In Brazil Corn Grains Are Gold Again

A cornfield in BrazilCorn was once the ugly duckling of agriculture. Prices went on a free fall in the past. But now the commodity is back on top, and once again it plays a key role in the global economy, as it did in the Maya civilization, in Mexico. In the future, Brazil will be an important player in the global scenario of corn as well.

Projections by the Brazilian Ministry of Agriculture, Livestock and Supply – made before the United States, the main producer and exporter of the cereal, decided to use a large share of its production to make ethanol – forecasted that the country would produce 53.39 million tons of corn between 2016 and 2017. This figure represents an increase of approximately 11 million tons over the current production.

If the projections were already good before the United States made their announcement, now there is an open space for Brazil to grow. According to Flávio Turra, economic manager at the Organization of Cooperatives of the State of Paraná (Ocepar), in southern Brazil, the estimates of the Ministry of Agriculture became modest, given the current position of the United States.

"Brazilian corn production should reach 70 million tons in the 2016/2017 crop," he claimed. The road is being paved. For Ocepar, three or four years from now, the country will have already increased its production and consolidated its position in the international market, exporting to nations that are now supplied by the United States production.

Cesário Ramalho, president of the Brazilian Rural Society (SRB), agrees. "This year, Brazil should export twice the volume it exported last year: exports should total eight million tons, against four million tons in 2006. It will be a point scored by Brazil, an increase in revenue, because since the decision of the United States, the foreign market has been recording high rates for corn," he says.

To Ramalho, due to ethanol, "everything leads us to believe that a new chapter may be beginning in the history of Brazilian corn, which until recently was a second class commodity. Because of the commodity’s good international prices, Brazil should increase its planted area and its production area, thus becoming a major supplier of corn to the global market," he claims.

Corn Race

Mário Lanznaster, president of Coopercentral Aurora, is also attentive to the changes in the corn market, and is already leading another change, this one in the domestic realm: the migration of poultry meat production to the midwestern region of Brazil. "This is another consequence of the decision of the United States and of other powers, which are seeking to replace fossil fuel with ethanol," he says.

According to Lanznaster, corn is scarce in southern Brazil, and companies are seeking alternatives that will not change production costs too much. "Bringing the grain from the Midwest would be expensive: one bag, which costs from about US$ 6 to US$ 6.50 arrives here at US$ 10. Given that value, we even imported from the United States, because it was cheaper. Now, with the new stance of the United States, companies tend to migrate to midwestern Brazil in order to stay closer to corn. It will be the corn race," he claims.

"Companies Sadia and Perdigão are already there, and so are we. We put together a swine unit in the city of São Gabriel do Oeste, in the midwestern Brazilian state of Mato Grosso do Sul," he says.

To have an idea of the sector’s demand, 3.5 kilograms of corn are required for each kilogram of swine meat. In the case of poultry, the ratio is two kilograms of corn for one kilogram of poultry. "What should take place is a dilution of the Brazilian swine and poultry meat production, which are currently focused in the southern region, especially in the state of Santa Catarina," Lanznaster explains.

To the president of company Aurora, heading to the Midwest will also make it easier to reprocess swine and broiler litter waste, which can be applied to crops. "We have a problem dealing with it in Santa Catarina, the properties are small, the surplus is discarded into rivers. In the Midwest, plantations are large, therefore they need manure," he says.

Grain by Grain

In the future, Brazilian soy will have a great responsibility: supplying a large share of the Chinese market. China will be the main consumer of the grain in the world by around 2015 and 2016, exceeding the United States, the current leaders.

The Americans, however, will produce less, granting Brazil and Argentina – the other two large producers of soy – the chance to increase their market share and supply the global market. The Ministry of Agriculture, Livestock and Supply estimates that by 2015/2016 the country will have a harvest of 72 million tons of soy, and will export 35 million of this total.

To the Food and Agricultural Policy Research Institute (Fapri), Brazil will be the main soy exporter in the 2007/2008 crop, when the United States participation in the foreign market should fall from 42.2% to 28.8%, and the Brazilian will rise from 41% to 54.5%.

The first indicators that Brazil will manage to reach these figures arose last week, with the disclosing of the agribusiness trade balance. In the first months of the year, foreign sales of the soy complex rose 11.3%, from US$ 2.6 billion to US$ 2.9 billion.

Another Brazilian product with a planned future is coffee. With the estimated increase in global coffee consumption, leaping from the current 118.9 million bags to 144.6 million, in 2014, according to the Ministry of Agriculture, Brazil should answer to around 30% of the volume. That is, the country will have to export around 43 million bags of the product. In 2006 exports totaled 27.2 million bags. Sales totaled US$ 3.3 billion – growth of 14.8% over the previous year.

According to Otto Vilas Boas, business advisor at the Guaxupé Regional Cooperative of Coffee Producers (Cooxupé), to reach the figure expected for 2014, the coffee sector will have to continue investing, as it did last decade.

"We must have average yearly production of 50 million bags if we do not want to lose foreign market, as took place in other periods, when Vietnam entered the scene," he said. To him, "the difference from that time to date, which is guiding the future, is that competitors do not have the same conditions for production increases."

Vilas Boas stated that the Brazilian producers have facilities to increase productivity, due to cultural aspects and also to the excellent advances of research in Brazil. "Farmers are well guided, aware," he said. Today, average productivity is from 19 to 22 bags per hectare, and the intention is to reach this figure to 28 bags per hectare.

Another point is the increase of the cultivated area, which, according to Vilas Boas, is also already taking place. "Land that was previously considered inappropriate now even leads in productivity of irrigated coffee. In the state of Minas Gerais, southeastern Brazil, for example, production was restricted to the south. There are currently three important production areas: the Wood Region, the Savannah and the Minas Plateau. The latter producing high quality coffee."

Regarding consumption, Vilas Boas believes that consumers will certainly be interested in the quality and method of production. They will be aware of the fact, for example, that the grain is organic, produced in a sustainable manner, etc. "In 2017, the demand for special coffees should rise."

This is where a problem that needs a solution comes: remuneration of most of the farmers, mainly the medium and small ones, does not make it possible for them to invest in special coffees. "In crops, the gain in quality is gradual, not fast, and investment, testing and trial and error are necessary," he said. To Vilas Boas, a change in exchange policy is the best solution for the sector to guarantee its arrival in 2017 without stumbling.

Anba – www.anba.com.br

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