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Texas Agriculture Archive

April 21, 2006

South America: A real eye-opener

By Mike Barnett
Editor

Farmers' and ranchers' eyes tend to glaze over when talk turns to agricultural trade. WTO and FTA, NAFTA and CAFTA and all those other acronyms become confusing when trying to sort through the details of this complex and often touchy subject. But your eyes tend to open wide when you travel to other countries and see what the competition's all about.

At least that's my opinion after visiting South America and learning about agriculture in Argentina and Brazil.

What I saw in these two countries was amazing.

Argentina's a powerhouse when it comes to soybeans. Driven by the profitability of a combination of Round-up Ready soybeans and no-till farming, farmers are replacing acreage devoted to cattle and other crops with the oilseed. Recognizing the growers' enthusiasm and ability, foreign companies are committing big bucks to boosting the infrastructure, and are constructing the largest concentration of crushing and export facilities in the world in Rosario, located 250 miles upstream from the Atlantic Ocean on the Parana-Paraguay River.

Good thing for Texas farmers and ranchers that Argentina producers are finding their profits in soybeans instead of cotton or cattle. And good thing that productive land is limited, and the farmers are having to rob Peter to pay Paul to expand soybean acreage.

The Argentine farmers are progressive, will readily adapt new technology, and let me tell you, they're good at growing 'beans.

So what's holding these guys back? By and large, the Argentina government finds agriculture an easy mark, taxing agriculture exports to fund social programs.

For example, farmers are still making money on soybeans, even with transportation costs higher than the U.S., a 23 percent export tax and no government help.

Other agricultural products are treated the same way. The Argentine government, in an effort to keep inflation and food prices under control, levies hefty taxes on all agriculture exports...and if that doesn't work, they willingly institute an export ban, as they did for 180 days on beef cattle.

Try developing export markets in those kinds of conditions.

Then there's Brazil. About the size of the U.S., only 5 percent of the country is devoted to crops, compared to 19 percent in the U.S. The potential for agriculture there is tremendous. There are huge amounts of productive land just waiting to be farmed, and the climate's conducive to growing crops year around.

So what's holding Brazilian farmers back?

Again, it's the government, and their lack of commitment in developing Brazil's infrastructure. Little has been done in the past few years to improve the situation.

But look out. The Brazilian government can accomplish great things when they set their minds to it.

During the energy crisis of 1974, the Brazilian government took steps to reduce the country's dependence on foreign oil. They developed and supported an ethanol program that today has made this vast country self-sufficient in energy. Using sugarcane as a dual purpose crop, the Brazilians are not only the leading producer of ethanol in the world, but of sugar as well.

If the Brazilian government ever recognizes the true potential of its agricultural industry—a huge country with only a small percentage of land committed to growing crops, an excellent climate and the ability to produce in abundant quantities—then watch out: Brazil will become an even bigger contender in world markets.

Keep in mind that across the board, American farmers grow around 30 percent more commodities than Americans consume. That's why exports are important.

The farmers and ranchers of countries like Brazil and Argentina are eager to take a bigger bite out of that world market. If their governments ever get behind them, it's Katy bar the door.