Over the last year or so there’s been a major change in world agriculture. It concerns the comparative power and market shares of two main players, the US and Brazil.
The main reason for the changing situation is the severe drought this year in farming areas of North America. This has of course led to drastic reductions there in the production of important crops of all kinds. One major example is corn (maize) an absolutely vital food for both humans and animals and one of the five main crops cultivated world-wide. There’s been nearly a fifty per cent drop in American output this year, due to the weather conditions there. Another important crop seriously restricted is soy (soya or soybeans) almost as vital as corn, with a one-third fall in production in the US.
Needless to say all this has had a severe knock-on effect on food prices worldwide, with many of the world’s poorest people bearing the brunt of the increases. According to the United Nations, world food prices experienced a six per cent rise overall in July this year. A huge amount for just one month.
Brazil has managed to redress the shortages to a considerable extent, without such severe weather conditions as the US and its own exports boosted by increased demand from countries such as China. Evidence of this points to the fact (according to the International Grains Council at least) that Brazil will overtake the USA as the world’s biggest soy producer this year.
Corn (maize) producers in Brazil are also seeing record growth in sales as they strive to fill the gap caused by widespread ruined harvests in their northern competitor. A significant feature is that this year, for the first time ever, the USA is actually importing corn from Brazil.
All this increased activity in Brazilian agriculture is of course due to the misfortunes of the North Americans, a situation that is regrettable for them. However, it is certainly good news for the southern hemisphere BRICS nation. According to Luiz Antonio Pinazza, the President of Brazil’s ‘Sectoral Chamber of Agricultural Inputs (‘CSIA’); “The US situation has created an atmosphere of euphoria in our own countryside”. However, so far the main beneficiaries of the boost seem to be the large food producers in Brazil with working class and middle class consumers much less enthusiastic over rising prices.
None the less, as regards providing opportunities for domestic or foreign short term investment or long term investment in Brazilian agriculture, the present situation is an attractive one. In the long term the private and public sectors both say that the benefits will ‘trickle down’ to everyone. In any event the view is that the general market economy in Brazil will benefit.
This is especially remarkable when one looks at the Government’s recent easing of restrictions in developing new agricultural land, especially in the rainforest areas. This is a controversial measure, to be sure, but one that President Dilma Rousseff and her government say is economically necessary. Environmentalists and conservationists don’t agree and say that the steps are actually not needed. The investment community in Brazil and well a Investment News websites tend not to sympathise with them and general investment in Brazil continues to grow year after year and with the upcoming Fifa World Cup in 2014 and the Rio Olympics in 2014 there has never been a better time to invest in Brazil and turn a modest profit.