June 22, 2011

 
Brazil expanding into corn and cotton

Brazilian farmers are now on the brink of crop breakthroughs in cotton and corn, after transforming global agriculture by quintupling their soy production since 1980.

Helped by high futures prices and a sustained local agricultural boom, cotton and corn acreage is spreading fast despite being twice as capital intensive as soy crops.

Statistics show that the number of ship berths dedicated to these two crops at Brazil's ports is growing. While soy will continue to remain Brazil's primary crop, analysts say that even a modest shift toward corn and cotton could make a difference in global markets due to Brazil's sheer size.

However, while farmers flush with cash are sinking money into sowing new acreage, investments elsewhere have not kept pace with the country's agricultural expansion.

The lack of investment in local fertiliser output forces Brazil to import 80% of its annual needs, pitting local farmers against other big importers such as China for the vital crop inputs.

Local fertiliser sales are on course for a record year, but another surge in prices for crop nutrients like in 2008 could clip farmers' potential for boosting yields and output from Brazil's nutrient-poor soils.

For the moment, however, the expansion could help smooth out global prices for corn and cotton between North American harvests over the medium term, and squeeze market share for agricultural rivals in the Southern Hemisphere, namely Argentina and Australia.

The government expects cotton and corn production to soar 48% and 24% respectively, according to a new 10-year forecast released last week. That growth would be enough to make Brazil the No.3 cotton exporter after US and India, and bring it within striking distance to overtake Argentina in corn.