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Production
Estimates and Crop Assessment Division |
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Production
Estimates and Crop Assessment Division |
Summary
During a recent trip through Brazil, USDA/FAS personnel met with numerous official agricultural research agencies and private sector agribusiness companies and consultants in an effort to learn more about the future of farming in the country. Collectively, the individuals and organizations represented the entire supply chain from research and production to consumption and exports. The key observation gleaned from this investigation is that the future of farming in Brazil has enormous potential, and that previous estimates of the scope for possible agricultural expansion 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. It is conservatively estimated that Brazil could increase its total cultivated land area by 170 million hectares or more if key legal, technical, and financial developments occur. Specifically, this entails the eventual legalization of GMO’s in Brazil, widespread adoption of newly available high-yield crop varieties, and intensified investment in the development of transportation infrastructure. Each of these factors would act to significantly lower the already low cost of production of Brazilian crops and substantially increase the average farmer’s net return per hectare. In time, regions currently considered to be too remote for commercial farming owing to their distance to market would become viable, while alternative agricultural lands used for less profitable enterprises (i.e. pasture) could readily be converted to cropping. The existing scope for agricultural expansion in Brazil is equal to (if not greater than) the total cropland resource in the United States (NASS, 1997 Census of Agriculture), and this expansion is possible without any additional deforestation in the Amazon Basin. It is apparent that the underlying potential for growth in Brazil’s agricultural economy over the next century has been seriously underrated to date, given the nation’s wealth of available land resources and its highly professional and enterprising agribusiness community.
On the other hand, a variety of factors could act to slow the rate of agricultural expansion or limit its future extent. However, none of these are on the immediate horizon. Examples of key limiting factors include but are not limited to:
Land Resources
To provide some perspective
on Brazil’s land resource situation, it
is helpful to compare it to the United States. Though both countries are nearly
equal in size, the U.S. devotes far more land to agricultural production (both
crops and pasture). The U.S. is estimated to have roughly 19 percent of its
total land area under crops (174 MHa), and 22 percent under pasture (199 MHa).
Brazil,
by comparison, devotes 5 percent (41.8 MHa) of its land resource to crops and 21
percent (177 MHa) to pasture. In purely environmental terms, however, Brazil
has the
potential to have a far
larger area under cultivated agricultural crops than the U.S. owing to its more
favorable climate (warmer and wetter), relatively flat topography, and enormous
supply of arable soils that are conducive to mechanized farming. The majority
of Brazil’s existing pasture lands could readily support rain-fed crop
production, whereas those in the U.S. cannot due to soil and/or climate
limitations. In addition, portions of Brazil’s vast Amazon
Basin could support both crop production
and pasture for cattle if they were not strictly protected from deforestation by
law. Brazilian
forests occupy an
estimated 53 percent (444 MHa) of total land area, whereas in the United States
forests cover 33 percent (302 MHa).
Agricultural Expansion Potential
A great deal of
speculation has been made over the past two decades regarding the future of
agriculture in Brazil, and particularly the extent to which it could increase
its production base by opening up and settling its vast frontier. This is
especially true in respect to the future of soybean production, following the
unprecedented growth in sown area
witnessed in its Center-West or Cerrado region (including the states of Mato
Grosso, Goias, Mato Grosso do Sul, Bahia, and Maranhao). During the past 7 years
alone, cultivated soybean area increased roughly 5.0 million hectares or 114
percent in these states, while it increased 7.0 million hectares or 65 percent
at the national level. This dramatic development was largely accomplished
through wholesale clearing and conversion of virgin savannah land called “cerrado.”
Both private and public sector agencies in Brazil have made detailed analyses in recent years of the potential for agricultural expansion in the country. Notable among them are the forecasts from Brazil’s Ministry of Agriculture (90 million hectares), its national agricultural research agency EMBRAPA (65 million hectares), and leading agricultural marketing and trade consultancy Safras & Mercado (67.8 million hectares). It has become apparent that the criteria used to determine the future growth potential for grain and oilseed production were overly conservative. These studies exclude significant sources of arable land and often used static agro-economic assumptions regarding production and transport costs, crop yields, and technology. This analysis approach tended to limit official expansion projections to levels thought “realistic” under subjective political and economic circumstances.
