The fields of Brazil
Mar 25, 2008 12:46 PM
Day 2: Jose Renato’s Farm
Our next stop was a family farm just outside Tangara da Serra. The owner is Jose Renato, a third-generation farmer. Renato’s grandfather bought it in 1972. Once, it was all forest and ran as a cattle ranch of 21,000 acres. Renato earned a master’s degree in California in calculus, business, and economics, and moved back to the farm in 1990. He started raising soybeans because of poor cattle prices. He has 10,000 acres of pasture, 1,500 acres of sugarcane, 4,000 acres of soybeans, and 5,500 acres of refuge.
Sugarcane is the most profitable crop of Renato’s farm, but it also has high input costs. There is a $700 seeding cost per acre, and the labor cost is high because the crop needs to be planted and harvested by hand. There are 18 months between planting and harvest. Sugarcane can be harvested annually up to nine years before it has to be replanted. The sugarcane processing plants run 24 hours a day for 185 days a year. The producer must supply cane every day.
The farm employs 90 migrant workers. It is very hard and dangerous work because of the poisonous snakes. Hand cutting requires burning the leaves off first. After the cane is burned, it must be cut within 48 hours. Renato is looking at purchasing a $420,000 sugarcane harvester that would replace 80 hand cutters. He is reluctant to buy it, because he is concerned about the workers who would lose their jobs.
We saw several cowboys rounding up a steer that had escaped. Renato’s beef operation produces 8,500 head of feeder-to-finish cattle. Thirty percent are fed organically. He has a 2,800 head feedlot that he uses during the winter, which is the dry season, May through September, because the grass is poor. He feeds two groups of 1,400 head for 75 days.
When the cattle weigh between 850 to 1,200 lbs., they are fed a ration that consists of sugarcane pulp, grain sorghum, cotton seed, and soybean meal. Corn is rarely used for feed, because it is more costly. Renato fertilizes his pastures to increase grass production. It takes 36 months for beef cattle to reach 1,250 lbs. on pasture. Cattle prices during our visit were $0.70/lb. hanging weight.
Although Renato’s farm was “only” 21,000 acres, his operation was much more diversified than Campo Verde. Renato’s farm seemed small with more manual labor and older equipment.
Day 3: Serra Agricola Company
On our third day, we stayed in Tangara da Serra and visited two retail ag stores owned by the Serra Agricola Company. One was a cattle feed and veterinary store. Serra Agricola has eight stores across three states and employs 350 people with gross sales of $86,000,000. It handles many of the same base chemicals that we use in the United States. With the help of Brian and Darren Hefty, we compared prices of the chemicals with U.S. prices. Although some South American prices were higher, we found that Roundup cost about 40% less than in the United States.
Each individual can only borrow $100,000 from the banks, so approximately 90% of the store’s sales are on credit, with the suppliers charging interest rates between 14 and 20%. This compares to the bank’s rate of approximately 8.75%. The store’s average farm customer has approximately $100,000 on loan, and its average rancher customer has $15,000 on loan. Because of the company’s exposure, it must employ a full-time lawyer to handle loan documentation and delinquent accounts.
While at Serra Agricola, we met with Ricardo Arioli Silva whose responsibilities in the operation include agronomy and marketing. He also farms west of Tangara da Serra and was leading another group of farmers from the United States, and we crossed paths with this group several times.
Silva told us that the Brazilian government has supplied some low-interest loans to farmers. However, no government safety net is provided to Brazilian farmers such as the U.S.’s LDP or other loan programs. Silva thinks that they need 50 bu./acre of soybeans at $8/bu. to stay in business. He stated that fertilizer costs for soybeans can be more than $100/acre, along with chemical costs up to $70/acre. Silva has turned a profit on his farm by planting a second crop of corn, which can yield about 80 bu./acre.
The exchange rate of the Brazilian real to the U.S. dollar has often affected the farm’s profitability, Silva said. Brazil’s soybeans are priced in U.S. dollars and then converted to reals. In the past few years, the exchange rate dropped from 3.8 reals to the dollar to less than 2.5 at the time of our visit, with no way to lock in the exchange rate. Another factor on soybean prices is the 12% Brazilian tax on soybean meal but not raw soybeans.
Silva also said that in the state of Mato Grosso there is room to develop three times the crop acres and still have a 50% refuge.
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