Brazil's grasslands could replace food production of American heartland
South of the Border: The Great American Land Grab
Tina Butler, mongabay.com
August 1, 2005
Today when Brazil is mentioned in the same sentence with "agriculture," people often first envision the Amazon rainforest giving way to soybean plantations and cattle farms. While the Amazon is being converted for such purposes, the cerrado, a vast area of savanna-like grasslands covering more than 20% of the country's surface area, is increasingly under threat as farmers from the United States and Europe are setting their sights on the biome's sizeable agricultural potential.
Agricultural production on the Brazilian plateaux. Photo: Sue Wren.
The cerrado, which literally translates to "closed" and was long viewed by many Brazilians as essentially worthless land, is in fact a distinct and important ecosystem that has an integral role in carbon cycling and is characterized by high plant and animal biodiversity. Knowledgeable American farmers have discovered another valuable function for cerrado, one that at first perplexed and now aggravates Brazilians.
The problems stemming from the seemingly suspect farming and land valuation practices aside, cerrado remains one of the most threatened eco-regions in South America. With current rates of agricultural and ranching conversion exceeding two million hectares anually for the past 15 years, conservationists predict the possibility of a complete eradication of the ecosystem by 2030. Currently, less than five percent of the original two million square kilometers of cerrado is protected.
The importance of the cerrado ecosystem to the integrity and health of the Brazilian environment is largely overshadowed by the temptation of wealth and productivity of the country's agricultural industry. Brazil is fast emerging as an agricultural superpower with vast amounts of arable land, low costs and high productivity and crop yields. Brazilian land is significantly under-priced compared to land in the US and Europe, with high-quality cropland selling for $700-800 per acre in Brazil, compared with the American Midwest, where similar tracts sell for $4000-5000 per acre. Production costs per acre are lower as well, with Brazil's costs hovering around $160 per acre, juxtaposed with $235 per acre in the States. Farmers are selling premium-priced farmland in the US and Europe and investing in vast parcels of under-valued earth in Brazil.
Additionally, with the possible imminent reduction in agricultural subsidies in the United States, there is serious potential for a transferring of farm wealth from the Northern to Southern hemisphere. For example, the USDA has calculated that subsidy-free cotton farms in the Western Bahia region averaged 35 percent profits margins last year. In 2003, poor US cotton production combined with a high demand from Asia resulted in profit margins of 60 to 70 percent. Brazil established a legal precedent in 2004 when the country successfully challenged cotton subsidies before the WTO. However, cotton is not the only notable agricultural product in the country.
While these exports are important, soybeans are Brazil's premier cash crop. Due to high inflation rates and the country's recurrent currency crises, land is priced in 132-pound soybean sacks instead of dollar amounts in some areas.
Despite this current prevalence of soya, its success was not assured from the outset. When soybeans were first introduced into the region, cultivation of the plant was difficult, as the equatorial climate proved incompatible with the bean. The breakthrough came a little over 20 years ago when agricultural department developed heartier strains better suited to the environment. Today the crop is flourishing -- since 1998, Brazil has added 30 million acres of soybeans.
Despite this extended period of tremendous potential for wealth and production, agriculture in Brazil is not without its detractions. Crippling bureaucracy, a dysfunctional judicial system and a corrupt legislature deeply inhibit the otherwise appealing market opportunity. It has been estimated that 10-20% of the country's GDP gets lost in the various manifestations of red tape. What is more, taxes are extremely high, public resources are often misused and laws on land ownership and titles are transient and highly manipulable.
Farming, while profitable, can be a very dangerous enterprise in Brazil. Towns in these growing agricultural areas are growing as rapidly as the crops in the fields, bringing unprecedented wealth and tension between the haves and have-nots. Land holdings are poorly distributed, accumulated in massive tracts, and often held by single families. Brazilians not enjoying the financial rewards available in their own country are harboring increasing resentment towards those reaping the crops and the cash. Not all landholdings are a result of passed down inheritance -- many landowners are new entrepreneurs with their eyes on the irresistible opportunities available in South America; people who are willing to meet risks and threats of the same proportion.
Despite all this activity, the transformation of Brazilian land is still in its nascent stages. While Brazil is roughly equal to the US in landmass, the country devotes only five percent of its land to crops, compared with the 19 percent of that of the US. An additional 420 million acres of farm crops could be added in Brazil, the equivalent to the US's entire agricultural space, without infringing on the hotly contested and environmentally sensitive Amazonian rainforest. In order for this to happen, continued conversion of pastureland and the fragile cerrado will have to occur, but Americans especially, seem up for the challenge without the conscience.
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