Home At Last

One last "team photo" after we landed on Gustavo's
grass runway near San Andreas de Giles.
Naturally, we had to include our pilots, Carlos and Leandro,
who not only flew us safely across South America,
but kept us entertained and opened many doors for us.
P.S. Pay no attention to the dog in the background.
He's NOT doing what it may appear he's doing...

As far as we know, everyone made it home safely on Friday, January 23. Our plane left Buenos Aires as scheduled and once we hit Miami, we all went our separate ways to our respective states—better educated about the dynamics of Brazilian and Argentine grain production, biofuels, deforestation, government policy and socioeconomic issues. We'll be developing a summary of the mission, but more importantly, a series of action items related to the visit that will help our corn-producing states address some serious challenges related to land use change, exports, food and fuel, and international cooperation and competition.

Stay tuned for future updates to this blog as we fill in the blanks. Thanks for reading. Hope you enjoyed it. Adios!

Rosario Board of Trade

TUESDAY, JANUARY 20—Catching up on an activity from last week:

Grain testing is just one of the services
provided by the Rosario Board of Trade.

On Tuesday, January 20, we were hosted by the Bolsa de Comercio de Rosario (The Rosario Board of Trade), which is responsible for agricultural/food testing as well as for managing commodities trading for much of Argentina.

First we toured the comprehensive testing laboratories. This is where all grain samples are tested as well as food products, biodiesel, soils, etc. After the tour, we were welcomed briefly by the Mayor of Rosario, after which we sat down for a series of presentations.

During the presentations, we learned a number of things:

- The Rosaro BOT trades 80% of the nation’s soybean production, 40% of the corn production, 30% of the wheat production and 20% of sunflowers.

The Mayor of Rosario (second from left) took time
from his schedule to welcome us
to his city and to the Board of Trade.

- Argentina will have a 5 percent biofuels mandate in place by 2010—including both biodiesel and ethanol in gasoline. They are also focused on becoming a major exporter of biofuels.

- Traditionally a corn exporter, Argentina is focusing on adding value to corn before it is exported (bioethanol and other products). Current corn customers include Spain, Portugal, Peru, Cile, Morocco, Malaysia and Egypt.

- Argentina is also the number one exporter and number three producer of soybean oil.

- Argentina currently has soybean crushing capacity of 160,000 tons per day.

- Argentina currently plants about 30 million hectares of land. There are another 13 million available with Class I to Class II soils—and another 15 million when adding Class IV soils.

- If you laid Argentina over North America, it would stretch from the middle of Canada down to the middle of Mexico. In other words, it covers a lot of latitude.

Juan Gear, executive director of MAIZAR, makes
a presentation during our visit to the Board of Trade.

A New Corn Group in Argentina Juan Gear is the executive director of a new (five years old) corn and sorghum growers association called MAIZAR. His group’s goal is to dramatically increase corn acres in Argentina from the current 4 million hectares to 10 million by 2017—with production increasing from 25 million metric tons to 80 million in that period. Considering that Argentina is already the world’s second largest corn exporter (the U.S. is first), it’s clear they are focused on becoming an even more important supplier, in spite of punitive export taxes levied by their federal government (currently 20% on corn exports).

A Closed Loop Dairy We also heard from Alejandro Moriena with Adecoagro, a startup company that is looking to build an integrated facility that includes milk production/dairy, grain production, electric generation and ethanol production. This “closed loop” concept has been explored in the U.S. as well, mostly as a means to increase the net energy balance of ethanol production. This company, however, sees milk production as the primary objective—and ethanol is simply a by-product of the process.

Don Elsbernd of Iowa and Dave Loos of Illinois also had the opportunity to repeat their presentations on the U.S. biodiesel and ethanol industries they had given in Brasilia.

Our takeaways from the four-hour meeting with the BOT:

- Argentina’s federal government is considerably less supportive of agriculture than Brazil’s.

Members of our group, along with representatives
of the Board of Trade, listen intently
to a presentation on Argentine agriculture.

- While ag producers in the U.S. may empathize or sympathize with the crushing tax structure on commodity exports in Argentina, they could become an even more formidable international competitor of those taxes are reduced or disappear altogether.

- The biofuels mandate provides an interesting take on the commodity export tax structure. Adding value to soybeans by converting them to biodiesel helps reduce/avoid the export taxes. Could this be part of the federal government’s plan to force producers to add value to commodities in-country, thus increasing jobs and income?

- There may be an opportunity to partner with Argentina in telling the story about world food and energy production.

Smack in the Middle of the Drought

Gustavo Miroglio leads the team
through a drought-ravaged cornfield.

WEDNESDAY, JANUARY 21—A short flight—and a landing on another grass runway (this one felt as if it were a washboard) as we visit San Andreas de Giles and the integrated farming operation of Gustavo Miroglio. His grandfather started farming in 1915, and now Gustavo’s two sons are helping with the operation

Gustavo began in agriculture in 1969, raising poultry with his father and two brothers. In 1990, he began grain farming—soybeans, corn and wheat. He raises 2.5 million broilers each year and the chickens eat 100% of his corn crop. But after seeing the effect of this 100-year drought, his chickens may be going hungry this year if they have to rely on his corn. There has been no rain—not a drop—in this area since November 28. They had a hard frost on November 15.

Gustavo is a realist, however. “My job is to do the right things at the right time. I cannot worry about the weather because I cannot control it.” But Gustavo, who manages the multi-enterprise operation, definitely controls what he can control. Ask him any number—and he has it in his head. He knows his breakevens (10 tons per hectare on corn, for example…and this year his corn will yield 6 to 7. Not good.) He knows his soil pH, his organic matter, his nutrient levels, etc. etc. In other words, he’s pretty much like any of the successful farmers on our bus! On a side note, the soil numbers are very similar to those in many areas of the Corn Belt.

