pioneer locations - braziloalp.okstate.edu/files/brazil_2006/brescia_presentation.pdf¾pioneer is...

Subsidiary of Pioneer Hi-Bred International, largest seed company in the world;

Pioneer Hi-Bred sells around US$2 billions/year, present in more than 50 countries;

Corn, soybeans, sorghum, sunflower, alfalfa, canola, forage additives;

Since 1999 Pioneer Hi-Bred belongs to the DuPont Group;

Pioneer is established in Brazil since 1970

PIONEER SEMENTES PIONEER SEMENTES -- BRASILBRASIL

PIONEER LOCATIONS PIONEER LOCATIONS -- BRAZILBRAZIL

Research

Supply

Main Office

Passo Fundo - RS

Planaltina - DF

Toledo - PR

Santa Rosa - RS

Santa Cruz do Sul - RS

Cristalina - GO

Itumbiara - GO

Balsas - MA

Sorriso - MT

Planaltina - DFFormosa - GO

•370 full time employees, and 98 sales reps.

•Total Sales: 1.9MM (60MK/bag) bags of corn and 900 M of soybean (40kg bag)

• Focus is mostly Corn, Soybeans, Seed treatments and Services;

• Leader of high technology market in corn with around 40% Market Share;

• Known as "technology differentiated" company, for the strong field work and easy farmer access –Pioneer has been bench mark of the industry for long time – RD, Supply, Quality, Positioning, Pricing, Farmer access etc.... - Recognized by all for product quality and technical know-how.

RELEVANT FACTS ABOUT PIONEER IN BRAZILRELEVANT FACTS ABOUT PIONEER IN BRAZIL

94

172027

94

202129

101

242730

94

2524

38

132

35

39

49

155

39

49

55

188

47

64

71

0

50

100

150

200

250

300

350

400

1999 2000 2001 2002 2003 2004 2005

Number of Pioneer Brazil employees per area

Administration/FinanceCommercial

ResearchSupply

Pioneer Growth in Brazil

Crescimento do Merc. Tecnificado em 15 anos

0 500.000 1.000.000 1.500.000 2.000.000 2.500.000

60MK seed bags

2002

1987

Year

Vendas PioneerMercado Tecnificado

400.000 scs ~ 90% of Technified Market

1.200.000 ~ 50% of Technified Market

PIONEER SALES AND THE TECHNIFIED MARKET 1987- 2002

PIONEER SALESTECH.MARKET

Agribusiness in Brazil

• Brazil has a good climate, 13% of all the water in the planet, and 388 million hectares of fertile land. 90 million hectarsare still not explored;

• Of each R$3.00, R$1.00 is generated by the agribusiness;• Brazil’s agribusiness is responsible by 42% of total exports,

and 37% of Brazilian jobs;• Brazil is the first producer and exporter of coffee beans,

sugar, ethanol and fruit juices; • It is also the first exporter of soybeans, beef, chicken,

tobacco, leather and leather shoes;• Everything indicates that in no time Brazil will be the main

producer of cotton and bio-fuel;• Corn, rice, fresh fruit, cocoa, nuts, pork and fish are also

important products of Brazilian agribusiness.

Should Brazil Give You Heartburn?

Sept. 2003

Brazil’s a very big country

lower 48: 3.32 million square miles

: 3.29 million square miles

Brazil by comparison

12.7%22.0%Population below poverty line

5.8%6.4%Unemployment rate1.6%8.3%Consumer price inflation rate

$37,600$7,600GDP per capita$10.4 trillion$1.3 trillionGross domestic product (GDP)

290 million182 millionPopulation

source: CIA “World Factbook”

1½x

8x5x

Ag is a bigger part of Brazil’s economy

ag 8%Share of GDP


Share of labor force

industry 36%

services 56%

ag 2%

ag 23%

ag 2%

24%

24%

industry 18%

53% 74%

services 80%

BRAZIL’S ADVANTAGES

Brazil has lots of cheap land

Argino Bedin, Mato Grosso farmer

• Owns 37,500 acres

• Land in this area now about US$640 per acre

• 3 crops per year: soybeans / edible beans / rice, under center pivot irrigation

• Someone recently offered him 25,000 acres of uncleared land along the paved highway for US$62 per acre

Iowa average $1926 per acre, and $124 per acre cash rent.

