Brazil’s well-diversified agricultural sector contributes much to the nation’s domestic economy and balance of trade and provides self-sufficiency in most food products.
Brazil typically ranks first in exports of coffee, orange juice and soybean meal, second in exports of soybeans and tobacco and third in exports of beef and poultry. Major exports markets are the U.S., Argentina, Japan and the Netherlands.
Livestock production and meat exports are important sectors, with rapid growth in the poultry, pork and milk industries reflecting changes in consumer tastes. Nonetheless, field crops remain predominant, accounting for 60% of agricultural output on a value basis.
WHEAT AND FLOUR MILLING
Nearly all of Brazil’s wheat crop is grown in the three southern-most states, with Parana as the largest producer. Traditionally, the domestic crop falls far short of domestic needs.
In 2002, the agriculture ministry introduced a program to expand domestic wheat production. The program aims to reduce imports to 50% from 75% of domestic consumption by this year and to boost production to 6.7 million tonnes by 2005, more than doubling the record 2001-02 harvest.
To encourage this increase, the Brazilian government raised the minimum price for wheat and maintained higher and differentiated prices for non-traditional growing regions. In a further move, the government increased the amount of subsidized credit available to Brazilian wheat producers by 18.5% to R450 million (U.S.$132 million) in 2003.
The incentives have proved successful, prompting a big jump in plantings and production. Wheat area in 2003-04, at 2.7 million ha, is up 43% from 2001-02, and production this season is estimated at 5.2 million tonnes, up 60% from the record 3.25 million set in 2001-02.
As a result of the production surge, Brazil’s 2003-04 wheat imports are expected to slide by 17% from the previous season, to 5.6 million tonnes, or about 56% of expected consumption of 10 million. Indeed, a pool of cooperatives in Rio Grande do Sul, the second-largest wheat producing state, reportedly plans to export 100,000 tonnes of wheat to Europe, marking the first time in history that Brazil will sell wheat abroad.
Over the longer term, however, Brazil’s ability to increase output further or sustain current higher levels is doubtful. Wheat production costs in the expanded areas are double those in Argentina and the United States, as extensive fertilizer use is required. Brazil’s climate also is unfavorable for wheat production, and crops are often affected by droughts, floods and frosts.
In the wheat milling sector, agricultural liberalization in the past 10 to 15 years has resulted in consolidation. The number of operating wheat mills in Brazil fell from 489 in 1967 to about 200 in 2003. Top milling companies include Moinho Pacifico, Bunge Alimentos (Santista Alimentos), J. Macedo, Predileto (Moinho Cruzeiro do Sul), Moinho Anaconda S.A. and M. Dias Branco.
Total national milling capacity is estimated at 15.37 million tonnes of wheat per year, and capacity utilization in 2003 was estimated at 60%.
Moinho Pacifico in Santos, 96 km from Sao Paulo, is the largest mill in Latin America, with a capacity of 1.12 million tonnes of wheat per year following an expansion in 2003 from 900,000 tonnes.
Meanwhile, Fortaleza-based M. Dias Branco is expanding its presence in the northeast city of Aratu, Bahia, with the construction of a wheat mill, cookie/cracker and pasta factory and port facilities. The new plant has a milling capacity of 1,800 tonnes of wheat per day.
The company produces vitamin-fortified flour and is working closely with the Bahian government to increase the nutritional value of bread.
A proposed law requiring the inclusion of manioc powder in wheat flour stirred considerable debate in the Brazilian wheat sector last year. Wheat millers were opposed to the idea because the blend lowers the quality of the flour and reduces its nutritional value. They also argued that the move would not necessarily reduce the cost of flour, as millers would be forced to import manioc in times of domestic shortage.
Those in favor of the proposal asserted that the manioc powder improved baking quality and shelf life of bread. Indications suggest that the proposed law is unlikely to gain enough support to pass.
Brazilian wheat consumption is 52 kg per capita, below the world average of 82 kg, according to U.S. Department of Agriculture. But consumption is increasing, and millers hope a new "Zero Hunger" Program aiming to eliminate malnutrition will stimulate wheat consumption.
COARSE GRAINS AND FEED
Maize is produced in nearly every state in Brazil, but 85% to 90% of total production is concentrated in the center-south region. While domestic demand generally is fairly constant, output fluctuates depending on weather. Maize production also
depends on soybean prices, as growers can easily switch between the two crops.
The pork and poultry sectors are the main maize consumers and depend on domestic production. Their export operations are vulnerable during domestic maize shortages; they are reluctant to use imported maize because they promote "GMO-free" products in the European market.
According to official statistics, Brazil’s animal feed production was estimated at 43.9 million tonnes in 2003, a sharp increase on the 41.6 million produced in 2002. Of the 2003 total, 24.4 million tonnes were used for poultry, 13.2 million for pigs and 3.9 million for cattle.