There has been no rain in this area since the
end of November, reducing Gustavo's
yields by 40% or more.

Gustavo has a poultry operation, a feed mill and his cropping operations. He also plants his own test plots using hybrids from companies we’ve all heard of as well as a few local varieties. He prefers to do his own test plots so he can see how they perform under his specific management practices. While he shares his results with the seed suppliers, he also “controls what he can control” in the test plot environment.
He recently created a new office downtown in this well-kept community of 23,000. The office is in a building that used to be his grandmother’s home. In fact, in the backyard is a rose bush with a real family history—it is the rose bush his grandfather brought to his grandmother’s home when he proposed to her decades ago.

Paul Taylor (IL) gets a closer
look at Gustavo's cornfield.

From Gustavo we heard the same frustration with “Cristina” and the taxes and policies of the national government. Farmers pay high taxes on inputs and on the commodities they grow. But in spite of the drought, land appears to be holding its value at this time—about $3500 per acre.

Gustavo was gracious with his time and honest with his answers. Members of our team pretty much felt as if Gustavo Miroglio was a smart farmer and that the challenges and opportunities facing growers are very similar in Argentina and the United States.

Gustavo listens intently as one of the
corn growers on our team asks a question.

The Santa Fe Trail

The Governor of Santa Fe, Dr. Hermes Binner,
speaks of his five-point plan while the
interpreter (right) looks on.
Also picture at far left is David Merrell (NE).

TUESDAY, JANUARY 20—After a morning meeting with the Board of Trade, we headed north to the capital of Santa Fe—Santa Fe. We have the special privilege of meeting with the Governor, Dr. Hermes Binner. Binner is the former mayor of Rosario. You may recall that Enrique Bertini called him an “honest man”—and believes that Binner may well run for president in 2011.

There is definitely a theme of frustration and disappointment with the federal government in this nation. We heard if from Bertini. We’ve heard it from farmers. We heard it at the Board of Trade. And we heard it from the Governor of Santa Fe.

Binner is proposing a concept he calls “rurality”—in which agriculture is used as the basis to generate economic activity. He spoke of the taxes on exported commodities and said that many farmers are simply storing their commodities and not selling them at this point. How long this can go on, especially with the current drought, is uncertain—but it is contributing to a slowdown in trading.

He says that access to markets is being controlled by weather—and “the face of your friends” (a reference to government favors to insiders).

Binner has forwarded a five-point plan to the national government, the only such proposal from any Argentine province. First is to establish dialogue between the federal government and the states, and between the public and private sectors. Governor Binner said that dialogue is important to address differences and challenges. “But dialogue takes two participants, not one talking and the other not even listening,” he said. “People do not trust the national government.”

The second point is to develop sources of employment and retirement. “We need to give dignity back to our people,” Binner added. He wants to use public works projects such as schools, hospitals and infrastructure to create more jobs. (Sound familiar?)

The official portrait of
Cristina Fernandez, president
of Argentina.

The third point is a 180-day suspension on the tax on commodity exports. Fourth, he wants to provide tax incentives for the purchase of machinery. And finally, he wants to use “sin’ taxes on gambling, tobacco and alcohol to generate more revenue.


The plan was just recently forwarded to the Argentine president Cristina Fernandez, who is currently on a tour meeting with the leaders of Cuba and Venezuela. This may provide a clue as to her political views. When she returns, Binner hopes to have a meeting with the national leadership to discuss his proposals.

Binner spent about 90 minutes with us, along with a couple of his staff. Needless to say, all of us on the team will be following the 2011 Argentine presidential election with great interest.

Deere and Vincentin

Mindy models the latest in safety gear
at the John Deere plant.
Note the cool Frankenstein boots.

MONDAY, JANUARY 19—After lunch at Bertini’s, we went to a John Deere production plant where they manufacture engines. About 95% of their product goes to Brazil for final construction, which is then marketed back into Argentina and other South American markets. Deere has been manufacturing in Argentina since 1985.

We heard again about the Argentine drought affecting sales. Still, Deere commands a 43% market share in combines and a 33% market share in tractors—making them first in both categories.

After a tour of the Deere plant, we headed to the Vincentin soybean crushing plant—a gargantuan facility located the Paranå River. The plant crushes 10,000 metric tons of soybeans per day, which are delivered by truck (about 600 per day) and about 10% comes in by rail. Beans also arrive from Paraguay by barge. A word about the rail: The gauge of the track is narrower going east and south than it is going north and west.

A team photo in the lobby of the
John Deere engine plant in Rosario.

Farmers are paid based on a third party grain test that is conducted by the testing labs at the Board of Trade. More on that later.

Due to the drought, the river is so low that Panamax ships cannot be loaded to full capacity—only about 65%. As the ship gets close to Brazil, it will be loaded to capacity since the river is deeper and then will go on to markets in Europe.

The plant employs 450 full time and 250 part-time.

Vincentin also produces biodiesel and has recently doubled production capacity to 400,000,000 liters per year. They use soybean and rape seed only—and can easily shift from edible oil to biodiesel depending on the market and value.

A shot down the Paranå River showing
the large number of port loading facilities.

A truck full of soybeans is dumped.
Trucks pull onto a platform that raises
to speed up the delivery of
beans to the plant.

A line of trucks is a continual
sight at the Vincentin soybean crushing plant.

