From China to America, monumental forces are driving global demand for food, feed and renewable fuel. Faced with a worldwide credit crunch, demand will probably take a breather, but the long-term trends are still strong.

Revving Up The Ag Machine
Brazil and Argentina will not only compete with U.S. farmers to supply the world's growing appetite for food but also will likely become the top powerhouse.
By Kieran Gartlan

Brazil and Argentina are already formidable competitors for the U.S. on world agricultural markets, but things are about to get a lot tougher.

Both countries already have impressive credentials. Brazil is the world leader in beef, sugar, coffee, citrus and ethanol exports. Yet only around 7% of its total area has been developed for agriculture.

"We have a lot of land available here, but we are still five to 10 years behind in terms of technology, infrastructure and access to capital," says Dilton Brandao, an agronomist in Brazil's frontier state of Tocantins. "We are making up ground, though, and the gap is narrowing."

Neighboring Argentina doesn't have the same potential for expansion as Brazil, but it has more developed infrastructure. It's also the world's largest exporter of soymeal and soy oil, thanks to a huge crushing industry. Argentina ranks as the world's second largest corn exporter, shipping about 16 million metric tons last year.

A bright future. Brazilian farmers claim ag's growth stalled in recent years because of limited demand for their products and restricted access to world markets. However, now that world food demand has heated up, especially in Asia, the future looks much brighter.

"We have always had to fight for new markets and this made us more efficient," says local farmer Wagner Sundfeld, located about 60 miles from the Tocantins state capital, Palmas. "However, with growing demand I think importers will soon be fighting over limited supplies, and we will be ready to fill that demand."

Brazil has a total land area of 2.1 billion acres, slightly more than the 1.9 billion acres in the lower 48 United States. About 43% of Brazil's area—900 million acres—is suitable for agricultural purposes. So far only 150 million acres have been developed, compared to 450 million acres in the U.S.

"We have a lot of undeveloped land and a perfect climate that allows two crops a year," points out Cezar Ceretta, a rice and soybean grower in Lagoa da Confusao in southwestern Tocantins. "There is no reason why we cannot double or triple agricultural output in coming years."

Shifting focus. In the past, Brazil's expansion has centered on the country's vast area of scrubland, around 250 million acres, in the center west and north of the country. However, growing environmental pressure is slowly changing this.

"There are a lot of environmental restrictions at the moment," explains local farmer Cezar Ceretta. "Maybe in the future, as world food demand increases, this will change. But for the moment it is nearly impossible to clear new land."

Instead, focus is shifting to Brazil's vast area of pastureland, which is mostly in poor condition and underutilized. The country has about 540 million acres of grassland, compared to 584 million acres in the U.S. The main difference, however, is most of Brazil's pastureland is suitable for crops.

"Most of our pastureland is flat and gets enough rain for crops," says Corombert Oliveira, an agronomist with the Tocantins Agricultural Secretariat. "The only thing missing is capital to transform it into fertile land."

Most of Brazil's 204 million head of cattle are grass-fed. Reducing the amount of pastureland, however, would not necessarily mean lower beef production because of the enormous potential for growth in feedlots.

"Grazing is not very efficient and stocking rates here are very low, almost half or one-third that of other countries," points out Tarcizio Goiabeira, head of

SPI, one of Tocantins' largest cattle confinement operations. "Feedlots are a good alternative and can produce more tender meat for the export market. They also make it easier to control diseases like foot-and-mouth."

Brazil is the world's largest beef exporter, with shipments of about 3 million tons (carcass weight equivalent) expected this year. Most is exported to Europe (23%) and Russia (23%), and Israel and the U.S. each receive 8% (processed meat).

Better roads and rail. Currently, about 57% of Brazil's soybeans are transported by truck, compared to 80% five years ago. Rail is responsible for moving 36% of the soybeans to port. Two major rail projects could have a huge impact on Brazil's logistics over the next five years.

• For more on these markets from DTN's Kieran Gartlan, go to about.dtnpf.com/southamerica