AgDM newsletter article, October 2000

Brazilian soybeans - What is the potential? *

Phil Baumel Bob Wisnerby Marty McVey, AGRI-Industries, and Phil Baumel and Bob Wisner, professors of economics, 515.294.4843, pbaumel@iastate.edu

This is the first in a series of three articles on Brazilian soybean production. Future articles include: Brazilian soybeans—Transportation problems; Brazilian soybeans—Implications for U.S. farmers

Soybeans have been produced in Brazil since 1882 *. By 1960, soybean production reached 0.2 million metric tons, all of it processed domestically. The oil was used in domestic foods and the meal was used to support a growing poultry industry. At this point, Brazil was by no competitor in world soybean markets.

That began to change in the early 1970s when the following chain of events propelled Brazil into the world soybean market. In 1971, the U.S. devalued the dollar causing the export price of U.S. corn, wheat, and soybeans to fall sharply relative to the rest of the world. During that time, the USSR generated large supplies of foreign currency by increasing its petroleum production. Using this foreign currency, the USSR financed large quantities of imported U.S. wheat and then later, large quantities of U.S. corn and soybeans.

Simultaneously, adverse worldwide weather conditions reduced world grain production. Later, in 1972-73, an exceptionally harsh El Nino greatly reduced the supply of Peruvian fishmeal—at that time, a major source of protein in animal feed rations. As a result, foreign demand for U.S. soybeans increased dramatically, causing soybean supplies to dwindle. Soybean prices skyrocketed to an all time record of $12.00 per bushel. This drew loud complaints from U.S. consumers who feared that the U.S. would run out of soybeans.

Responding to political pressures in June 1973, President Nixon imposed an embargo on soybean and soybean meal exports. The soy embargoes and the Peruvian fish meal shortage combined, created a worldwide impression that the U.S. and Peru were unreliable suppliers of animal feed protein. Major soy importers -- Japan and Europe -- began seeking alternative sources of animal feed protein. Attempting to encourage the growth of soybeans in Brazil, Japanese investors bought land in Brazil for soybean production. Since then, soybean production has increased from 5 million metric tons in 1973 to about 32.5 mil. metric tons in 2000. Today, Brazil is the world's second largest soybean exporting country.

Sources of future growth

The huge growth in Brazilian soybean production came from increases in both yields and acres planted. Brazilian soybean yields increased from about 17 bushels per acre in 1970 to 55 bushels per acre in Mato Grosso in 2000. During the same time, total harvested acres increased from 3.2 million acres in 1970 to 32.4 million acres in 2000. Soybean production in 1970 was predominantly in the southern states of São Paulo, Paraná, Santa Catarina and Rio Grande Do Sul. Increases in soybean acreages in these states has come at the expense of rice, peanuts, potatoes, corn, cotton, coffee, and grazing land. The most spectacular growth in Brazilian soybean acres has occurred in the state of Mato Grosso and the cerrado area of central Brazil. Figure 2 highlights the state of Mato Grosso and the cerrado region of central Brazil.

The Cerrado

The cerrado area has been defined as a wasteland with stunted twisted trees. The cerrados are not rainforests. The soils of the cerrado are highly acidic, saturated with aluminum, deficient in phosphorous and have low water-holding capacity. Early on, many felt that the land in the cerrado could not be cultivated. Contrary to popular belief, the soils in the cerrados proved to be deep and well drained with excellent physical characteristics suitable for mechanized crop production. About 234 million acres or 46 percent of the cerrados are suitable for large-scale crop production. By comparison, the U.S. produces about 75 mil. acres of soybeans. It is clear that there is a potential for large increases in crop production in the cerrados.

Figure 1. Map of the state of Mato Grosso and the cerrado regionRainfall over most of the cerrados ranges from 39 to 75 inches per year. About 80 percent of this precipitation falls during Brazil’s rainy season, which runs from September through April. Brazil's soybean growing season coincides with its rainy season. Therefore, the good drainage of the cerrado's soil is essential for soybean production. The dry season runs from May through August.

The rapid growth in soybean production in the cerrados has been made possible by modern mechanical, chemical and biological technologies. The mechanical technologies allow relatively inexpensive clearing of virgin cerrado land for crop production and for low-cost soybean planting, cultivation, harvesting, and drying. On average, virgin cerrado land can be put into production for about $250 U.S. per acre.

Chemical technologies have corrected the low fertility, high acid soils through the application of limestone, phosphate fertilizers and trace minerals. Before adopting these agronomic technologies, Brazilian producers grew rice for two years on newly cleared land to reduce the soil's acidity. Nevertheless, correcting these soil deficiencies with current technologies is relatively expensive.

Biological technologies have resulted in the development of high yielding soybean varieties with a high tolerance to high aluminum soils, droughty soils, and to low latitude tropical climates. Today, soybean varieties grown in Mato Grosso yield slightly higher than varieties grown in Iowa.

* This article draws heavily on information from: Warnken, P. F. 1999. The Development and Growth of the Soybean Industry in Brazil, Iowa State University Press, Ames, Iowa.

 

 

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