Easy to bring more land into production

• 33,000 acres: 17,500 in crops, remainder cattle pasture

• Just cleared another 2,500 acres in 24 days

• Three crops per year: soybeans / corn / millet

• 100-day soybean varieties, sprayed with paraquat to speed maturity, then 100-day corn varieties

Darcy Ferrarin, Mato Grosso farmer

The cerrados is bigger than the U.S. grain belt

Dr. Rogério Borges, U. of Wisc.

Well-drained tropical soils with low organic matter, but easily made fertile

Huge economies of scale

combines turning around mid-field

No weather risk: it’s warm

0

10

20

30

40

50

60

70

80

90

J F M A M J J A S O N D

Average temperature, °F

Source: www.worldclimate.com

Des Moines, IAyear avg. 49.8°

Cuiabá, MTyear avg. 78.3°

86° ideal

Double- and triple-cropping

30 combines followed by 12 planters

No weather risk: it rains

0

1

2

3

4

5

6

7

8

9

J F M A M J J A S O N D

Average precipitation, inches

Source: www.worldclimate.com

Des Moines, IAyear avg. 33.1"

Cuiabá, MTyear avg. 53.8"

soy harvest

corn harvest

More choices of alternative crops: coffee

Irrigated coffee

Alternative crops: cotton

Cotton in rotation with soybeans

soybeanscotton

Growing almost as much corn as soybeans

Tall, green corn in February

Greater diversity of crops

13.42.1Cotton45.85.0Wheat

–4.2Cassava0.0065.9Coffee

69.329.3Corn

3.27.8Rice1.710.3Dry beans1.012.5Sugar cane

72.140.3Soybeans

2002 acreage, millions of acres

Source: U.N. Food & Agriculture Organization, 2003

Brazilian farmers can buy the same equipment

The same no-till technology

Brazilian-made no-till (plantio direto) planters at “Show Rural”

The same crop genetics

Familiar logo on that seed corn bag?

The same chemicals

Soybean acreage increasing

0

10

20

30

40

50

60

70

80

'92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03

Mill

ions

of a

cres

+ 26%

+ 88%in 11 yrs

73

49

58

26

Source: “Oilseeds: World Markets and Trade” / FOP 07-03 (USDA, July 2003)

Forecast 9% increase in this September’s planted acreage.

Soybean production growing 5x ours

0.0

0.5

1.0

1.5

2.0

2.5

3.0

'92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03

Bill

ions

of b

ushe

ls

+ 32%

+ 163%in 11 yrs

2.9

2.12.2

.8


Goal to surpass US by 2010.

Soybean yields now higher than ours

0

5

10

15

20

25

30

35

40

45

'92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03

Bus

hels

per

acr

e

+ 6%

+ 32%in 11 yrs41.7

39.737.6

31.5 ( Iowa avg. 44 bushels

in 2001 )


Mato Grosso yields could go to 60 bushels

Andréa Ornellas, agronomist, MatoGrosso Foundation

• Mato Grosso Foundation, a private R&D organization funded by farmers, has developed 30 new soy varieties specifically for this state

• Adapted to longer daylight hours near equator

• Aluminum and acid tolerant

• Enhanced rooting in tropical soils

• Yields now average 50 bushels per acre, may increase another 10 bushels over next decade

And they’re beating us on quality

• crushers in Japan and Europe prefer Brazilian soybeans because higher oil and protein content, lower foreign material contamination

• Brazilian soybeans now 36~37% protein

• US average about 34%

• upper Midwest 31~32%

Soybean exports growing 15x ours

0

200

400

600

800

1,000

'92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03

Mill

ions

of b

ushe

ls

+ 28%

+ 425%in 11 yrs

989

808770

154


Production Costs

USA ARGENTINA

Paraná Mato Grosso

Variable 224 273 301 177Seeds 64 53 48 52Fertilizers 24 49 94 8Chemicals 61 77 79 58Mechanized operations 67 58 48 34Return on capital 2 13 17 13Others 6 22 16 11

Fixed 387 129 90 138Depreciation 149 32 19 21Cost on land use 219 87 60 106Insurance and other fees 19 10 11 11

Total 610 401 390 315

Productivity 47,7 44,0 49,0 45,2 bg/ha

Variable 4,69 6,20 6,13 3,92Fixed 8,11 2,92 1,83 3,05Total 12,80 9,12 7,96 6,97Cos

tC

ost

BRAZIL

US$/bg

US$/ha

Logistic Cost: As least U$20/MT more than in the US

Doubled share of crop they export

+ 105%in 11 yrs

35%

39%

34%

19%

1992 2003


Who’s the competition?

