BRAZIL’S SOYBEAN PRODUCTION POTENTIAL AND COMPETITIVE POSITION VS. U.S. Dr. Robert Wisner Iowa State University

SOURCES OF INFORMATION 4farms in three states 2railroad companies 1barge company 2truck firms 1major grain company 1soybean processor 1wet corn miller 1export elevator 1port authority 2country elevators 3soybean seed producers 3livestock producers 1new farm storage facility

HISTORY 1971 U.S. devalues dollar USSR buys huge amounts of U.S. grain harsh El Nino reduces Peruvian fish meal 1973 U.S. food companies, livestock feeders and consumers raise fears of running out of soy products June, 1973, President Nixon embargos soybean and soymeal exports soy importers buy land in Brazil to grow soybeans

BRAZIL SOYBEAN PRODUCTION Mil. Tons Mil. Bu , ,600 USDA Proj ,766

Brazil’s Cerrados Land purchase prices: $100/Acre or less plus clearing costs Land purchase prices: $100/Acre or less plus clearing costs Quality varies, buyer beware Quality varies, buyer beware Web site for real estate: _agriculture_frontier.htm Web site for real estate: _agriculture_frontier.htm

Crops Raised in Cerrados Soybeans Soybeans Wheat Wheat Rice Rice Sugar cane Sugar cane Cotton Cotton Corn Corn Coffee Coffee Pasture Pasture

Brazil’s Cerrados Soil types: sandy to sandy loam Soil types: sandy to sandy loam Aluminum content: 0.05 to 0.06 Aluminum content: 0.05 to 0.06 Requires about 1.6 tons of lime/A. Requires about 1.6 tons of lime/A. Avg. annual rainfall: 35 to 80 inches, depending on the location Avg. annual rainfall: 35 to 80 inches, depending on the location Avg. temperature: 73 F. range: Avg. temperature: 73 F. range: Irrigation water available Irrigation water available Double/triple cropping possible Double/triple cropping possible

Rate of Expansion in South American Soybean production Brazil: = 55 mil. bu./year Brazil: = 55 mil. bu./year Argentina: = 51 mil. bu./year Argentina: = 51 mil. bu./year Projected expansions: Projected expansions: Brazil +74 mil. bu. Brazil +74 mil. bu. Argentina +103 mil bu. Argentina +103 mil bu. Other small expansions in Bolivia, Paraguay, Uraguay Other small expansions in Bolivia, Paraguay, Uraguay

Brazil Corn Brazil is a major corn grower Brazil is a major corn grower Brazil exports no corn in most years Brazil exports no corn in most years Reason: Reason: Transport costs nearly equal price of corn Transport costs nearly equal price of corn What it would take for Brazil to export corn: approximate doubling of corn yields What it would take for Brazil to export corn: approximate doubling of corn yields

Estimated Costs of Producing Soybeans, Iowa & Brazil, 2000 Non-land costs Seed +innoculant Fertilizer & lime Labor Chemicals Crop insurance Interest Machinery Miscellaneous Sub-total Land Total Normal yields Cost per acre Cost per bushel Mato Matto IowaParanáGrossoIowaParanáGrosso $ 18.00$10.00 $0.36$0.22$ $154.99$132.48$141.17$3.10$2.94$ $294.99$174.48$173.17$5.90$3.87$

Farm access road through the small scrub brush of the Cerrados.

Typical dirt road in Brazil during the beginning of the dry season. Brazil Cerrados Top Soil 120 ft

Cotton planted on Cerrados

Newly Cleared Land In Brazil Planted to Upland Rice

Current and potential production in expansion areas(mmt) Total mil. Bu.

Major waterway systems

Sapezal export route

Central Iowa Export Route

Major railroads

Ferronorte rail cars, the old and the new

Railroads 1.Are in bad condition a.different rail gauges b.less than 300 miles of new and upgraded lines c.trains derail regularly on old rail 2.Ferronorte (Soy Railroad) purchased 50 cutting edge technology locomotives and 700 new 105-ton aluminum covered hopper cars 3.Derailments essentially destroy aluminum cars 4. Major grain company buying 40 smaller hoppers 5.Very limited grain loading facilities on the new rail

Railroads - cont’d 6.New loading facilities unlikely until all new rail completed 7.Seasonal grain movements unlikely to support new railroads 8. Directly serve only small areas 9.Grain carrying capacity likely to increase but at a very modest rate

Conclusions Brazil has large and clear cost advantage in soybean production Brazil soybean transport costs range from 100% to 400% higher than U.S. transport costs Brazil land clearing and soy production will likely continue at the historical rate Brazil’s transportation investments will be limited by: a.capital shortages b.environmental and social problems c.politics

Alternatives for U.S. Agriculture Reduce marketing costs Increased use of semi trucks Bypass high cost elevators Reduce cost of producing U.S. soybeans through lower land costs Emphasize value added products

Y and justice for all The U.S. Department of Agriculture (USDA) prohibits discrimination in all its programs and activities on the basis of race, color, national origin, gender, religion, age, disability, political beliefs, sexual orientation, and marital or family status. (Not all prohibited bases apply to all programs.) Many materials can be made available in alternative formats for ADA clients. To file a complaint of discrimination, write USDA, Office of Civil Rights, Room 326-W, Whitten Building, 14 th and Independence Avenue, SW, Washington, DC or call Issued in furtherance of Cooperative Extension work, Acts of May 8 and June 30, 1914, in cooperation with the U.S. Department of Agriculture. Stanley R. Johnson, director, Cooperative Extension Service, Iowa State University of Science and Technology, Ames, Iowa.