December 17, 2004

 

Soybean Boom Seen Sweeping Across South America

 

A soybean boom is sweeping South America like a gold rush. The boom, fueled largely by China's growing appetite, is transforming global agriculture. This transformation is largely at America's expense, and accelerates the demise of the hemisphere's last virgin savannahs and tropical rainforests.

 

Argentina's farmers planted about 17 million acres of soybeans in 1997. Today, they plant more than 34 million. Brazilians planted 32 million acres in 1997. They presently plant 57 million.

 

In 1982, US farmers produced 80 percent of the world's soybeans. Today they produce 37 percent. US production on about 72 million acres is dwarfed by the 91 million acres of soybeans now under cultivation in Brazil and Argentina.

 

The US share of world markets is certain to decline further because American farmers have virtually no more acreage to plant. South America has millions of acres, and they are clearing them as fast as they can burn them. Latin leaders, with some exceptions, are turning blind eyes to the devastation.

 

South America's soy surge has already driven down global prices and hit US taxpayers in the wallet. The target price for soy under US federal farm price support programs is $5.80 per bushel of soybeans, and the government compensates farmers when prices are lower. As soybeans have fallen below that price, US soy farmers will receive an estimated $1.6 billion in subsidized income support this year. That could rise to $2.5 billion or more next year if expected record South American crops drive prices still lower.

 

Over time, US farmers will be forced out of the soy market. "No question about it," according to Chris Hurt, an agricultural economist at Purdue University in West Lafayette, Ind.

 

Historically, Latin booms have gone bust, from rubber tapping to organic guano to eucalyptus farming. But the soy boom appears to be built around real and durable demand: As standards of living have increased across much of the globe, so has the demand for meat products, cooking oils and sauces.

 

The soybean is low in cost, rich in protein, an ideal additive to manufactured foods and the perfect protein supplement in animal feed to fatten swine, poultry and cattle.

 

"We have seen global demand for soybeans grow between from 1990 and 2004 by 101 percent," said John Baize, an international adviser to the American Soybean Association. "We've seen rising incomes around the world, and people want more meat and vegetable oil in their diets."

 

He predicted that the 186 million tons of soy products produced in 2003-2004 will soar to 300 million tons by 2020.

 

US agribusiness giants such as Cargill, Bunge, Monsanto and Archer Daniels Midland are entrenched in the South America trade, both buying and selling soybeans.

 

"Clearly there is a lot of expansion taking place in South America because it is a logical place. There is a lot of room for expansion," said Stewart Lindsay, the spokesman for White Plains, N.Y.-based Bunge, South America's largest soybean buyer. "We are confident that supply and demand will remain" strong.

 

Transformed by the booming trade are unlikely places such as tiny Uruguay, where soybeans, dubbed green gold, offer relief for farmers who've been sunk in poverty for years.

 

"Four years ago, I had monstrous debts. In two years of soy, I have managed to get out from under it," said Jose Luis Gomez, a farmer in Dolores.

 

However Gomez and his neighbors, who are among Uruguay's moonlight planters, face new competitors. Argentine and Brazilian soy speculators are buying up cheap $40-an-acre farmland in western Uruguay.

 

In Brazil's Amazon basin, armed soy speculators are seizing rainforest land illegally and clearing it for soybeans. Brazilian growers also are eyeing Bolivia's eastern Amazon region, promoting a dam, canal and dredging project that would make more than 2,600 miles of inland rivers navigable by barges. The dream is to deliver soybeans to Atlantic and Pacific ports from fertile interior areas.

 

Pacific ports are key for soybeans because China is now the big buyer. It imported 21.4 million metric tons of soybeans last year, about a third of the global total. China's soy imports are projected to surge in the world's most populous nation. Its economy is growing at 7 percent to 9 percent a year.

 

Paulo Pimenta, a congressman from Brazil's soy-growing southernmost state of Rio Grande do Sul, sees dizzying possibilities.

 

For example, while US soy oil consumption is about 6 gallons per capita, China's is only about 3.2 quarts (3 liters).

 

"China, if it goes to 6 liters, would absorb all of Brazil's soybean production," Pimenta said. "I don't have any doubt this market will continue to grow."

 

China also has eyes on South American farmland. During a state visit to Brazil on Nov. 14, President Hu Jintao indicated that China aims to purchase about 1.2 million acres in Brazil, an area equal to about that many football fields, to grow soybeans to sell to itself.

 

By 2020, five South American countries - Brazil, Argentina, Bolivia, Uruguay and Paraguay - are expected to grow most of the world's soybeans. In each, the boom already is upending traditions and threatening ecosystems.

 

In Uruguay, a picturesque nation of 3.4 million known as the Switzerland of South America, a tidal wave of soybeans is making the country's cattle ranches and sunflower farms disappear. Uruguayan farmers planted 20,000 acres of soybeans in 2000, according to farmers and export groups. This season, they're expected to plant 860,000 or more.

 

"We never imagined this was possible," said German Bremermann, an adviser to Erro, Uruguay's largest soybean exporter.

 

Nearly half the increase will come from Argentines who bought or rented Uruguayan farmland using proceeds from their own soy boom.

 

Argentina's surge began with the conversion to soy of cattle ranches and grain farms in the flat, humid Pampas regions south and west of the capital of Buenos Aires. The new growth is in Argentina's northern states, which are part of a vast three-country ecosystem of semi-arid bush savannahs called the Chaco.

 

The World Wildlife Fund, in a report this year, warned that 15.5 million acres of Argentine Chaco, more than 24,000 square miles, could disappear over the next 15 years. Steep losses are also projected in the Bolivian and Paraguayan Chaco.

 

The reason, according to the WWF: "Unlike forests, savannahs can be converted directly to soy plantations." The politically moderate environmental group wants South American governments to do a better job enforcing environmental laws.