E-mail this article to
yourself or a friend.
Enter address:


The Brazilian bean powerhouse

(Thursday, April 10, 2003 -- CropChoice news) -- The 2003 Brazil bean exports will increase by 30 percent, surpassing those of the United States, according to Gazeta Mercantil. They'll be nearly $8 billion, outpacing the United States by $1 billion. The Brazilian Association of Vegetable Oil Industries is forecasting the export of 37 million tons of soybeans, more than half of its 60 million ton production.

Transportation infrastructure improvements have reduced the costs of moving those soybeans to ports for shipment to North America, Asia and Europe. For example, the Velho and Itacoatiara ports have allowed for barges to reduce the cost of transporting Mato Grosso beans to the Amazon by 30 percent compared with shipping them to the southern ports of Santos or Paranagua. When the Itacoatiara Port opened in 1997, it handled 321,000 metric tons of Mato Grosso soybeans. That increased to 1.2 million metric tons last year.

Meanwhile, Bunge on Wednesday announced that, instead of netting $25 million to $30 million in the quarter that ended March 31, they're projecting more net income -- $30 to $35 million ($.0.30 to $0.35 per share). By comparison, in the first quarter of 2002, the company netted $13 million, or $0.15 per share.

Bill Wells, Chief Financial Officer, stated: "We are experiencing strong performance in the first quarter across most of our businesses, especially in our South American oilseed processing and fertilizer businesses and our international marketing operations, partially offset by weakness in North American oilseed processing..."

In North Carolina, Wilmington Bulk LLC, a consortium of hog and poultry producers (U.S. premier pork producer Smithfield Foods) is running a port that has already imported 65,000 tons of feed wheat from Britain (with the possibility of 200,000 more in late summer when U.S. supplies hit the world markets along with those from emerging wheat growing powers of Ukraine and Kazakhstan.)

Wilmington likely will import Brazilian soymeal soon. In April 1999, it imported 75,000 tons of cheaper Brazilian soymeal for the first time. Last year it imported 90,000 tons. The official line is that the high cost of freight in the U.S. Southeast make domestic supplies too expensive. Farm groups last year said the answer was to amend the Jones Act, which disallows foreign-flagged vessels operating within the United States.

One analyst pointed out that such talk diverts attention from the monopoly power of the railroads and the loss of section 22 of the Agricultural Adjustment Act of 1933, which allowed the Secreatry of Agriculture to restrict imports if they threatened the cost of domestic farm programs.

Sources: Reuters, Gazeta Mercantil, Corn and Soybean Digest

Brazilian acreage potential is larger than previously thought

by Daryll E. Ray

Two years ago I thought I was putting my neck on the chopping block when I wrote, "Brazil has 200 to 300 million acres of unsettled land that can be economically brought into production." Based on a recent USDA Foreign Agricultural Service (FAS) study, it looks like I was wrong. Their conservative estimate puts the number closer to 420 million acres.

Michael Shean of the Production Estimates and Crop Assessment Division at FAS recently reported, "that previous estimates of the scope for possible agricultural expansion [in Brazil] have been grossly underestimated. There are in fact few natural limits to the future expansion of grain and oilseed production which cannot be overcome by astute planning, research, and adequate investment capital."

Before you fall into complete despair, it should be noted that Shean estimates that this land will not all come into production at once. The long-term trend suggests that this expansion would proceed at the rate of 3 to 4 percent a year, if current conditions continue to prevail. Significantly lower crop prices or higher cattle prices could retard the expansion of crop acreage, while high crop prices could accelerate the growth in crop acreage.

This growth is premised on three conditions: 1) the legalization of the production of GMO crops in Brazil; 2) the widespread adoption of high-yield crop varieties; and 3) improvement in the transportation infrastructure in Brazil that will lower the cost of getting agricultural crops to the port.

