Brazil: Bread–basket of the World

by 5m Editor
17 May 2012, at 8:06am

BRAZIL - For decades it has been predicted that Brazil would become the breadbasket of the world, writes Martin Riordan, Sales and Service at Genesus Brazil.

The Creator was generous when he made Brazil: a vast land area (slightly less than Canada and the USA), climates rangeing from tropical in the north to temperate in the south, total absence of natural disasters, such as volcanoes, earthquakes and tsunamis. Brazil has everything to be one of the best countries in the world for its inhabitants.

A well-worn joke in Brazil explains that, when St. Peter questioned God’s generosity with Brazil, He replied: “But wait till you see the people I am going to put there!“

Over the last five decades, agricultural production in Brazil has exploded. This is partly due to an increase in the area planted, as dynamic farmers from the south of the country migrated north into states with vast, unexploited agricultural resources. Thirty years ago, this migration opened up the Center West region of the country and more recently it is doing the same for the North East.

Even more important has been the increase in productivity. Modern Brazilian farmers are innovative and progressive, and rapidly adopt new technologies which increase productivity. They have been aided in this quest by Embrapa, a federal government agricultural research organization that has played a vital role in adapting crops to different climatic conditions, thus extending the geographical area where crops can be produced.

Looking at the two principal ingredients for producing pigs, with data taken from Wikipedia, we can see the following changes from 1960 to 2005:

  • Corn production increased from 8.67 million metric tons (mmt) to 35.13 mmt, an astounding increase of 305 per cent.
  • Soybean production grew from almost nothing (0.20 mmt) to 51.18 mmt.

This would lead one to the conclusion that Brazil is the ideal country for large-scale, low-cost production of pork. It has all the ingredients: land area, grain production and a kind climate.

So why does Brazil not dominate the world market for pork products, as it has with chicken and beef since 2004?

For a long time, pork exports were almost zero. This changed from around the year 2000, when exports started growing rapidly. By 2003, Brazil was exporting over 600,000 metric tons (mt) and exports peaked in 2005 at 761,000 mt. Since then, exports have stagnated, and by 2011 fell to 582,000 mt. This contrasts with exports of beef and especially chicken, which have been growing much more constantly as shown by this somewhat outdated USDA chart:

Genesus Global Market Report
Prices for the week of April 29, 2012
Country Domestic price
(own currency)
US dollars
(Liveweight a lb)
USA (Iowa-Minnesota) 77.06¢ USD/lb carcass 57.02¢
Canada (Ontario) 1.43¢ CAD/kg carcass 52.01¢
Mexico (DF) 18.08 MXN/kg liveweight 59.61¢
Brazil (South Region) 2.02 BRL/kg liveweight 45.82¢
Russia 95 RUB/kg liveweight $1.40
China 13.46 RMB/kg liveweight 96.18¢
Spain 1.29 EUR/kg liveweight 74.77¢

What is the problem? Here are some answers:

Trade barriers: many importing countries impose political barriers to imports, in order to protect domestic producers. These require political negotiation, and the Brazilian government has not demonstrated competence in this area. Many times exports to Russia, historically the most important importer of pork products, have been cut overnight, leading to slumps in exports. The current battle is with Argentina, Brazil’s commercial partner in Mercosur, which imposed a ban on pork imports.

Animal health: Brazil has animal health problems, and government agencies have been slow to address the problem. However, there is progress. Santa Catarina is now a state free of foot and mouth disease without vaccination. But many world markets, such as Japan, which demand that the whole country be free of F&M, are still beyond the pale for Brazilian exporters.

It is unlikely that either of these factors will change much in the short term. Brazil’s international competitors have little reason to worry.

The domestic situation for pig producers continues in dire straits. Soya meal prices are very high, over US$500 per metric tonne. Corn prices have dropped some 10-15 per cent with harvests coming in, and are around US$5.70 per bushel. But the price of live market hogs has remained low, well below cost, and more and more independent producers are being obliged to cease production, unable to sustain the debt load generated over the last 3-4 years.