U.S. Drought Boosts Brazilian Agriculture

By Andrew Willis, Contributing Reporter

RIO DE JANEIRO, BRAZIL – While consumers across the globe are currently struggling with higher food prices caused by the worst U.S. drought in half a century, Brazilian farmers are enjoying bumper sales and a surge up the agricultural league tables.

The latest piece of evidence came last week when the International Grains Council predicted in a monthly update that Brazil would overtake the U.S. as the world’s top soy producer in 2012-2013.

The council raised its forecast for Brazil’s soybean crop in 2012-2013 by one million tonnes to 76 million, simultaneously cutting its forecasts for U.S. production by six million tonnes to 73 million.

“Strength in international values will likely encourage farmers in the southern hemisphere to boost plantings for next year’s harvest,” the IGC said. Until now the U.S. has been clearly the world’s top soy producer in recent years.

Fresh statistics released by the Chinese government this month also show that Brazil overtook the U.S. as the lead exporter of soy to China in July, although this trend may be reversed.

Brazilian corn farmers are also enjoying record sales as they seek to fill the void left by devastated harvests in the United States. News last month that American meat companies had placed orders in Brazil is thought to be the first time that the South American country has exported corn to the U.S. ever.

The drought has “created an atmosphere of euphoria in the [Brazilian] countryside,” Luiz Antonio Pinazza, president of the Sectorial Chamber of Agricultural Inputs (CSIA), said last week.

Large state subsidies for corn in the U.S. have traditionally ensured the country’s dominance in the sector, but the blistering heat this summer has destroyed 45 percent of the country’s corn and 35 percent of the soya bean crop.

This in turn has pushed the price of some agricultural commodities to record highs, with overall global food prices rising by six percent in July, according to the United Nations, sparking calls for an emergency G20 summit to tackle the problem.

The last severe food crisis, in 2008, sparked riots in cities from the Caribbean to the Asia, and the UN food agency warned this month that “there is potential for a situation to develop like we had back in 2007-08.”

The Vatican recently joined calls for an emergency summit after a senior executive with commodities trading giant Glencore said the company stood to make good profits from the current high prices of agricultural commodities.

And while large Brazilian farmers are reaping benefits, consumers in the country are among those suffering from higher food prices and associated inflation.

Environmentalists too are unlikely to be encouraged by the current trend, with Brazil’s farming sector subject to much criticism in the past over its environmental record, especially for its role in the deforestation of the Amazon rainforest.

Arguing economic necessity, President Dilma Rousseff has used her nineteen months in office to roll back a number of longstanding rules that curtail deforestation and protect millions of square kilometers of watershed.