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.
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.
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.”