Boom in growing soybeans endanger South American environment
By Kevin G. Hall
Posted on Wed, Dec. 08, 2004
Knight Ridder Newspapers
DOLORES, Uruguay - A soybean boom is sweeping South America like a gold rush. Farmers with soy fever are plowing by moonlight, speculating in jungles and dreaming of digging new canals to carry their soybeans from the continent's vast and fertile interior to Atlantic and Pacific ports.
The boom, fueled largely by China's growing appetite, is transforming global agriculture, largely at America's expense, and hastening the demise of the hemisphere's last virgin savannahs and tropical rainforests.
Argentina's farmers planted about 17 million acres of soybeans in 1997. Today, they plant more than 34 million. Brazilians planted 32 million acres in 1997. Now they plant 57 million.
In 1982, U.S. farmers produced 80 percent of the world's soybeans. Today they produce 37 percent. U.S. production on about 72 million acres is dwarfed by the 91 million acres of soybeans now under cultivation in Brazil and Argentina.
The U.S. share of world markets is certain to decline further because American farmers have virtually no more acreage to plant. South America's have millions of acres, and they're clearing them as fast as they can burn them. Latin leaders, with some exceptions, are turning blind eyes to the devastation.
South America's soy surge has already driven down global prices and hit U.S. taxpayers in the wallet. The target price for soy under U.S. federal farm price support programs is $5.80 per bushel of soybeans, and the government compensates farmers when prices are lower. Because soybeans have fallen below that price, this year U.S. soy farmers will receive an estimated $1.6 billion in subsidized income support. That could rise to $2.5 billion or more next year if expected record South American crops drive prices still lower.
Over time, say experts, U.S. farmers will be forced out of the soy market. "No question about it," said Chris Hurt, an agricultural economist at Purdue University in West Lafayette, Ind.
Historically, Latin booms have gone bust, from rubber tapping to organic guano to eucalyptus farming. But the soy boom appears to be built around real and durable demand: As standards of living have increased across much of the globe, so has the demand for meat products, cooking oils and sauces.
Enter the soybean, low in cost, rich in protein, an ideal additive to manufactured foods and the perfect protein supplement in animal feed to fatten swine, poultry and cattle.
"We have seen global demand for soybeans grow between from 1990 and 2004 by 101 percent," said John Baize, an international adviser to the American Soybean Association. "We've seen rising incomes around the world, and people want more meat and vegetable oil in their diets."
He predicted that the 186 million tons of soy products produced in 2003-2004 will soar to 300 million tons by 2020.
U.S. agribusiness giants such as Cargill, Bunge, Monsanto and Archer Daniels Midland are entrenched in the South America trade, both buying and selling soybeans.
"Clearly there is a lot of expansion taking place in South America because it is a logical place. There is a lot of room for expansion," said Stewart Lindsay, the spokesman for White Plains, N.Y.-based Bunge, South America's largest soybean buyer. "We are confident that supply and demand will remain" strong.
Transformed by the booming trade are unlikely places such as tiny Uruguay, where soybeans, dubbed green gold, offer relief for farmers who've been sunk in poverty for years.
"Four years ago, I had monstrous debts. In two years of soy, I have managed to get out from under it," said Jose Luis Gomez, a farmer in Dolores.
Gomez and his neighbors, who're among Uruguay's moonlight planters, face new competitors, however. Argentine and Brazilian soy speculators are buying up cheap $40-an-acre farmland in western Uruguay.
In Brazil's Amazon basin, armed soy speculators are seizing rainforest land illegally and clearing it for soybeans. Brazilian growers also are eyeing Bolivia's eastern Amazon region, promoting a dam, canal and dredging project that would make more than 2,600 miles of inland rivers navigable by barges. The dream is to deliver soybeans to Atlantic and Pacific ports from fertile interior areas.
Pacific ports are key for soybeans because China is now the big buyer. It imported 21.4 million metric tons of soybeans last year, about a third of the global total. China's soy imports are projected to surge in the world's most populous nation; its economy is growing at 7 percent to 9 percent a year.
Paulo Pimenta, a congressman from Brazil's soy-growing southernmost state of Rio Grande do Sul, sees dizzying possibilities.
For example, while U.S. soy oil consumption is about 6 gallons per capita, China's is only about 3.2 quarts (3 liters).
"China, if it goes to 6 liters, would absorb all of Brazil's soybean production," Pimenta said. "I don't have any doubt this market will continue to grow."
China also has eyes on South American farmland. During a state visit to Brazil on Nov. 14, President Hu Jintao indicated that China aims to purchase some 1.2 million acres in Brazil - an area equal to about that many football fields - to grow soybeans to sell to itself.
By 2020, five South American countries - Brazil, Argentina, Bolivia, Uruguay and Paraguay - are expected to grow most of the world's soybeans. In each, the boom already is upending traditions and threatening ecosystems.
In Uruguay, a picturesque nation of 3.4 million known as the Switzerland of South America, a tidal wave of soybeans is making the country's cattle ranches and sunflower farms disappear. Uruguayan farmers planted 20,000 acres of soybeans in 2000, according to farmers and export groups. This season, they're expected to plant 860,000 or more.
"We never imagined this was possible," said German Bremermann, an adviser to Erro, Uruguay's largest soybean exporter.
The hitch: Nearly half the increase will come from Argentines who bought or rented Uruguayan farmland using proceeds from their own soy boom.
Argentina's surge began with the conversion to soy of cattle ranches and grain farms in the flat, humid Pampas regions south and west of the capital of Buenos Aires. The new growth is in Argentina's northern states, which are part of a vast three-country ecosystem of semi-arid bush savannahs called the Chaco.
