Brazil's bumper harvest is one of the few bright spots in the economy. The Confederação da Agricultura e Pecuária do Brasil (CNA) is forecasting that the agricultural part of the economy will grow much faster than the rest of it. It forecasts that agriculture will increase its output by 5.3% this year.
The central bank is forecasting a growth rate of 1.5% for the economy as a whole. The government is still hoping for 2% growth.
The bulk of the gain is likely to come from arable farming. The CNA is forecasting that this will jump by 9.22% this year, thanks to the bumper crops.
Stockraising and businesses such as chicken farming, are still in difficulty and will increase output by less than 0.1%, the CNA reckons. Stockraising is still feeling the effects of the foot-and-mouth disease and the slowdown in the domestic economy, which has depressed demand for meat.
Exports. Soya is the main reason for the surge in the country's trade surplus this year. For the first six months and one week, the country has a trade surplus of US$10.7bn. The trade surplus on agricultural trade was up by 50% in the first half of the year, at US$11.2bn.
The main reason for the 40% surge in agricultural exports, to US$13.6bn in the first half, was the doubling of the soya trade surplus. The soya surplus is running at US$3.6bn, up from US$1.6bn in the same period of 2002. Soya exports were worth US$3.8bn, up from US$1.7bn in the same period of 2002. The key market for Brazilian soya is China, which has switched from US soya to Brazilian because of worries about genetic modification in US soya.
Agricultural exports accounted for 45% of total exports in June. Trade officials fear that agricultural exports will be hurt by the strengthening of the Real against the dollar in recent weeks. In the first week of July, the average daily value of exports fell by 3%; raw material exports were the main culprits, falling by 18%.
Production. The Brazilian soya crop is likely to be around 50mt this year. So far Brazil's crop is officially free of genetically modified soyabean seeds. Farmers and commentators admit, however, that some smuggled GM seeds have been used in Brazil.
There is a vocal lobby in favour of GM technology. This lobby argues that there is a massive potential for increased yields with greater resistance to herbicides, which are usually sprayed on soybean plants to get rid of weeds and grasses.
Those against point to possible health risks and environmental contamination from introducing relatively unknown and little-studied factors into the environment.
GM seeds are designed produce soybean plants resistant to certain agrochemicals such as 'Roundup', a herbicide manufactured by Monsanto, a US-based agrochemicals company.
A new factor in the argument is China's hostility to GM soya. This country, now Brazil's biggest market, has switched from buying US (GM) soya to buying 'natural' Brazilian soya.
Currently, non-GM soya attracts a premium on the international market. This is because European buyers want non-GM soya and are prepared to pay up to get it.
Reasearch. In 1998, the Brazilian biological research agency, CTNBio, gave Monsanto permission to plant GM soybeans. The decision was immediately challenged by a national consumer group, IDEC, and the environmental organisation Greenpeace.
The subsequent court cases have resulted in a de facto moratorium. The government recently ruled, however, that GM soya could be sold from January 2004, provided it is clearly labelled. This has thrown the industry into confusion.
What nobody knows is how much GM soya seed has been smuggled into the country. Abrasem, the Brazilian Seed Producers' Association, said last year that as much as half the crop in Rio Grande do Sul could have been grown from illicit seeds or plants. This year it could be as much as 80%.
Argentina. Soya farmers here have taken the US shilling and embraced GM crops. The soya crop is likely to have been a record, at around 35mt from 12.5m hectares. The harvest should have finished by the end of June. In the previous crop year, the country harvested 30mt of soya. There was a 10% increase in the acreage given over to soya, but the crop went up by 16% in volume terms, indicating that better land was being used.
The crop is likely to earn farmers US$7.63bn. In 2002, soya exports were worth US$5.4bn or 20% of the country's total exports. As the government swipes 20% of the export receipts, what happens to soya prices and production is of more than passing interest to it.
If soya prices were to fall by 20%, the government would lose US$800m in foreign exchange and US$200m in revenues. This is equivalent to half the support programme for heads of households.
Commentators are becoming worried by the prevalence of the crop, and the fact that it is GM. Other crops are beginning to be dropped in favour of the easy profits from soya. The acreage used for maize this year, for example, was down by over 21%. Most of the land was used for soya.
Monoculture. The increasing importance of soya, which now accounts for about half the total grain crop, is worrying agronomists. There is now much less rotation of crops, which may have an effect on the fertility of the Pampa humida. Traditionally, soya was grown on land that was rotated with beans, cotton and rice.
The lack of rotation means that pests become more of a problem. Another problem is that by dropping other crops for soya, the country is losing export markets. Farmers says that it is already seeing this happen in sunflowers and maize.
So far farmers see only the easy money to be made from soya. They are expected to increase their soya acreage by another 1m ha for 2003/04.
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