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Brazilian writing on the wall for U.S. soybean growers? (Tuesday, Sept. 23, 2003 -- CropChoice news) -- Andrew Martin and Greg Burns, Chicago Tribune, 09/20/03: WASHINGTON -- Brazil's show of force in the recent failed round of world trade talks in Cancun caught many by surprise. Duane Ohnemus was not among them.
For the last three or four years, Ohnemus, a farmer in Milo, Iowa, said competition from Brazil and Argentina in soybeans has added yet another obstacle for U.S. farmers.
"Everybody has seen it coming," said Ohnemus, who raises corn, soybeans and cattle. "Every farm magazine you pick up has an article about South America, about their production."
American negotiators left the World Trade Organization meeting in frustration, in part because they couldn't figure out how to deal with Brazil, which banded together with more than 20 other nations to demand deep cuts to American and European farm subsidies.
Ohnemus and other soybean farmers are faced with a similar quandary: How can they deal with a country that has vast amounts of cheap, undeveloped land and substantially lower production costs?
"This is a major challenge to American agriculture, one that has been ignored until very recently," said Dan Glickman, who was U.S. secretary of agriculture during the Clinton administration.
"We're not going to be able to quash them," Glickman said. "We're going to have to compete with them."
Phil Warnken, who as president of AgBrazil helps facilitate investment in Brazilian agriculture, said the U.S. government must continue to subsidize the soybean crop, which amounted to $671 million in 2002, if domestic farmers hope to compete.
"Brazil can outcompete the United States in soybean production," Warnken said. "It doesn't matter what we grow. Brazil can grow it cheaper."
In 2001, the United States produced 79 million metric tons of soybeans, compared with 41.5 million metric tons for Brazil and 27 million in Argentina, according to statistics from the U.S. Department of Agriculture.
South American soybean production has soared in the two years since, surpassing U.S. production for the first time last year. South America has the potential to produce 100 million tons when it pulls in its next harvest during late winter in North America, said Rich Feltes, vice president and director of research for Refco, a trading firm in Chicago. That would far surpass the projected U.S. crop of 72 million tons. Midwest farmers are just beginning to harvest their soybeans.
"They certainly have the acreage to do it, and we are seeing strong prices just as they prepare [for planting]," Feltes said. Over time, he said, "the importance of the U.S. harvest is going to diminish."
Brazil's ascension as an agricultural powerhouse is a fairly recent phenomenon, and it explains, in part, why the country emerged as a key player in the WTO talks in Cancun.
Soybeans were a minor crop in Brazil until the 1960s. But an increase in world demand, government incentives and an embargo on U.S. soybeans in the 1970s prompted Japanese investors to invest in Brazilian land for soybean production. The surge in soy acreage was accelerated further by the development of a soybean plant that prospered in the tropics, and by advances in improving the fertility of the highly acidic soil.
From 1970 to 1990, Brazil's soybean production grew by more than 10 percent a year, according to the USDA.
Brazil's push into the soybean industry was made possible because of vast tracts of undeveloped land in the western part of the country, including a savannalike expanse called "the cerrado," as well as the rainforest, which environmentalists believe should be off limits to agriculture.
But given the importance of agriculture in Brazil's economy, battling to protect undeveloped land from farming is an uphill battle, environmentalists contend. Brazil's agricultural sector represents 14 percent of gross domestic product, compared to 2 percent in the U.S., according to a 2001 USDA report.
"It is expanding at the expense of the Amazon forest or the cerrado forest," said Andre Giacini de Freitis, executive director of the Institute for Agriculture and Forestry Management and Certification in Brazil. "The cerrado is a really rich kind of forest. In some cases, it has as much biodiversity as the Amazon."
But boosters of Brazilian agriculture such as Warnken describe the cerrado as a "wasteland" that is just waiting for development. Brazil's government is also interested in boosting its soybean business, and at the recent WTO meeting, Brazilian negotiators joined forces with China, India and a coalition of other developing nations to urge the U.S. and Europe to cut agriculture subsidies.
While the outcome of trade talks remains unclear in the wake of the collapse at Cancun, some agricultural experts predict that America's soybean crop will start to decrease because of the onslaught from South America.
"You're going to see some dwindling of soy acreage over the next five or 10 years," said Darrel Good, an extension economist at the University of Illinois at Urbana-Champaign. "Our comparative advantage is in feed grains. Their comparative advantage is soybeans."
Ohnemus said the impact of Brazil on his soybean crop would be apparent at this year's harvest, which is expected to be relatively poor because of dry weather. Normally, he said, a poor harvest would be partially offset by an increase in the price of soybeans.
But these days, once the price of soybeans inches up, Brazilian farmers sell beans held in storage from last year's harvest, pushing the price back down, he said. The poor harvest "brought up prices about $1 a bushel," Ohnemus said. "If it weren't for South America, it would have brought it up $3."
Source: http://www.chicagotribune.com/business/chi-0309200133sep20,1,1274779.story | |
