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DAVID KRUSE

By Staff | Aug 9, 2013

My son, Matthew Kruse, is the chief operations officer for Fazenda Iowa which is a 22,000-acre farm in Brazil.

It is located in Bahia, Brazil and they produce three crops – corn, soybeans, and cotton.

The following are excerpts from a recent interview with him.

Q: You have been there since 2006 and likely understand Brazil and the culture a bit more than the rest of us. There has been a lot of unrest in Brazil lately. Can you give us your prospective of that and what is going on in Brazil?

Matthew: As you may know, The World Cup is going to be held in Brazil next year for soccer. The Brazilians are huge soccer fans and they are spending literally billions of dollars. The number I saw was about $16 billion on new soccer stadiums that were going to be built around the country to only be used once after they build them for the World Cup.

The government was able to come up with billions of dollars for these new stadiums while the common people were starting to complain that they didn’t have asphalt and hospitals, and good schools. The people were starting to come together and really complain about this.

There were a couple of things that triggered that. First, some of the stadiums were expected to cost about $1 billion and there was a lot of cost over runs so some of the stadiums are turning out to cost twice as much. A lot of people began to question how the government could come up with the money to cover the cost over runs, while it doesn’t enough money for the schools, hospitals, roads and things like that.

One of the other things that triggered the protests was a minor price increase in bus fares in Sao Paulo. Sao Paulo is the largest city in Brazil and the third largest city in the world. It is a good thing for the country that the people are starting to come together.

Unfortunately there have been reports of violence, looting and some things like that. But I do think that there has been more good than harm done here. Brazil’s president and the congress are starting to move forward. They have suddenly been passing laws that have been on the table for the last 10 years, so it is making the policy makers move forward and make some progress again.

Q: What is the crop outlook for next year, as well as the crops that will be planted and any obstacles you see for Brazilian farmers next year?

Matthew: I think you are going to see more of a tendency to plant more soybeans next season. Soybeans continue to be the cheapest crop in terms of inputs when compared to corn and cotton. There has been a new insect in Brazil called helicoverpa which is similar to a corn ear worm or a cotton boll worm.

That has been expensive and difficult to control in Brazil. Chemical companies like Dow and DuPont actually air freighted insecticides into the country from the U.S. because there was a shortage of supply. I think that is going to be a big concern next year. We don’t have the winters in Brazil that you have in the U.S. that kills off a lot of pests and diseases so we are going to have to make some adjustments for that.

One thing that may help Brazilian farmers out a lot is some new soybean seed with new Bt technology that Monsanto is producing called Intacta. They are actually introducing this genetic into Brazil before they are introducing it into the U.S. This new seed technology is expected to be resistant to a lot of these new pests we are facing.

Q: Looking at the infrastructure in Brazil what are the prospects of them modernizing that?

Matthew: Some of the reports that I have seen are that ships are staying out at sea right at port at upwards of one or two months at a time waiting to load. That gets expensive because it costs something like $20,000 a day for the ship to sit out at sea so it can add up very quickly. And of course that cost gets passed on to the farmer, so that can make a big difference to us.

Now there has been a lot of talk on improving the ports and making them bigger but that is going to take a lot of time and money and as I discussed, Brazil has been prioritizing building new soccer stadiums instead of building new infrastructure in its country.

Q: What do you see as the competitive outlook for Brazil relative to the U.S. in these global markets? How long do you think it will take them to catch up, so to speak, with their infrastructure deficiencies?

Matthew: Well I have been in Brazil long enough to know that the right answer to that question is, “I will believe it when I see it.” Unfortunately I believe a lot of the infrastructure that they need is going to take years if not decades. They have very few good asphalt roads, very few railways.

Q: So essentially, what you are telling me is Brazilian agriculture is being challenged by insects that in our instance, because of our winter, we are protected from. They also have little prospect of advancing their infrastructure construction at a rate that will challenge U.S. agriculture.

Matthew: Yes. Farmers here in the U.S. don’t really have it all that bad.

David Kruse is president of CommStock Investments Inc., author and producer of The CommStock Report, an ag commentary and market analysis available daily by radio and by subscription on DTN/FarmDayta and the Internet.

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