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Brazil poses growing threat to U.S. farmers
RONDONOPOLIS, Brazil, May 20, 2005 (St. Louis Post-Dispatch - Knight Ridder/Tribune News Service via COMTEX) -- On Big Farming's last frontier, the methods are basic - even crude.
Farmers buy land by pledging to produce bags of soybeans in return. They use chains strung between bulldozers to level wilderness, spread lime to rejuvenate the soil, then plunge ever deeper into Amazon territory, sending exotic creatures like giant anteaters running for cover.
It may not be high-tech, but as farmers convert vast swaths of Amazon savanna into lucrative croplands, Brazil is fast transforming agriculture in much the same way that China changed manufacturing with cheap labor and low prices.
The agriculture boom in Brazil's Midwest leaves farmers in America's Midwest wondering if their business is going the way of Rust Belt manufacturing.
Brazil already is the leading exporter of coffee, beef, sugar, ethanol, tobacco and orange juice and soon will topple the United States as the No. 1 soybean producer.
If Brazil's expansion weren't enough for farmers in the United States to worry about, Brazil recently persuaded the World Trade Organization to ban some of the U.S. government subsidies that enable Americans to compete in global markets.
It's no wonder that Missouri farmers like Greg Sharpe watch with alarm as Brazil muscles in on global markets in Asia and Europe that were carved out by Americans.
"We've helped create those markets. American farmers' money has gone to educate consumers overseas. Now Brazil is at the point where they can fill those markets, too," said Sharpe, who farms 900 acres near Hannibal, Mo.
Size is why the state of Mato Grosso inspires fear. In Mato Grosso, principal locale of Brazil's farm expansion in recent years, farmer Celso Griesang was able to buy 700 acres of scrub lands for $20 an acre when he arrived 25 years ago from the southern part of the country.
Today, Griesang plants 10,000 acres of soybeans and 7,500 of cotton, plantations that enable him to live prosperously in the city and tend his crops from afar.
But Griesang's spread pales in comparison to that of a neighbor, Carlos Augustin, who started in Mato Grosso at about the same time on 1,250 acres of land.
Now, Augustin's "family operation," as his farm manager described it, comprises 75,000 acres - about 170 times larger than the average-sized farm in the United States.
The transformation of Brazil's vast tropical grasslands has been methodical but swift.
"We are doing in our Midwest what you did in your Midwest long ago," said Griesang, 49. His family arrived in Brazil from Germany in the mid-19th century, about the time German immigrants were settling in Missouri, Illinois and other Midwestern states. But the Brazilian land was less naturally suited to agriculture, and it was not until the 1970s that farmers there figured out how to treat the land so it would bloom.
Seemingly limitless land and cheap labor (farm workers earn less than $300 a month) already have transformed Brazil itself into an agriculture superpower.
Americans still hold the advantage over Brazil in transportation, often cited during debate over the controversial $2 billion proposal in Congress to double the size of seven locks on the Mississippi and Illinois rivers. In Brazil, exporters operate in a land of largely unpaved roads far from navigable rivers. Mato Grosso farmers say it costs them about $65 per ton to get soybeans to ports, more than three times what American farmers pay.
"The price of freight can be a monkey around your neck," said Mato Grosso farmer Christopher Ward, part of the reason the Brazilians claim they fared poorly on their just-harvested soybean crop.
Nonetheless, as noted by Luiz Marcos Suplicy Hafers, another land-rich Brazilian farmer and former head of the Brazilian Rural Society, enforcement of global free trade rules would hand his country even larger shares in global markets for commodities like soybeans, which are used the world over to make animal feed, vegetable oil and other products as diverse as baby formula, adhesives and ink.
Said Hafers: "The world doesn't yet know the Brazilian threat."
Eleven years ago, frustration at closed markets for their products prompted the United States and other nations to give the World Trade Organization the task of refereeing claims of unfair trade practices. But now the shoe is on the other foot, and many American farmers worry about what has been set in motion.
Rejecting a U.S. appeal in March, the Geneva-based WTO agreed with Brazil's contention that the United States distorts global trade by paying cotton companies to buy American cotton. The WTO also branded as illegal a broader program subsidizing exports of soybeans and several other commodities.