“The so-called ‘competition’ between Brazil and the US farmers is a red herring.

“The new ‘owners’ of Brazil’s soy industry are the same companies that dominate the seeds, fertilizers, growing, shipping and sales of US soybeans.

“Nearly half of Brazil’s soy crop is now planted and harvested by foreign companies.

“Cargill, Archer Daniels Midland and Bunge alone control more than 60% of Brazil’s soy exports.”

Glenn Switkes, Feedstuffs, 4/30/2001

Multinationals are driving soy expansion

ADM soy facility on Highway 163 in Rondonopolis, now doubling capacity to 2000 tons/day

6 crushing plants now, building 5 more major elevators in Brazil

Multinationals are driving soy expansion

Bunge soy facility on Highway 163 in Sorriso

Multinationals are making huge investments

Largest soybean storage facility in South America: 300 m long x 50 m wide x 30 m deep 7.5 million bushels

Bunge’s expansion plans at Sorriso

three soy mills

rail line

Highway 163

three more 7.5 million bushel grain storage buildings

Bunge recently idled two US plants and postponed expansion of another

“Go south young man, go south”

“Unless the U.S. government wants to see the many millions of taxpayer dollars invested in U.S. land grant universities used to train Americans to become future farmers of South America, policy makers better get a grip on the situation U.S. agriculture faces...

“A key is to remove or reduce the artificial incentives that are driving farmland values and rents out of reach of those wanting to farm...

“Otherwise, it might also want to begin offering today’s farmers Portuguese lessons so they can talk to their grandchildren in the future.”

John Baize, Ag Perspectives, 2/15/2002

Offset by higher shipping costs

$5.80$5.92Price at Rotterdam

0.570.38Ocean freight to Europe

5.235.54Cost at export port1.340.43Internal transport & marketing

$3.89$5.11Total costs (US$ per bushel)Mato GrossoMidwest

76% of US

94%

98%

source: "Agriculture in Brazil and Argentina: Developments and Prospects for Major Field Crops" / WRS-01-3 (USDA, 2001)

0 200 400 600 800 1,000

Waterways

Railways

Paved highways

We’re still way ahead in transportation infrastructure

Thousands of miles

135,000

18,000

25,000

30,000

110,000

3,440,00031x

7½x


Railroad density: Comparison Brazil v. the USA

29.83.4km of railroad for every 1,000 km2

km of railroad for every 1,000 km2

Railroad Network

But they’re closing the transportation cost gap

“Lack of an adequate transportation system has been one of the major reasons that cropland expansion in Brazil hasn’t progressed at an even faster pace.

“That is changing quickly and it’s changing because private money – not government money – is being spent to get barge and rail networks built – and built quickly.

“They aren’t waiting for governmental bureaucracies or environmental studies. They’re moving dirt and pouring concrete.”

Mike Krueger, Ag Perspectives, 3/25/2002

Brazilian entrepreneurs are pioneering new export shipping routes

• Maggi Group’s Madeira River -Amazon River route, using their own barges and terminals

• 26 hour, 500 mile drive to river (Des Moines to Denver)

• Cargill has also recently built a barge terminal at Porto Velho

Maggi has doubled capacity at Amazon terminal

new building

paved runway

Third 4 million bushel building planned for 2003.

The Amazon is a huge advantage

Ocean ships at Manaus, 1000 miles upstream from the mouth of the Amazon

1 mi150 miWidest point

MississippiAmazon

27zeroLocks

220+zeroBridges

10~12 ft165 ftAverage depth

1,814 mi2,220 miNavigable length

The Amazon makes the Mississippi look like a creek

The Amazon has 14 tributaries that are bigger than the Mississippi.

Multinationals also investing on the Amazon

“SANTAREM, NEW AGRICULTURAL FRONTIER FOR THE WORLD”

“THE FUTURE OF BR 163 BEGINS HERE”

Santarem

Hwy 163

• $20 million project

• 4 x 30,000 MT silos (2 shiploads)

• Land is only US$18 per acre around Santarem

• $106 per acre clearing cost; $80 per acre for lime

• “This is very nice place to invest in chicken and pork after we have the grain production.”

• “Brazil is more competitive in pork and chicken than corn and soybeans.”