The World Wildlife Fund, in a report earlier this year titled "Managing the Soy Boom," warned that 15.5 million acres of Argentine Chaco, more than 24,000 square miles, could disappear over the next 15 years. Steep losses are also projected in the Bolivian and Paraguayan Chaco.
The reason, according to the WWF: "Unlike forests, savannahs can be converted directly to soy plantations." The politically moderate environmental group wants South American governments to do a better job enforcing environmental laws. Chief among them are laws requiring controlled burnings that leave 20 to 30 percent of native forest standing when land is cleared. The group also favors integrated soy farming and cattle ranching operations.
Evidence of the environmental threat was on display in the northern Argentine province of Salta in late November, when a massive burning of savannah outside the town of Saravia lit the night sky for 20 miles or more.
The fire approached what until June had been 57,000 acres of protected nature reserve. Provincial authorities lifted the protected status and sold the land to soy-minded farmers. Authorities defended the sale as legal, but it was done with remarkable speed and without public input.
"You've heard of the state being absent. Well, that's a lie," warned Emiliano Ezcurra, who heads Greenpeace Argentina's anti-deforestation efforts. "The state is present in Bolivia, in Paraguay, in Argentina and in Brazil. It has taken a side and it is on the side of uncontrolled expansion of agriculture."
Salta's environmental secretary, Gustavo Lopez Asensio, initially told Knight Ridder that he was unaware of the land-clearing fire.
A day later, he e-mailed to say that his inspectors had "detected" the blaze and would investigate. After another day, he confirmed that a rancher had sought to clear 6,400 acres and had been authorized to log nearly 2,000 acres. In the rush to plant soybeans, he said, the farmer had burned more than two-thirds of the authorized land without doing any logging. Lopez Asensio ordered a halt to clearing on the still-smoldering land. An appeal is expected.
Francisco Fortuny, a large soybean grower in Salta, said environmental arguments ignore the jobs created when land is cleared for soybeans, the jobs created in the fertilizer sector and the number of truckers employed to haul soybeans grows.
"They don't take into account the most important thing: the people who live in a tremendous state of poverty," he said.
The lack of rural land control is particularly problematic in Brazil's vast eastern Amazon rainforest. There, speculators who routinely seize land illegally expect a land boom if a consortium of multinational companies and trading companies, including Minneapolis-based Cargill, paves a road through the jungle to Cargill's new soy terminal at the Amazon port of Santarem.
About an hour from Cargill's imposing terminal, longtime resident Fredson Cosme Chagas and four friends last year cleared nine small plots of land to grow rice. While they awaited a deed from the government land-titling agency Incra, a man in a new pickup truck showed them a document that he said proved he'd bought the land from Incra.
"I knew Incra doesn't sell land," said Chagas. "He thought we were stupid. He just showed us this little piece of paper."
The largely impenetrable land in question lies 20 miles from the road Cargill hopes to pave to support the soybean boom. No matter. Someone razed the settlers' huts in January and destroyed their crops. Soy waits for no man.
On Tuesday, Brazilian federal police arrested Incra's regional boss, Jose Roberto Faro, on charges that he'd taken more than $100,000 from soy farmers in exchange for land titles in the state of Para.
Police made additional arrests in a crackdown called Operation Far West in the cities of Belem and Santarem, where Cargill has its terminal, and in Manaus, the capital of Brazil's largest and most environmentally diverse state, Amazonas. Prosecutors said those arrested had provided land ownership documents to soybean growers from southern Brazil who were expanding into the Amazon.
In Bolivia, South America's poorest country, roughly 500,000 acres of savannah and dry forests disappeared annually between 1993 and 2000, according to World Wildlife's report. Most of the soybeans are grown near Santa Cruz in southern Bolivia, the capital of the state with the same name.
The state is so wealthy from farming and cattle that residents want to secede. You can see and smell the price of prosperity in the smoke from rampant land clearing fires.
The Bolivian Environment and Development Forum, an environmental group, is more worried about the future of the country's Amazon region, which borders the Brazilian state of Rondonia.
There, engineers hope to build two large dams to provide hydroelectric power to the remote region, raise water levels and transform more than 2,600 miles of floodplains into inland waterways.
Under the plan, which requires approval from federal and state governments on each side of the border, barges could transport soybeans from landlocked Bolivia to Brazilian terminals for export, and Brazilian producers would have increased access to Pacific ports via Peru.
"We feel like a state of Brazil, not so much Brazil, but the companies that operate in certain states and are tied to the powers there," complained Patricia Molina, a coordinator for the Bolivian environmental group.
Brazilian backers of the massive project, she said, "say openly that thanks to this, Bolivia can cultivate soybeans throughout the entire region" of the Amazon.
All the agrarian progress raises a question: Could overproduction kill the boom?
"You worry about the price dropping," said Ivander Secci as he planted soybeans in Carazinho, a farm town in Brazil's southernmost state of Rio Grande do Sul. "If you look now, they are planting (soybeans) everywhere."
A combination of oversupply; bird flu in Asia, which drove down demand for soy meal; and growing competition from palm oil and rapeseed oil also could send soy prices tumbling.
If that happens, said Baize, the adviser to American soybean growers, "something like 40 million tons of soybeans is going to be looking for a market, and all of it isn't going to have a home." Disposing of the surplus, he added, would be "likely to take prices down to very low levels."
Chris Van Dam, an environmental sociologist at the University of Salta, worries about something that's already happening.
Efficient soybean growing, he said, leaves out small farmers because it requires lots of land. Soybeans also yield little gain for local economies because they're mostly exported. Most of the profits end up in the hands of relatively few speculators, growers, farm equipment suppliers, exporters and shipping companies, many of them foreign.
Like past Latin booms, which exploited natural resources to feed markets for minerals and rubber, among other commodities, soy leaves little behind, said Van Dam.
"The lesson," he said, "is that we have not learned that lesson."
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