Brazil argued successfully that U.S. subsidies encourage overproduction and thus lower the price farmers everywhere get for their crops. As a result, developing countries, where subsidies are few, can't compete.
The United States was told to end those payments July 1.
Brazil celebrated still another big-stakes victory last month, this time against Europe, when the WTO ruled that the 25-nation European Union illegally subsidized exports of sugar made from beets.
In this North-South clash, Brazil is cast as the champion of small farmers in places like West Africa, where cotton is the cash crop that sustains families tending a handful of acres. But in Brazil, it's the exporters of Mato Grosso, where farms stretch to the horizon, who stand to gain the most from the WTO victory over the United States.
Farmers in Missouri - which produces 400,000 acres of cotton - can expect even more competition from cotton growers in Brazil, where exports are growing swiftly. Brazil's 435 million tons of cotton exports last year was twice its global sales in 2003 and four times what it sent abroad in 2002, according to the U.S. Agriculture Department.
Charles Parker, a farmer in Missouri's Dunklin County, said he and other Missouri growers would be forced to scale back their cotton crops if Brazil's success in the WTO leads to cuts in American farm programs.
"We're going to let the National Cotton Council and Congress fight them (the Brazilians) and we're just going to grow our cotton," he said.
(EDITORS: BEGIN OPTIONAL TRIM)
Even as Brazil attacks U.S. subsidies, its own farmers benefit from tax breaks and government programs that provide low-cost loans in a land where commercial lending rates exceeded 20 percent in 2004.
In Cuiaba, the capital of Mato Grosso, Gov. Blairo Maggi argued recently for expanded subsidy programs.
It helps to have one of your own in high office, and farmers could do no better - or find a friend any bigger - that Maggi.
With some 350,000 acres, Maggi's ranks as Brazil's largest soybean operation. That's in addition to another 100,000 acres of Maggi Group corn and cotton.
Maggi has built roads in Mato Grosso to help speed soybeans to the market and engineered a partnership that opened a barge channel on the Maedira River in the northern part of his state to the Amazon River.
The blunt-spoken Maggi is especially concerned about Brazilian soybean growers getting blamed for destroying Amazon forests, a charge he heatedly disputes.
Speaking with reporters in his office recently, Maggi argued that Brazil's small farmers need government payments to exist.
"I do not see any future for small producers if we don't have subsidies," he said.
The difference, the Brazilians argue, is that unlike U.S. farm programs, their subsidies would not distort global trade.
(END OPTIONAL TRIM)
If American farmers want a villain, they might pay a visit to Pedro de Camargo Neto at his farm near the Brazilian town of Presidente Prudente, where his 5,000 head of cattle graze on 6,000 acres.
Chances are, Camargo will be off somewhere planting lawsuits, not soybeans, in hopes of further undermining the farm subsidy system in the United States and Europe.
A former agriculture trade official who now heads a farm-export group, he dresses in fine white cotton shirts and holds an engineering degree from the Massachusetts Institute of Technology, along with a doctorate from a Brazilian university.
But it's his determination, not his education, that Americans and Europeans should fear the most.
More than other Brazilians, Camargo is responsible for Brazil's success in the World Trade Organization. That is why he is known in some circles as "the godfather of the WTO cases."
His challenges, and others to come, could begin to dismantle a system of subsidies that has been propping up U.S. agriculture for nearly a century.
Farm programs began in the Depression Era as a means to preserve family farms. But two-thirds of U.S. farmers get no subsidy payments, according to a database of government records compiled by the Environmental Working Group, a Washington-based advocacy group.
Those subsidies are coming under attack not just abroad but at home, where key members of Congress and activists are complaining about their cost as well as the fairness of their distribution. The Bush administration's budget proposal would cut subsidies by more than $5 billion over the next 10 years.
Government price supports, export assistance and various payments have averaged more than $14 billion over the past nine years. Those subsidies have enabled U.S. farmers to sell their crops at lower prices to compete with Brazil and other rivals in world markets - and made it more difficult for farmers in Brazil and other developing countries to sell their products abroad.
Starting a decade ago, Camargo grew angrier and angrier at assurances from the United States and the European Union that changes would be made in farm subsidy systems.
