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October 16, 2012

Brazil Assumes Leadership Role as World's Largest Soy Producer

It was no surprise when Conab's first estimate of the 2012/13 Brazilian soybean crop indicated that it would surpass that of the U.S. In the October Crop Report, the USDA estimated the U.S. soybean crop at 77.8 million metric tons while Conab's first estimate of the 2012/13 Brazilian soybean crop put it at 81.4 million tons (midpoint in their range of 80.0 to 82.8 million tons). Brazil will also become the number one exporter of soybeans as well with 39.1 million tons of soybean exports compared to 34.4 million tons for the U.S.

For years, everyone had assumed that Brazil would surpass the U.S. one day in soybean production, but that day came sooner than expected thanks to one of the worst droughts in modern times in the U.S. and record high soybean prices. The leadership role in soybean production may switch back and forth between Brazil and the U.S. for several more years depending on the individual growing seasons, but if soybean prices remain strong, eventually Brazil will emerge as the consistent leader in soybean production.

Brazil will retain its leadership role in soybean production for a number of reasons including:

  • Soybeans are the preferred crop of Brazilian farmers.
  • Brazilian farmers are very good at producing soybeans.
  • The Brazilian climate is well suited for soybean production.
  • A long growing season allows for multicrops in the same year, which spreads out the risk of crop production.
  • Brazilian scientists have developed high yielding soybeans adapted to the conditions in Brazil.
  • The demand for soybeans will continue to increase especially in China, which is the number one destination of Brazilian soybean exports.
  • There are hundreds of millions of acres of underutilized land in Brazil that could eventually be brought into agricultural production.
  • Additionally, there are hundreds of millions of acres of pastureland that could also be converted to row crop production as well.

There is also a social attitude in Brazil that pushes agriculture to the forefront. Agriculture is one of the essential sectors of the Brazilian economy and farmers and ranchers are held in high esteem in Brazilian society. Nearly all well-to-do Brazilians aspire to be landowners, so this brings highly educated, ambitious, and successful people into agriculture. Most of the new soybean production in Brazil is not family-run operations handed down through the generations, but rather, they are business run by successful business people. Individuals in Brazil don't necessarily get into agriculture because it is a way of life that they enjoy, they enter agriculture because of the opportunities it affords and they therefor treat it like a business.

The agricultural sector in Brazil is not without its problems of course and Brazil continues to struggle with inadequate and antiquated infrastructure, environmental concerns, a highly bureaucratic governmental system, high taxes, limited credit, and a tropical climate that fosters increased insect and disease pressures. Brazilian farmers have bemoaned their inadequate infrastructure for decades, but in spite of these challenges, they have now surpassed the U.S. and they will continue to be the leader in soybean production in the decades ahead.