BRAZIL: Agribusiness faces multiple anxieties (IHT)

Oxford Analytica
Monday, November 10, 2008
The financial crisis and subsequent credit squeeze, coupled with global recession fears, are having a serious impact on agriculture and agribusiness, a crucial source of both foreign exchange and employment.
Elusive finance. The sharp drop in the value of the real has in theory largely compensated for the fact that prices of most grains and oilseeds have fallen by 30% since mid-year highs; if the exchange rate remains weak, farmers will receive significantly more in the local currency in which most expenses are incurred. However, exchange rate uncertainty is making trade finance difficult to obtain, both for exporters and many importing countries.
The government has injected some 15 billion dollars into currency markets in recent weeks, more than half of that amount from international reserves, in part in a bid to get more money to farmers and to finance trade. However, banks are presently reluctant to lend for the long time period that elapses between commodities sales being agreed and goods being paid for.
Sugar and alcohol. In the midst of a 30 billion dollar expansion plan, Brazil's sugar industry is facing a severe crisis:
•Loans made to some 300 companies to finance expansion projects fall due in the next 12 months. While state banks may refinance debts, private banks are reluctant to do so.
•A record amount of the sugar crop is now used to produce alcohol for fuel. However, with credit restricted, new car sales will fall by up to 20% next year, slowing growth in domestic demand for alcohol. Moreover, exports of alcohol may remain static or fall next year, mainly due to the cutback in usage in the United States, the leading market.
Hedging headaches. Brazil's leading poultry producer and exporter, Sadia, has reported losses of about 400 million dollars in unwise hedging and currency speculation, exposing it to large penalties. Sadia, together with Brazil's largest pulp producer and exporter, Aracruz, and a large steel mill, has proposed to challenge contracts that oblige it to pay heavy penalties, although the steel company has admitted that its profits from hedging have far exceeded its losses thus far. It is not yet known whether other large agribusiness companies, including sugar mills, have also suffered large losses due to poor hedging decisions.
Meat matters. The chicken, beef and pork industries should have a record year in 2008. However, this situation will clearly not be repeated in 2009:
•Industry leaders have urged chicken producers to cut back production sharply, in an attempt to avoid large surpluses early next year that would push prices down further.
•Several large beef packers that bought processors in Latin America, the United States, Europe and Australia in the past two years, may have overstretched themselves financially and encounter serious difficulties. Three such companies went public in 2007 and raised large sums on the stock markets. Although their share prices have now collapsed, they received large loans from the National Development Bank.
President Luiz Inacio Lula da Silva has said maintaining the relatively high growth rate of the past few years is a "matter of honor" and has promised to aid companies in agribusiness, including those which made hedging operations which turned sour. It is not clear that this will prove feasible.

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Sugar harvest advances have social cost in Brazil (IHT)

Ines dos Santos, who also once travelled to Sao Paulo, to work as an orange picker with some of her kids, fears for their future."The only way will be going back to farming, just like it was before," she said.

