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Corn+Soybean Digest

If You Can't Beat 'Em

The old saying, “if you can't beat them, join them,” rings true for a trio of Illinois soybean growers.

After one year of operation, the growers involved in Illinois-based South American Soy, LLC, remain just as optimistic about long-term prospects of farming in South America as they did on day one. The company continues to expand its operation and services in Brazil to capture a share of the country's tremendous agricultural growth potential.

“South American Soy (SAS) was created in 2003 to allow U.S.-based farmers and investors to take advantage of the opportunities being created by the rapidly expanding agricultural sector in Brazil,” says Brad Glenn, a farmer from Stanford, IL, and SAS marketing manager. “SAS is building, buying and operating agribusinesses in Brazil that employ a combination of North and South American technologies.”

In addition to Glenn, SAS is managed by Phil Corzine, a grower from Assumption; Kent Sorrells, a grower from Raymond; and Brazilian director Neige Caiapo. About 85 farmers and investors from 10 Midwest states provided more than $1.3 million during 2003 and 2004 to fully capitalize the LLC in October 2004.

“SAS offers services to individuals and entities seeking to invest, operate or connect to the agricultural sector in Brazil, including farmland,” says Glenn. “Last summer, through our wholly owned Brazilian subsidiary, Nova Frontera Limitada, we made our first purchase of approximately 2,500 acres of farmland in the state of Tocantins, Brazil.”

SAS placed 250 of those acres in soybean production during the 2004-05 growing season. The group plans to raise soybeans on about 700 acres during 2005-06. The group also plans to purchase upwards of 20,000 acres in the first eight to 10 years of operation. Brazilian law requires 35% of acreage remain in a natural setting, along the same lines as U.S. conservation programs, although Brazilian farmers aren't paid for keeping the reserve.

“Tocantins is considered part of the new frontier in Brazilian soybean expansion, so it takes some initial effort to bring the ground into production,” says Glenn.

Tocantins is located in the central-west region of Brazil. The state was created in the early 1980s by splitting the state of Goias in half. Nova Frontera is located in southern Tocantins, not far from the border with Goias. The area has low land values and a growing economy.

“With nearby domestic soybean crushing facilities and existing and expanding rail, river and road transportation infrastructure, Tocantins is well positioned to offer access to both domestic and export markets in the future,” says Glenn.

To bring the land into production, SAS relies on the expertise of Silvio Caiapo, a local farmer and Nova Frontera's on-site manager. The property has three creeks, a small pond and relatively flat topography.

“I take the raw land and turn the soils into good soils for cultivation,” says Caiapo, who made his first trip to visit U.S. soybean growers in August. “I focus on the top 20 in. of the soil, provide advice about lime applications and erosion protection.”

Caiapo found U.S. conditions “completely different,” from those in Brazil. “We have more sand in our soils (than in Illinois) and a greater variety of clays,” he says. “We have a different mind-set because our soils are 28-40% clay and have little organic matter. In Brazil, the redder the soils, the better they are.”

Tocantins sees an average 72 in. of rain during the growing season, which is a plus for production. The farm faces no problems with weed pressure at this time. “We plant conventional, public soybean varieties,” says Caiapo. “We have looked at Roundup Ready soybeans, but we don't have enough weed pressure yet to really need them.”

Caiapo's partner on the trip to Illinois was Roberto Bulher, a local businessman who helps the farm with crop input transportation, trucking harvested soybeans to market and related activities.

“The location is good for transportation compared to other parts of Brazil,” he says. “For us, 120 miles to the elevator is okay.”

Both Brazilians are interested in learning as much as they can to improve the operation in their state.

“This is a global market, not separate U.S. and Brazilian markets,” says Bulher. “There is much land to be opened and opportunity for everyone.”

Rural Brazilians are very receptive to the economic development Americans bring to the area, adds Caiapo. “They think their land values will go up really fast, and they think about what they can sell their land for to Americans,” he says. “It is attractive for Americans to invest in Brazil because land is cheap and soybeans grow well here.”

“Brazilians like the foreign capital because cows on pasture don't generate as much opportunity as soybeans,” says Glenn. “With soybean production, you also generate new business for implement dealers, truckers, crop input companies and others. You can spin the economic benefits around many times. This allows the Brazilians to improve their infrastructure and raise their standard of living. They welcome Americans.”

While Glenn notes other U.S. growers are interested in expanding soybean production in the states of Bahia and Mato Grosso, few are looking at Tocantins.

“We are here to stay, and we have found industry is willing to help us because they know we are here to stay,” he says. “We have found political support and get positive media coverage. We make an effort to be part of the community and to be good neighbors.”

Glenn adds that while the economics for soybeans have not been favorable for this first year of production, given that the Brazilian real has strengthened against the U.S. dollar and input prices have risen, everything is cyclical. “All you have to do is look at China's appetite for soy to know the future there is bright,” he says.

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