{"id":84,"date":"2009-09-02T12:10:23","date_gmt":"2009-09-02T11:10:23","guid":{"rendered":"http:\/\/www.cardy-brown.com\/?p=84"},"modified":"2009-09-02T12:10:23","modified_gmt":"2009-09-02T11:10:23","slug":"commodities-natural-advantages-should-sweeten-deals","status":"publish","type":"post","link":"https:\/\/www.cardy-brown.com\/?p=84","title":{"rendered":"Commodities: Natural advantages should sweeten deals"},"content":{"rendered":"

As\u00a0published in the\u00a0Financial Times:
\nA large landmass, warm climate, abundant water and large amounts of unused fertile land \u2013 these are the elements that have made Brazil a leader in global agriculture commodities markets, according to President Luiz In\u00e1cio Lula da Silva. He also believes they are likely to facilitate further growth in its food exports. \u201cBrazilian agriculture has undergone enormous improvement in recent decades, transforming entire regions into rich farmlands and achieving global pre-eminence in the production of several agricultural commodities,\u201d say Fabiano Costa and Emma Cardy-Brown in their report \u201cInvesting in Agricultural Land in Brazil\u201d by AgriInvest Publications<\/strong>. \u201cIn the process, considerable wealth has been created where previously there was often little more than subsistence farming,\u201d they add. \u201cNot only has the general population seen an improvement in living standards but also landowners have seen their personal fortunes rise dramatically.\u201d
\nStarting almost from scratch in the early 1970s with the help of Japanese trading houses such as Mitsui, Brazil has become the world\u2019s second-largest exporter of soyabeans \u2013 a key commoditiy for livestock feed in China. The country is also the world\u2019s largest exporter of sugar and coffee and plays critical roles in corn, in which it is the third largest exporter, livestock and lean hogs, in which it is the world\u2019s largest and third-largest exporter, and rice, where it is the 10th largest exporter.<\/p>\n

Brazil\u2019s natural advantages, particularly the large stock of land and abundant water, will continue to enhance the country\u2019s critical role in global agricultural markets. However, the financial crisis has also highlighted vulnerabilities of the recent expansion, notably a large accumulation of debt.
\nStarting almost from scratch in the early 1970s with the help of Japanese trading houses such as Mitsui, Brazil has become the world\u2019s second-largest exporter of soyabeans \u2013 a key commoditiy for livestock feed in China.
\n
\nThe country is also the world\u2019s largest exporter of sugar and coffee and plays critical roles in corn, in which it is the third largest exporter, livestock and lean hogs, in which it is the world\u2019s largest and third-largest exporter, and rice, where it is the 10th largest exporter.Brazil\u2019s natural advantages, particularly the large stock of land and abundant water, will continue to enhance the country\u2019s critical role in global agricultural markets. However, the financial crisis has also highlighted vulnerabilities of the recent expansion, notably a large accumulation of debt.
\n
\nIn Mato Grosso, Brazil\u2019s key state for soyabean production, banks are repossessing farm machinery while credit for fertiliser and other inputs has dried up. Some farmers are selling land or tractors to pay debts, while the government is trying to extend the terms of loans to ease pressure on farmers.
\nElsewhere in Brazil, finance is so tight that Bayer, a large European chemical company, is accepting grain as payment for agrochemicals as a way to stave off a slowdown in sales as farmers struggle to obtain bank loans to raise cash.
\nThe sugar sector is emblematic of the overall debt problem, but experts say the sector also serves as an indicator that, through consolidation, Brazil\u2019s agriculture industry could emerge stronger from the crisis. Brazil\u2019s capital-intensive sugar industry, which leveraged its expansion on cheap debt, has suffered under the weight of the credit crunch and low prices for most of 2007 and early last year.
\nFive sugar companies with total production of about 1m tonnes \u2013 about 4 per cent of the country\u2019s exports \u2013 have applied in the past 18 months for \u201cjudicial recuperation\u201d, the Brazilian form of US Chapter 11 bankruptcy protection. The sector is now undergoing a rapid consolidation, with companies such as Cosan SA Industria e Comercio, the world\u2019s biggest sugar cane processor, buying troubled smaller rivals.
\nAnother key problem is the lack of adequate infrastructure \u2013 particularly roads \u2013 to transport crops from the frontier areas of the cerrado, near the Amazonian forest, to export terminals on coast of the Atlantic. Although Brazilia has invested considerable amounts in logistics, traders say the country lags behind its neighbour Argentina on infrastructure.Brazil\u2019s environmental record is also a problem \u2013 the push to increase agricultural production has come, at least in part, at the cost of cutting down the fringes of the Amazonian rainforest.Although some in the industry refers to this reputation damage as one of the \u201cmyths\u201d about the Brazil\u2019s farming industry, the government is aware of the problem and is tightening regulations about the expansion of farmland.
\nMr Costa and Ms Cardy-Brown echo a widely-held view among industry participants and acknowledge in their report the current difficulties of farming in the country, but they add: \u201cBrazil is definitely not for the uninitiated but, despite the turbulence in world markets, it continues to offers huge opportunities.\u201dOne of these opportunities is the local food market: Brazil\u2019s 200m population is becoming more affluent and is demanding more and more varied food.
\nBut the export market is likely to continue to dominate production as Brazil is a world leader in low cost agricultural commodities, particularly soyabeans.
\nAnalysts also continue to point to natural factors such as high soil quality and favourable weather \u2013 particularly rainfall \u2013 application of the latest technology such as genetic modified organisms to achieve higher yields and a move towards large-scale farms that achieve economy of scale: \u201cAs a consequence of these factors \u2013 and despite some trade barriers \u2013 the trend has been for Brazil to consistently increase exports year-on-year,\u201d the report states.<\/p>\n","protected":false},"excerpt":{"rendered":"

As\u00a0published in the\u00a0Financial Times:<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"_links":{"self":[{"href":"https:\/\/www.cardy-brown.com\/index.php?rest_route=\/wp\/v2\/posts\/84"}],"collection":[{"href":"https:\/\/www.cardy-brown.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.cardy-brown.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.cardy-brown.com\/index.php?rest_route=\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.cardy-brown.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=84"}],"version-history":[{"count":0,"href":"https:\/\/www.cardy-brown.com\/index.php?rest_route=\/wp\/v2\/posts\/84\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.cardy-brown.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=84"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.cardy-brown.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=84"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.cardy-brown.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=84"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}