The nation’s vast pastures, accounting for 177 million hectares or 83 percent of total agricultural land, were not considered a source for future grain and oilseed crop expansion in Brazilian assessments, despite their ease of conversion to mechanized farming and their location adjoining crop lands throughout the country. Cattle ranches or grazing properties are a near-ideal resource for farmers who are interested in expanding row crop cultivation, and abundant pasture acreage exists in virtually every state. In fact, the conversion of pasture land to soybean production in the past few years has been sizable and widespread in Brazil. Farmers sought to increase their net acreage to achieve economies of scale and cash-in on strong soybean returns following a substantial multi-year devaluation in the Brazilian currency. Many producers and agribusiness leaders believe that in the long term pasture would ultimately provide a greater resource for the expansion of grain and oilseed cultivation than native savannah (called Cerrado). They explained that this was due to pasture’s ease of conversion, the comparative lack of legal restrictions on its use, the shrinking pool of virgin Cerrado land available to them, and the lower cost of clearing and road building.
FAS
agrees with this evaluation,
and estimates that 70-90 million hectares of
Brazil’s existing pasture acreage could
be converted to
cropping in the future. This represents about 40-50 percent of
the nation’s total pasture. These lands could be converted owing to their
advantageous proximity to existing crop production, their generally level
topography, and favorable soil properties. In addition to this ample resource, Embrapa estimates that 65 million hectares of virgin Cerrado (savannah land)
which is capable of supporting mechanized commercial grain and oilseed
production remains undeveloped in 2002. There are also up to 10 million hectares
of degraded pasture or deforested land that is available in the Amazonian states
of Rondonia, Amazonas, Acre, Amapa, and Roraima. These lands are already being
targeted by agricultural researchers for restoration, with the goal of
developing viable grain and oilseed-based farming systems that are tailored to
their unique conditions.
Given these details, FAS conservatively estimates that between 145 and 170 million hectares of land is potentially available for future field crop expansion in Brazil. It is also conceivable that the cultivated area under soybeans could increase by 50-100 million hectares if supportive political, macro-economic, and agricultural policy conditions prevail over the next few decades.
To a large degree, the critical mass of resources required to catalyze this transformation are already in place, including:
· Sufficient population of professional agri-business and farm management personnel widely distributed across the nation
· World-class agricultural technology and research capabilities
· Advantageously low relative labor and grain production costs
· Plentiful land resources and low relative land values
· Substantial commercial investment from public and private sector (including multinational corporations)
Fuel For The Fire
The movement of land between alternative cropping and/or grazing enterprises has been fairly strong the past two years, owing to fluctuating commodity and livestock returns. Whether or not this process is sustained at current annual growth rates will largely be determined by the degree to which per hectare commodity returns for beef can compete with soybeans. At the moment, soybeans have the edge and land resources are actively being reallocated to foster its production. In the near term, it is logical to assume that any new development that acts to lower the average cost of production for Brazilian soybeans will likely tip the balance on a more permanent basis and accelerate the shift in land resources towards greater production. The greater the savings accrued, the larger the potential expansion. Several developments already on the horizon could provide such a stimulus; some are revolutionary and others evolutionary.
Revolutionary:
The prospect that Brazil will legalize GMO crop varieties for production, consumption, and export.
Growers, especially large-scale producers, would welcome the opportunity to reduce their grain and oilseed production costs, increase profit margins, and expand crop acreage. Asked what effect GMO legalization would have on soybean expansion, major growers in the Center-west state of Matto Grosso replied, “production would likely double in a fairly short time.”
An indication of the scope of savings awaiting Brazilian producers comes from a close neighbor. GMO soybean producers in Paraguay report that they have reduced their average cost of production by $20-40 per ton through lower herbicide use alone. In Brazilian terms, this level of savings would imply a 20-50 percent reduction in the per hectare cost of growing soybeans (assuming average yields of 2.7 T/Ha; existing cost of production =$R 230-310/Ha).
