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April 1, 2014

Brazilian Ranchers Combining Cattle and Row Crops for Profit

Cattle ranchers in Brazil have been trimming their herds in recent years as they convert some of their pastures to more lucrative soybean, corn, and sugarcane production. As a result, more of the cattle in Brazil are now being placed in feedlots.

While grain prices have declined, cattle prices in Mato Grosso and Parana have risen 20% and 17% respectively over the past 12 months putting producers in the black. A year ago ranchers in Parana lost R$ 240 per head, but today those same producers are turning a profit of R$ 300 to 400 per head. Market analysts are expecting these strong cattle prices to continue for up to three years.

The strong cattle prices are the result of robust domestic demand and reduced cattle numbers in the United States and Australia. The combination of strong soybean prices and record high domestic cattle prices, it now appears that ranchers in Brazil who converted some of their pastures to row crop production are in for an extended period of profitable production.

In the state of Parana for example, the cattle numbers have been declining since 2002 as pasture is converted to additional row crop production. In 2002 there were 10 million head of cattle in the state, but that has declined 17% to 8.3 million in 2013 and yet the beef production in the state has remained constant. The reason why beef production has not declined is the increased number of cattle in feedlots, the reduced time needed to reach market weight and improved cattle genetics.

In years past, a grass-fed cow in Parana reached market weight of 500 kilograms in 3 to 4 years. Today that same weight can be achieved in 24 to 30 months. A grass-fed cow gained 800 grams per day, but a cow in a feedlot can gain 1.5 kilograms per day. Between 2011 and 2012, the number of cattle on feed in Parana increased 18% from 86,000 to 102,000 and Parana has a small number of cattle on feed compared to the big cattle states in central Brazil.

Scientists from Embrapa have long contended that Brazil could increase crop production and cattle production by a more intensive use of feedlots. That contention has been proven correct by the Cachoeira Ranch in Sao Sebastiao do Amoreira, Parana, which is considered a model operation by the Brazilian Feedlot Association.

The operation has a feedlot capacity of 2,160 head and they send 200 cattle per week to market. The intensive use of the feedlot allows the farming operation to expand their soybean and corn production. The ranch utilizes 630 hectares to produce the silage used in the feedlot. They also produce their own grain and the only feed item brought in is salt. If the cattle on the ranch were only grass-fed, it would require 7,300 hectares of pastures. Therefore, the intensive use of the feedlot has allowed 8 of every 10 hectares on the ranch to be converted to grain production and today 35% of the income comes from cattle sales and 65% comes from grain sales.

The example of the Cachoeira Ranch is the exception in Brazil and there are still many opportunities to increase the efficiency of beef production in Brazil. In the U.S. the average weight of a market steer is 600 kilograms, while in Brazil it is approximately 450 kilograms. The average age of a steer sent to market in Brazil is 3.5 years and the carrying capacity of grass-fed beef in Brazil is 1.34 animals per hectare (2.47 acres), which is up slightly from five years ago when it was 1.26 per hectare, but still far short of what it could be.