"It was an outrage that grew from years and years of nothing happening," Camargo, 49, recalled recently over dinner in Sao Paulo, the Brazilian capital.
In 2001, Camargo and the Brazilians prepared to challenge American soybean subsidies in the WTO. But due to a drought, China began importing vastly more soybeans, which drove up the global price and diminished Brazil's case.
So Brazil brought a challenge instead against the U.S. cotton policies - the case they won in March.
But Camargo still has soybeans on his mind; rice, too. He says he thinks Uruguay would have a good chance to win a case against U.S. rice subsidies, potentially a matter of concern to Missouri's $100 million rice industry.
Likewise, he is again prodding the Brazilian government to revive the case challenging how American taxpayers support their soybean industry.
"Even if we lose, we will have a useful communications tool," he said.
The United States has said it will comply with the WTO ruling ordering it to eliminate cotton subsidies but has given no hint as to how or when.
Virtually no one believes it will happen by July 1. More likely, according to industry officials, the United States will seek delays while negotiating a new global trade agreement in WTO trade talks that resume in Hong Kong later this year.
Then there's the potential of the United States simply ignoring the WTO ruling, which Brazilians say could jeopardize the future of the new trade agreement and multilateral dealings in general.
Camargo proposes a hard-line response if the United States doesn't comply, perhaps seeking to retaliate by producing copies of patent-protected drugs made by U.S. pharmaceutical companies.
Brazilian officials, aware of the negotiating leverage the WTO ruling has brought them, are unwilling to make such threats - or to show their cards.
"There is no next step," said Brazilian agriculture minister Roberto Rodrigues. "We have no Plan B because we believe everything is going to happen the right way."
Speaking at his sugar cane farm in northern Sao Paulo state, Rodrigues offered a rationale for his country's aggressive trade policies.
"Brazilian farmers are not competing against American farmers or against European farmers. We are competing against Fort Knox," he said, referring to subsidies that come from the U.S. Treasury.
But sooner or later, Fort Knox might begin closing to American farmers. With that in mind, and surrounded by valuable crops, Rodrigues spoke buoyantly of what lies ahead for Brazil.
"We believe that free trade, fair trade, will bring us a bright future," he said.
RONDONOPOLIS, Brazil, May 20, 2005 (St. Louis Post-Dispatch - Knight Ridder/Tribune News Service via COMTEX) -- On Big Farming's last frontier, the methods are basic - even crude.
Farmers buy land by pledging to produce bags of soybeans in return. They use chains strung between bulldozers to level wilderness, spread lime to rejuvenate the soil, then plunge ever deeper into Amazon territory, sending exotic creatures like giant anteaters running for cover.
It may not be high-tech, but as farmers convert vast swaths of Amazon savanna into lucrative croplands, Brazil is fast transforming agriculture in much the same way that China changed manufacturing with cheap labor and low prices.
The agriculture boom in Brazil's Midwest leaves farmers in America's Midwest wondering if their business is going the way of Rust Belt manufacturing.
Brazil already is the leading exporter of coffee, beef, sugar, ethanol, tobacco and orange juice and soon will topple the United States as the No. 1 soybean producer.
If Brazil's expansion weren't enough for farmers in the United States to worry about, Brazil recently persuaded the World Trade Organization to ban some of the U.S. government subsidies that enable Americans to compete in global markets.
It's no wonder that Missouri farmers like Greg Sharpe watch with alarm as Brazil muscles in on global markets in Asia and Europe that were carved out by Americans.
"We've helped create those markets. American farmers' money has gone to educate consumers overseas. Now Brazil is at the point where they can fill those markets, too," said Sharpe, who farms 900 acres near Hannibal, Mo.
Size is why the state of Mato Grosso inspires fear. In Mato Grosso, principal locale of Brazil's farm expansion in recent years, farmer Celso Griesang was able to buy 700 acres of scrub lands for $20 an acre when he arrived 25 years ago from the southern part of the country.
Today, Griesang plants 10,000 acres of soybeans and 7,500 of cotton, plantations that enable him to live prosperously in the city and tend his crops from afar.
But Griesang's spread pales in comparison to that of a neighbor, Carlos Augustin, who started in Mato Grosso at about the same time on 1,250 acres of land.
