Consider this formula: cheap, productive land, and plenty of it; cheap labor, and plenty of it; cheap agricultural chemicals; reasonable equipment costs; ideal growing seasons and markets eager to take what you grow.
So, where do you sign up?
How about Brazil?
The potential for Brazil to increase its already healthy agricultural industry might give U.S., farmers the willies, says Bryce Myrick, with the Texas Farm Bureau.
Myrick has made two fact-finding missions to Brazil and says the country has set its sights on agricultural production that will encompass 90 million acres within 10 years.
“They are on pace to do that,” Myrick said recently at a recent international trade conference in San Antonio.
“Brazilian farmers have tremendous production potential,” he said, “and they are increasing acreage every year.”
Myrick said he wanted to see first hand what kind of a competition Brazil poses for agricultural markets. It's considerable, he decided.
“Brazil is about the size of the Continental United States,” he said. “Production includes soybeans, their main crop, coffee, wheat, rice, corn, sugarcane and cotton. Trade partners include the United States, Japan, the European Union and Argentina.”
He said Brazil stands to gain market share. “Currently, the United States produces 34 percent of the world's soybeans,” he said. “Brazil accounts for 22 percent. But, from 1990 through 2001, production increased from 15 million metric tons to 39 million. Europe, China and Japan are the major buyers.”
In many areas, Brazilian farmers enjoy a competitive advantage over the United States. “They can make money with $3.80 per bushel soybeans,” he said. “Land costs average $100 per acre. Labor is cheap, about $1.40 per hour for managers and 70 cents per hour for tractor drivers.
“Roundup costs them only $12.80 per gallon, and they can get a 140 horsepower John Deere tractor for $55,000.”
Myrick said soybean yields average 40 bushels per acre or more and many farmers double-crop behind the beans and make from 50 to 100 bushels of corn per acre.”
Storage, however, is a key to success.
“At harvest, soybeans usually bring only $3.50, but if they can store for a month or so, prices could rise to $4 or $5 per bushel.”
Myrick said cotton, at 34 to 36 cents per pound offers little incentive. “Cotton acreage is not likely to increase and could drop,” he said.
Limitations include a poor infrastructure to move equipment and harvested crops. Also, Brazil imposes a 16 percent sales tax on equipment.
“Agriculture gets no exceptions, except the tax goes down to 12.75 percent if the machinery is made in Brazil. Agriculture does not rate high with the government,” Myrick said.
Donald Patman, Texas Farm Bureau President, says Brazil's low production costs and the strong U.S. dollar improve Brazil's competitive advantage in international markets.”