April 17, 2012
High Prices Buy Acres both in the U.S. and in Brazil
When commodity prices approach record levels, farmers rush to take advantage of those prices by increasing their acreage. It happens in the U.S. and it happens in South America as well. One of the questions that I am often asked is just how much could Brazilian farmers expand their soybean acreage and does the expansion of sugarcane, corn, or cotton acreage limit the potential expansion of soybean acreage.
Soybeans compete for the same acreage with full-season corn and full-season cotton, but the total soybean acreage is approximately 2.5 to 3 times larger than the corn and cotton acreage combined. Therefore, an increase in full-season corn or cotton has a limited impact on soybean acreage. As far as sugarcane is concerned, there is very limited overlap between sugarcane acreage and soybean acreage with most of the expansion of sugarcane resulting from the conversion of pastureland.
The potential for soybean expansion in Brazil is nearly unlimited; at least as far as available land area is concerned. The factors that could limit soybean expansion includes: soybean prices, infrastructure development, transportation costs, environmental concerns, and currency policy.
Having enough land available for soybean expansion is not one of those limiting factors. As an illustration of that point, below are some geographic facts to keep in mind.
- Brazil is larger than the U.S. if we would exclude Alaska.
- Three countries the size of Argentina would fit inside of Brazil.
- Fifteen countries the size of France would fit inside of Brazil.
- Ninety two countries the size of Portugal would fit inside of Brazil, which is ironic since Brazil initially was a colony of Portugal.
- Mato Grosso is twice the size of Sweden.
- Mato Grosso do Sul is the size of Germany.
- Minas Gerais is the size of France.
- Sao Paulo is the size of the United Kingdom.
I could go on, but you get the point. When we talk about the potential increase in crop production in Brazil, the availability of land is not one of the limiting factors.