Letter from Brazil

Can Brazil Feed the World?

The answer is -YES.

Everyone in the Americas - South and North, has been feeling devastation of the 2012 Drought. The big difference is that in South America, we don't have a good crop insurance system, and a lot of farmers lost money. That puts those growers in a tough situation for the 2012/2013 crop, especially in the south states.

Last season in Mato Grosso, we had some farmers who only received about 400 millimeters of water - or about just under 16 inches - and produced about 20 to 25 bags per hectare (about 10 to 12 bags per acre). However, prices were very high and could give South America a record profit margin, if weather conditions keep helping us.

Our initial projections show that Brazil could produce a new soybean crop at about 83.7 million metric tons. That's a lot of beans, and often you'll hear and read about our poor infrastructure and logistics in country. And it's true, we don't have enough storage facilities. And just to give you a little idea about road conditions - we have 1 million miles of road and only 12.5% is asphalt. That's compared to 3.5 million miles of road in the United States and 70% of that is asphalt.

Our rail situation is worse. Brazil has only 10% of 175 thousand miles that the U.S. has, and we only use 12% of our capacity, which means Brazil USES LESS than 1.5% of rail capacity that the U.S. uses. It's a tremendous shame, and the Brazilian government has started a call for  an investment in roads, rail and port capacity with an investment of about R$ 109 Billion Reals ($53 billion U.S.) - broken down in U.S. dollars that's about $23.8 billion in roads, $21.62 billion in rail, $2.36 billion for the ports and $1.28 billion for waterways until 2014 and $2.03 billion after 2014.

Taking a look at the month-to-month numbers for corn offers an export surprise, and you can see from the chart below that there's a new market record since July.

Can Brazil Feed the World?

The orange line in the chart represents the best monthly export in the past 11 years, while that blue line shows pretty clearly the huge volumes that Brazil has exported this year. It could be explained by a fast and big volume of soybeans exported in the first half of the year, and a little slowdown in the meal markets.

In the chart below, I want to show you the big increase we had in Brazilian exports, including corn/soybeans/soymeal.

Can Brazil Feed the World?

Yellor bar=corn; Orange bar=soybeans; Red=soymeal

And here's a look at the year-over-year evolution of exports from Brazil.

Can Brazil Feed the World?

Okay, that's enough of the charts and the boring stuff, now I'll be clear and direct.

My projections show that Brazil could export 40 to 45 MMT in 2013, and could top the soybean record export during 2013.

First, we enter the new season with a record sale in the up-front, which we call "new crop sales." Farmers in Brazil use "up front" sales - or forward contracting - to a cooperative or to a domestic market. They don't have the market tools like American's do.

Second, in 2012 China bought a new record volume in Brazil, and they will make a new record in 2013 due to the lack of product in the U.S. market.

Can Brazil feed the world? Yes, and a strong woman will do a lot (see what I have below).

I'm pretty arrogant saying that Brazil alone could feed the world, but if Argentina is helping with good export volumes, as well as Paraguay, I really believe that South America will rebuild world soybean stocks. But I'm not sure we can handle the same large volumes of corn that we've seen in the last four months with a lot of beans entering the port system.

One thing is clear, even with weather catastrophes, like we had last crop season, Brazil will produce a lot of soybeans, and strong woman will do her part. I would like to introduce that strong woman, that I and most Brazilian farmers admire - Mrs. Norma Gatto.

In 2000, Mrs. Norma was a simple "housewife", taking care of her family and hearing about soybean production and the difficulty of being a farmer in Brazil. She was born on a farm and married a small farmer in Rio Grande do Sul state, Mr. Aldroaldo Gattoi in 1975. In 2000, Mrs. Norma's husband was murdered by a worker discontent that they would reduce cattle areas to raise soybean plantings.

And as she says: "Life as I know it ended, just there, in that moment." The future suddenly disappeared: dreams, plans, even the simplest tasks of daily life have been replaced by a distress, and a lot of questions for her: How to raise the children? What to do with the farm, where planting was only half-way done that year? There were bills to pay, an office to manage, personnel in the field waiting for guidance...it was difficult and painful. "I never imagined myself doing this. I always thought [farming] was a masculine task."

She had three little boys to care for, and the family was planting 7,200 acres, so she needs to keep going. With the help of her husband's brother, Loinir Gatto, along with Isaias Azerado Moraes and Dario Hiromoto from Fundacao Mato Grosso (Matto Grosso Agriculture Foundation), she persevered.

After all the challenges life imposed this year, with the help of her son's Felipe Gatto, Igor Gatto and Eduardo Gatto, Mrs. Norma will produce a record area of 24,000 acres. And Brazilian agriculture has a lot of things to learn with her as she keeps bypassing obstacles and growing faster than many others.

Can Brazil Feed the World?

It is my little tribute for this Strong Woman, and her family, who always believed in me, and more important gave me a tremendous opportunity for me to get to know Mato Grosso Agriculture and develop my job.

Thanks all,

Joao Carlos Kopp

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