Politics, Business & Culture in the Americas

Agriculture: Brazil Goes International

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Even after a decade of rising agricultural productivity, Brazil is poised to become a stilllarger player in the global food industry in the years to come. The key question for its private and public sectors is what actions must be taken to ensure continued growth.

From 2002 to 2008, Brazil increased its share of global agricultural trade from 4.6 percent to 6.8 percent. The rising internationalization of Brazilian agriculture is a result of internal and external factors: domestic macroeconomic stability; growing global food demand; and an increasing international presence of Brazilian corporations, among others. But Brazil also benefits from large tracts of arable land, a climate that allows for two harvests per year, and new technologies that optimize crop yields.

In fact, according to Companhia Nacional de Abastecimento, the crop forecasting agency owned by the Ministry of Agriculture, the amount of arable land rose from 93.4 million acres (37.8 million hectares) in the 1999–2000 season to 117.1 million acres (47.4 million hectares) in 2009–2010. This 26 percent increase in land used for grain production is complemented by a 40 percent rise in productivity in these areas, resulting in a nearly 64 million ton spike (to 146.9 million tons) in harvest yields over the 10-year period. So while Brazil’s population rose 14 percent over the decade (to 192 million people in 2010), its grain production jumped by 77 percent.

The result is an increase in agricultural potential that outweighs the demands of the domestic population. Add to the mix an expansion in available land and productivity, and signs point to further participation in the agricultural trade.

Export numbers tell the story. Between 1999, when agricultural exports reached approximately $14.1 billion, and 2009, their value soared to more than $54.8 billion. According to the Ministry of Agriculture, the value of Brazil’s agriculture exports to the EU rose by 74 percent (to $15.7 billion total) and by 337 percent to China (to $7.4 billion) between 2003 and 2009. As of February 2011, China-destined agriculture exports had jumped another $3.7 billion to $11.1 billion.

Investments in productivity helped drive the export boom. For example, soybean productivity is now about three tons per hectare—a number on par with world leaders—with technology based on genetic modification accounting for more than 60 percent of production. For corn, the average productivity is still relatively low (1.9 tons/acre or 4.3 tons/hectare), because production is scattered across regions and wide variations exist in the size of producers and technology available to them. Another challenge facing corn exporters is the seasonal nature of the crop: the harvest is traditionally subject to inclement weather conditions.

The critical question is whether these achievements are sustainable.

Looking purely at economic fundamentals, Brazil is poised to reap a greater share of the world food trade. It is one of the few countries that—despite enormous progress—still has a large, under-utilized agricultural area. These areas could be tapped for food production after a relatively low-cost investment in soil improvement and fertilization.  Best of all, it could be done without adding further pressure to environmentally sensitive ecosystems. That said, converting land to agricultural use always becomes a political discussion, as farmers, environmentalists and other interests discuss the relative economic benefits and the ecological costs.

But there are still challenges.  Tapping Brazil’s substantial agricultural potential also means modernizing logistics and transportation, and addressing the burdensome and conflicting regulations and policies for infrastructure investment. The Brazilian model, based on government control, is inefficient and cannot keep pace with private sector demands. Legislation to facilitate and encourage private-sector investment in the construction and administration of roads, ports and airports is crucial. For example, 60 percent of agricultural production is transported by truck, but only 10 percent of roads are paved. If infrastructure upgrades do not occur immediately, with projects often taking years to complete, the agricultural sector will stagnate or decline.

Further, the public sector must recognize its vital role in making this happen. Institutions at both a federal and state level need to provide greater investment security, either from the contractual point of view—meaning no changes in the rules of the game—or in terms of property rights guarantees.

Political attention and public-private efforts can help to solidify Brazil’s position as a global agricultural supplier. The potential is certainly there; the next few years will show whether the will is there as well.

Tags: Agriculture, Brazil, Ricardo Cotta Ferreira
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