The matter of the legalization of GMO crops is a matter of intense debate in Brazil. If approval is granted, soybean producers are planning on growing both GMO and non-GMO varieties in the hope that they will be able to receive a premium for the additional costs associated with producing and segregation the non-GMO beans. the high-yield crop varieties are already coming on-line and their widespread adoption is just a matter of time.

When it comes to the infrastructure issue (rail, highways and barges), one only needs to note that the new Governor of one of the largest soybean growing areas in Brazil, the state of Mato Grosso, is Blairo Maggi. Maggi has been called the "King of Soybeans" because he produces nearly a quarter million acres of soybeans. He ran his election campaign on a platform of economic development. One can be sure that cost reducing improvements in infrastructure are high on his list of economic development tools.

Much of the potential additional acreage for crop production comes from land that is now used for pasture and cattle production. In the U.S., much of the land that is used as pasture cannot be used for crop production because it is too arid or hilly. In Brazil much of the pasture land is agronomically identical to the adjacent soybean acreage. If the returns from soybeans exceed the returns from cattle then a portion of the pastureland will be converted to crop production. Much of the recent soybean acreage increase has come from pastureland.

Additional Brazilian cropland will not swamp U.S. producers in any given two to five year period. Rather it will continue to keep the pressure on. We also must keep in mind that any U.S. policies that are designed to drive our competitors out of the international marketplace are not likely to work. Policy or no policy in the U.S., Brazil seems destined to open up its vast agricultural areas in the same way that the U.S. opened up the prairies west of the Mississippi.

Daryll E. Ray holds the Blasingame Chair of Excellence in Agricultural Policy, Institute of Agriculture, University of Tennessee, and is the Director of the UT's Agricultural Policy Analysis Center. (865) 974-7407; Fax: (865) 974-7298; dray@utk.edu; http://www.agpolicy.org.

Reproduction Permission Granted with:
1) Full attribution to Daryll E. Ray and the Agricultural Policy Analysis Center, University of Tennessee, Knoxville, TN;
2) An email sent to hdschaffer@utk.edu indicating how often you intend on running Dr. Ray's column and your total circulation. Also, please send one copy of the first issue with Dr. Ray's column

U.S. Soybean Exports Stronger


Filed at 12:08 p.m. ET

WASHINGTON (AP) -- U.S. soybean exports are stronger this month, in part because China increased its imports to record levels, the U.S. Department of Agriculture said Thursday.

Department economists projected Chinese imports at 16.5 million metric tons this month, up 500,000 tons over last month. All soybean exports from the United States are forecast at 27 million tons for April, an increase over last month's 26.1 million tons.

China likely will increase soybean imports this month because it has been short on soybean oil, said Keith Menzie, a department economist.

``One way to get that is to bring in seed, crush it and get the oil out,'' Menzie said.

He noted that the leftover material, soybean meal, can be fed to livestock. That allows the country to cut down on soybean feed imports.

Because of heavier trade with China, projected stockpiles of U.S. soybeans fell slightly this month to 3.9 million tons, down from last month's 4.3 million tons.

Soybeans are expected to sell for as much as $5.60 per bushel.

U.S. exports of corn slipped and stockpiles grew slightly last month as exports from Argentina and other foreign competitors increased.

Economists lowered their projections for U.S. corn exports by 1.7 million tons since last month, to 42.5 million tons, because of increased competition from Brazil and Argentina.

However, they said the drop in U.S. exports mostly will be offset by an increase in domestic use as companies buy more corn to produce sugars, starches and ethanol. Total domestic use probably will be 201.6 million tons, up 1.8 million tons since March, the department said. The price for corn may be as high as $2.35 per bushel.

Corn exports from Brazil and Argentina -- leading competitors for the United States -- likely will increase. Brazil is expected to ship 2.5 million tons of corn this month, up from the 2 million tons it exported last month.

Corn shipments from Argentina are projected at 10.5 million tons, an increase of 500,000 tons over last month.