January 19 2008: 5:31 PM EST
Email | Print    Type Size  -  +

Soylandia (pg. 2)


"It was a much bigger assault on an ecosystem than what was occurring in the tropical forest," says Donald Sawyer of the Institute for Population, Society, and Nature, a Brazilian nonprofit. The cerrado vanished at a rate "almost double that of the rain forest," he says. "But there was almost no complaint from the big environmental groups, because the cerrado, though very beautiful, doesn't get put on the calendars." According to Sawyer, the conversion of the cerrado was probably the biggest, fastest land-use change in human history - some 450,000 square miles, an area bigger than Texas and Oklahoma combined, converted in less than a generation.

Opening up the landscape was pointless if Brazilians couldn't figure out how to use it. That was the goal of a second part of the generals' program: sending Brazil's best and brightest to foreign universities, most of them in the U.S. In the 1960s and 1970s state schools in the Midwest and California were awash with Brazilians studying crop breeding, soil science, and regional planning. Many of the new Ph.D.s returned to the Empresa Brasileira de Pesquisa Agropecuária (Embrapa), a network of state-run agricultural research and extension agencies. In a suite of remarkable achievements, Embrapa's scientific teams bred soy varieties that could thrive in shorter days and strains of nitrogen-fixing bacteria that could tolerate cerrado soils - and then figured out how to inoculate the new soy seeds with the new microbes en masse.

Between 1985 and 1995, soy harvests in Mato Grosso quintupled, soaring from a million metric tons a year to 5.2 million. In the process, so much acreage was burned for clearing that soy in general - and soy from Mato Grosso, the hottest of burning hot spots, in particular - became a favorite subject for environmentalist campaigns. But most Brazilian economists, entrepreneurs, and politicians saw Glycine max in a very different light. Largely due to agro exports, Brazil stopped being a debtor nation, and South American soy, its new biotechnological wonder, became a major presence on the Chicago Board of Trade's exchange.

"These guys have the finest low-latitude agricultural technology on the planet for soy and a number of other crops, like cotton," says Goldsmith, the National Soy Research Institute director. Soy, in Goldsmith's view, is the first in a series of temperate crops that are shifting to the tropics, with wheat and corn next in line. In a kind of agricultural offshoring, the production chain could move from the Midwest to cheaper, emptier tropical zones: Latin America, parts of Asia, and ultimately Africa. (Not only will the places be tropical, but much of the necessary technology will be controlled by patents in Soylandia.) In the past such shifts have had profound consequences. At the dawn of the 20th century, Poland and France, the West's former breadbaskets, lost out to the prairies around the Great Lakes. The rise of mechanized agriculture in the Midwest helped set the stage for this nation's industrial supremacy, much of it based on factories in those same areas. Similarly, the shift of high-tech agriculture outside of the U.S. will probably stimulate other kinds of industry - other kinds of competition adapted to the enormous land masses of the tropics.

"It's very interesting when the U.S. and Europe aren't the center of the universe," Goldsmith says drily. "And it'll be even more interesting if we fall behind."

When Kory Melby wants to show Americans what he means by the competition from South America, he takes them to a town called Lucas do Rio Verde. Melby, a farmer from northwest Minnesota, first visited Brazil in 1994. But it was not until 2001, when he and several other farmers took a trip to Mato Grosso, that Melby understood what was happening. They drove north from Cuiabá on BR-163, Mato Grosso's other new highway. For the first hour they climbed a dry plateau. There wasn't much to see: wooded pastures with forested mesas and water courses. Then they hit the top of the plateau, Melby recalls, and saw "an ocean of green - soybeans as far as you could see." For hour after hour the farmers passed by low, undulating hills covered with what is called the "soy complex": Glycine max and the corn, sunflower, and other crops grown in rotation with it. "We were all in shock," Melby reported. The farmers asked themselves, in Melby's recollection, "They grow two crops per year here? They can grow soybeans here for $2.80 per bushel? Can this be true? If so, I am screwed."

Melby, 38, decided to move to Brazil, where he now advises U.S. investors who want in on Soylandia. Just as he was, they are usually blown away when they reach Lucas do Rio Verde. Laid out in neat, paved, well-lighted streets and flowered plazas, the city is a far cry from the bawdy boomtowns typically associated with frontier settlement. Free clinics sit beside new schools; children splash around municipal swimming pools; workers hurriedly erect hundreds of neat bungalows for new arrivals; buses wait in yards to take them to their jobs. Meanwhile, mothers walk to part-time jobs at a chicken-incubation plant. In the next three years Lucas's population is expected to almost double, to 50,000.

Today Lucas do Rio Verde County - an area a bit bigger than Yosemite National Park - produces 1% of Brazil's soy crop, 10% of its corn, and 4% of its cotton. In Soylandia, where export commodities are king, Lucas is the jewel in the crown, a place that typifies what is known in Brazilian development circles as the "Mato Grosso model." More succinctly, it offers a peek into what Soylandia's executive class views as the future of tropical agriculture.

