BRAZIL’S SOYBEAN PRODUCTION POTENTIAL AND COMPETITIVE POSITION VS. U.S. Dr. Robert Wisner Iowa State University

1. BRAZIL’S SOYBEAN PRODUCTION POTENTIAL AND COMPETITIVE POSITION VS. U.S.Dr. Robert WisnerIowa State University

2. SOURCES OF INFORMATION 4 farms in three states 2 railroad companies 1 barge company 2 truck firms 1 major grain company 1 soybean processor 1 wet corn miller 1 export elevator 1 port authority 2 country elevators 3 soybean seed producers 3 livestock producers 1 new farm storage facility

3. HISTORY • 1971 U.S. devalues dollar • 1971-72 USSR buys huge amounts of U.S. grain • 1972-73 harsh El Nino reduces Peruvian fish meal • 1973 U.S. food companies, livestock feeders and consumers raise fears of running out of soy products • June, 1973, President Nixon embargos soybean and soymeal exports • 1973-74 soy importers buy land in Brazil to grow soybeans

4. BRAZIL SOYBEAN PRODUCTION Mil. TonsMil. Bu. 1973 5.0 184 2000 34.2 1,259 2002 43.5 1,600 USDA Proj. 2003 48.0 1,766

6. Brazil’s Cerrados • Land purchase prices: $100/Acre or less plus clearing costs • Quality varies, buyer beware • Web site for real estate:http://www.AgBrazil.com/brazil_s_agriculture_frontier.htm

7. Crops Raised in Cerrados • Soybeans • Wheat • Rice • Sugar cane • Cotton • Corn • Coffee • Pasture

8. Brazil’s Cerrados • Soil types: sandy to sandy loam • Aluminum content: 0.05 to 0.06 • Requires about 1.6 tons of lime/A. • Avg. annual rainfall: 35 to 80 inches, depending on the location • Avg. temperature: 73 F. range: 63-90 • Irrigation water available • Double/triple cropping possible

9. Rate of Expansion in South American Soybean production • Brazil: 1993-1999 = 55 mil. bu./year • Argentina:1993-1999 = 51 mil. bu./year • Projected 2000-01 expansions: • Brazil +74 mil. bu. • Argentina +103 mil bu. • Other small expansions in Bolivia, Paraguay, Uraguay

14. Brazil Corn • Brazil is a major corn grower • Brazil exports no corn in most years • Reason: • Transport costs nearly equal price of corn • What it would take for Brazil to export corn: approximate doubling of corn yields

16. Estimated Costs of Producing Soybeans, Iowa & Brazil, 2000 Cost per acre Cost per bushel Mato Matto Non-land costs Iowa Paran á Grosso Iowa Paran á Grosso Seed + innoculant $ 18.00 $10.00 $10.00 $0.36 $0.22 $0.20 Fertilizer & lime 27.30 38.00 47.00 0.55 0.84 0.94 Labor 19.60 10.00 10.00 0.39 0.22 0.20 Chemicals 30.00 35.00 24.40 0.60 0.78 0.49 Crop insurance 3.00 0.00 0.00 0.06 0.00 0.00 Interest 5.90 6.48 6.92 0.12 0.14 0.14 Machinery 43.19 25.00 33.85 0.86 0.56 0.68 Miscellaneous 8.00 8.00 9.00 0.16 0.18 0.18 Sub-total $154.99 $132.48 $141.17 $3.10 $2.94 $2.82 Land 140.00 42.00 32.00 2.80 0.93 0.64 Total $294.99 $174.48 $173.17 $5.90 $3.87 $3.47 Normal yields 50 45 50

17. Farm access road through the small scrub brush of the Cerrados.

18. Typical dirt road in Brazil during the beginning of the dry season. Brazil Cerrados Top Soil 120 ft

19. Cotton planted on Cerrados

20. Newly Cleared Land In Brazil Planted to Upland Rice

33. Current and potential production in expansion areas(mmt) Total +480-550 mil. Bu.

34. Major waterway systems Major waterway systems

40. Sapezal export route

43. Central Iowa Export Route

45. Major railroads

47. Ferronorte rail cars, the old and the new

48. Railroads 1. Are in bad condition a. different rail gauges b. less than 300 miles of new and upgraded lines c. trains derail regularly on old rail 2. Ferronorte (Soy Railroad) purchased 50 cutting edge technology locomotives and 700 new 105-ton aluminum covered hopper cars 3. Derailments essentially destroy aluminum cars 4. Major grain company buying 40 smaller hoppers 5. Very limited grain loading facilities on the new rail

49. Railroads - cont’d 6. New loading facilities unlikely until all new rail completed 7. Seasonal grain movements unlikely to support new railroads 8. Directly serve only small areas 9. Grain carrying capacity likely to increase but at a very modest rate