Fortune currently has an interesting article, Soylandia, on the success of the Brazilian soy bean industry. The overall message the story presents is “Brazil is beating the U.S. in soy beans…and they could beat us at everything else”. While there is certainly credence to the success of the Brazilian agricultural market, I think the article is rather one dimensional in its outlook.
Only movies take such an elementary arc in their story lines. This article, while telling the “truth” doesn’t incorporate the entire story of what is going on. Here are a couple things to think about when reading this article:
Low costs part of the equation
The big hole in the Brazil Ag argument is that Brazil is still a fairly poor country. While they can produce a lot of ag products to be sure. But they also don’t have high costs of labor.
Some notes about Brazil’s productivity from the article:
Soybean yields in Brazil have surpassed the U.S. in three of the past six years. Average costs per bushel in the U.S. are about $6.70, including domestic and ocean freight, while Brazilians weigh in at $5.05.
The United States was built this way – relatively high productivity with relatively low wages. We even still fight about high wages today even though much of the duties of a farm are automated. As Brazil matures politically and grows wealthier (meaning people can move to cities as has happened in all developed nations) then Brazil will face the same issues. But they will certainly do well in the mean time.
Not Zero Sum
A strong Brazil is good for everyone. Obviously what is going on there is shocking to Midwestern farmers and to the U.S. in general. But the end game of all of this is affordable food for everyone. The Midwest isn’t going to go out of business over this. And I love adamame so I know nothing’s going to happen to soy beans. So the undertone of “the U.S. is in trouble” isn’t really true or relevant.
Given the improvements the article notes on the growing strength of anti-deforestation efforts, the rest of the world will certainly benefit:
Given the Amazon’s recent history of anarchic brutality and environmental mayhem, one would expect Sting and Leonardo DiCaprio to be flying planeloads of eco-activists to Mayor Franz’s doorstep to denounce Lucas do Rio Verde and the other rising agricultural capitals in Mato Grosso. But Soylandia is jacking up production even as it greens itself – or, more precisely, becomes considerably less brown than it was. According to the Brazilian space agency, the Amazon’s annual rate of deforestation fell by 64% between 2004 and 2007. And much of the decline was in Mato Grosso.
Still more work to do
As the citizens of Brazil grow wealthier, they are going to want more freedoms. Brazil still isn’t a free and open society. They have their traditional means of governing and making economic policies. Their oil and ag industries are still pretty closed off to internationals. So as they grow, they will ultimately have to address this issue as well. This is a good thing too as it will help their nation to continue its prosperity.