Now, Augustin's "family operation," as his farm manager described it, comprises 75,000 acres - about 170 times larger than the average-sized farm in the United States.
The transformation of Brazil's vast tropical grasslands has been methodical but swift.
"We are doing in our Midwest what you did in your Midwest long ago," said Griesang, 49. His family arrived in Brazil from Germany in the mid-19th century, about the time German immigrants were settling in Missouri, Illinois and other Midwestern states. But the Brazilian land was less naturally suited to agriculture, and it was not until the 1970s that farmers there figured out how to treat the land so it would bloom.
Seemingly limitless land and cheap labor (farm workers earn less than $300 a month) already have transformed Brazil itself into an agriculture superpower.
Americans still hold the advantage over Brazil in transportation, often cited during debate over the controversial $2 billion proposal in Congress to double the size of seven locks on the Mississippi and Illinois rivers. In Brazil, exporters operate in a land of largely unpaved roads far from navigable rivers. Mato Grosso farmers say it costs them about $65 per ton to get soybeans to ports, more than three times what American farmers pay.
"The price of freight can be a monkey around your neck," said Mato Grosso farmer Christopher Ward, part of the reason the Brazilians claim they fared poorly on their just-harvested soybean crop.
Nonetheless, as noted by Luiz Marcos Suplicy Hafers, another land-rich Brazilian farmer and former head of the Brazilian Rural Society, enforcement of global free trade rules would hand his country even larger shares in global markets for commodities like soybeans, which are used the world over to make animal feed, vegetable oil and other products as diverse as baby formula, adhesives and ink.
Said Hafers: "The world doesn't yet know the Brazilian threat."
Eleven years ago, frustration at closed markets for their products prompted the United States and other nations to give the World Trade Organization the task of refereeing claims of unfair trade practices. But now the shoe is on the other foot, and many American farmers worry about what has been set in motion.
Rejecting a U.S. appeal in March, the Geneva-based WTO agreed with Brazil's contention that the United States distorts global trade by paying cotton companies to buy American cotton. The WTO also branded as illegal a broader program subsidizing exports of soybeans and several other commodities.
Brazil argued successfully that U.S. subsidies encourage overproduction and thus lower the price farmers everywhere get for their crops. As a result, developing countries, where subsidies are few, can't compete.
The United States was told to end those payments July 1.
Brazil celebrated still another big-stakes victory last month, this time against Europe, when the WTO ruled that the 25-nation European Union illegally subsidized exports of sugar made from beets.
In this North-South clash, Brazil is cast as the champion of small farmers in places like West Africa, where cotton is the cash crop that sustains families tending a handful of acres. But in Brazil, it's the exporters of Mato Grosso, where farms stretch to the horizon, who stand to gain the most from the WTO victory over the United States.
Farmers in Missouri - which produces 400,000 acres of cotton - can expect even more competition from cotton growers in Brazil, where exports are growing swiftly. Brazil's 435 million tons of cotton exports last year was twice its global sales in 2003 and four times what it sent abroad in 2002, according to the U.S. Agriculture Department.
Charles Parker, a farmer in Missouri's Dunklin County, said he and other Missouri growers would be forced to scale back their cotton crops if Brazil's success in the WTO leads to cuts in American farm programs.
"We're going to let the National Cotton Council and Congress fight them (the Brazilians) and we're just going to grow our cotton," he said.
(EDITORS: BEGIN OPTIONAL TRIM)
Even as Brazil attacks U.S. subsidies, its own farmers benefit from tax breaks and government programs that provide low-cost loans in a land where commercial lending rates exceeded 20 percent in 2004.
In Cuiaba, the capital of Mato Grosso, Gov. Blairo Maggi argued recently for expanded subsidy programs.
It helps to have one of your own in high office, and farmers could do no better - or find a friend any bigger - that Maggi.
With some 350,000 acres, Maggi's ranks as Brazil's largest soybean operation. That's in addition to another 100,000 acres of Maggi Group corn and cotton.
Maggi has built roads in Mato Grosso to help speed soybeans to the market and engineered a partnership that opened a barge channel on the Maedira River in the northern part of his state to the Amazon River.
The blunt-spoken Maggi is especially concerned about Brazilian soybean growers getting blamed for destroying Amazon forests, a charge he heatedly disputes.