In regards to GMO legalization, Brazilian producers think they are in a position to benefit from both sides of the equation, with their preference being “let the market help us decide whether to plant GMO’s or not.” They would welcome the fact that the world market would be forced to offer a substantial premium for non-GMO commodities to encourage producers and exporters to incur the added cost of certifying and segregating the product.
The imminent prospect of new non-GMO soybean and corn varieties that will substantially increase yields under normal commercial field conditions.
It cannot be denied that Brazilian farmers are already benefiting from world-class genetics. Over the past 30 years, average soybean yields have increased approximately 130 percent, while seed quality is as high as any produced in the world including in the United States. Brazilian crop researchers have succeeded in breeding high-yield soybeans for every climate regime in the country, including tropical varieties for the equatorial lowlands. This means soybeans can be grown anywhere in the country where soil physical properties are adequate, without any climatic limitations whatsoever. In fact, tropical soybeans are being cultivated near the major port of Santarem on the Amazon River in the state of Para. In the remote northern state of Roriama, 3 soybean crops can be grown in a single year. Embrapa has established a major breeding program there, and believes that it will provide the most promising new soybean varieties for the Cerrado environment owing to its climate and the speed with which breeding lines can be evaluated. In addition, soybean researchers at Embrapa have released a new soybean variety in 2003 (BRS-Raimunda) for commercial distribution that yields an average of 5.0 tons per hectare under normal Cerrado field conditions. This compares to existing varieties in the major producing states of the Center-west which yield in the 2.4-3.3 tons per hectare range. Though most corn breeding research has been conducted by commercial private sector companies, Embrapa has been making modest headway and currently has breeding lines for corn which yield 15 tons per hectare, compared to 9.0-9.5 tons per hectare that the best corn producers in the Cerrado today achieve.
These singular developments in plant breeding signal the not-too-distant prospect of Brazilian farmers obtaining substantially higher average yields for their predominant grain and oilseed crops, with potential productivity gains of 30-70 percent or more over existing varieties. In regards to national soybean yields, widespread adoption of such new varieties could produce substantial savings in production costs on a per hectare basis and provide the impetus to maintain Brazil’s strong track record of productivity growth and its competitive prospects vis-à-vis the United States.
Evolutionary:
Completion of planned transport infrastructure, and the advent of transport competition.
As part of its policies to promote immigration and rapid economic development, the Brazilian federal government is planning to sharply expand the existing network of paved highways and infrastructure within Brazil’s Amazon Basin. Under the auspices of its Avança Brasil (Advance Brazil) program, the government intends to invest over US$40 billion in highways, railroads, gas lines, power lines, hydroelectric reservoirs, and river-channel projects that will criss-cross large expanses the basin, greatly increasing accessibility to remote frontier areas. About 7500 km of highways will be paved (Laurance et al., 2001a) and road networks will also be expanded markedly. These projects are designed to improve energy and transportation networks and accelerate development in the industrial agriculture, timber and mining sectors of the economy. By criss-crossing the basin, these projects will open up extensive new frontiers for colonization and encourage further immigration into a region that is already experiencing rapid population growth.
While the costs of moving grain to port in Brazil remain high relative to North American and European standards, freight rates have reportedly declined an average 35 percent in the past few years in the major grain regions, and could fall an additional 20 percent in the next few years according to Brazil’s Ministry of Agriculture (Top Producer, June/July 2001). In this regard, completion of the Avança Brasil projects, especially the improvement and expansion of regional transport infrastructure, would have a dramatic effect on opening up vast new areas of relatively remote land areas to potential agricultural production. Not only would overall grain transport costs decline, but the secondary and tertiary road networks spawned from the initial highway improvements would increase the spatial extent of cultivatable acreage. In addition, real competition between road, rail, and river freight rates will bring added efficiencies and lower overall costs of getting product to market.
Intensification and diversification of the Brazilian farming system.
