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Brazil investments

During a recent visit to Brazil, it was apparent the country's economy is on an upswing. In particular, the agricultural sector is enjoying increased government backing, with the highest amount of infrastructure support in history to build better roads, railways, and grain shipping ports.

Economic success attracts investors, though. For Brazil, that means dealing with foreign parties.

It's not surprising, with all of the foreign investment in farmland since the 1990s, Brazil is trying not to lose its identity. As a result, the Brazilian government has passed legislation to promote foreign investment by way of farmer groups vs. outside investment firms such as index funds.

U.S. investment

Michael Gretter, brother Mark, and friend Perry Sieren, all Keokuk, Iowa, natives, invested in Brazilian farmland eight years ago. The Iowa-based producers still see plenty of opportunity in South American farming.

“Compared to previous years, you're seeing fewer individual U.S. farmers coming here and more larger investor groups. With the U.S. farm industry improving, combined with increased land prices in South America, there may be less incentive to farm in Brazil. “But we enjoy the climate, the people, and all that Brazil offers. So we still see opportunity.”

From a social standpoint, the Gretter brothers and Sieren say it's important to embrace the culture. “We get along very well with our Brazilian-born farmhands and neighbors. We realize we are guests in this country,” Mark says.

In 2011, the Iowa natives are growing cotton, soybeans, and corn on their northeast Brazilian operation. “I love it down here,” Michael says. “We introduced higher equipment and seed technologies down here, much like in Iowa. For instance, we planted single-stacked Bt corn this year. Next year, we will use double-stacked treated corn, Bt-treated cotton, and Roundup Ready soybeans.”

Before Bt varieties, the Iowa native farmers were recording corn yields of 60 bushels per acre. With genetically modified corn seed, this year's yields are expected around 180 bushels per acre.

Group interest

Larger ag-based investment groups have the best business model to work in Brazil, according to Kory Melby, a native of Minnesota now living in Brazil as an agricultural business consultant. “For instance, the bigger foreign companies that have been doing business in Brazil for nearly 30 years with entrenched employees, business styles, and relationships tend to succeed more vs. foreign-based start-ups with a my-way-or-the-highway mind-set,” Melby says.

Scott Shanks serves as general manager of Fazenda United, an investment group of U.S. interests. Fazenda United owns 21,000 acres of Brazilian farmland. Though his current employer has only been in Brazil for five years, Shanks has called Brazil his home since 1999.

“There are still a lot of U.S. farmers who come here, want to see and understand the farming atmosphere, and see what the opportunities are,” Shanks says. “That traffic is as high as ever.”

As inputs increase and farm sizes grow, the investment interest has gone from a small business owner coming to Brazil 10 years ago to a group of farmers, he says.

In Mato Grosso, the number one soybean-producing state, average soybean production is 50 sacks per hectare or 44 bushels per acre. For the 2012 crop cycle, the cost of fertilizer, seed, and chemical equates to 30 sacks.

“With those 20 sacks left over, eight will be set aside to pay for land rent. Another seven or eight sacks disappear to fuel and labor costs. The four or five sacks left will be used to keep the wife happy,” Melby says. “If I produce 55 or 60 sacks, now I have extra.”

In the 1980s, the state of Mato Grosso was labeled the area of South America with the greatest potential for millions of acres of soybean production. That title has been transferred to the New Agricultural Frontier of Brazil's Cerrado.

Though farmers have produced crops here for 10 years, electricity just showed up last year in this town located on a northeastern Brazil plateau thousands of feet above sea level. Farmers journeyed here from the southern states of Rio Grande do Sul and Parana. The land-seeking farmers were led here by a cooperative to clear Cerrado land that was priced, at the time, at $66 per acre. After two years, the co-op pulled out, but the farm families stayed. Today, developed land sales for $1,890 per acre.

With over 766,947 acres in production, this New Agricultural Frontier has tremendous potential. In fact, the entire plateau, which includes four cities, has another 12.3 million acres of land that can be cleared for crop production.

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Wilson Marcolin, 37, a third-generation farmer, left the family's southern Brazil farm site in Parana to extend the operation on the New Agricultural Frontier. In Nova Santa Rosa, he met his would-be wife, Geisa, and they now raise two children on 2,474 acres.

Notes on Brazil's farm industry

This list of impressions is a result of visiting with farmers, officials, reporters, and market analysts.

• The government's social programs help smaller farmers buy tractors and improve their chances to grow.

• With many signs of poverty, the country has been blessed with the soybean.

• Like the U.S., Brazil is seeing a shifting of where crops are grown and used.

• More cotton is being raised in 2011.

• For humanitarian efforts, the sugarcane industry is being entirely mechanized.

• Four new railroads are planned throughout the country.

• Farmers are adopting high-tech seed and equipment practices.

• The second corn crop size will soon be larger than the regular season crop.

• Brazil's crop insurance participation is very low.

• Farmers are taking advantage of higher markets by forward-selling some of the 2012 crop.

• Though infrastructure improvements are visible, many farmers remain frustrated with grain transportation.

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This year, the Marcolins are growing 1,979 acres of soybeans and 495 acres of corn. “If I can, I'd like to keep my rotation of 70% soybeans and 30% corn,” Marcolin says.

Wagner Rossi, Brazil Agriculture Minister, is developing new documents that spell out which foreign investments are allowed and which are not.

“For instance, those big-fund investors are not welcome,” Rossi says. “However, individual farmers who come from the U.S. or wherever are welcome. They help our agriculture grow.”

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