Speaking with reporters in his office recently, Maggi argued that Brazil's small farmers need government payments to exist.
"I do not see any future for small producers if we don't have subsidies," he said.
The difference, the Brazilians argue, is that unlike U.S. farm programs, their subsidies would not distort global trade.
(END OPTIONAL TRIM)
If American farmers want a villain, they might pay a visit to Pedro de Camargo Neto at his farm near the Brazilian town of Presidente Prudente, where his 5,000 head of cattle graze on 6,000 acres.
Chances are, Camargo will be off somewhere planting lawsuits, not soybeans, in hopes of further undermining the farm subsidy system in the United States and Europe.
A former agriculture trade official who now heads a farm-export group, he dresses in fine white cotton shirts and holds an engineering degree from the Massachusetts Institute of Technology, along with a doctorate from a Brazilian university.
But it's his determination, not his education, that Americans and Europeans should fear the most.
More than other Brazilians, Camargo is responsible for Brazil's success in the World Trade Organization. That is why he is known in some circles as "the godfather of the WTO cases."
His challenges, and others to come, could begin to dismantle a system of subsidies that has been propping up U.S. agriculture for nearly a century.
Farm programs began in the Depression Era as a means to preserve family farms. But two-thirds of U.S. farmers get no subsidy payments, according to a database of government records compiled by the Environmental Working Group, a Washington-based advocacy group.
Those subsidies are coming under attack not just abroad but at home, where key members of Congress and activists are complaining about their cost as well as the fairness of their distribution. The Bush administration's budget proposal would cut subsidies by more than $5 billion over the next 10 years.
Government price supports, export assistance and various payments have averaged more than $14 billion over the past nine years. Those subsidies have enabled U.S. farmers to sell their crops at lower prices to compete with Brazil and other rivals in world markets - and made it more difficult for farmers in Brazil and other developing countries to sell their products abroad.
Starting a decade ago, Camargo grew angrier and angrier at assurances from the United States and the European Union that changes would be made in farm subsidy systems.
"It was an outrage that grew from years and years of nothing happening," Camargo, 49, recalled recently over dinner in Sao Paulo, the Brazilian capital.
In 2001, Camargo and the Brazilians prepared to challenge American soybean subsidies in the WTO. But due to a drought, China began importing vastly more soybeans, which drove up the global price and diminished Brazil's case.
So Brazil brought a challenge instead against the U.S. cotton policies - the case they won in March.
But Camargo still has soybeans on his mind; rice, too. He says he thinks Uruguay would have a good chance to win a case against U.S. rice subsidies, potentially a matter of concern to Missouri's $100 million rice industry.
Likewise, he is again prodding the Brazilian government to revive the case challenging how American taxpayers support their soybean industry.
"Even if we lose, we will have a useful communications tool," he said.
The United States has said it will comply with the WTO ruling ordering it to eliminate cotton subsidies but has given no hint as to how or when.
Virtually no one believes it will happen by July 1. More likely, according to industry officials, the United States will seek delays while negotiating a new global trade agreement in WTO trade talks that resume in Hong Kong later this year.
Then there's the potential of the United States simply ignoring the WTO ruling, which Brazilians say could jeopardize the future of the new trade agreement and multilateral dealings in general.
Camargo proposes a hard-line response if the United States doesn't comply, perhaps seeking to retaliate by producing copies of patent-protected drugs made by U.S. pharmaceutical companies.
Brazilian officials, aware of the negotiating leverage the WTO ruling has brought them, are unwilling to make such threats - or to show their cards.
"There is no next step," said Brazilian agriculture minister Roberto Rodrigues. "We have no Plan B because we believe everything is going to happen the right way."
Speaking at his sugar cane farm in northern Sao Paulo state, Rodrigues offered a rationale for his country's aggressive trade policies.
"Brazilian farmers are not competing against American farmers or against European farmers. We are competing against Fort Knox," he said, referring to subsidies that come from the U.S. Treasury.
But sooner or later, Fort Knox might begin closing to American farmers. With that in mind, and surrounded by valuable crops, Rodrigues spoke buoyantly of what lies ahead for Brazil.
"We believe that free trade, fair trade, will bring us a bright future," he said.