Brazilian agricultural researchers have a vision of the future farming system in Brazil (especially the Cerrado region), that involves the total integration of crop and animal production into a single diversified enterprise. At present, both cattle and grain production systems are practiced by producers in isolation, though they inhabit the same general rural landscape. A new integrated farming system would actively rotate land between crops and pasture, and intensify the overall production scheme in all seasons. The pasture component would be managed intensively, including fertilization and the sowing of improved grasses and legumes to raise productivity and carrying-capacity. Embrapa research has shown that by combining crops and pasture into an integrated enterprise and enhancing pasture management, producers could reduce pasture acreage by 75 percent while also increasing their stocking rate 190 percent (going from 1.1 cattle per hectare to 3.2 per hectare). For example, a 10,000 hectare grazing property which previously supported 11,000 cattle could be transformed into a mixed cropping/livestock enterprise that is able to maintain 8,000 cattle on 2,500 hectares of pasture, while devoting 7,500 hectares to new cultivated grain and oilseed crops. Though the original cattle herd is reduced 30 percent in this example, the potential increase in gross returns from the sizable new grain and oilseed crop acreage would more than compensate, substantially enhancing the total net return of the property.
Its not difficult to perceive the benefits posed by this "hybrid" farming system nor the prospect that it could energize the consolidation of farm properties and enhance agricultural expansion in established farming regions across Brazil. It offers the potential for substantially higher financial returns from a given property while also diversifying production risk from weather, disease, and fluctuating commodity prices. This farming system formula will in all likelihood gain ground at a very gradual pace in the future, as crop researchers and extension services promote it and producers become convinced of its benefits. Its adoption would enable a broad scale intensification of the average Brazilian farm enterprise, and at the same time signal the maturity of Brazil’s agricultural expansion process through the consolidation of the rural landscape.
Food For Thought
Gradual expansion of the country’s agricultural land area will inevitably occur over the next 50-100 years, irrespective of the advent of major political or technological innovations, as the rural population expands and the demand for land grows. The long-term rate of growth in soybean acreage (the largest contributor to agricultural expansion) has been estimated at approximately 3-4 percent per annum under existing conditions, though this rate has accelerated recently owing to a weak local currency and relatively strong commodity prices. Even at this modest pace, soybean area by itself could increase 200 percent over the next 50 years, rising from 18.0 million hectares in 2002 to 54.0 million in 2052. However, should circumstances arise that enable the Brazilian's to significantly reduce production costs or increase productivity, the rate of agricultural expansion will likely be stimulated and its ultimate extent increased.
Over the next century should growth in world soybean demand warrant it, and profitability permit it, Brazil's soybean area could conceivably rise by 50-100 million hectares. Under these circumstances Brazil's soybean production capacity would increase by 150-300 million tons at current yield levels. In the long term, whatever the rate of growth, it is clear that Brazil has the capacity to meet or exceed world demand for soybeans by tapping its ample arable land resources. At the same time, being the world’s leading low-cost producer of premium quality beans, they (unlike their competitors) have the capacity to prosper in an environment of markedly lower international commodity prices.
As radical as it sounds, the prediction that 170 million hectares of new farmland could potentially be brought under crop production in Brazil might still be considered a conservative estimate. The reasons for this are that the FAS projection assumes no more than 50 percent of existing pasture land would be converted to field crops under any circumstances, and it ignores the actual scope of deforestation, immigration, and economic development that is occurring and is likely to continue to occur in the Amazon Basin over the next century.
In regards to the future of agricultural development in the Amazon region, it should be noted that prominent teams of scientists supported by NASA’s Large-scale Biosphere Atmosphere (LBA) program have produced quantitatively rigorous analysis which indicates the following:
Deforestation rates since 1995 have averaged nearly 2 million hectares per year (equivalent to 7 football fields per minute), and increased over those of the early 1990’s despite stricter environmental laws (INPE, 2000; Laurance et al., 2001).
Large-scale cattle ranchers, rather than small-scale farmers, appear to be responsible for 70% of all forest loss (Fearnside, 1993; Wood & Skole, 1998; Nepstad et al., 1996).
The prevalence of fire-dependent agriculture in the Amazon, particularly cattle ranching and slash-and-burn farming, means that controlling forest burning will remain a chronic and difficult challenge to enforce and control (Nepstad et al. 1999b).
