How Brazil Out Farmed The American Farmer

Via Gateway to South America, commentary on Brazil’s ascension to the global soyabean lead:

After a half-century of dominance, the U.S. is losing its edge in agriculture to a booming, high-tech Latin American powerhouse. Its secret weapon? Soyabeans.

A big swath of soya-producing lands that stretch between the Andes and the Atlantic forest and from northern Argentina to the southern flanks of the Amazon basin. Soylandia, as this immense region might be called, is almost entirely unknown to Americans and indeed much of the Western World. But it may well be the future of one of the world’s most important industries: grain agriculture.

Brazil’s rapid rise in the growing of Cereals – from amateur to global power in the space of a couple of decades. Its scale of operations is nothing short of stunning. A big farm in Illinois may cover 3,000 acres; but farms in Soyalandia are routinely ten times as big.

Twenty years ago it would have seemed absurd for an American farmers to move into South America. U.S. growers still aren’t rushing in en masse – These is only around 400 U.S. groups invested in this region – but the notion of doing so no longer seems ridiculous. Today Soyalandia, with nearly 60% of the world market, dominates the global soya trade. And Brazil – the heart of Soyalandia – is an agricultural powerhouse. Not only is it the world’s biggest soya exporter, a title it seized from the U.S. in 2006, but it has the world’s biggest farm trade surplus.  It is also the leading producer of beef, poultry, pork, ethanol, coffee, orange juice concentrate, sugar, and tobacco, Brazil has seen farm exports grow an average of 20% a year since 2000, according to the USDA.

But of all those products, soya is by far the most important – and demand is exploding. Asia has long produced its own soya foods: tofu, soya milk, miso. Now soya is ever more prominent in the U.S. diet, though it is often hidden by aliases like “hydrolyzed vegetable protein.” Meanwhile the use of soya for animal feed is soaring. China wants it for its fast-growing poultry, swine, and fish-farming industries, while Europe increasingly demands it because soya-fed cattle can’t develop mad cow disease.

The main boost in demand, however, is industrial. Non toxic, non polluting, and biodegradable, soya is becoming the precursor of choice for manufacturing paints, solvents, textiles, lubricants, plastics of every variety, and countless other products. Soya provides oil for chainsaw motors in Montana, glue for plywood cabinets in Michigan, foam insulation for offices in Massachusetts, and backing for artificial turf in putting greens and stadiums throughout the Midwest. In July, Ford  announced it would replace the petroleum-based polyurethane foam cushions in its car seats with cushions made from soy foam. The company’s first green-seat car: the 2008 Mustang. Muscle-car soya! More important still, the fuel in the tank can also be made from soy biodiesel. With oil stumbling toward $100 plus a barrel, Brazil is positioned to become the Saudi Arabia of biofuels. (It could also become a Saudi-like power in conventional fuel: The state oil company, Petrobras (PZE), found the biggest new petroleum reserve in 30 years in 2007 ( 155 miles offshore from Rio de Janeiro.)

Ordinarily the soya boom would represent a huge opportunity for U.S. agriculture. Since World War II, U.S. farmers have led the world in the three most important staple crops: wheat, corn, and soya. Midwestern harvests have steadily increased during that time, in large part due to American prowess at moving laboratory innovations – improved seeds, new fertilizing methods – to the field and to the global market. Along the way, agriculture became the crown jewel of U.S. exports. Even as cars, steel, and other former standouts lost market share to foreign competitors, agriculture reliably put up impressive U.S. balance of trade numbers, partially offsetting America’s apparently limitless appetite for Pokemons, Perrier, and Priuses.

Today that is changing. As the rise of Soylandia demonstrates, crops formerly dominated by temperate-zone producers can be transformed into tropical commodities. Latin American soya production is the equal of anything in Iowa or Illinois. Indeed, it’s often better: Soya bean yields in Brazil have surpassed the U.S. Average costs per bushel in the U.S. are about $6.70, including domestic and ocean freight, while Brazilians weigh in at $5.05.

In the U.S., soya has little room left to expand. There just isn’t much unused good farmland left. Worse, ethanol subsidies have driven the prices for corn so high that many American soya farmers are switching crops. Despite the global rise in soya demand and near-record prices, the USDA reported in July that U.S. soya plantings fallen considerably. Meanwhile, the United Nations reports that the four main nations of Soylandia – Brazil, Argentina, Paraguay, and Bolivia – were increasing as much as 5% a year.

Labor and land are cheap in Soylandia, but that’s not why it is shaking up the farming world. Instead, its advantages are due to its native climate and home-grown technology. Because Soylandia lies in the tropics, its growing season is nearly year-round. Two – and with irrigation, three – crops a year are the norm. In addition, the region is less vulnerable to climatic extremes than the southern and western zones of the Midwest, which are at constant risk of drought and flooding – a risk that may be exacerbated in temperate zones by global warming. South America “has a clear comparative advantage,” says Peter Goldsmith, director of the National Soy Research Center at the University of Illinois. “In the long run, there’s no obvious way for American farmers to catch up. I wouldn’t bet against these people.” South American soy, he says, “is a kind of competition America has never faced before.”

