31 August, 2014 / Ziqa'ad 4, 1435

Shifts in global farm economy

Published Nov 26, 2012 06:57am

AS US cornfields withered under drought conditions last summer, Brazil’s once-empty Cerrado region produced a bumper crop, helping feed livestock on US farms and ease a drought-related spike in prices.

The US imports of Brazilian corn were small by world standards. But they are rising fast, and they mark just one element of the increasingly complex and sometimes contentious relations between the world’s leading agricultural producer and its fast-growing competitor amid shifts in the global economy.

Starting at zero in 2010, Brazilian corn exports to the United States are on pace to exceed $10 million this year and are bound to rise as farmers here expand planting and more corn is funneled to nonfood uses, such as ethanol production.

Brazil is expected next year to dethrone the United States as the world’s largest producer of soybeans. With so much land available for cultivation, that status will probably become permanent.

With a heavy dose of US capital and know-how, a massive agribusiness complex has been established here. Just as American firms have moved production to China to be close to potential consumers, the John Deere equipment trundling across Brazilian fields and the Kellogg’s Corn Flakes found in Brazilian supermarkets come from local factories.

Despite what is described as intense cooperation between the two governments, there is a developing sense of competition as well.

Brazil challenged US cotton programmes in the World Trade Organization, arguing that US government support for domestic growers held down world prices and hurt cotton farmers in Brazil.

As the result of a 2009 WTO ruling, Brazil now receives about $17 million in monthly payments from US taxpayers — money being used to advance the Brazilian cotton industry with research on best practices, pest management and other issues.

The Obama administration agreed to the payments as an alternative to either curbing government support for US cotton growers or having Brazil slap import taxes on American goods to compensate for the loss to its farmers.

Battles over sugar, poultry and other products that are grown in plenty here were among the issues that stalled the Doha round of world trade talks.

“We will surpass the US in the future” as Brazil brings massive reserves of open land into production and benefits from still-untapped potential to boost its yield per acre, said Ronaldo Spirlandelli de Oliveira, head of the Sao Paulo cotton growers association.

The Sao Paulo group recently received $500,000 in US funds to train technicians in pest management. Under the cotton agreement with the United States, the money can’t go directly to growers but is being funneled through a new agency to fund research, technical training and other programmes for Brazil’s cotton industry. The cotton case is just one example of the swagger Brazil is carrying into global agricultural markets.

State-backed research since the 1970s has turned the Cerrado — once considered unproductive scrubland — into a vast farm belt. Still mostly unplanted, and comfortably distant from Brazil’s environmentally sensitive Amazon region, the Cerrado has become a new frontier in the green revolution that made US farmers the most productive in the world.

Just as the vast plains of the American Midwest helped keep down world food prices for the last half of the 20th century, the Cerrado may do the same in the 21st.

Brazil has adapted the soybean — native to the temperate areas of China — to make it thrive in tropical conditions. And the country has invested heavily in the application of nutrients needed to make the Cerrado productive.

Already, Brazil’s output is critical to world supply. The boatloads of soybeans shipped from here to China are central to feeding the world’s largest country at a time when it is becoming richer and consuming more per person.

The corporations that defined America as a land of plenty have invested heavily here. Grocery shelves are stocked with US brands such as Mazola oil and Corn Flakes, manufactured at local plants where Cargill, Kellogg’s and other staple Midwestern companies employ thousands of Brazilians. Of seven new factories that John Deere said it plans to build worldwide, two are in Brazil — with three in China and one each in India and Russia.

“It is a tricky issue,” said a US official who spoke on the condition of anonymity because he was not authorised to comment publicly. “US companies are doing all this investment in an agriculture superpower that is a huge competitor….. .. Growers from the US are definitely watching what is happening down here.”

Farmers here increasingly use a faster-growing strain of soybean that can be planted in September — the start of spring in the southern hemisphere — and harvested in January. A second crop can then go in the ground and be ready by June.

We have just started having a corn market in Brazil,” with futures contracts and other tools helping farmers invest in a second planting, said Marcos Rubin, a partner at Brazilian consulting firm Agroconsult. “It is a new model of farming,” he said. “As we become more solid [corn] exporters it will help farmers plan better for a second crop.” —Washington Post/Bloomberg


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