If you've been to Argentina and Brazil, what blows your mind is the immense scale of the land. It's as if you'd taken hundreds of Montanas and Wyomings and lumped them together, with land and sky as far as you can see, millions and millions of acres.
Increasingly larger chunks of the acres in farmland, or being converted to farming, are growing soybeans. Analysts say Brazil alone has potential for boosting cropland by 500 percent over the next several years.
Brazil is number 2 in world soybean production, Argentina number 3, and the United States' hold on the top spot grows ever more tenuous. Those in the know say it's just a matter of time until we're second to Brazil.
Already, Brazil, Argentina, and Paraguay collectively produce more total tons of soybeans than the United States.
In a recent St. Louis Post-Dispatch Knight Ridder/Tribune Business News article by Repps Hudson, the retiring head of Bunge North America, John Klein, says “The gap is clearly narrowing.”
Brazil, he says, “has as much land that could be cultivated as (the United States has) under cultivation.” He tells of “a phalanx of combines harvesting the soybean crop, and behind them comes a phalanx of planters planting a second crop — you can have two crops, on huge acreages.”
The expectation, Klein says, is that in the world soybean market, the United States “will become less the dominant exporter and more the residual exporter.”
I've traveled the Brazilian savanna and the Argentine pampas, and the vastness of the land is mind-boggling. While the two countries have struggled to get infrastructure in place to support the potential of their enormous land resources, they're making more and more progress, and becoming more and more competitive.
An Argentine friend from my travels e-mails from Buenos Aires: “We're living in a soybean boom. China's purchases and the smaller U.S. crop in 2003 brought high prices, and our farmers planted as much as they could. Argentina had 25 million metric tons in the 2002-03 season and USDA is saying we'll have 36.5 million for 2003-04 — a 40 percent increase in one year (though that seems a little high).
“Brazil is increasing its soybean output as well. GMO varieties have been a big boost in Argentina and helped, in an illegal way, the increase in southern Brazil. The Brazilian policy on GMOs is under revision, and the next step will be to plant them in the subtropical region with legal approval.”
Argentina's economy, he notes, depends heavily on agriculture, with the main revenue for the government a 20 percent export tax on grains, oilseeds, and petroleum.
“After the economic debacle in 2001-02, we're back in a better situation. The rate of exchange is pushing exports, plus a general 5 percent export tax. At the same time, Argentina isn't paying most of its foreign debt, so we feel wealthier.”
Will the Chinese demand for soybeans keep growing? Will prices remain high? The crystal ball doesn't say, but it does present an increasingly clearer picture of two countries with enormous potential for expansion of soybean acres, and little reason not to capitalize on that potential.