The Soy Situation

Editorial

RIO DE JANEIRO, BRAZIL – About 13 million hectares (32 million acres) of tropical forests are disappearing each year, or an area the size of the State of Alabama in the U.S., according to a UNEP report. Now after a decrease between August 2009 and June 2010, Brazil is reporting that deforestation of the Brazilian Amazon rainforest had increased by 27 percent in the last nine months.

Brazilian Minister of the Environment, Izabella Teixeira, is the person currently on point for managing Brazil’s natural resources, and she certainly has her hands full. The conflict between “progress” and the monitization of the country’s environment for the better of the nation’s people (some anyways), and the “conservation” of the worlds eco-system, is not going away anytime soon.

The recent reports suggest the deforestation increase is largely driven by the State of Mato Grosso, the country’s largest producer of soy.

Soy, or soja in Portuguese, after being processed into fat-free soybean meal is a low-cost source of protein for animal feeds and most prepackaged meals around the world. Approximately 85 percent of the world’s soybean crop is processed into soybean meal and vegetable oil.

The soybean first arrived in South America in Brazil in 1882, and produce significantly more protein per acre than most other uses of land. The main producers of soy are the United States (35 percent), Brazil (27 percent), Argentina (19 percent), China (6 percent) and India (4 percent).

In 2005 Brazil exported 51 million metric tons and earned over US$9 billion. Now Brazil will increase soy output by 7.2 percent this year to 73.7 million tons, according to the Agriculture Ministry recently. Mato Grosso, which produced 27 percent of Brazil’s last soybean harvest, will boost production 8.8 percent to 20.4 million tons

The president of Grupo Bom Futuro, Brazil’s largest soybean producer, Erai Scheffer, said he is expecting a record crop this season, to the highest in three years.

According to a report from the Brazilian Ministry of Agriculture, soy complex (beans, meal and oil), grew by 35.7 percent to US$3 billion from last year (38.4 percent of all agribusiness products exported in April 2011).

So what does all this mean, the billions of dollars at stake and the vast operation split across the supply chain for the Amazon and it’s protectors? … In a word, trouble.

Half of Brazil is covered by forests, with the largest rain forest in the world located in the Amazon Basin. Agriculture accounts for 8 percent of the country’s GDP, and employs about one-quarter of the labor force in more than 6 million agricultural enterprises.

The same report on Brazilian agribusiness heralds a new export record. In the last twelve months (May 2010 to April 2011) export revenue totaled US$81.3 billion, up 20.4% year on year.

In short, although not as big as the Oil business, these are are massive forces at play and Brazil and the world will have a hard time slowing the tide.