South America Calling
Alastair Stewart South America Correspondent

Tuesday 10/23/12

Brazilian Agriculture and the Pasture Myth

Brazil has vast swathes of degraded pasture that will allow farmers to supply the globe's soybean needs over the next 20 years without touching the rainforest.

If you have read a big-picture story about Brazil's farm prospects over the last ten years, it's likely that you are familiar with the above sentiment -- I myself have rolled this out a few times.

However, as with most sweeping statements, it is not completely true. While Brazil does have 440 million acres of pasture, much of it massively underutilized by the commercial herd of 213 million head of cattle, a relatively small portion is suitable for top-notch soybean and corn production, according to numbers compiled by Agroconsult and Bigma, two local farm consultancies.

Of Brazil's pasture, only 17.8% sits above 500 meters (1,640 feet), which is seen as ideal for grain farming. Meanwhile, some 7% is on steep slopes, which would preclude conversion to row crops, the consultancies estimate.

"It's a myth that Brazil has all this degraded pasture waiting to be converted," said Mauricio Nogueira, chief agronomist at Bigma.

Agriculture will tend to move onto the higher-altitude pasture, which tends to be the most productive and not the degraded land in Brazil's backwaters, he said.

The comparative advantages of producing row crops versus ranching means agriculture has been eating up pasture over the last five years and Agroconsult and Bigma think that pressure will intensify during the next decade.

In order to keep pace with demand for grains, sugarcane and forestry, Brazil will have to convert approximately 31 million acres of pasture thru 2022.

If ranchers are to live with this encroachment and meet rising global demand for their beef, they must dramatically intensify production.

"In 10 years' time, three out of every 10 tons of beef could be produced in Brazil, but farmers need to invest in technology," said Andre Pessoa, director of Agroconsult.

The good news is that ranchers seem to be getting the message.

Agroconsult and Bigma have just completed a six-week survey of Brazil's ranching regions, covering 28,000 miles and surveying properties with 1.3 million head of cattle.

They found pasture was in better shape than is commonly thought, with 51% of the areas surveyed in good or great condition, while some 42% of farmers fertilize the fields and 86% want to reform 14.5% or more of their pasture this year. In a further sign of technological advance, some 11% are integrating ranching with agriculture as a way of increasing profits from the beef business.

"Our sample is not completely representative because we did not get to the low-tech farmers off the beaten track. But it does indicate a trend," said Nogueira.

This trend needs to intensify if ranching is to become more profitable. National margins on ranching currently stand at 74 reals per hectare ($14.83 per acre) in 2012 compared with over 1,000 reals per ha for soybeans. Using a full technological package, ranchers could raise margins to 732 reals per ha, estimates Agroconsult.

If agriculture doesn't move into ranching country then Brazil will have to cut down much more forest and scrub -- Agroconsult currently forecasts a further 7 million acres will be cut for grains production thru 2022 -- and that will attract the ire of environmentalists everywhere. If Brazilian agriculture doesn't expand, then we will probably see global food and feed prices rise and then many more people will be unhappy.


Posted at 4:45PM CDT 10/23/12 by Alastair Stewart
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