RIO DE JANEIRO, BRAZIL – In recent months, 40-year-old Maurício De Bortoli, from Rio Grande do Sul, has been dedicated to deciphering colors. They help him interpret the soybean productivity on his 9,000-hectare farm in Cruz Alta, Rio Grande do Sul. It is not the trained gaze of this third-generation representative of a family of farmers that comes into play, but rather sensors that, coupled with probes fitted into the soil, capture the light waves emitted by the plants and help Bortoli make decisions on the farm.
Electromagnetic signals are sent to a software that decodes the plant colors and identifies the incidence of pests or nutrient shortages. “With this, one can know at a very early stage if the plant is sick and what needs to be done, using fertilizers or pesticides in the correct amount,” says Bortoli.
The search for detail led Bortoli’s farm to be the champion in soybean productivity in the country in 2019 in an annual competition promoted by the Soybean Brazil Strategic Committee, one of the most respected organizations in the sector. His farm produced 124 sacks of the bean per hectare (more than double the national average).
Currently, Bortoli is producing about 1.1 million sacks of soybean per year on the farm built by his grandfather Aquelino. In 2018 and 2019, he reinvested approximately 15 percent of his revenues, over R$100 million (US$20 million), in new technologies. The management process was also improved, with the establishment of a board of directors and the hiring of market professionals in leadership positions.
The achievements of rural entrepreneurs, such as Bortoli from Cruz Alta, are an encouragement to the Brazilian economy in dark times. The novel coronavirus pandemic is expected to curtail the country’s gross domestic product by as much as nine percent. But while other economic sectors are expected to suffer bitter losses this year, the agribusiness GDP is expected to grow 2.5 percent, reaching R$728.6 billion.
“It will be the highest figure ever achieved by the sector, something very positive in a year when the economy is so faltering,” says Renato Conchon, an economist and economic coordinator at the National Confederation of Agriculture and Livestock (CNA). In parallel, the industry’s GDP is expected to contract by 7.9 percent, followed by a 9.8 percent drop in trade and 5.5 percent in services, according to the FGV’s (Getúlio Vargas Foundation) projection, which estimates that the Brazilian economy will contract by 6.4 percent.
Agribusiness, which has been breaking records, is expected to account for nearly 24 percent of Brazil’s GDP in 2020, an historic mark. The grain harvest of 250 million tons should also be the largest recorded to date. “Agribusiness is being instrumental in helping to mend the damage caused to the economy by the coronavirus,” says economist Marcos Jank, a professor and senior researcher of global agribusiness at INSPER (higher education and research institution). And the future is promising: by 2027, Brazil should reach the 300 million-ton mark.
The Paranaguá and Santos ports, through which much of Brazil’s production is sold, have never been so busy. The shipment of foodstuffs increased 23 percent between January and April compared to the same period last year. According to estimates by economist José Garcia Gasques, general coordinator of Information and Policy Evaluation for the Agricultural Policy Secretariat within the Ministry of Agriculture, exports should reach US$102 billion this year, a six percent increase.
The record figures for agribusiness in 2020 are feasible because the sector is experiencing an upsurge in productivity that began in the 1970s. A number of public policies and investments in the development of new technologies that were crucial for the sector’s competitiveness come from that time. With the creation of the Brazilian Agricultural Research Corporation (EMBRAPA) in 1972, came the development of seeds suited to the country’s tropical climate – until then, they were imported from countries like the United States.
It was not long before new agricultural borders were opened, spreading to the vast Cerrado (tropical savanna) region in the Centerwest and to the northeastern region that became known as Matopiba, which covers part of the states of Maranhão, Tocantins, Piauí, and Bahia. The development of new planting systems, preserving the plant remains that cover the land and ensure greater presence of nutrients, was yet another major breakthrough.
“The generation of wealth and the productivity in agribusiness have not stopped growing for decades thanks to a public policy to encourage research, technical guidance offered to producers and new technologies,” says Gasques.
With agribusiness GDP growing, companies in the sector are hiring. This is the case of BRF, the world’s largest chicken exporter, which has created over 2,000 jobs in its several facilities nationwide. The financial results are expected to continue to grow. In the first quarter of 2020, the company recorded net revenue of almost R$9 billion, 22 percent more than in the same period in 2019.
“The worldwide demand for chicken, mainly from China and the Middle East, is expected to continue to rise,” says Lourival Luz, president of BRF. Other companies in the sector are also seizing the good moment. Marfrig Global Foods, the second-largest beef producer in the world, is expected to experience its best year ever. The company is expected to achieve revenues of over R$60 billion this year, up from R$50 billion in 2019. The company’s shares have already accumulated a 35 percent increase in the year to date.