Bertini Talks Ag...and Politics

Enrique Bertini points out some
features of his planting equipment.

MONDAY, JANUARY 19—Up early for a three-hour flight to Rosario, a port city in the province of Santa Fe, Argentina. First stop was at Bertini Equipment Manufacturing, a leading maker of no-till planting and seeding equipment. Enrique Bertini, Sr. came to Argentina from Italy when he was 12 years old and built his business at a time when there were dozens and dozens of small equipment manufacturers.

Then in the late 1980s came no-till practices in an effort to address soil quality issues being created by double cropping (issues such as lack of organic matter and severe soil compaction)—and many of the factories were shut down. Bertini, however, had anticipated this change and was positioned to capitalize on this new farming method. Nearly all crop farms in Argentina now use no-till. When no-till was introduced, organic matter in the upper profile of the soil was around 2%. Now it’s closer to 6-7%.

David Merrell (NE) inspects a planter
at the Bertini plant in Rosario, Argentina.

Most of his equipment is sold in Argentina, but he also sells to Russia, France, Bolivia, Colombia, and other nations. We toured the factory, which makes many of its own parts. The tire-kicking farmers in the group gave the Bertini equipment high scores for quality and innovation.

As mentioned earlier, Argentina is in the middle of its worst drought in 40 years. Corn harvest typically starts in March, but Bertini says there will be little corn harvested. Bertini says he won’t sell many planters this year. He has about 60 dealers, but only 10 to 15 sell a significant amount of equipment.

Jim Robbins (IL), Bert Vandenberg (IA), Roger Knoblock (IA)
and Gary Schmalshof (IL) listen as Enrique Bertini
talks about his no-till equip

Enrique Bertini spoke passionately about his business, but he became truly animated when he began talking about the federal government. “We have a communist government that wants to give free food to people who don’t want to work,” Bertini said. “Our president is disconnected from the world. The people evidently want a terrorist government.”

Bertini railed against what he considers a punitive tax on agricultural products. For instance, soybeans for export are taxed at 35% of the grain’s value! The rate is 21% for corn and wheat; and 25% for sunflowers. In March, the government proposed an increase to 42% for soybeans as well as other increases—and farmers took to the streets. “The proposed tax increase was an affront to farmers,” he said.

Paul Taylor (IL) listens as Enrique Bertini
shares his thoughts on the Argentine ag market.

The next presidential election is in 2011, and Enrique Bertini hopes his company can survive that long, what with the drought and government policy. The former mayor of Rosario, Dr. Hermes Binner, is now governor of the state of Santa Fe. Bertini calls him an honest man and he feels that Binner may well run for president. Binner has been vocal about his disagreements with federal farm policy and, as a result, the federal government has withheld some dollars from the state.

Yes. More meat. The cook samples his own fare
as he prepares lunch for us at the Bertini plant.

This and That

A few tidbits from our trip:

- Our pilots, Carlos and Leandro, have been wonderful. Highly skilled with great English—and they have helped us through a number of situations. Carlos says: “A good landing is one you can walk away from. An excellent landing is one in which you can fly the plane again!”

- Meat is always on the menu in Brazil. The churrascaria is their version of a barbecue restaurant. Meat is cooked and served at your table on skewers—pork, chicken, sausage, beef—you name it, they grill it. The waiter slices off a piece while you hold onto the slice with tongs. Throughout the meal, waiters are bringing by different meat choices—and sometimes even grilled fruits or vegetables. You indicate your desire for more by flipping a card on your table. The green side up means “more meat, please.” Red means “No thank you.”


PHOTO: On John Carter’s ranch (as well as in other areas of Brazil), we have seen fields filled with termite nests.








PHOTO: Infrastructure and logistics are a challenge in this part of the world. Believe it or not, this is the federal highway near the Carter ranch. Ruts and washouts make for slow traveling.











PHOTO: Carter ranch employee Julian checks out the broken tie-rod on one of the vehicles taking us to our plane.






PHOTO: Put a farmer in a field and he checks out the soil. Randy Uhrmacher and Dave Merrell inspect a field in the Xavante Indian Reservation.










- The hotel in Cuiba did our laundry, and for a “brief” time they feared they had mixed up everyone’s underwear. While the problem ended up not being a problem, we were all anticipating a Fruit of the Loom Frenzy as the team sorted through a pile of unmentionables. Talk about getting to know each other intimately! Thankfully, we didn’t have to go through that adventure.

A Comprehensive Look at South America

SUNDAY, JANUARY 18—A three-hour meeting Sunday morning with John Grossmann and Gabriel Ramos, both with ADM in Paraguay. We’re at the “three corners” where Argentina, Brazil and Paraguay meet, so it was about a one-hour trip for the ADM guys. ADM has been in Paraguay since 1997.

PHOTO 1: Gabriel Ramos of ADM in Paraguay talks about the South American market.

John is responsible for ADM operations in both Paraguay and Uruguay, but he was a great source of information on South America in general, including Brazil and Argentina. His colleague, Gabriel Ramos, also provided some powerful information on current production and potential production in the primary South American nations.
Some takeaways from this conversation:

- John said that South America cannot be viewed as a whole. One must consider each nation separately. “Mato Grosso is not South America. Even though you could fit the seven main U.S. Corn Belt states inside Mato Grosso, it is only a portion of South America,” he said. “Brazil is the locomotive for South American agriculture, but each country has unique opportunities and potential.”

PHOTO 2: John Grossmann of ADM in Paraguay discusses the logistic challenges of transporting agricultural products in South America.

