Brazil's cropland expansion is pausing but its appetite for grain isn't

BOONE, Iowa — Brazilian farmers are expected to add little or no new cropland in the coming season after two decades of steady expansion, but growing domestic demand for corn ethanol and biodiesel there will keep squeezing U.S. export prospects, experts say. Matthew Kruse, president of CommStock Investments and a northwest Iowa farmer who also farms in Brazil, said Brazilian planted acreage has grown by an average of 5% a year over the past 20 years. ADVERTISEMENT "It's no secret that Brazil's land production area has been growing tremendously over the years," Kruse said during a Sept. 1 Farm Progress panel titled "The Brazil Factor." Also on the panel was Cesar Cruz, director of Research at Advance Trading Inc. Next season looks different, Kruse said, with higher input costs — especially on imported fertilizer, which Brazilian growers depend on more than U.S. farmers — bringing expansion to a halt. He said that raises the stakes on weather conditions because added acres have historically cushioned production losses. "They're not going to have that buffer next year," he said. Both panelists said forecasts point toward dryness in South America through the end of the year. Kruse said an El Niño pattern is a larger threat to Brazil's second corn crop than to soybeans, because farmers can delay bean planting by a few weeks but cannot easily shift the corn that follows. "They have a very short window to plant that second crop corn in Mato Grosso, following the beans," he said. Even a flat Brazilian crop would not mean more grain on the world market, as corn ethanol accounts for 20% to 25% of Brazil's ethanol production, up from essentially nothing a decade ago, Kruse said. Both panelists said U.S. farmers need to push for domestic demand growth rather than counting on Chinese purchases. ADVERTISEMENT "We need to kind of take a page from Brazil's book and continue to develop our own industry," Kruse said. In the near future, Cruz said Argentina is the bigger competitive threat. USDA estimates the Argentine corn crop at 63 million to 64 million metric tons, he said, while local estimates run above 70 million. Roughly 65% of the crop is typically exported. "That can be a threat for us right when we harvest our corn here," Cruz said. Kruse said studies suggest Brazil could convert as much as 80 million acres, much of it degraded pasture, though he estimated 40 million acres of high-quality ground. That would take 10 to 15 years, he said. "There still is tremendous growth potential ahead for Brazil," Kruse said. With soybean futures trading near $13, Kruse said U.S. growers are back in profitable territory. "For me, profitability probably started at $11 on my farm in northwest Iowa," he said. ADVERTISEMENT Cruz said pressure will not ease on its own. "If you don't see a structural change that can change domestic demand for us here for both corn and soybean, it's going to be very hard for us to not see Brazil growing in the coming years," he said.