Is Brazil the reservoir of future ag productive capacity?
In addition to double cropping, Brazilian farmers have the option to rotate crops with cattle production, an option unavailable to most Iowa and Illinois farmers. In 2003 when we talked to a member of the FAS team that estimated the 420 million acres, he told us that the rotation of livestock and crops, particularly soybeans, accounted for a portion of the increased acreage they had identified. That option is particularly attractive given the synergy between crop and livestock production.
In the last decade Brazil has made some progress improving its transportation infrastructure, but with the huge increase in crop production, there is still a long ways to go. However, once again today’s high prices are driving long-term investments in paving roads, extending railroads, and improving port facilities all with the goal of reducing transportation costs.
To us all of this suggests that, for the foreseeable future, the world’s ability to grow crops, lead by Brazil, will continue to run ahead of population growth, putting a downward pressure on crop prices. As suggested by the word “continue,” this is indeed what has been happening over the decades, with the major geographical contributions to agricultural productivity varying over time.
However, there are those who believe that agriculture has entered a “new era.” They argue that future agricultural supply and demand conditions will cause inflation-adjusted agricultural prices to reverse their historical patterns and trend upward in the years and decades ahead.
Although such Malthusian predictions are been embarrassingly common, some of the arguments this time around are worth seriously considering. We will summarize those arguments in our next column.
Source: Daryll E. Ray and Harwood D. Schaffer, Agricultural Policy Analysis Center, University of Tennessee, Knoxville, TN;
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