- While areas of Mato Grosso hold potential for 2.5 to three crops per year, Paraguay is actually doing it. The difference is rainfall. In Brazil, there is a rainy season and a dry (very dry!) season. Not so in Paraguay, where rains occur throughout the year. As a result, farmers in Paraguay plant soybeans followed by a winter crop of corn in the north or wheat in the south—and then another crop of sunflower or canola. This triple-cropping helps spread out risk and increases the output per hectare.

- Paraguay is the 4th largest soybean exporter in the world. Typical yields are 41 bushels per acre (acre, not hectare) for soybeans and 62 bushels per acre for corn. Grossmann said that farmers don’t really invest in corn. It is considered a second winter crop, and many farmers grow their own varieties by holding back seed at harvest and planting it the following year.

- Argentina is experiencing its worst drought in 40-plus years. As a result, the 22 million metric ton corn crop estimate has been lowered to 14 million.

- Agribusiness companies are serving as the financial services provider for farmers in Paraguay. ADM helps finance everything from inputs to diesel fuel. In return, ADM insists that farmers market their crops through ADM and, if they plant corn, they must plant commercially available hybrids, not the homegrown varieties. ADM has had to offer financial services because the banks are reluctant to do so. In recent years, banks did start to get into ag lending but have pulled back severely in the current financial crisis. ADM also has 60 agronomists on staff to help their customers.

PHOTO 3: John Grossmann talks with David Merrell of Nebraska (left) and Gary Schmalshof of Illinois.

- Argentina is number one in the world in terms of exports of soybean meal and soybean oil. Brazil leads the world in poultry and cattle exports—and is fourth in pork exports.

- John stressed several times that a South American farmer’s success is not based solely on the commodity price. The value of currency can have as great an impact on profitability as the price on the board. For example, a one percent change in the value of the Brazilian reais can affect the per bushel price by 12 to 15 cents. In other words, beans worth $12 per bushel when the currency is worth $1.55 will result in roughly the same level of profitability as $9 beans when the currency is worth $2.40. While currency value affects U.S. farmers as well, it’s a bit more pronounced in South America given the number of nations on the continent.

- Paraguay is becoming an attractive place for outside investors in agriculture, particularly Brazilians. There are also American, Japanese, German and other landowners and operators in Paraguay. “There are state of the art farms in Paraguay of a level that you don’t even see in Brazil,” Grossmann said.

- Uruguay is also getting interest. There were no soybeans grown in Uruguay ten years ago. Now it produces 800 metric tons. One Argentine group is growing 190,000 acres of soybeans in Uruguay.

- We discussed the land use issue. Grossmann says that in Brazil the new acres are not coming from the Amazon forest but from the cerrado, the savanna-like central area of the nation. “Deforestation is not an agricultural issue, it’s a security issue,” he said. Having been on the John Carter ranch, we can vouch for that.

- Uruguay is on the upswing in terms of ag production—and it has a huge upside in terms of potential hectares.

- The population of Paraguay is 6.5 million. Uruguay is 3.3 million. Interestingly, the median age in Paraguay is a young 21 years old; in Uruguay it’s 33. The life expectancy is 75 and 76 years respectively. So both countries have a generally younger population.

- Grossman echoed a recurring theme of this trip—that Brazil has a long term strategic plan and vision for agriculture and energy.

The three hours with John Grossman and Gabriel Ramos flew by—with reams of notes taken by our team. This was an extremely valuable meeting which provided an even better insight into the unique aspects of agriculture in a number of South American nations.

We Meet the Xavante...at Their Place!

WEDNESDAY, JANUARY 14—Back to the Carter ranch experience for today's post...

In yet another throwback to the Old West, the native tribes in Brazil have not been treated particularly well. The Xavante (shuh-VON-shee) reservation (400,000 acres) is adjacent to John’s ranch.

PHOTO 1: John Carter meets with Damaio, chief of the Xavante, about some of the projects the tribe has underway.

This branch of the Xavante, distantly related to the Apache, is known as warriors and they have a long and bloody history. They saw their first white man in the 1950s! In recent times, however, they have been shuffled about from place to place. At one time, a few hundred were flown to southern Brazil for relocation—where the combination of stress and an inadequate immune system led to the death of some 25% of the relocated group.

PHOTO 2: Our group listens as John and the chief talk.

After some initial tenuous and tense situations (some stories for another time and place!), John has established a peaceful coexistence with the tribe. John is helping the tribe by giving them the occasional animal, teaching them to ride horses (mules, actually) and generally helping them gain skills in managing crops, cattle and land.

What does this have to do with our trip? The dynamic between the Indians, the squatters, the invaders and the landowners is complex—and is yet one more factor in the land use issue. The opportunity to manage land, crops and cattle is helping restore some pride and confidence in a people who have been displaced and distressed for decades. And this intricate equation of competing interests is at the very heart of the land use issues in Brazil.

PHOTO 3: John Carter has given the Xavante some cows to help them start a herd.

Very few white people have ever entered the reservation—but John Carter was gracious enough to provide the opportunity of a lifetime for our group. After a long drive on a rough and tumble federal “highway”—and a several km drive after entering the reservation—we came upon a clearing with a few thatched roof huts. And suddenly we were transported into a world that only a handful of people have ever seen.

We stood by respectfully as John spoke with the chief, Damaio, about the tasks that needed to be completed—fence repair, etc. Through John, the chief welcomed us and hoped we would pay attention to the plight of the Xavante and share their story.