Lucas wasn't always a showcase. The city's mayor, Marino José Franz, came to Mato Grosso with nothing but a suitcase in the early 1980s. Like his brother, who accompanied him, he was stunned to encounter the region's bad roads, endemic disease, and rampant violence: It was Deadwood with malaria. Unlike most of their counterparts, though, the brothers had degrees in agronomy. The Franzes, two of the few early migrants who decided to stay, now run a big agricultural supply firm called Fiagril. And Fiagril played a major role in Lucas's newest accomplishment: the soy megacomplex rising in a clamor of trucks, cranes, and red dust on the east side of town. At the center will be a processing plant owned by the Maggi Group - one of the world's biggest soy growers, owned by Blairo Maggi, the current governor of Mato Grosso (no relation to the Nestlé subsidiary that produces Maggi bouillon). Up to 3,000 tons of beans a day will be trucked into one end of the facility. After crushing, the soybeans travel out the other end into what are in effect two great pipelines. The output from one will go to a new, nearby $15 million biodiesel refinery controlled by Mayor Franz's Fiagril Group and intended to ensure Lucas's energy independence for its tractors, harvesters, and trucks by producing local farm fuel. (Most Brazilian vehicles can run on several types of fuel - the country has long been a leader in "flex-fuel" technology, for which Brazilian companies hold most of the patents.)

The rest of the soy will be processed into meal - rations for chickens and swine - to supply the "meat shed" for a $400 million slaughterhouse complex under construction by Sadia, a Brazilian meatpacker that is one of the world's biggest. (The biggest is another Brazilian firm, FriBoi, which recently acquired the icon of Midwestern carnivory, Swift.) Part of the factory will process 500,000 chickens a day; another part, when at full capacity, will handle 5,000 hogs a day. When the facility opens in March, it will be Latin America's biggest slaughterhouse.

The Lucas complex, Melby says, "is something you can't find anywhere else in the world." In no other place are "the corn growers or soybean growers all in a row with a feed mill and a processing plant sitting there waiting to buy all the stuff for their animals." Lucas, in his view, will be the "next Des Moines or Decatur, Ill."

Like Decatur, but more efficient. Similar attempts at integration are underway in the U.S. In Frankfort, Ind., for example, Frito-Lay, Archer Daniels Midland (ADM, Fortune 500), and Indiana Clean Energy are building a facility that will use hog manure and corn-processing waste to produce electricity. But such complexes are easier to set up in Latin America, because they don't require undoing 150 years of history. In the course of the crash effort to produce ethanol in the U.S., says Texas A&M agricultural economist Daniel Klinefelter, "we're producing an incredible amount of DDG [distillers dried grains] as a byproduct." DDG is widely used as cattle feed. "The problem is we have this stuff in Iowa and the cattle are in Texas." Texas ranchers can't shift their feedlots to Iowa to cut shipping costs - "local communities and environmental regulations won't let them." Meanwhile, Soylandians face fewer constraints. "If you have a blank slate," Klinefelter says, "it's a whole lot easier to design things."

Given the Amazon's recent history of anarchic brutality and environmental mayhem, one would expect Sting and Leonardo DiCaprio to be flying planeloads of eco-activists to Mayor Franz's doorstep to denounce Lucas do Rio Verde and the other rising agricultural capitals in Mato Grosso. But Soylandia is jacking up production even as it greens itself - or, more precisely, becomes considerably less brown than it was. According to the Brazilian space agency, the Amazon's annual rate of deforestation fell by 64% between 2004 and 2007. And much of the decline was in Mato Grosso.

"It's all due to my policies, of course," jokes Maggi. Actually, he notes, part of the decline is because "nobody's got any money." The weakness of the dollar, which makes Brazilian goods more expensive, has slowed the growth of export agriculture and with it, the drive to clear land. More important is that both growers and government have changed focus. Environmental questions, he says flatly, "have been thoroughly integrated into everything we do - the entire supply chain." Rather than mindlessly erasing more of the cerrado, he says, the approach now is to intensify production on previously cleared land.

It is difficult to overstate how surprising these claims are. Maggi is so detested by activists that Greenpeace gave him its 2005 Golden Chainsaw award for his contributions to deforestation. Today Maggi "has got religion," says Mark London, co-author of "The Last Forest," a recent book about the Amazon. "I interviewed him 25 years ago [for a previous book], and the contrast between what he was saying then and doing now is incredible."

Earlier pressure from environmentalists and the national government had begun forcing Mato Grosso to shift course even before Maggi took office in 2003. Nonetheless, his administration not only supported the changes but has actually made Mato Grosso's environmental standards among the stiffest in the world. And the state is enforcing those standards. For instance, growers must avoid planting on hilltops and dedicate 20% of their cerrado holdings to natural vegetation (the figure rises to 80% in rain forest). If they don't comply, they have to pay steep fines.

Company Price Change % Change
Bank of America Corp... 16.09 0.08 0.50%
Apple Inc 102.50 0.25 0.24%
Intel Corp 34.92 0.27 0.78%
Facebook Inc 74.82 0.96 1.31%
General Electric Co 25.98 -0.03 -0.12%
Data as of Aug 29
Index Last Change % Change
Dow 17,098.45 18.88 0.11%
Nasdaq 4,580.27 22.58 0.50%
S&P 500 2,003.37 6.63 0.33%
Treasuries 2.34 0.01 0.39%
Data as of 7:27pm ET
Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.