Gilmar Tirapelle, Cargill soybean agronomist

• “ We have the cheapest corn and soybeans in the world here, so hogs will come.”

• New poultry plant opening in Sorrisowith 140,000 birds per day capacity

• In the future, beef feedlots (this land too good for pasture)

Claudio Zancanaro, Agrosoja, Sorriso

Family-owned soy crushing plant, US$2.2 million investment

Pork production increasing

0

1

2

3

4

5

6

7

8

9

'97 '98 '99 '00 '01 '02 '03

+ 14%

+ 73%in 6 yrs

8.9

2.6

7.8

1.5

source: Livestock and Poultry: World Markets and Trade / DL&P 1-03 (USDA, 2003)

Mill

ions

of m

etric

tons

(MM

T)

Driving the U.S. meat industry offshore?

“The message [of a packer ownership ban] is unmistakable. If one wants to enter the meat business or expand in it, those risks make the U.S. an unattractive place to do so.

“It would make far more sense to put the investment into say, Brazil, where land and labor are cheap, where environmental issues do not loom so large, where meat exports are rapidly growing and where politicians and government officials would welcome the investment with open arms.”

Bob Kohlmeyer, Ag Perspectives, 3/21/2002

Factory farms welcomed:Smithfield’s 10,000-sow unit at Diamantino

Plans for 50,000 sows, consuming 213,000 acres of corn and 105,000 acres of soybeans. Building own slaughter plant with 10,000 head per day capacity.

Pork exports growing

0

200

400

600

800

'96 '97 '98 '99 '00 '01 '02 '03

Thou

sand

s of

met

ric to

ns

+ 70%

+ 793%in 7 yrs

746

500

440

56


Exporting bigger share of production

+ 443%in 7 yrs

5.7%

19%

8.4%

3.5%

1996 2003


+ 47%

They’ve got their own tropical swine genetics

MS 58 hog, developed by Brazilian Agricultural Research Corp. (Embrapa):

• leaner, lower fat and cholesterol

• feed conversion ratio < 2.3,saving 10 kg. feed per pig

• higher ham and loin yields

• no Halotane (stress) gene

• MS 60 under development, > 90% lean carcass yield

'96 '97 '98 '99 '00 '01

Room to increase domestic consumption

0

20

40

60

80

100

120

'96 '97 '98 '99 '00 '01

Poun

ds p

er p

erso

n pe

r yea

r

78 lbs

66

25


109

96

68

+ 16%

+ 39%

Pork Production

Pork Consumption

Pork Exportation

Fewer manure regulations

Slurry sprayer

Way fewer manure regulations

New hog barn and manure lagoon on steep hill above a river, Santa Catarina state

Poultry production is increasing too

0

2

4

6

8

10

12

14

16

'97 '98 '99 '00 '01 '02 '03

Mill

ions

of m

etric

tons

(MM

T)

+ 18%

+ 71%in 6 yrs

14.5

7.7

12.3

4.5


Poultry exports growing

0.0

0.5

1.0

1.5

2.0

2.5

3.0

'97 '98 '99 '00 '01 '02 '03

Mill

ions

of m

etric

tons

(MM

T) + 10%

+ 138%in 6 yrs

2.3

1.6

2.1

0.6


World-class poultry quality standards

“Lar” Cooperative’s chicken processing plant at Medianeira:

• capacity 140,000 birds/day

• 200 different products, 99% frozen

• 40% of volume, 60% of value is exported to Middle East, Japan, and China

• Private label for Carrefour Supermarkets; supply all the McDonald’s in Brazil, Uruguay, and Chile

Exporting bigger share of production

+ 43%in 7 yrs

16%

20%

16%

14%

1996 2003


Poultry Production

Poultry Consumption

Poultry Exportation

Beef production is growing

0

2

4

6

8

10

12

'97 '98 '99 '00 '01 '02 '03

Mill

ions

of m

etric

tons

(MM

T)

+ 2%

+ 23%in 6 yrs

12.0

7.4

11.7

6.1

Brazil now has the world’s largest beef herd, more than twice the size of the U.S. herd.


Beef exports have tripled

0

200

400

600

800

1,000

1,200

'97 '98 '99 '00 '01 '02 '03

Thou

sand

s of

met

ric to

ns

+ 20%

+ 318%in 6 yrs

1163

970969

232


Beef: It’s what’s from Brazil.