Clearly there was a mutual respect between John and the chief. Each time John visits the reservation, he goes away with a “wish” list from the chief. Interestingly, today’s list included ten dictionaries for the Indian school which was recently established. As we bid our goodbyes to the tribe, we offered some small gifts from the states to the chief and several members of the tribe shook our hands in friendship.

The Meeting with the Governor...NOT!

FRIDAY, JANUARY 16—Well, they said it’s rainy season in Brazil. This morning proved it. Woke up to a driving torrent, which we feared would force us to sit in the hotel (and this ain’t no Hilton) for most of the morning. Ask Randy Klein about the roach in his room that he could have saddled up!

PHOTO 1: A Brazilian Chevy dealer discusses engine performance with the team.

But once our pilots, Carlos and Leandro, got to the airport, they determined we could take off. And so we did. Fingers crossed.

PHOTO 2: Jim Robbins and Paul Taylor check out the engine on a flex fuel vehicle at a Brazilian Chevrolet dealership.

Turned out to be an uneventful one-hour flight south to Cuiabå, (koo-ya-BAH), a city of some 525,000. Along the way we flew over dozens and dozens of swine and poultry operations. At one point, we counted enough poultry buildings within about a 10-square mile area to house some 10 million birds.

Once we got checked in, we held a debriefing meeting to catch up on what we’ve learned and seen—and what that means in terms of initiatives and responses once we get back home.

After a great lunch at a churrascaria (traditional Brazilian barbecue), we visited a Chevrolet automobile dealership. We learned more about the vehicles that run on 100% ethanol and Gasoline C (25% ethanol).

• A one-liter engine is popular here, and it’s quite small. On 100% ethanol, the engine achieves 70 Hp; on Gasoline C (25% ethanol) it’s 50 Hp. On a 2.4 litre engine, the difference in Hp is not as great: 147 Hp on 100% ethanol and 140 Hp on Gasoline C.

• There is a small gasoline canister under the hood. This fuel is used to start the engine in cold weather—cold here defined as 14 degrees Celsius. That’s about 57 degrees Fahrenheit. Not Corn Belt cold by any means. The engine uses the gasoline automatically when needed using computer sensors that know when the temperature point is met.

• In the U.S., our flex fuel vehicles run on up to 85% ethanol and 15% gasoline. In Brazil, they can run on 100% ethanol, but it’s ethanol with a difference. It has water in it. The ethanol producers in Brazil do not use the final “molecular sieve” process to remove the last bit of water like we do in the U.S. As a result, Brazilian ethanol has water in it when it leaves the plant. And apparently, the engines have been engineered to match this product.

• Because of the water in the fuel, the fuel delivery system in the vehicle has to be water-resistant.

• According to this dealer, all Chevy vehicles sold in Brazil are now flex fuel.

Back to the hotel to freshen up and change clothes for our visit to the Governor. But there’s a hitch. The Governor will not be available. So we end up meeting with Alexander Torres Maia, his chief of staff, a former military officer. While we were disappointed that we were not going to meet with the legendary Governor Maggi, Alexander spoke very good English and had a decent grasp on the issues in which we were interested, so our meeting was productive.

(We dressed in business attire for this meeting. So we were a bit surprised when the Governor’s chief of staff arrived wearing an untucked shirt and blue jeans. Guess what. They have “casual Friday” in Brazil, too.)

You’ll recall that the Brazilian state we are in is Mato Grosso (Big Forest), with a population of 2.7 million—and the leadership of this state knows that agriculture is the primary driver of their economy and thus offers the greatest opportunity for development. What we saw at Lucas do Rio Verde was no accident—it was a conscious, planned effort to capitalize on the area’s strengths and attract investment from agribusiness and others. Similar initiatives are currently underway in other areas of Mato Grosso.

PHOTO 3: Alexander Torres Maia, chief of staff to Mato Grosso Governor Maggi, gestures during a comment on the state's environmental initiatives.

Governor Maggi is in the middle of his second term, which expires in 2010. He is also the largest soybean farmer in the world. Most of his land is on the west side of the state, but he recently bought land east of the forest in John Carter’s area. Alexander said that Maggi’s background as a farmer and businessman has been a plus, but he expects the next governor to continue this emphasis on agricultural as a means for economic and social development. “We are not growing corn and soybeans,” Alexander said. “We are growing food. And by doing that, we are growing prosperity.”

PHOTO 4: Maia points out details on a map of his state to the group. Paul Taylor of Illinois looks on.

Some other high points from the discussion:

• The Brazilian government has a special secretary/agency focused on small farms—defined as five hectares or less. There are some 150,000 farmers who fit this criteria with many of them located in the southwest corner of the state. The agency works to develop and support farmer cooperatives, provide technical assistance, etc.

• In terms of environmental regulations, Mato Grosso is more restrictive than the federal government in many instances. For example, the federal government requires a 30 meter buffer along waterway, while Mato Grosso require 50 meters.

• Contrary to what we heard at the biodiesel plant, there are strict air quality standards related to agriculture and biofuels production.

• Less than one percent of the total area of Mato Grosso is used to produce soybeans.

• The focus is one increased efficiencies. For example, with cattle production, the current average is one animal per hectare of land. The goal is to reach five animals per hectare through improved pasture and management practices. Two things are of interest here: 1) By improving efficiency, Brazil can make more and better use of existing hectares and thus reduce pressure on the forest; and 2) Brazil actually has a goal and a plan—complete with objectives and measurable results.

• Mato Grosso is divided into three environmental regions (biomas) from north to south: In the Amazon bioma, a land owner is required to set aside 80% of the land—with no improvements, production or destruction of any kind to take place on the set aside. In the “cerrado” or savanna bioma, the set aside is 65%. And in the southern “pantanal”, the only agricultural production allowed is cattle.

