Domestic Consumption ’ s Impact on Export Potential in Brazil February, 2012
-
Upload
colin-rhodes -
Category
Documents
-
view
27 -
download
1
description
Transcript of Domestic Consumption ’ s Impact on Export Potential in Brazil February, 2012
Facing a new world
"I'm excited to meet Mickey. It's always nice to meet a world leader who has bigger ears than me"
Kai Lan is a children's television show, that
teaches how to speak in Mandarin
For my daughter Mickey Mouse is a true world leader, but he is not alone…
40% increase in Visas for China and Brazil “rapidly growing economy, huge population… and fastest growing middle classes”
Brazilian Economy
• Although affected by the global downturn of recent years, the next five years are forecasted to be a period of steady growth and continued stability
• One of the 10 biggest economies in the world
• Conservative monetary and fiscal policies (i.e. control of government expenses and inflation targeting)
• Credibility from international governments and financial community
• Significant growth in direct investments
• The current government has strong public support
Consumer Inflation (% p.a)
Real GDP Growth (% p.a)Brazil Highlights
Source: BCB / Macroconsulting
The strength of internal consumption
Soybean Meal Consumption Soybean Oil Consumption
Motorcycles sales
Thousa
nd
s
Source: Andav/USDA
Thousa
nd
sM
illio
n
Mill
ion
Automobile sales by type
For the farmers, internal consumption is minimizing our logistical problems!
Source: Rabobank, Bloomberg
Geographical problem: distance to ports Soybean Basis: Mato Grosso x CBOT (BRL/ bag)
Brazilian soybean Premium – May Delivery
*Average discount price in region versus CBOT
3
2
4
1 1.600Km
2.011Km
2.000Km
1.891Km
3 2 4
1
Monopoly on Railroad operations Waterways and railroads still unexplored
The multimodal alternatives can still be further developed
The strength of internal consumption
How the production can meet demand?
5,7 Years5,7 Years
Let´s do some math…
Conversion cost: $370 acre
Profitability (new area)
$9,5 bu 40 bu/acre $380 acre
Local Price Yield gross revenue
Production cost$315 acre
Net return$65 acre
Payback periodPayback period
$675 acre $1,900 acre
Land Price
+ 180%Source: IMEA
Agricultural Farmland in Brazil
Totalarea
Amazonforest
Pantanal Cerrado Indianreservation
Availableland
851
420
15
303
29
84
Virgin area (1)
Pasture
Currently with crop production
Note: (1) Approximately 70% of the total gross area can’t be used in agriculture and has to be destined to legal reserves
Brazilian Land Availability Breakdown (Million hectares)
Source: Embrapa and FNP - Elaboration Macroconsulting
The greatest amount of available arable land along with a abundant rainfall level gives Brazil an unbeatable combination. Brazil has the potential to more than double its grain area only by converting current pasture land.
A new route to the north
According some studies the
exports through north ports will
increase more than 500% in the
next 10 years;
Main routes:
BR 163
North/South railroad
But also it will be easier to reach
the Brazilian northeast region.
New routes and north ports
We´re not in heaven…yet!
The Brazilian tax system is shoddy, marked by over taxation
Despite the improvement, the transport system is still lagging
behind, with tremendous inefficiency and high costs
Labor cost is increasing at fast pace
International commercial tariffs are still impeding the entry of
Brazilian products into overseas market
Final messages
1. At moment the major competitor of Brazilian exporters is Brazilian consumption
2. Intensive use of land - The next revolution will be in the cattle beef chain
3. For the continuation of Brazilian agricultural growth, we have to face two sleeping giant: LABOR COST and COMMERCIAL TARIFFS
Established in 1965, represents more than 26,000
landowners and farmers in the State of Mato Grosso.
To achieve our goals, we are present in 86 counties and
split the work between SENAR, Rural Unions and IMEA.
These four entities together form the Famato System.
Who we are
Focus on the farmers needs
Policy Advocacy
Research and dissemination of knowledge
Market development
Communication and public relation
Leadership, training, information and education
What we do
Famato - Mato Grosso Farm Bureau
Thanks!Seneri Kernbeis Paludo
Executive Director