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Are we still competitive?

Brazilian agriculture is followed and frequently evaluated by our competitors. For some commodities, Brazil is no longer a supporting actor and plays a lead role, along with other key players. Soybean and corn production has risen significantly worldwide in the last decade, when Brazil started to play a crucial role.

 

The average Brazilian production of soybean amounted to 45 million tons between 2000 and 2002 and went to 101.8 million from 2014 to 2016, a sharp increase of 122.2%. The United States, in turn, produced 76.2 million tons, on average, between 2000 and 2002, to 110.3 million tons between 2014 and 2016, moving up to 44.7%. As for corn, the average production in the United States was 364 million tons from 2014 to 2016, 51% up in relation to the period between 2000 and 2002 (240 million tons). In Brazil, the production was 83 million tons from 2014 to 2016 against 41 million tons from 2000 to 2002 – the Brazilian production doubled in 16 years.

 

These figures show the important role that Brazil plays in the international scenario of soybean and corn production. However, another country has emerged into the spotlight: Ukraine. From 2000 to 2002, the average corn exported was 520 thousand tons, but exportations rose to staggering 18.4 million tons from 2014 to 2016. Brazil, the world’s second major corn exporter, shipped 27.5 million tons in the same period. As for soybean, Ukraine exported 2.5 million tons between 2014 and 2016, which is approximately 22 times smaller than the amount that Brazil sold. However, between 2000 and 2002, Ukraine shipped only 6.7 thousand tons.

 

The significant expansion of corn and soybean production in Ukraine is attributed to major international investments, as groups of investors and producers rented farms and introduced new machinery, planting and cropping techniques, after the collapse of communism. International players have several arguments to invest on Ukraine, namely fertile land, low production costs, labor force availability and low land costs. This competitive advantage in Ukraine ensures profitability for soybean and corn crops. For instance, the average profitability of three seasons (2012/13 to 2015/16) total on production costs was 17% for soybean and 18% for corn – in Brazil, numbers are 18% for soybean and -27% for the second corn crop. Logistics is important regarding competitiveness. The major corn-producing region in Ukraine is about 300-600 km far from the Black Sea – the exportation port – and crop flowing is performed by train. In Brazil, the distance is between 150 and 2,200 km and the production is flowed by trucks.

 

Brazil will continue a major player of food production in the world, due to the availability of agricultural areas. Discussions, however, cannot be limited to the amount of arable lands, but on the necessary investments to make new agricultural borders competitive globally. This means discussions on logistics, possession of private property, reduction of bureaucracy to register new chemical products, as well as other bottlenecks that compromise competitiveness of Brazilian agriculture.

 

Meanwhile, other countries from the former Soviet Union, such as Ukraine, that still preserve the socialist model, presenting faster suggestions than Brazil is for their internal issues, becoming more attractive for international investment. 

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