• Next to health and education, which are largely driven by federal requirements, environmental activities are the largest portion of the Mato Grosso state budget. Satellite imaging and monitoring of land use changes are a constant effort.

The meeting closed with a discussion on how the two countries might work together to address the media attacks on the biofuels industry, deforestation and land use, and other issues on which we share a common interest and objective.

All of us left this meeting looking at our own states and, to some degree, committed to encouraging our state leaders to support agriculture with the same enthusiasm, investment and most importantly, strategic plan and vision, that we have seen in Mato Grosso.

Three Crops per Year?

THURSDAY, JANUARY 15—We met on Thursday afternoon in Lucas do Rio Verde with a Foundation that essentially serves as extension education for Brazil—especially in the Lucas area. The city of Lucas is actually less than thirty years old—but it has become a thriving city with an economy based on agriculture. In effect, Lucas is a bit like an agricultural industrial park—with virtually every major agribusiness represented, from Cargill to Bunge, from Sadia to Syngenta and Monsanto.

The Foundation is supported by contributions from agribusiness as well as through a “checkoff” paid by ag producers. The facility we visited included several research plots of corn, soybeans, rice, etc.

With its climate, Brazil can actually grow two crops a year—which typically are soybeans (soja) and corn (milho). However, they are working to develop a triple-cropping system in which they plant grass with the corn. Once the corn is harvested, cattle are turned out on the grass as pasture. Naturally, those of us who fight grasses and weeds in cornfields wondered about the effect of the grasses on corn yields, but the value of the grass in terms of cattle production apparently overcomes the yield drag on the corn. At least that’s the theory.

PHOTO 1: Three members of the Illinois team in front of a research cornfield. L to R: Paul Taylor, Gary Schmalshof, Jim Robbins
PHOTO 2: The Illinois team inspecting a research field of soybeans, apparently forgetting which commodity paid their way on this trip!
PHOTO 3: The Iowa team poses in front of a research field. L to R: Mindy Larsen Poldberg, Don Elsbernd, Bert Vandenberg, Roger Knoblock
PHOTO 4: Two members of the Nebraska team. L to R: Randy Urmacher, Dave Merrell

The Wild, Wild West Redux

On Wednesday, we had the rare and unique opportunity to spend a day with John Carter, a 42-year-old native Texan who has been in Brazil since 1996—but has essentially been living a life straight out of the 1880s in the United States. Land grabs. Squatters. Gunfights. Invasions. You name it—John Carter has lived it over the past dozen years…and continues to do so.

John has built a cattle ranching operation in what was once Amazon tropical forest. He is married to a Brazilian who inherited land from her father, who was originally an immigrant from Spain. He built everything from the ground up—from the buildings to the hydroelectric power plant, from hundreds of miles of fence to the dam on the lake that helps generate his electricity. It’s an incredible story—and an overwhelming accomplishment.

In his twelve years in the Brazilian frontier, John has witnessed firsthand the transition of land from dense forest to wide open pasture or soybean fields. He pointed out hectares and hectares of land that was once 100-foot-high forest that now serves as wide open pasture or soybean production.

As he raises his Brahma influenced cattle, John is also working diligently to restore tropical forest on his operation—while taking a strong stance on conservation and restoration.

Carter’s take on land use issues is simple: Follow the money. According to John, the growth of biofuels has nothing to do with deforestation of the Amazon. John says it’s all about corruption and profiteering…and the basic “lawlessness” of a frontier. And that’s definitely what this part of Brazil is—akin to America some 125 years ago.

One only needs to sit for a brief time with John Carter to hear stories that sound as if they came from the Wild West. Bone-chilling tales of mayhem, murder and tribal uprisings—all happening within just a few miles of his place. And sometimes right on it.

It’s this fundamental lawlessness that has led to situations in which squatters can come onto a landowner’s property, set up shacks, cut down trees, grow a few rows of crops and eventually lay claim to the property by demonstrating that they have made improvements that the landowners have not made. Keep in mind that these properties are enormous by U.S. standards—so squatters can set up shop deep in the remaining forest, start cutting down trees (sometimes with the financial support of a corrupt politician or other ringleader) and operate with virtual impunity.

The legal system is not working well (if at all) in this situation. In fact, some landowners have lost title to squatters in the courts. And while Brazilian law now requires landowners to maintain or restore 80% of the forest and 35% of the riparian zones on their land, in this part of Brazil there is little enforcement or will to enforce. And thus, more trees are harvested and more land is transformed from forest to agricultural use.

John Carter decided to go about addressing the challenge from a different angle.

Through a non-profit organization, (aliancadeterra.org.br), Carter is creating incentives and opportunities for landowners to initiate restoration on their property—from riparian buffers to reforestation. He has developed a market-driven program that rewards landowners for doing the right thing—and it’s getting some serious traction, not only with the landowners, but with foundations that are seeing actual results from their investments. John’s non-profit is gaining the attention of some major donors—and some well-known environmental groups are following his lead (essentially co-opting his idea). In October 2008, John appeared on Late Night with David Letterman to talk about what he’s doing—and he continues to gain international recognition and support for his cause.

As with most issues, the soundbites and headlines from the media shape public opinion. Worse yet, many journalists and even more consumers really don’t want to take the time to truly understand an issue this complex. If someone says that an acre of corn being used to make ethanol results in an acre of Brazilian forest being destroyed, it must be the truth, right? It makes for a nice, tidy one-to-one correlation—but life is simply not that simple. The land use issue is one that is being raised regarding the growth of biofuels—and it’s important and essential that policy makers in the U.S. and around the world understand what is really driving deforestation. John Carter is telling the story—not from some ivory tower office in Manhattan, but from the front lines of the frontier. Who would you believe?