“Exports are increasing due to a number of global factors and also because the country is perceived as a reliable partner, which has not had its production chain affected by the coronavirus,” says Miguel Gularte, Marfrig’s president.
In the United States, over 30 beef, pork, and chicken factories were forced to suspend their activities in April and May because of the death of employees as a result of the coronavirus – among them are the Brazilian-owned JBS facilities. In Brazil, Covid-19 cases were also reported in slaughterhouses. Despite the still limited impact, on June 30th the Chinese government shut down imports from four meat packing plants in the country, including JBS and Marfrig’s plants in Rio Grande do Sul and Mato Grosso.
Agribusiness has not only been helped by international demand in 2020. The climatic conditions and the economic situation also play in its favor. In May last year, the US Meteorology and Oceanography Center reported that this year El Niño and La Niña, weather phenomena that cause either excess rain or drought, would not occur.
In addition, humidity corridors in the Amazon have formed to cause rainfall at the right time and in the right amount, particularly in the Midwest and Southeast. The Northeast Region was also benefited by rainfall, due to the cooling of the Atlantic in the Northern Hemisphere and its warming in the Southern Hemisphere. There is no knowledge of all these phenomena ever having happened simultaneously, which favors Brazilian agriculture in a unique way.
The planning of agribusiness entrepreneurs also yielded results. “Producers increased their investments in 2019 with an eye on the almost certain opportunities in 2020,” says CNA’s Conchon. Investments in new supplies, such as higher-yielding seeds and state-of-the-art fertilizers, totaled R$84 billion in the planting of the harvested crop in 2020, a ten percent increase compared to the previous cycle. This is a reflection of a new generation that is rejuvenating agribusiness.
A survey by the McKinsey consultancy, conducted with 750 farmers across the country, shows that over 70 percent of young people up to 35 years of age are more willing to purchase sensors and machines that operate with advanced technologies, such as the Internet of things. The percentages are similar among 35 to 45-year-olds. “The grandchildren of the farms’ founders are revolutionizing the countryside,” says Nelson Ferreira, a senior partner at McKinsey. “They keep up with trends and learn from older generations that the key is to unite productivity, new technology, and sound planning.”
Luciana Dalmagro, 34, belongs to the fourth generation of a family of rural producers. She has been managing her father’s farm, Paulo Portugal, for five years and has made the property located in Sales Oliveira, in the countryside of São Paulo, one of the largest and best equipped farms in the country, slaughtering three million birds a year. There, she invested in traceability and animal welfare systems that enable export of the entire production to clients in Europe looking for high quality products.
Equipment that simulates sunrise and sunset makes chickens “happier”. In addition, there is more room for them: 13 birds are raised per square meter, ten percent fewer than the usual average. According to market estimates, the turnover of farms with these features is a few million reais per year. Dalmagro has a degree in pharmacy, a master’s degree in science and an MBA in business – she is the first in her family to take an MBA. “I want to become a top manager, something that is increasingly important in agribusiness,” she says.
The trade and political war between the United States and China has also helped Brazil. In June, in the last round of disputes between the two countries, the Chinese government advised the main state-owned agricultural companies to stop buying products from the United States. The Chinese disapproved of US President Donald Trump’s criticism of a new law that could endanger Hong Kong’s autonomy, a territory that belongs to China.
Since 2018, the trade dispute between the world’s two major powers has raised import tariffs on both sides, pushing up prices for agricultural products. “Brazil, with its massive production, is the great beneficiary of this dispute,” says Gasques.
For the first time in history, shipments of Brazilian corn to China have exceeded American exports to the country. Between January and April, Brazil sold 37 million tons of corn to China, while the Americans exported 35 million tons. The devaluation of the real against the dollar and the high productivity of grains in Brazil added even greater attractiveness to the Chinese market.
Brazilian grains were 23 percent cheaper than the American. Much of the success of agribusiness is a result of China’s growing demand for food. Brazil’s largest trading partner, the country purchased US$30 billion in agricultural products last year. By 2025 this figure is expected to reach US$48 billion – an increase of 60 percent.
Rural producer Enio Fernandes follows the agribusiness variables in the international market daily. Owner of three farms in Palestina, Goiás, totaling 5,000 hectares with soy, corn, and sugar, he realized that there was a new opportunity on the horizon. In 2018 and 2019, a fatal virus that only affects pigs decimated half the Chinese herd, causing the death of 175 million animals. The market as a whole realized that the Chinese demand for animal protein – not only from pigs but also from poultry and cattle – would enter a growing spiral.
