Agribusiness in Brazil

Adapted from a report published in Veja magazine, issue #1843, March 3rd 2004.

In February 2004, Norman Borlaug, awarded with Nobel Prize of Peace in 1970, visited Brazil to learn about the way agriculture is managed in the country. Aged 90, he is still one of hte most respected voices in the agricultural development field. Thanks to his researches, large areas of land all around the world which were considered improper for cultivations were turned into productive areas, helping protect hundreds of millions of people from stavation, mostly in Asia. Now, he says that Brazil will be the world's most important character in agriculture in the next few years. The main reason: Brazil has the largest reserve of productive land still available in the world.
The biggest producer of food in the world today, USA, can't expand their production because all the technology available is already being employed by American farmers, and there are no new frontiers to explore. In Europe, likewise, all useable land is already taken. India, Russia and Canada, other three countries with large extensions, have to face climatic and geographic limitations to expand their productions. China has 10% of all the agricultural area in the world, but has also two major problems: first, they have to feed 20% of the human population; second, it will take a lot of resources to prepare the Chinese soils for production.
Then, there is Brazil, the only country in the world with large extensions of land already mapped and available for immediate usage.

The sizes of Brazilian lands
Brazil's total area is 851,000,000 hectares (1 hectare = 100 m x 100 m = 10,000 sq. meters). Agribusiness takes a bit more than 280 million hectares. Most of this area, 220 million hectares, is taken by cattle and other animal farming. An area of about 20 million hectares is taken by permanent cultures, such as sugar cane and orange. It's from the remaining 40 million hectares (about 5% of the total territory) that Brazilian farmers extract more than 120 million tons of grains.
What's left? Of the other 570 million hectares where there isn't agro activities, a good part will never be used (areas taken by cities, Amazon forest, reserved areas, roads, dams, lakes, etc); however, there is an area of about 106 million hectares of fertile land which still can be incorporated to the productive Brazil.
How big is that? For comparisons, one can remember that, in the USA, the total area dedicated to plantations is 140 million hectares; that means that Brazil has a land reserve almost equal to the entire American land stock. And with another significant difference: Brazilian population is about 175 million inhabitants, against 290 million Americans; so, Brazil can have more excedents, destined to exportation, than the US.
Besides quantity, Brazil has yet much more to gain in quality. Brazilian agribusiness has received massive injections of capital and knowledge. Brazilian researchers managed to rectify the nutritional deficiencies of the soils, and, when this wasn't enough, they genetically modified the plants to stand tougher adverser conditions. Representatives from American government visited Brazil to take their own conclusions about the matter. The results were published in a report recognizing Brazil as an emerging agricultural power. "The main observation about the trip to Brazil is that the country has enormous potential and all previous estimatives were grossly underestimated", says Michael Shean, the American who undersigns the report.
Visit the site of Embrapa, a world respected Brazilian center for agriculture and animal researches.

The Brazilian production today
The impact of the incoporation of all useable areas to Brazilian agribusiness is not clear yet, but stakes at bet are high.
Even occupying a small part of the potential area, Brazilian agribusiness is already big. Brazil has the largest ox and chicken stocks in the world, the largest production of orange and coffe, the second production of soy and the third of corn. By recent previsions, in a few years the soy production will surpass America's, putting Brazil in the top.
After a period of stagnation, the Brazilian crops are growing again. Last year, total production was 120 million tons, and the forecast for this year is 130 million tons. The agro Brazilian business is the most dynamic of all in the Brazilian economy; there is a surplus of 23 billion dollars in the foreign commerce of agri-products. According to IBGE, the Brazilian agency for statistics, agribusinesses are responsible for 30% of GNP and 40% of jobs in Brazil; and, compared to American and European agroeconomies, in Brazil there is very little subsidies to farmers.
Another boost to agribusiness may come from improvements in infrastructure and legislation. Brazilian roads are notoriously bad; much of the production is lost, and if not, its cost is significantly increased to compensate for the extra expenses (maintenaince, insurance, delays, etc). Also, the Brazilian ports (must still owned by the State) are very inefficient, by international standards. The environmental legislation in Brazil is considered, by some, too strict, and should see some adaptations. Also, among the big players, Brazil is the only which still didn't regulate the production of transgenics; a recent law was approved by the Congress, but, according to this law, a Council composed by government members (from several Ministeries, including Agriculture, Development and Environment) has the power to approve or not the transgenic researches and products; it's yet to be seen the trend of this Council.
Main Brazilian products, by cultivation areas: soy (18.5 million hectares); corn (13 mil.); sugar cane (5.3 mil.); beans (4.3 mil.); rice (3.2 mil.); coffee (2.4 mil.); wheat (2.3 mil.); orange (0.8 mil.); cotton (0.7 mil.).

The Agrarian issue
Among the priorities of the government Lula, there is the Agrarian reform. Lula's main argument is that there still many large unproductive properties, and these would be more useful if the land was distributed to the land-less. Indeed, official statistics show that there are still some large farms which are not producing anything; however, most of these properties are in the Amazon and other areas of North and Northeast, where agriculture is unviable. In regions where climate and soil are proper for plantations, there are not any unproductive areas left; even INCRA, the official Institute in charge of agrarian issues, is having difficulties to find idle land.
The economic results of agribusiness are also changing the view about Agrarian reform. In the past, 90% of the total investment on an agricultural business were towards buying the land; under such conditions, it made perfect sense for the State to buy the land and distribute it to small agricultors, who otherwise wouldn't be able to start any culture. Today, however, the cost of land corresponds to only 10% of total; machines, irrigation, adubation and other factors take the remaining 90% - and are the responsible for the high productivity.
With the growing mechanization, one single farm worker can produce food for 1,000 people; analysts say that land distribution can only be seen as a means to combat poverty, not to increase the productivy of the economy. Over the past 30 years, 600,000 families were given land; the total area was 30 million hectares, and the total cost was about R$ 24 billion. Most of the production is for internal consumption.

The challenge
The main challenge of Brazilians is to keep the high productivy of the agribusiness, and still keep the social pressures under control.


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