Everyone on this fact-finding mission left the Carter ranch shaking their heads in wonder—and grateful for the unique opportunity to spend a day with an amazing and articulate pioneer who has demonstrated uncommon courage in the face of daunting odds.

PHOTO 1: A profile of John Carter, a Texas native who has been in Brazil since the mid-1990s.
PHOTO 2: Carter tells a story of how an anaconda grabbed him during some work on his ranch as Mindy Poldberg of Iowa and Paul Taylor of Illinois listen.
PHOTO 3: On the site of a squatter camp on his own ranch, Carter talks to the group about how he has worked with the squatters to minimize their effect on his operation.
PHOTO 4: John Carter points out the location of his ranch and its relationship to the Amazon forest.

Lucas do Rio Verde

Thursday morning, we reluctantly bid adieu to John Carter’s ranch around 7:30 a.m. to fly to Lucas do Rio Verde, a two-hour flight to the west. Due to the size and weight of the plane, we needed to take off from a neighbor’s runway. A handful flew to the other runway, while John and one of his employees took two carloads on a 40-minute journey down a road that most of us would call a pasture trail. True to the adventure of the past 24 hours, one of the vehicles broke a tie-rod along the way…and all of us piled into John’s pickup for the last 15 minutes of the trip.

Landed in Lucas do Rio Verde late morning and went immediately to a biodiesel plant. They use a variety of feedstocks, mostly soybeans but also animal fat, sunflowers, and peanuts.

The plant uses wood to fire its boiler (40 tons per day, if we heard right)…and we saw thousands of wooden pallets stacked behind the plant. Unfortunately, the plant was going through maintenance during our visit, so we didn’t get to see the emissions from the wood-fired boiler. "Wood" have been interesting, to say the least.

This 135 million litre plant is planning to be the first in the world to develop a process certification program—essentially a set of standards at every step that, they hope, will distinguish their brand of biodiesel from all others.

Additionally, the plant is participating in the social fuel certification program we learned about at the Ministry earlier in the week. They plan to buy 25 percent of their soybeans from “household agriculture” (small farmers) in order to qualify for the tax incentives involved with the program.

Later in the day, we visited a pork production facility built eight months ago. There were four buildings with 2200 animals each. The facility uses biodigesters to process the manure and we stood right next to the lagoon and detected virtually no odor.

The same producer, who contracts with an agribusiness company called Sadia, also raises broilers in a relatively new facility….eight buildings with 25,000 birds each. His employees are primarily couples or families who live right on the premises.

More to come our visit to what apparently is Brazil's version of extension education.

Brazil's Social Fuel Certificate Program

During our visit to the Brazilian Ministry of Mining & Energy on January 13, Ricardo and Marlon spoke about a new program to promote rural economic development and the biodiesel industry. The “social fuel certificate” program is designed to involve smaller soybean growers in the profit opportunities of biofuels. Typically, these growers cannot participate due to their size, inefficiencies, etc. This program is focused on socio-economic development of rural agrarian areas of Brazil.

“Household agriculture” is their term for “small farmer.” And that definition, which is tied to operation size, crop and labor force, changes from region to region.

Essentially, biodiesel producers receive a tax incentive for purchasing soybeans from these smaller producers. To qualify, they must purchase a minimum amount of soybeans from the small farmer. But just as importantly, they are required to provide technical assistance to farmers in the form of agronomic expertise, seed technology, etc. Finally, the biodiesel producer must have a contract in place in order to get the tax incentive.

This is yet another example of Brazil’s strategic vision centered on using biofuels as driver for economic and social growth.

Photo: Randy Klein with the Nebraska Corn Board (third from left) talks with Ricardo and Marlon from the Ministry of Mining & Energy. Mission leader Eric Rund (right) looks on.

Brazil Concerned About World Perception

Brazilian energy officials are concerned that their nation is being held up as the only country that’s doing biofuels “right.” While they are deservedly proud of their achievements and leadership, they absolutely do not want public perception to be that sugar cane should be the sole source of biofuels. Biofuels are a global solution to a global challenge—and offer the opportunity to significantly disperse economic power and energy production from a few nations to hundreds. Sugar cane may be the feedstock of choice in Brazil but other feedstocks can make economic and environmental sense in other countries. In Brazil’s view as portrayed during our January 13 visit to the Ministry of Mining and Energy, not every country can grow sugar cane, but dozens of countries can participate in the benefits of biofuels using their own agricultural resources, policies and industry development.

PHOTO: Paul Taylor of Illinois makes a point during the group's January 13 visit to the Ministry of Mining and Energy in Brasilia.

Corn Growers on Stage in Brasilia

During a visit to the Ministry of Mining and Energy on Tuesday, January 13, two members of our group had the opportunity to provide Brazilian officials with an update on the U.S. ethanol and biodiesel industries.

Dave Loos of Illinois gave an update on the ethanol industry in the U.S. Don Elsbernd of the Iowa Corn Growers (pictured) briefed the group on biodiesel in the U.S. Both presentations sparked considerable discussion about the similarities of the two countries’ industries—and the distinct differences, especially regarding government policy and long-term strategy. Of course, Brazil also has the infrastructure, the fuel and the initiative to make energy independence happen in their nation.

