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Changes coming in BRIC nations
BRIC is an acronym for four of the world’s fastest developing nations Brazil, Russia, India and China. BRIC could also be a building block for dramatic changes in world agricultural markets, both as new outlets for U.S. products and competition.
That’s the impression left Thursday by a panel of trade experts who spoke at the USDA’s Agricultural Outlook Forum in the Washington, DC area.
No group of four people would possibly predict the future of trade with these four big and complex countries. But they gave some tantalizing hints of possibilities. Here are some:
Could Brazil become a competitor in corn exports as well as soybeans?
Seneri Paludo of the Mato Grosso Farm Bureau in Brazil told a standing room only crowd that more pasture land in the his state is being converted to soybeans and that there’s a lot of room for double cropping corn after soybeans. Of some 47 million acres of cropland, only 2 million is currently planted to corn.
Seneri Paludo of the Mato Grosso Farm Bureau in Brazil
But as cattle move off pasture and into feedlots, Brazil is feeing more corn and soybeans to a domestic market. When a new highway is opened from Mato Grosso north to the Amazon, corn prices for farmers will likely rise and Brazil will be able to export corn, or beef, more efficiently. It also opens up Brazil’s fastest growing consumer market in the Northeast, what was once the one of the poorest regions in that country. Paludo told Agriculture.com in an interview later that in the short run, the transportation corridor to the north will likely increase exports but in the long run the bigger market may be in Brazil’s Northeast.
“The internal market is growing in Brazil, just like in China,” Paludo said earlier.
He sees Russia a potential growth market for Brazil’s beef exports.
Russian could be an even better market for the U.S. as well, now that it’s been approved for joining the World Trade Organization, said Eric Trachtenberg of McLarty Associates in Atlanta, Georgia.
The former USDA trade authority said that from 2006 to 2011, consumer spending on food in Russia has grown by 114%, thanks to Russia’s petroleum-driven prosperity. Russia already imports food, with as much as 70% of the raw materials for some meat processing plants coming from outside of the country. Russia is already the fourth largest export market for U.S. poultry, fifth for beef exports and sixth for pork, Trachtenberg said.
Once Russia formally joins the WTO, probably in August, its phytosanitary rules on meat imports should become clearer and tariffs and quotas will start to drop.
Yet, when he was taking questions from the audience, Trachtenberg shared some doubts, too.
Russia’s government has made a commitment to the WTO, he said. “The question is, how deep that commitment is.”
The bureaucracy is unreformed and corruption remains.
“I believe the accession (to the WTO) could improve things, but how much, I don’t think anybody knows,” he said.
India has strong demand for food, too, where inflation in prices for meat, eggs and poultry is running at about 25%. But it’s probably the most protected major agricultural market in the world, said Rip Landes, an agricultural economist with the USDA’s Economic Research Service.
India subsidizes its own agriculture. And state governments can halt the shipment of essential commodities across state lines if those crops are in short supply.
Much of the protectionism is at the state, not the federal level, in India, Landes said. Trucks pay taxes when moving from one state to another.
“One observer made the comment that India really needs to have a free trade agreement with itself,” he said.
Some little know facts about India: It’s also one of the few nations to export corn. And it’s a leading exporter beef, mainly culled cows. That’s almost a state secret in a country where cows are literally sacred.
China remains a promising growth market for many farm products that is still difficult to predict.
William Westman, vice president of international trade for the American Meat Institute, who has lived in China, said it’s an extremely complex market.
“If anyone claims to be an expert, ask them how long they lived there and what they did,” said Westman, who is also a former USDA staffer.
China is already America’s third largest export market for pork, with even more potential. In any week, somewhere in China a 500-head processing facility is either being built or retooled, he said.
China still has restrictions on beef imports.
“What’s going to happen when the country opens to U.S. beef? They are going to move the markets,” Westman said.