in production (subject to geological limits) and logistics infrastructure (transport, warehousing and ports). …

Brazil’s importance in the global market stems not only from the volume, but also because of the fact that demand is concentrated in the second half of the year (other major purchasing countries make most of their purchases in the first half of the year as a result of their agricultural calendars), which gives the country a fair deal of bargaining power.

According to ANDA, the country’s 2010/2011 harvest registered a 5% compound annual growth rate (CAGR) in fertilizer consumption compared to the 1969/1970 harvest. … Fertilizantes Heringer S.A. develops and commercializes products for vegetable nutrition …

The Brazilian fertilizer industry underwent a significant process of consolidation in recent years when small regional companies were acquired, lost market share or left the market. According to LAFIS, in 1995, 40.8% of the NPK market was concentrated in the six largest companies in the sector while in 2008, the market share of these companies increased to approximately 86%. Heringer’s growth followed the concentration of the NPK market and we are among the three largest fertilizer companies in Brazil, with market share of 17.0% in 2011. Our main competitors are Bunge, Fertipar, Mosaic and Yara.

The following graph shows the leading companies in the sector in the raw material and NPK formula production phases:

Fertilizer consumption in Brazil is concentrated in four major crops: soy, corn, sugarcane and coffee. In 2011, these crops accounted for approximately 70% of all the fertilizer consumed in the country.

According to ANDA, the fertilizer industry in Brazil sold 28.3 million metric tons in 2011.

The increase in fertilizer consumption is a fundamental driver for increasing agricultural productivity. Planted areas and fertilizer application rates in Brazil have been expanding as a result of solid grain prices, improvements in transport and adequate conditions for growth (climate and soil).”

Ports a bottleneck for fertilizers

16 Aug 2012. Reuters via Chicago Tribune.

http://articles.chicagotribune.com/2012-08-16/news/sns-rt-fertilizer-brazildelaysl2e8jgf0j-20120816_1_brazilian-ports-fertilizer-imports-grain

“Fertilizer trapped at ports threatens Brazil grain crops”

“Over a million tonnes of fertilizer at ports in Brazil might not make it to local soy and corn farmers in time for planting to help fill a supply gap left by a drought in the U.S. farm belt.

Brazil, which has not invested significantly in its ports in decades, relies on imports for more than 80 percent of its fertilizer needs. A flurry of strikes by port workers, inspectors and truckers has exposed this as a major weakness of the Brazilian agricultural sector.

Brazil is the most important producer and exporter of food after the United States. In addition to leading in sugar, coffee, orange juice, beef and poultry exports, Brazil has become the second largest soy and third largest corn exporter.

Global markets are looking to Brazil to help refill grain stocks after the U.S. drought created a shortfall of more than 50 million tonnes of corn.

A lineup of more than 60 ships carrying fertilizer, with some waiting 48 days to unload at Brazil's main grain port of Paranagua, highlights the dire state of the county's infrastructure after decades of under investment. The constant bottlenecks and high expense contribute to what investors call the “Brazil cost.”

“There is a risk to the supply of fertilizer,” said David Roquetti, the chief executive of fertilizer distribution association Anda. “Sales by mixers and distributors are in chaos right now. They are being held hostage.” …

Large grain traders such as Bunge Ltd, Archer Daniels Midland Co and Cargill Inc are some of the main buyers of this fertilizer in Brazil, which they then trade to farmers in exchange for soybeans and corn.”

Analysis of global fertilizer market

27 Aug 2012. CRU (consulting co.) presentation at an ANDA conference.

http://www.anda.org.br/pdfs/palestras_2012/Fertilizer.pdf

“Global Fertilizer Supply/Demand Five-Year Market Outlook (2012-2017)”

“Conclusions

  • Price projections corn, soybeans and wheat to stay well above first half of the 2000s on tighter stocks and ever- rising demand for food
  • Urea trade to see steady growth over next five years rising to over 50 million mt by 2017 – prices to stay above post 2008-crisis levels
  • Phosphate China production to stabilise over next five years; Brazilian P2P5 demand to support market; DAP pricing to rebound from 2013
  • Potash weakening supply/demand balance to put downward pressure on prices over the next five years”

Institutional investors want land; scale of agriculture

29 Sep 2012. Al Jazeera.

http://www.aljazeera.com/indepth/features/2012/09/2012913112137744956.html

“US farmers scramble to buy Brazil's farmland. Gabriel Elizondo”

“A decade ago, the majority of foreign agricultural money coming into Brazil was from a relatively small to medium-sized farmers like Corzine. In the past few years, however, cash has been pouring in from foreign hedge funds, private equity, and mutual fund firms in New York and Europe who are now the key foreign investors in developing country agricultural markets.

In 2010, $14bn was invested by global private-sector investment in agriculture, and the figure was expected to triple by 2015, according to an OECD study.