Elsbernd noted that, in the U.S., biodiesel blends of up to B20 are common. In Brazil, there is a 3% blend mandate that is slated to grow to 5% in a few years; but is expected to actually reach 10% simply through market forces.

The discussion included comments on the auto industry. Several automakers market FFVs and 100% ethanol-compatible vehicles in Brazil. In the brief time we’ve been in country, we’ve seed everything from Ford to Hyundai, from Peugeot to Toyota, from Renault to Kia, from Honda to Chevrolet. If a carmaker is going to compete in Brazil, they have to offer FFVs and 100% ethanol vehicles. It’s as simple as that. And Brazil has shown that this can be done. Our trip to a car dealership got postponed due to the length of our meeting at the Ministry, but we hope to reschedule within the next day or two.

A National Energy Vision

Met today, for five hours, with representatives of Brazil's Ministry of Mines and Energy, the federal agency that oversees the nation's biofuels program. Also in the meeting were representatives from Petrobras, the private/public company that is leading the way in Brazil's biofuels (ethanol and biodiesel) industry.

Pictured here is Ricardo Borges Gomide (left), deputy director of the Renewable Fuels Department; and Marlon Arreas Leal, deputy administrator.

A few highlights from today's fact-finding mission:

• Total fuels use in Brazil is roughly equivalent to that of California. The Brazilian fleet includes some 25 million "light vehicles" and 3 million diesel vehicles. Total annual fuel use is 40 billion litres of diesel; 20 billion litres of 100% ethanol; and 20 billion litres of "gasoline C", which is the 25% ethanol blend.
• Brazil expects ethanol production and consumption to grow at an average rate of 11% per year. In fact, this rate of growth is in the Ministry's 10-year plan (imagine that...a 10-year plan for ethanol growth!)
• Brazil has done an analysis of available land for agricultural use (land that does not encroach on critical habitat, etc.) and has determined that they have nearly 100 million hectares available for expansion of agriculture. Cattle production is big, but inefficient. Still, they believe they have 17 million hectares available for livestock expansion (pasture, etc.)
• 85% of the electrical power in Brazil is hydroelectric...and some sugar cane is used for electrical generation.
• Since 2003, about 7 million flex-fuel vehicles have been sold in Brazil—about 27% of the fleet. These FFVs aren't like ours in the U.S. The Brazilian versions can run on up to 100% ethanol, and most gas stations have a pump that dispenses 100% ethanol and another that dispenses Gasoline C (25% ethanol). In fact, of the 37,000 independent gas stations in the nation, 94% offer the 100% ethanol option to their customers.
• There are 427 ethanol plants in Brazil. Again, expanding at an 11% annual rate. Brazil is the world's 2nd largest ethanol producer (6.6 billion gallons/year)...and they use 6.4 million hectares to support the industry through sugar cane production.
• Engines in Brazil are optimized for performance on ethanol. Note that the emphasis is on performance (power) and not on mileage.
• Brazil has been shipping ethanol in pipelines since the 1970s and is able to do so with multiple products in the pipelines. In other words, they don't rely on dedicated pipelines for ethanol distribution. One Ministry official said: "You should. You can. You must build pipelines for ethanol."
• Brazil is a huge biodiesel maker/user as well. Currently, the mandate is a 3% blend. In 2013, that will be 5% by law, but the Ministry expects to reach 10% by that time.
• 10% of Brazil's soybean production goes to make biodiesel...and 75% of the biodiesel on the market is soy-based.

More to come, but suffice it to say that Brazil clearly has a long-term, strategic approach to their domestic energy production and consumption. While the U.S. fell off the renewables wagon after the panic of oil embargo of the 1970s passed, Brazil kept its eye on the ball...and continues to do so. Get this: Brazil's federal environmental agency supports biofuels! And the entire nation has been "agro-zoned" to identify the best areas for biofuels production.

Brazil sees biofuels from not only an energy security standpoint, but they have an integrated strategy that includes economic factors, environmental impacts and—here's the really interesting part—the social aspects of biofuels: How biofuels can provide jobs and improve lives. This strategy extends beyond the borders of Brazil. They see biofuels as an economic and social driver for the entire world. "Renewables are the best way to minimize the effects of fossil fuels," said Marlon Arraes Leal, deputy administrator. And as Brazil sees it, those effects are far-reaching.

Stay tuned.

The Eagle Has Landed

We're here. Left Miami about 6:30 Monday night. Flew to Sao Paulo and then to Brasilia. Arrived at the hotel about noon local time, which is four hours ahead of U.S. Central Time. We have just enough time to freshen up and then we're off to the Ministry of Mining & Energy for some policy discussions, presentations and enlightenment on Brazil's ethanol and biofuels industry. Watch for a post later today or this evening with an update.

Miami Twice

The best laid plans...

Last night's flight to Salvador, Brazil was canceled. And the rescheduled flight for early this morning (very, very early this morning) ended up not working out either. So, unfortunately, we continue to wait in Miami...We're rescheduled to leave tonight into Salvador (same flight as last night, only 24 hours later) and hope to make a connection to Brasilia Tuesday morning in time for our scheduled meeting with the Ministry of Mining and Energy, as well as Petrobas, Brazil's semi-private energy company. At this point, we've missed our first day of activity in the Recife area and thus will likely not have the opportunity to see sugar cane harvest. Bummer.

An aside: This morning's USA Today carried a headline that said U.S. airlines have recorded their safest two years in history. After our experience the past 18 hours, we think we know why. It's awfully hard to have airplanes fall from the sky when you don't put them there in the first place!

Stay tuned. Our sequel to "Planes, Trains & Automobiles" continues...;-)