Rapid expansion of Amazonian population, rising from 7.5 million in 1970 to 20 million in 2000 (IBGE Census, 2000) is increasing pressure on forest resources.
Amazon has the highest rate of immigration of any region in Brazil, and has often been characterized as an “escape valve” for reducing overcrowding, social tensions and displacement of agricultural workers in other parts of the country (Anon, 2001).
Amazonian population increase has largely resulted from Government policies designed to accelerate immigration and economic development, including large-scale colonization schemes, credit and tax incentives to attract private capital, and major transportation projects (Moran, 1981; Smith, 1982; Fearnside, 1987).
The Brazilian government plans to sharply expand the existing network of paved highways and infrastructure under its Avanca Brazil program, leading to 7,500 km of paved highways in the region (Laurance et al., 2001)
By criss-crossing the basin, these projects would open up extensive new frontiers for colonization and encourage further immigration into a region that is already experiencing rapid population growth (Laurance et al., 2001).
Most deforestation, logging and forest fires in the Amazon occur in the general vicinity of roads and highways (Fearnside 1986; Laurance 1998; Alves et al. 1999; Steininger et al. 2001a, 2001).
New highways and roads sharply increase Amazonian deforestation (Fearnside, 1987; Imbernon, 2000; Carvalho et al., 2001; Laurance et al., 2001b; Steininger et al., 2001a; Nepstad et al., in press)
Highway (paved roads) proximity emerged as the single most important predictor of deforestation. Because they promote efficient, year-round access to forests, highways tend to have considerably larger-scale impacts than roads (unpaved).
Major highways tend to spawn secondary road networks, as has occurred extensively in the southern and eastern Amazon (for example, around the Belém-Brasília, Transamazon, BR-364 highways).
Modeling studies that incorporate remote sensing and spatial data on planned Amazonian highways and infrastructure projects suggest that the Avança Brasil program will lead to dramatic increases in forest loss and fragmentation during the next 20-25 years (Carvalho et al., 2001; Laurance et al., 2001b).
Deforestation was most concentrated in drier, more seasonal areas of the Brazilian Amazon. The most obvious reason for this pattern is that drier forests are easier to burn, reducing the effort needed to clear forests and maintain pastures and croplands. There might also be some tendency for drier forests to overlay more fertile soils, because heavy rainfall can leach soil nutrients.
In Brazilian Amazonia, drier forests are most extensive along the southeastern margin of the basin, which is also most accessible to immigrants and markets from southern population centers. However, deforestation has also been very high in areas such as Roraima state, which contains extensive seasonal forests but is located in northern Amazonia far from major population centers. In a recent study, Schneider et al. (2000) asserted that rainfall, rather than proximity to population centers, is the more important determinant of deforestation in the Brazilian Amazon.
Soils have played a relatively insignificant role in determining deforestation activity on a basin-wide scale. In Brazilian Amazonia, most large-scale colonization and development projects have been implemented with little or no information about soil characteristics (Moran, 1981; Fearnside, 1984). Even on a local scale, soil quality was found to be much less important than distance from roads in determining deforestation by colonists (Fearnside, 1986). Rather than determining where deforestation occurs, soil features may influence how quickly land is abandoned after being deforested, and how rapidly forest regenerates after abandonment (Saldarriaga et al., 1986; Laurance et al., 1999). It is also not inconceivable that farmers and ranchers on low-fertility soils are forced to clear larger areas of forest than those on better soils, in order to remain viable.
These scientific assessments and analyses indicate that it is logical to assume that significant additional deforestation will likely occur in the Amazon region, and that substantial agricultural development will follow in the next few decades. As outlined above, large-scale cattle rancher’s and small-scale farmers are currently responsible for the lion’s share of Amazon deforestation, and their access to new land parcels will be accentuated by new road development. FAS’s projection for Brazil’s potential agricultural expansion, therefore, is understated by an unknown degree. What is evident is that Brazil has more than adequate land resources outside the Amazon Basin to radically expand its agricultural economy, substantially increase crop production, and support continued immigration and development in its frontier regions.
