Drought in Southern Brazil has been in the news lately, and U.S. farmers are looking at the story and hoping for a rally. But the drought became very real for several Americans today as we headed into our second day of touring Brazilian agriculture.
Our first stop was with Sebastião Pittarelli, who grows 2,450 acres of soybeans in Maringá, Brazil. “Last year we averaged 59 bu. per acre,” Pittarelli told us through an interpreter. “This year we expect about 40 bu. to the acre.” And those losses, he added, are not as bad as some other farmers in this state of Parana, located west of Sao Paulo. Some reported yields of 15 to 30 bu. per acre. “We had a few more rains than others, so in a way, I am lucky,” he says.
Parana, where Pittarelli farms with his wife, Terezinha Fernandes Dias Pittarelli, is a leading soybean state, along with Matto Grosso, the region further north that came out untouched by the drought.
So how do you handle a 33% cut in yield and potential profits? If you farm in America, you generally call your crop insurance agent and begin a process that will lead to a payment. But when you ask Pittarelli about crop insurance, he just shakes his head. Brazilian farmers have little or no crop insurance options as a way to manage income risk. If you think you need a strong stomach to farm in America, just try it here.
“That’s the reason why I stay diversified,” says Pittarelli, who follows soybeans with no-till corn as a double crop and has about 900 head of cattle on pasture. Brazilians usually plant soybeans in September or October, harvest in February, and no-till another crop like cotton, corn or wheat into the soybean stubble. Growing seasons here are longer than the northern hemisphere and rarely do temperatures get below freezing.
Most Brazilian farmers can get a bank loan and something called “ProAgro,” a private insurance plan with the loan. If they don’t harvest a minimum yield to pay back the loan, they have this to fall back on, Pittarelli explains. “But it does not do nearly enough to cover the risk,” he adds.
What farmers like Pittarelli do have, however, is membership at the local co-op. Cocamar is a $1.5 billion business with 11,000 farmer members. It stores commodities, processes and brands food products like orange, grape, soy, coconut and papaya juice, and provides inputs for farmers to buy. It even offers grain marketing info and futures contracts, a relatively new risk management tool for Brazilian farmers.
Pittarelli uses his stored soybeans as a kind of bank account. If he needs cash for a new piece of equipment, or notices that soybean prices are rallying, he can call the co-op and have them sell some of his beans. Like most Brazilian farmers, he has no storage of his own. He can contract ahead, but only for a few months in advance and for only 35% of expected average yield.
Even so, it is another tool to manage risk. “It helps me sleep better,” he says.