Meet Your Competition

Part three: Brazil's farmers are smart managers and savvy global thinkers

ITEAIPULANDIA, PARANA - Domingos Trevisan Neto slowly ambles down his farm's driveway as a horde of journalists tumble out of a tour bus to greet him. The Brazilian Ministry of Agriculture has brought in a group of us from around the world to meet key players behind this country's agriculture success story. Neto is one of them, and he's gamely fielding questions from the translator in rapid fire order.

Meet Your Competition
Neto (left) manages a 7,500-acre farm in southern Brazil, certainly not typical for this region where most of the operations are small, family farms. He manages 16 employees and several more seasonal workers to grow soybeans, corn and a herd of 1,500 Bos Indicus, a breed of cattle brought over from India years ago (see photo below).

After a few minutes it becomes apparent Neto thinks a lot like the American farmers we write for at Farm Futures. His focus is on capturing margins and running a business with efficiency. These days that seems like more fun than usual.

"It's a good time to be a farmer," he says. "I've been managing this farm for 25 years and in that time, corn yields have tripled."

In those years Neto has seen Brazil's agricultural revolution take place before his eyes. Twenty five years ago much of the land was thicket, he adds; farmers introduced mechanization and government researchers developed new varieties of soybeans for the tropics. Neto has always been ahead of his peers, say his colleagues. All of his crop land is no-till planted with GM seed. The corn crop here is about five feet tall and will be harvested in July.  

Managing risk

"Costs are something I can control, but markets are hard to predict," he says. "We do manage our risk by doing things like crop rotation and using crop insurance." A government program analyzes five year yields and compares them to the operator's average yield. Producers with higher yields have lower risk so more money is available for wider insurance coverage. Neto also takes advantage of discounted interest rates for farmers through Banco do Brasil, Latin America's leading bank. (It's also the Brazilian farmer's best financial ally, with 21% of its portfolio coming from agriculture).

Neto's crop is sold at harvest to third party buyers like Cargill and ADM and then exported. Using the futures market he typically sells 20% of the crop before harvest.

In fact, everything Neto produces is exported, including beef from his cattle. When the European Union closed its borders to Brazilian beef a few years ago for lack of traceability, the country instituted a traceability program. Now every animal has a record since birth showing veterinary activity and nutritional intake. Neto just sees it as a cost of doing business. "If countries like Germany require it and we want to sell to them, we have to do it," he says.

That mindset wasn't typical in Brazil 20 years ago, but life for Brazilian farmers has been anything but typical for a long time. As one of the ten largest economies in the world and the largest in Latin America, Brazil is one of the major markets for foreign investment and an increasingly important player on the international stage.

More important, agriculture is leading the way. China now looks to Brazil as a key trade partner. While other countries were bogged down by the international financial crisis, Brazil's GDP increased 7.5% in 2010 compared to a year earlier, with the ag sedtor growing at a 6.5% clip. What was once a poor country is seeing household income grow, and unemployment is just 6.4%.

Agribusiness is responsible for 26% of GDP, 37% of exports and 37% of all jobs here. Two-thirds of Brazil's production is consumed at home and the rest sold overseas. That's a far cry from 40 years ago when the country had to import food to feed its people.

Neto is aware of his global competitors, especially the United States. He believes Brazil would see dramatic increases in export sales if countries like the U.S. and in Europe would stop subsidizing agriculture. Even so, he expects no let up in global demand as major grain producers look to feed the world over the next several decades.

"Brazil has a huge potential, not just in grain but meat," he says. "We have to live up to the challenge of feeding the world.

"Everyone has to eat," he adds. "That demand will always be there."


Meet Your Competition

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