Almost nobody in Brazil or Argentina actually eats soya. In this notoriously carnivorous land, the very idea of tofu is enough to cause a shudder. But as far back as the 1960s, some Brazilians recognized that the Asian bean – Glycine max, to biologists – represented both a major business opportunity and a potential solution to an intractable problem.

The dilemma was what to do with Brazil’s vast middle west, centered on the state of Mato Grosso, which is 1 1/2 times the size of Texas. “Less probably is known about the interior of Mato Grosso than any other inhabited place of equal size in the world,” wrote the journalist and traveler Peter Fleming (brother of the James Bond creator) in 1933. Even in the 1960s no decent roads or railroads connected it to the rest of the world. Its crumbling capital, Cuiabá, was then little more than a scruffy town that serviced local cowboys and alligator poachers. Today Mato Grosso, with almost 15 million acres planted, leads Brazil in soya production, and Cuiabá (pop. 550,000) is the new capital of Soyalandia.

The state’s current prosperity – and its source – would have startled Fleming. Most of Mato Grosso is covered by cerrado, wooded savanna that sprawls over 700,000 square miles of Brazil, including much of the southern Amazon basin. For decades after Fleming wrote, agricultural researchers believed Glycine max could not prosper there. The plant, imported to Brazil in the 19th century by Japanese laborers, needs long exposure to sunlight; the uniform 12-hour day at the equator is simply too short. (By contrast, Iowa summer days can be more than 15 hours long.) In addition, soy, like other legumes, uses symbiotic rhizobium bacteria in its roots to “fix” nitrogen into the soil, reducing the need for fertilizer. But because nitrogen-fixing bacteria can’t survive in the cerrado’s highly acidic, aluminum-rich soils, farms would have to be heavily fertilized with lime, a significant cost disadvantage. Even if the poor farmers on the cerrado had somehow managed to eke out a crop, they could not have exported it – Soylandia’s potholed dirt roads were impassable much of the year.

In the 1960s the generals who then ruled Brazil looked at their maps and observed to their displeasure that about 60% of the country was empty (actually, it was filled with Indians, the descendants escaped slaves, peasant farmers, and other forest peoples, but the government dismissed them). To the generals’ way of thinking, filling the emptiness was a matter of national security; in any case, like authoritarians everywhere, they wanted to do big projects.

In a program that would later trigger worldwide protests, the generals began linking the brand-new, ultramodernist capital, Braslia (itself an earlier megaproject), to a network of roads across the interior to the port cities of rain forest Amazonia. Much of the road system went through the cerrado rather than the better-known rain forest. Not only was it much easier to clear, but it was then not even in the environmentalists’ sights even though the dry forest is almost as biologically diverse as the wet forest.

One of the highways, BR-364, ran from Sao Paulo through Cuiabá to the west Amazon. In the 1970s and 1980s hundreds of thousands of migrants from central and southern Brazil thronged up BR-364, believing the generals’ promises that they could begin new lives in agricultural settlements. Instead, the government lost control of the land rush, setting off violent battles among squatters, speculators, and ranchers over homestead titles. Many small holders abandoned their farms soon after clearing them – few crops would grow in the cerrado’s soil. The big ranches didn’t do much better, even though many received subsidies from the government.

Despite the economic failures, land wars, and ecological havoc, the generals viewed the settlement program as anything but a failure: It opened up the cerrado in Mato Grosso, then moved north through the rain forests and created conduits all the way up to the Amazon River. By the 1990s more than half of the cerrado had been burned and bulldozed into pasture or farmland.

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Seeds Of A Revolution is committed to defining the disruptive geopolitics of the global Farms Race.  Due to the convergence of a growing world population, increased water scarcity, and a decrease in arable land & nutrient-rich soil, a spike of international investment interest in agricultural is inevitable and apt to bring a heretofore domestic industry into a truly global realm.  Whether this transition involves global land leases or acquisitions, the fundamental need for food & the protectionist feelings this need can give rise to is highly likely to cause such transactions to move quickly into the geopolitical realm.  It is this disruptive change, and the potential for a global farms race, that Seeds Of A Revolution tracks, analyzes, and forecasts.

Educated at Yale University (Bachelor of Arts - History) and Harvard (Master in Public Policy - International Development), Monty Simus has long held a keen interest in natural resource policy and the geopolitical implications of anticipated stresses in the areas of freshwater scarcity, biodiversity reserves & parks, and farm land.  Monty has lived, worked, and traveled in more than forty countries spanning Africa, China, western Europe, the Middle East, South America, and Southeast & Central Asia, and his personal interests comprise economic development, policy, investment, technology, natural resources, and the environment, with a particular focus on globalization’s impact upon these subject areas.  Monty writes about freshwater scarcity issues at and frontier investment markets at