Exactly how much of that foreign money flowed into Brazil in the past few years is not clear, but Melby estimates it's “billions of dollars”.

Horn said in the past two years he has been contacted by several international investment funds looking to purchase agricultural land in four frontier markets - which includes Brazil - with initial investments of $25m to $100m.

“I was at a conference in New York, standing room only, and I heard about a Scandinavian nurses' pension fund that was looking to invest $300m as a first step into the agricultural lands market,” Horn said. “The quantity of money on the table creates a very interesting situation in a place like Brazil.” …

And agriculture is big business in Brazil, accounting for 37 per cent of all exports, 37 per cent of all jobs, and 23 per cent of Brazil's $2.3tn GDP, according to Homero Pereira, a congressman from Mato Grosso, one of the country's most important agricultural states.”

Embrapa is taking climate change seriously

17 Oct 2012. Conference abstracts.

http://www.agropolis.fr/pdf/societe-biologie-2012/recueil-resumes.pdf

“RECUEIL DE RÉSUMÉS Montpellier Colloque France-Brésil 2012 Des recherches pour l’agronomie, la biodiversité et la sante”

“Climate change and Food security in Brazil: Evaluation of vulnerability, adaptability and mitigation. Eduardo DELGADO ASSAD Senior Researcher of Embrapa

The rise in temperature due to global warming could provoke seed crop losses of R$ 7.4 billion in 2020 – and up to R$ 14 billion in 2070 – generating drastic changes to the agricultural production map in Brazil. If nothing is done to mitigate the effects of the climate changes and to adapt the crops to the new reality, then we will witness a migration of plants to regions where they are not native in search of better climatic conditions. Areas which are currently the biggest producers of grains may no longer be suitable for plantation well before the end of the century. Cassava may vanish from the semi‐arid region, and coffee will have a slim chance of survival in the southeast. On the other hand, the southern region of Brazil, which, due to the high risk of frost, is presently more restrictive in terms of crops suited to the tropical climate, should witness a fall in this extreme event, thus becoming more suitable for planting cassava, coffee and sugarcane, but no longer for soybean, as the region is likely to become more vulnerable to water shortages. Meanwhile, sugarcane could spread throughout the country to the point of doubling its area of occurrence. The proposal is discuss about this possible future situation in Brazil, and what the government prepare to reduce this problem, and show the main actions and studies of vulnerability, adaptation and mitigation under way with the objective to improving food safety. References

Zullo Jr, J; Pinto Hs; Assad Ed; Avila Amh . Potential for growing Arabica coffee in the extreme south of Brazil in a warmer world. Climatic Change, v. 1, p. 1573‐1480, 2011.

Zullo Jr J; Pinto Hs; Assad Ed; Evangelista Sr. Potential Economic Impacts of Global Warming on Two Brazilian Commodities, According to IPCC Prognostics. Terrae (Campinas), v. 3, p. 28, 2008.

Zullo Jr J; Pinto Hs; Assad Ed. Impact assessment study of climate change on agricultural zoning. Meteorological Applications, v. 1, p. 69‐80, 2006.

Assad Ed; Pinto Hs; Zullo Jr J; Marin Fr; Pellegrino Gq; Evangelista, Sr; Otavian, A.F. . Aquecimento Global e a Nova Geografia da produção Agrícola no Brasil. 1. ed. Brasília: Embaixada Britânica, 2008. v. 1, 82 p.”

High cost of hauling farm products

1 Nov 2012. Reuters.

http://www.reuters.com/article/2012/11/01/us-brazil-transport-grains-idUSBRE8A014020121101

“The long, brutal haul from farm to port in Brazil. Peter Murphy”

“The cost of Mendonça's haul [Mato Grosso to Santos] amounted to nearly 40 percent of what the 37 metric tonnes (40.7 tons) of corn sold for in Santos. Transport across a similar distance in the United States, mostly by barge, amounts to only 10 percent of the price of U.S. corn at port.

Goods can also take three times as long to move a given distance as they do in China, a country that has used its run of economic success to invest heavily in roads, rail and ports. …

the low-cost advantage that Brazil once enjoyed is succumbing to rising transport costs. The jaunt from farm to port in Brazil already costs more than twice the sea freight fees to China, and that ratio is about to climb sharply as wages rise and the laws on rest periods for drivers take effect. …

Three hours in, we reached Alto Araguaia, a town where Mendonça's journey could easily end. That's where America Latina Logistica SA, a rail operator, runs the one link from the farm belt directly to Santos, the country's biggest port.

The company's 80-railcar trains haul as much corn as 230 two-trailer rigs like Mendonça's, but burn the diesel of just 40 of them. High demand after the harvest, though, means the trains run full and at prices producers say don't save much money.

Besides, the train takes just as long, with extended loading times at several terminals along the track and a steep decline near Santos port that has to be taken at crawling speed.

Brazil's rail network, spanning 29,000 km (18,019 miles), is now smaller than it was 90 years ago.”