In sign of growing clout, Brazil’s corn helps hold up U.S. market

SAO PAULO — As U.S. cornfields withered under drought conditions last summer, Brazil’s once-empty Cerrado region produced a bumper crop of the grain, helping feed livestock on U.S. farms and ease a drought-related spike in prices.

The U.S. imports of Brazilian corn were small by world standards. But they are rising fast, and they mark just one element of the increasingly complex and sometimes contentious relations between the world’s agricultural superpower and its fast-growing competitor amid shifts in the global economy.

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Starting at zero in 2010, Brazilian corn exports to the United States are on pace to exceed $10 million this year and are bound to rise as farmers here expand planting and more corn is funneled to nonfood uses, such as ethanol production. Brazil is expected next year to dethrone the United States as the world’s largest producer of soybeans. With so much land available for cultivation, that status will probably become permanent.

With a heavy dose of U.S. capital and know-how, a massive agribusiness complex has been established here. Just as American firms have moved production to China to be close to potential consumers, the John Deere equipment trundling across Brazilian fields and the Kellogg’s Corn Flakes found in Brazilian supermarkets come from local factories.

Despite what is described as intense cooperation between the two governments, there is a developing sense of competition as well. Brazil challenged U.S. cotton programs in the World Trade Organization, arguing that U.S. government support for domestic growers held down world prices and hurt cotton farmers in Brazil.

As the result of a 2009 WTO ruling, Brazil now receives about $17 million in monthly payments from U.S. taxpayers — money being used to advance the Brazilian cotton industry with research on best practices, pest management and other issues. The Obama administration agreed to the payments as an alternative to either curbing government support for U.S. cotton growers or having Brazil slap import taxes on American goods to compensate for the loss to its farmers.

Battles over sugar, poultry and other products that are grown in plenty here were among the issues that stalled the Doha round of world trade talks.

“We will surpass the U.S. in the future” as Brazil brings massive reserves of open land into production and benefits from still-untapped potential to boost its yield per acre, said Ronaldo Spirlandelli de Oliveira, head of the Sao Paulo cotton growers association.

The Sao Paulo group recently received $500,000 in U.S. funds to train technicians in pest management. Under the cotton agreement with the United States, the money can’t go directly to growers but is being funneled through a new agency to fund research, technical training and other programs for Brazil’s cotton industry.

The cotton case is just one example of the swagger Brazil is carrying into global agricultural markets.

State-backed research since the 1970s has turned the Cerrado — once considered unproductive scrubland — into a vast farm belt. Still mostly unplanted, and comfortably distant from Brazil’s environmentally sensitive Amazon region, the Cerrado has become a new frontier in the green revolution that made U.S. farmers the most productive in the world. Just as the vast plains of the American Midwest helped keep down world food prices for the last half of the 20th century, the Cerrado may do the same in the 21st.

Brazil has adapted the soybean — native to the temperate areas of China — to make it thrive in tropical conditions. And the country has invested heavily in the application of nutrients needed to make the Cerrado productive.

Already, Brazil’s output is critical to world supply. The boatloads of soybeans shipped from here to China are central to feeding the world’s largest country at a time when it is becoming richer and consuming more per person.

The corporations that defined America as a land of plenty have invested heavily here. Grocery shelves are stocked with iconic U.S. brands such as Mazola oil and Corn Flakes, manufactured at local plants where Cargill, Kellogg’s and other staple Midwestern companies employ thousands of Brazilians. Of seven new factories that John Deere said it plans to build worldwide, two are in Brazil — with three in China and one each in India and Russia.

“It is a tricky issue,” said a U.S. official who spoke on the condition of anonymity because he was not authorized to comment publicly. “U.S. companies are doing all this investment in an agriculture superpower that is a huge competitor. . . . Growers from the U.S. are definitely watching what is happening down here.”

Corn is a new part of the discussion.

Once reliant on imports, Brazil has seen its corn production explode in recent years. High world prices have enticed farmers into planting more, and crop management changes have allowed two plantings a year on Cerrado farms.

Farmers here increasingly use a faster-growing strain of soybean that can be planted in September — the start of spring in the southern hemisphere — and harvested in January. A second crop can then go in the ground and be ready by June.

This year that second crop was corn, and the record planting was ready just as the effect of the U.S. drought was becoming clear. A boon for Brazilian corn growers, it may spur more production.

“We have just started having a corn market in Brazil,” with futures contracts and other tools helping farmers invest in a second planting, said Marcos Rubin, a partner at Brazilian consulting firm Agroconsult. “It is a new model of farming,” he said. “As we become more solid [corn] exporters . . . it will help farmers plan better for a second crop.”

Brazilian farmers remain focused on soybeans and the potential to export to China. The country does not expect to displace the United States as the world’s top corn producer, said Elisio Contini, head of strategic studies at the Brazilian Agricultural Research Corp.

But it does expect to play an increasing role in agriculture. Farmers here say the major constraint — a notoriously slow and expensive transportation network — can be fixed over time.

Compared with this country’s unlocked potential, said Oliveira, the cotton farmer, “the U.S. is at its limits.”

 
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