In just three seasons, Brazil’s soybean production has surged by 54%, to an estimated 60 million tonnes in 2003-04. During the same period, U.S. output has slid by 11%, to an estimated 66.7 million tonnes in 2003-04.
And for the first time ever, Brazil’s soybean exports, an estimated 26.2 million tonnes in 2003-04, are expected to surpass U.S. 2003-04 shipments of 24.2 million.
Brazil’s dramatic rise in the world soybean arena has resulted from higher yields, as well as the opening up of new land. But underlying these factors is a whole new system of oilseed inputs, outputs and infrastructure led by multinationals, such as Cargill, Inc. and Bunge Limited, and large domestic companies.
The companies have made seed, fertilizer, herbicides and credit available on the one hand, and purchasing, transport and export facilities to complete the cycle. And the expansion continues, as new crushing capacity, roads and export terminals are under construction or are in the planning stages.
USDA has noted that Brazil’s processors and exporters should have no difficulty in marketing the soybeans, meal and oil produced this season. This amazing trend of expanding production and exports is likely to continue over time.
One of the few uncertainties hanging over this growth scenario concerns the issue of genetically modified organisms.
Brazil had implemented an official ban on GM soybeans in an effort to cater to markets, especially in Europe, that find GMOs suspect. But planting/harvesting of black-market GM seeds was widespread, making up perhaps as much as 20% of the 2002-03 crop, as growers found them more profitable.
In 2003, Brazil came under pressure from GM seed manufacturers who were losing royalties to the black market, and the government issued a provisional order relaxing the ban. Farmers had to sign documentation acknowledging the use of GM seed and accepting responsibility for any environmental damages or public health effects discovered at a later date.
But that order prompted Parana, a key producing state, to declare itself a "GMO-free zone" by banning planting, processing, transit and export of GM soybeans in the state.
Since Parana is home to 25% of the country’s oilseed processing capacity and typically is crossed by cargoes headed on to Parana’s key export facilities at Paranagua port, the state’s action has threatened to create a logistics nightmare. Indeed, within the first week of the measure’s adoption, hundreds of trucks were stopped by Parana officials for GMO testing.
Given the difficulties of enforcement and the disruption in market flow, some compromise or a federal injuction is likely. But the overall issue will continue to pose difficulties, as government officials and the public have not yet been able to agree on a permanent national GMO policy.
(See related article on Grain Handling in Brazil on page 38.)
Demography: Population 182 million (July 2003), 1.15% growth rate (2003 estimate); Portuguese language; Roman Catholic, 80%, religion.
Geography: Eastern South America, bordering the Atlantic Ocean; mostly flat rolling lowlands in north; some plains, mountains, narrow coastal belt; mostly tropical climate, temperate in south.
Government: Federal republic. Chief of state and head of government is President Luiz Inacio Lula da Silva.
Official agricultural agencies: Ministry of Agriculture under Minister Roberto Rodrigues.
Economy: With large and well-developed agricultural, mining, manufacturing and service sectors, Brazil’s economy outweighs that of all other South American countries and is expanding its presence in world markets. President Lula da Silva, who took office in January 2003, has given priority to reforming the complex tax code, trimming the civil service pension system and continuing the fight against inflation.
Agriculture accounts for 8.7% of gross domestic product and 31% of the labor force.
G.D.P. per capita: U.S.$7,600 (purchasing power parity), 1.5% growth rate, 8.3% inflation (2002 estimates), 6.4% unemployment, (2001 estimate).
Currency: Brazilian Real (BRL). Dec. 23, 2003 exchange rate: 2.90903 BRL = 1 U.S. dollar.
Exports: U.S.$59.4 billion (f.o.b., 2002), soybeans, iron ore, footwear, transport equipment.
Imports: U.S.$46.2 billion (f.o.b., 2002), machinery, electrical equipment, chemical products, oil.
Major crops/agricultural products: Soybeans, coffee, cocoa, sugarcane.
Wheat: Five-year annual production (1999-00 to 2003-04) averaged 3.1 million tonnes, although 2003-04 output is expected to surge to 5.2 million. Consumption averaged 9.8 million, and imports averaged 6.8 million. Virtually all consumption is for human use.
Soybeans: Five-year production averaged 45.8 million tonnes a year, with crush averaging 25.5 million and exports averaging 17.9 million. Output in 2003-04 is forecast to soar to 60 million tonnes. Exports in 2003-04 are projected at 26.2 million tonnes, which would make Brazil the world’s largest exporter.
Maize: Output averaged 38.2 million tonnes per year. Total domestic use averaged 35.2 million, with feed use accounting for an annual average of 31 million.
Transportation: Highways, 1,724,929 km, 94,871 paved; railroads, 31,543 km, mostly 1.000-m gauge; Paranagua, Porto Alegre, Santos are major ports.
Internet: Country code, *.br; 50 service providers (2000); 14 million users (2002).