Farming Is Hip in Brazil, Where a New Generation Is Outpacing the US

by Clarice Couto, Dayanne Sousa and Michael Hirtzer (Bloomberg) Thanks to its cheap labor, year-round harvests and close ties with mega-buyer Beijing, Brazil has rapidly encroached on the US’s long-held position as the world’s top supplier of key crops. Now, it has a new tool in its bid to unseat American agriculture: Gen-Z.

An army of young Brazilians is forgoing service-sector and manufacturing careers to follow their parents into the hip-again family farming business, turbocharging the country’s already accelerating standing in the global food supply chain. They’re attracted to the industry’s rapid expansion, widespread use of technology and history of minting big-name billionaires.

As the new generation joins the rural ranks, the age of the average farmer in Brazil has dropped to 46 years old. Meanwhile, America’s growers have never been older. That gap can’t be attributed solely to the countries’ overall median ages, which the US government says are within four years of each other. READ MORE

According to data from the USDA Foreign Agricultural Service, in 20 years Brazil has nearly tripled corn and soybean production, and exports have exploded by more than 1,000% and 400%, respectively.

“It’s easy to think about [the soybean boom] as a Brazilian story,” says Dr. Guilherme DePaula, a native Brazilian who is assistant professor of economics at Iowa State University. “But if you dig deep, it’s as much a U.S. story as a Brazilian story, because the boom happened when the trading companies jumped in.” Much of DePaula’s research has focused on Brazilian agriculture.

DePaula says investments from companies such as ADM, Bunge, and Cargill were integral to developing soybean and corn crops in Brazil.

“They started financing, commercializing, and transporting high volumes of soybeans from Brazil, mostly to China,” he says.

Between Brazil’s robust production rates, higher U.S. prices, and a strong dollar, the U.S. has increasingly felt the sting of competition in recent years. Joe Foley, commodity trading manager for corn and soybeans at global commodity shipping company Columbia Grain International, says the last three to five years have been particularly tough.

“With what’s going on in Brazil with production right now, we have a particularly difficult hurdle to get over,” he says.

To make matters worse, recently the U.S. hasn’t been able to bank on a longtime advantage it usually has over Brazil: transportation.

Historically, while the U.S. was known for being reliable, Brazil has struggled with infrastructure to get the crop out of the country. But during the past two years, Mississippi River water levels have dropped to record lows, slowing shipments and raising costs. Furthermore, DePaula says, transportation is the latest chapter in the story of Brazilian agriculture and American investment, with progress being made now toward better roads.

Brazil is China’s largest supplier of soybeans and, for now, its largest corn supplier. Steve Nicholson, global strategist on grains and oilseeds for Missouri-based lender and insurer Rabo AgriFinance, says he expects the U.S. and Brazil to continue to compete for China’s business.

“With the continued deterioration of the U.S.-Chinese relationship, the Chinese have pulled more and more business away from us and moved more and more business to Brazil,” he says. “They’re going to do anything to ‘punish’ the U.S. for their perceived ill treatment. They’re going to go someplace where they feel like they’re loved, wanted, and people want to do business with them.”

Nicholson says the recent U.S.-China trade war has a lot to do with China’s negative feelings.

“I said during the ’17–’18 period, when the tariffs were put on, that this will harm us for a number of years and it will take us a long time to get back the label of being a reliable supplier,” he says. “We’re still dealing with that hangover.”

“If we have the cheapest beans, they’re going to come to us,” he says. “They’re very price-sensitive.”

DePaula agrees, saying China wants competition between the U.S. and Brazil to drive prices lower.

“You see the U.S. investing in demand- generation programs, and Brazil is doing the same,” he says, adding Brazil is looking to start blending an increased amount of biodiesel with its diesel fuel supply. Biodiesel is a renewable fuel made from fats and vegetable oils, including soybean oil. It is typically blended into diesel fuel at a specific percentage. “That tells you that there is a real limit where the competition becomes unprofitable anymore if you don’t generate this additional demand,” DePaula says.

Nicholson says the U.S. should look to the European Union (EU) as a potential new market because the EU’s concerns about Brazilian deforestation may impede that country’s access. He also suggests farmers look into niche opportunities such as non-GMO or low-carbon crop markets. READ MORE