Share of production exported tripled

+ 191%in 7 yrs

7.2%

13.1%

9.7%

4.5%

1996 2003

+ 35%


Beef Production

Beef Consumption

Beef Exportation

Gaining market share in world meat trade

5.4%14.7%

2.2% 12.8%

1996 2003

11.3% 27.2%


• “I see a clear trend for growth... The weather is nice, the soil is good and Brazil has awakened for agriculture the last few years. For Brazil to be a major player, it’s just a matter of time.”

• “If Chicago beans are $4.50 or above, we can produce beans here. Even without subsidies.”

• “We can put meat into Europe cheaper than the United States can.”

Dilvo Grolli, President of Coopavel

BRAZIL’S LIMITATIONS

Rural roads in poor condition

Main road from the airport into town, Sinop, MT

The Cerrados is not competitive with the US on:

• Erosion

• Financing

• Freight

• Research

• Cash reserves

• Fuel costs

• Off-farm jobs

Ron Heck, American Soybean Assoc. president (Perry, IA)

• Organic matter

• Overnight UPS

• Government support

• Insecticides/fungicides

• Lime, fertilizer

• Machinery costs

• Marketing choices

Mandatory conservation set-asides

Slash & burn patches in the Amazon jungle

Must leave 20~80% of forest intact when clearing new farmland

Some restrictions on land clearing

Landowners can clear only 2500 ha / 1000 acres per year

Social problems: income disparity

Expensive condos on Ipanema Beach in Rio de Janeiro, with favela slums on the hills above.

• since 1984, 1.5 million members

• trying to force major land reform: over two-thirds of arable land owned by 3% of population

• more than 100 land takeovers now underway, 1000 people have died in violence over last decade

Landless Workers Movement(MST: Movimento dos Trabalhadores Rurais Sem

Terra)

Soybean Rust

• Brazil learned how to live with ASR. Not much yieldreduction, but less U$ in the pocket (2-4 applications);

• ASR won’t be as agressive in the US as it is for Brazil;• The GMO soybean is not a panacea for Brazilian growers

as a cost reduction factor. There are different results among the Brazilian regions;

• Growers will reduce investiments (a bit) in inputs thiscoming year mainly in soybean.

• Soybean is not going to increase acreage 05-06. Remember: Brazil had two years with losses (weather).

• Logistic definitly will slow down Brazil growth in the nextyears;

Foreign investment in BrazilThe early stages (2000 The early stages (2000 -- 2002)2002)

The 2004/05 crop. Starting up the cotton productionThe 2004/05 crop. Starting up the cotton production

The goal: agriculture/livestock integration, non till and doubleThe goal: agriculture/livestock integration, non till and double cropcrop

Faz. Novo México, April 2000 Faz. Novo México, April 2002Faz. Texas, April 2002

Faz. Illinois, Feb/2005 Faz. Novo Mexico, Feb/2005 Faz. Novo Mexico, Feb/2005

Agriculture/cattle operation near Faz. Novo México, Jaborandi, Bahia. Oct/2004

A good risk assessment and business approach is a key factor for success.

It is essential to contract consulting services with a track record in advising foreign investment and business start up .

Source: Céleres/BWB Consulting

Cotton field in Luis Eduardo Magalhães

Twelve reasons you should farm in Brazil:A sarcastic list by Jim Meyer, Iowa Corn Growers Assoc.

1. You would like to have less control over your invested capital.

2. You would like to pay more taxes.

3. You would like to drive further on dirt and gravel to get where you want to go.

4. You don’t like to operate your own machinery.

5. You like to replace the suspension system on every vehicle you own.

6. You don’t like to grow GMO crops. (Not applicable anymore)

Twelve reasons you should farm in Brazil:

7. You don’t like to use growth promotants and drugs in livestock production.

8. You like to raise and eat grass-fed beef.

9. You would like to leave profits made in Brazil.

10. You enjoy having a lot of low-paid labor in your operation and around you.

11. You would enjoy having a small airplane and landing field as part of your farm equipment.

12. You would enjoy being integrated in a purchasing-production-marketing coop.

30 combines followed by 12 planters

Photos by: Dr. Rogério Borges, University of WisconsinJeremy Coyle & Dale Johnson, Iowa Farm BureauRobert Slayton, Slayton Farms, Casey IAUSDA APHIS Plant Protection & Quarantine Div.

pioneer locations - braziloalp.okstate.edu/files/brazil_2006/brescia_presentation.pdf¾pioneer is...

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