As a result, Fernandes decided to invest in livestock for the first time. In 2019, he bought 2,000 head of cattle. This year, the sale of cattle destined for export should increase the farm’s revenues by 20 percent, reaching R$25 million. “As in the most competitive companies in the country, I carefully plan my investments”, he says.
Despite all of this, Brazil still has major challenges to overcome. One of them is the lack of connectivity in the field. Less than 40 percent of rural areas have a 4G signal. Inside the farms, the situation is even worse: “The reception fails a lot, and most producers have difficulty using modern, autonomous sensors and machines,” says Claudio Frischtak, of Inter.B, a consulting firm that conducted a study on the topic. “The solution is to debureaucratize the process of installing antennas and make regulatory changes in the sector.”
Authorization for the installation of towers and antennas, which is subject to the approval of each municipality, usually takes months on end. A great deal of paperwork is required for the process to progress. Many operators give up on extending internet coverage inland due to red tape. The solution requires all means necessary. Last year, a bill was passed in the Chamber of Deputies, known as the General Antennae Law, which determines that if there is no return on licensing requests within 60 days, the telecommunication network support infrastructure will be installed regardless, with or without a license. The bill is still pending in the Senate.
Meanwhile, reports of losses due to precarious connectivity are repeated. Farmer Fabio Tardivo, 31, who grows 1,400 hectares of soy and sugarcane on two properties, one in Batatais, São Paulo interior, and the other in Capetinga, Minas Gerais, has lost count of how many times he had machines stopped in the field for lack of internet signal.
“The signal is so poor that not even WhatsApp works at times, and the workers in the field can’t reach me when there is a problem,” he says. “We lose time and productivity.” The Minister of Agriculture agrees that taking internet access to the countryside is crucial. “Without connectivity, producers are unable to use the new technologies that help increase productivity,” Tereza Cristina said.
The drama of the shortage of antennas is a problem of simple solution if compared to the environmental risk that hovers over Brazilian agribusiness. Deforestation in the Amazon reached its 11-year peak in 2019, and in the first five months of this year alone, deforestation increased by 34 percent. In May, 829 square kilometers were destroyed in the Amazon, 12 percent more than in the same period last year, according to the Real-Time Deforestation Detection System (DETER), of the National Institute for Space Research (INPE). In August last year, the increase detected by the DETER made Brazil a global environmental villain.
After almost a year, the country has not learned its lesson. The Minister of the Environment Ricardo Salles made dire remarks about environmental preservation at the April 22nd cabinet meeting, which was recorded and soon spread around the world. Salles said the time was ripe to dramatically change the environmental protection rules, given that the media was focused on covering the coronavirus. The damage of the Minister’s statements has taken on gigantic international proportions.
“After that, the problem reached a new level, with international investors threatening to reduce contributions to Brazil,” says Marcello Brito, president of the Brazilian Agribusiness Association. In June, a group of international investors that manages US$3.75 trillion in assets sent a letter involving eight countries to the Brazilian embassy showing concern about the lack of public policies for forest conservation. The Norwegian fund Storebrand Asset Management, which manages US$80 billion in assets worldwide, is one of the letter’s signatories.
“We intend to maintain our investments in Brazilian companies, but more predictable regulation is required in relation to environmental policies that are aligned with sustainability,” said Jan Erik Saugestad, the fund’s chairman. Currently, Storebrand has US$117 million invested in 57 Brazilian companies. In May, 40 European companies, including the British company Tesco, one of the largest in the supermarket sector in the world, threatened to boycott Brazilian products unless the government takes specific actions to reduce deforestation.
Without progress in sustainability, agribusiness is unlikely to make further growth leaps, particularly in relation to exports. “Today, having a negative image on the international stage in issues related to the environment can lead to retaliation in the field of international trade and investment,” says former Ambassador Rubens Ricupero.
In a Brazil where agribusiness works, the story is quite different. There is no shortage of good examples of producers linked to innovation and sustainability. Maurício De Bortoli, the Brazilian soybean productivity champion, is proud to invest in technologies that not only increase productivity but also help protect the environment, with reduced use of pesticides and other chemicals.
Luciana Dalmagro, who exports all chicken production to Europe, placed hundreds of solar panels on her farm and invested in water reuse to improve the sustainability of her business. The new generations of rural producers in Brazil are sensational. However, infrastructures and public policies are lacking.
Source: Exame