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Covering South America

Agriculture.com Staff 05/15/2007 @ 2:23pm

My stay in South America this winter lasted 25 days. Traveling through Argentina, Paraguay and Brazil with U.S. producers and the American Soybean Association, I was able to see a large portion of South America's corn and soybean production areas.

It would be impossible to share everything learned. Instead, the following are 10 things I learned and you should know.

  1. Double-cropped corn
    Double-cropping with corn is becoming a very popular practice for Brazilian soybean producers. The market is telling them to plant corn, and they have found a way to produce more without using more land. In the future, this corn could be exported to the U.S. in the form of ethanol. In fact, bigger crops in South America could add nearly 7 to 8 million tons of new corn export competition to the world supply, according to USDA estimates.

    Environmental critics say if Brazilian producers don't refill the soil with lost nitrogen from producing corn, ultimately the soybeans planted on the same land will lose yield significantly over time.

    Argentinean producers want to plant more corn as well. There seems to be a conundrum building for them in this regard.

    The area where there is room to expand acres is in northern Argentina. But because of soil fertility issues and a drier weather pattern, this area is not suited for high-yield corn production. So, to increase corn acres, Argentina may be faced with replacing its best soybean acres in the central part of the country with corn.

  2. Asian soy rust control
    The fungus has become just another disease to control for Brazilian soybean producers. Though it's the most costly disease to control, what's important to note is producers' attitudes toward the disease have calmed.

    If Asian rust spreads deeper into the U.S., producers should know the fungus won't put them out of business. And accepting that it needs to be scouted for and controlled with more intensity than other diseases can go a long way in calming fears.

  3. Monsanto tech fee
    In Argentina, the wheels are in motion for new legislation that would force producers to finally pay the Roundup Ready technology fee.

    This issue has had many U.S. producers fired up for years. The ones on this trip learned that not only do Argentinean producers avoid paying the tech fee, they also pay less for a bag of Roundup Ready soybean seed.

  4. Alternative crop uses
    This means revenue from streams that haven't been there before. The world demand for renewable fuels is aiding Brazilian farmers who have been used to relying on the U.S. soybean market. For instance, ethanol is offering opportunities for raising more corn.

    It also offers the Brazilian farmer a choice to raise more sugarcane. Biodiesel offers another market for the soybean crop.

  5. Government support
    When Argentinean farmers stage a strike over a governmental tax on exports, no change occurs because the government knows the farmers are not unified (sound familiar?). Since not all farmers take part in the strike, the activist movement breaks down quickly.

    As a result, farmers' efforts fail in getting better roads, improved ports, and other infrastructure improvements to get crops on the world market more quickly. Meanwhile, Brazil's government has pledged to improve the agriculture infrastructure within the next four years.

    For the U.S. farmer, this means increased competition on the world soybean market. And eventually it might mean Brazil will be more readily available to export ethanol to the U.S.

  6. Improved attitudes
    This is happening mainly due to higher commodity prices and better crops. Keep in mind, the past few years have been either bad crop years or poor price years. This year, South American producers are enjoying a good crop season while U.S. markets are up as well.

    This type of year is much needed. Many producers have high debt from previous growing seasons, and input costs continue to go up.

    To offset financial problems, the banking industry appears to be willing to work with the farmers as much as they can. For instance, some loans have been deferred for an extra two to three years. Overall, South American farmers' attitudes appear to be strong.

  7. U.S.-Brazil competition
    With more world opportunities presenting themselves, the two countries are working together more often. As the renewable energy era takes hold and the demand for protein increases throughout the world, South American producers see a need for all Western Hemisphere producers to work together.

    For instance, the American Soybean Association pitched a joint project for Argentina, Paraguay, Brazil, and U.S. producers in getting the India soybean market open. So, it appears the two continents will seek future ventures.

  8. Exchange rate
    Investing in Brazilian agriculture is seen as a good idea if you have money to lose. The advice given includes phrases like, "It really takes $1 million if you're serious about farming in Brazil." Others say, "Rent land before you buy in Brazil. That way, your overhead isn't as large if you need to get out."

    Some U.S. investors say for every acre in the U.S., you can buy six at the same price in Brazil.

    One bit of advice from local farmers already involved in Brazilian agriculture is no matter what you do, understand the economy fluctuates a lot, and the relationship between the Brazilian real and the U.S. dollar is unstable. Brazilian farmers are saying the exchange rate instability is the hardest part of turning a profit.

  9. Equipment sales
    Sales of farm equipment jumped 33% in February as farmers begin reaping the benefits of high commodities prices.
  10. Progress versus jobs
    In South America, you see bigger equipment doing the work humans once did. This is nothing new, but may be accentuated more and more.

    Generally, the Brazilian agriculture sector is not as efficient as the U.S. industry. Keeping mechanization out of its society, however, is allowing more people to be employed.

    For instance, one ethanol plant we visited used 1,500 employees to cut 83,000 acres of sugarcane. This operation is big enough and more than capable of buying equipment to harvest the sugarcane, but it doesn't.

    This is a microcosmic example of what mechanization could do to thousands of Brazilians relying on agriculture for their livelihood. This concept is nothing new, in fact, it's happening in China as well.

What it means to you
Comparing my trip to Brazil in 2004 with this one in 2007, it's evident Brazil's agriculture industry is working with bigger equipment, better roads, plans for a national rail system, bigger river ports and a more efficient mindset.

For the U.S. producer, this will mean increased competition on the world export market.

My stay in South America this winter lasted 25 days. Traveling through Argentina, Paraguay and Brazil with U.S. producers and the American Soybean Association, I was able to see a large portion of South America's corn and soybean production areas.

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