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Brazil agricultural boom will reverberate for a long time into the future

Mick Keogh - Wednesday, May 01, 2013

Brazil's economy has experienced a boom over the last ten years due to stable governments and the extended growth that has occurred in its agriculture sector. While the nation's economic growth has stalled at present due to a number of factors including rapid growth in wages, there is no doubt that the extended boom that has occurred in its agriculture sector still has a long way to run.

Leading the boom is the State of Mato Grosso, a land-locked region in the centre of Brazil that has seemingly endless expanses of suitable agricultural land that can be brought into production WITHOUT clearing any rainforest. In fact, as noted in an earlier post, the regulations restricting the clearing of land for agriculture are stricter than those in most developed nations - with farmers required to retain anywhere between 20 and 80% (depending on their location) of their land in its natural state, and restricted from clearing vegetation within up to 100 metres either side of waterways.

Bringing the land into production is not a simple matter. The soil is quite acidic (pH 4) and requires up to seven tonnes of lime per hectare plus heavy applications of phosphate and potassium, but once in production achieves very high yields due to the abundance of sunshine, warm temperatures and plenty of water. It is not unusual to talk to farmers who are managing to grow three crops per year on the same piece of land (soy, corn and black beans), and growing two crops (soy and winter corn) is absolutely standard.

Logistics to get product to port are horrendous by developed nation standards, although a range of different measures are being introduced to ease the worst of the problems. Farmers are starting to utilise on-farm storage as a way of managing this issue in advance of major transport developments.

Any thought that Brazilian farmers might lag behind their developed nation counterparts in terms of technology and productivity are absolutely unfounded in the Mato Grosso State, and also rapidly becoming incorrect in much of the rest of the country especially in the case of the larger farms. Brazilian farmers are as technologically savvy as any of their counterparts in developed nations, and their farm sheds are full of the largest and latest versions of any machinery found on farms in the USA or Australia.

Any thought that their location might mean that farmers in this region are less market-savvy than their counterparts in other nations should also be quickly dispelled by the following picture taken of the trading room of a small soy and corn marketing cooperative located in Sinop, a town that did not exist twenty years ago and is now approaching 80,000 inhabitants in size and growing by 10% per year. Brazilian farmers come in and sit beside the traders as they negotiate sales, all the while watching the live feed from the Chicago Board of Trade displayed on the monitor on the wall.

There is no doubt the Brazilian agricultural boom has a long way to run, and informed commentators suggest that a doubling of the current output is entirely feasible without any increase in land use.

Three things that Brazilian agriculture has going for it are its land and water resources, sunshine, and the youthfulness and energy of its farmers. In combination these mean that any thought that the world will run out of agricultural resources any time soon is simply ridiculous.

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