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Corn+Soybean Digest

Ag Input Suppliers Invest In Brazil

As the 20th Century came to a close, Brazil looked like a pretty good place to invest, especially for agriculture and agribusiness. For starters, it's the world's No. 2 soybean producer and exporter, which makes it a big market. Brazil imported more than 14 million tons of fertilizer in 1997, 4 million of which were used on the soybean crop. Herbicide, fungicide, acaricide (for arachnids: mites, ticks, etc.) and insecticide sales for all crops across Brazil reached $2.6 billion in 1998, with the soybean crop accounting for 35% of that total.

It's no wonder, then, that U.S.-based Monsanto reportedly counts Brazil as its second-largest market. Monsanto claims its investment in Brazil has reached an estimated $1 billion, much of it in the purchase of Brazilian seed companies.

Not far behind is Minneapolis-based giant Cargill, which opened shop in Brazil in 1965. Cargill reports its estimated investment in Brazilian factories, farms, offices and port terminals comes to $600 million. Its more than 4,000 employees in Brazil process soy oil and meal, produce liquid fertilizers and transport grain and soy, as well as work with corn, oranges, cacau, coffee and other products and services. The company last year also bought a smaller fertilizer company called Solorrico.

Des Moines-based Pioneer has operated here since 1972. Last March, Pioneer announced its entry into the Brazilian soybean seed market, and the purchase of the Dois Marcos seed company and its seven soybean varieties. Brazil's annual soybean seed production is estimated at 850,000 tons.

What made the country suddenly popular was passage, in 1997, of the Cultivar Protection Law, which protected ownership of genetics. Previously, multinational companies were far less interested in Brazil, as royalties could be collected only with difficulty.

For U.S.-based ag equipment manufacturers, Brazil represents not only a promising market itself, but access to important markets across the region, such as Argentina and Chile. Brazil's cheap labor market, combined with its commercial agreements such as the Mercosul trading bloc, make it an excellent place to build tractors and other equipment.

Take the Racine, WI-based Case Corp. Case began operations in Brazil as early as 1920. But in 1997, the company said it would invest as much as $100 million over three years to manufacture large-scale farm equipment here for the Latin American market. By then the company had moved into its new manufacturing plant at Sorocaba, in the state of Sao Paulo.

The Brazilian market for equipment is a promising one. The country has one tractor in operation for every 104 hectares (about 257 acres) of farmland, while the U.S. has one for every 40 hectares (roughly 100 acres). What's more, Brazilian tractors are old, and new equipment will be increasingly needed in coming years. More than a third of the tractors and a fourth of the combines are between 16 and 25 years old, according to the National Association of Automotive Vehicle Manufacturers.

U.S.-based multinationals aren't the only ones in Brazil. Companies from Switzerland, Germany, Argentina and other countries are actively investing as well. And the companies mentioned here are not the only U.S. firms operating in Brazil - there are plenty more. In the world of soy, where Brazil is a major world power with plenty of land for expansion, the country presents a promising market for ag companies.

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