Reuters
Monday, October 20, 2008
By Inae Riveras
Ines Ferreira dos Santos lives with four of her kids in a spacious, colourful house at the end of a dusty street.
"With money from sugar cane we built this house. It has been good to us, too good," the 43-year-old housewife said.
This is the eleventh year that her husband, Joao Barbosa dos Santos, has travelled the 3,000 kilometres (1,864 miles) to work as a sugar cane cutter in Sao Paulo state in southern Brazil.
This time he is accompanied by three sons, also labouring in the cane fields, and a daughter, who cooks for the group. Every month, they send 2,000 reais (544 pounds) to the rest of the family.
The Santos' story is that of most people in Princesa Isabel, a town of 19,000 people in the arid backlands of Paraiba state in northeastern Brazil. With few other options to make a living, three out of 10 residents have worked as cane cutters.
But that is about to change.
The days are numbered for manual cane cutting, a gruelling job once done by slaves, in top cane producing states such as Sao Paulo and Minas Gerais, which account for 70 percent of Brazil's sugar cane crop.
For environmental and public health reasons, cane burning in these states must be phased out by 2014 in flatlands and by 2017 in hilly areas. Similar initiatives are being discussed in fast-growing farming states Mato Grosso do Sul and Goias.
But the change is likely to have a big impact on cane cutters and the families who depend on them.
Controlled burning has long been used in cane plantations to remove foliage and make it easier for workers to move about the fields. But when humidity is low, thick clouds of black smoke billow above the fields.
Every year, a larger share of the crop is harvested by machines, a trend that is starting to drive up unemployment in faraway towns like Princesa Isabel.
FAST CHANGES
The phasing out of manual cane cutting began to intensify two years ago, just as ethanol was making headlines around the world as a substitute for gasoline, ratcheting up the pressure for stricter environmental standards.
In Sao Paulo, where more than half of the crop this season will be cut mechanically, the number of cane cutters dropped to 140,000 from 158,000 in 2006, according to the Sugarcane Industry Association known as Unica. About 70 percent come from other states, mostly in the impoverished northeast.
"There will be a big number of unemployed people. What will happen to them? The government should help to settle them in their place of origin but little has been done," said Pedro Ramos, a cane industry expert at the University of Campinas.
The deaths of 20 workers on the job or while being transported to work locations in recent years increased calls for changes. Though the cause of these deaths is still being investigated, they put a spotlight on the brutal working conditions of cane cutters, driving up labour costs.
"Mechanized harvesting is today 25 percent cheaper than a cane cutter. Each machine replaces 90 workers per day," said Unica's technical director, Antonio de Padua Rodrigues.
In a sign of the times, not a single cane cutting job was created in Brazil's south-central region in the last two years, even as output surged to 487 million metric tons from 373 million metric tons.
"Things are already changing. There were less people going (to Sao Paulo) this year and some had already returned. In the past, no one would come me back before the end of season," said Joaquim Antonio Silva, who owns a transportation company to take workers from Princesa Isabel to Sao Paulo.
SOCIAL DISASTER
The bleak outlook for manual cane cutting has people on edge in Princesa Isabel, which has been churning out migrant workers for 15 years. Cane cutting is the town's main source of income after the public sector.
Every year, in February and March, about six buses leave town daily, southbound to Sao Paulo. About 2,500 to 3,000 workers make the journey, returning only in December.
"They send money every month. And when they get back, with the money from the contract's termination and unemployment insurance, sales jump in local shops," said Eduardo Abrantes, Princesa Isabel's financial secretary.
"Cane mechanization is a big worry for all of us. It's beginning to cause a very serious social problem."
Most of the streets in the town, which is named after the princess who signed a law abolishing slavery in Brazil in 1888, are unpaved. None of the houses have sewage.
Blessed with a favourable microclimate, the region was a big producer of beans and corn 20 years ago. But irregular rains and the allure of cane have emptied farms. The rural exodus snowballed, causing a disastrous drop in regional grain production, Abrantes said.
"More than government money, the worst problem here is the lack of technical assistance for small farmers," said Rinaldo de Medeiros Francisco, one of the region's largest producers.
Ines dos Santos, who also once travelled to Sao Paulo, to work as an orange picker with some of her kids, fears for their future.
"The only way will be going back to farming, just like it was before," she said.
(Reporting by Inae Riveras; Editing by Todd Benson and Eddie Evans)

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Obama's energy policy linked to ethanol interests

When VeraSun Energy inaugurated an ethanol-processing plant in Charles City, Iowa, last summer, some of that industry's most prominent boosters showed up. Leaders of the National Corn Growers' Association and the Renewable Fuels Association, for instance, came to help cut the ribbon - and so did Senator Barack Obama.
Then running far behind Senator Hillary Rodham Clinton in name recognition and in the polls, Obama was in the midst of a campaign swing through the state where he would eventually register his first caucus victory. And as befits a senator from Illinois, the country's second largest producer of corn, he delivered a ringing endorsement of ethanol as an alternative fuel.
Obama is running as a reformer who is seeking to reduce the influence of special interests. But like any other politician, he has powerful constituencies that help shape his views. And when it comes to domestic ethanol, almost all of which is made from corn, he also has advisers and prominent supporters with close ties to the industry at a time when energy policy is a point of sharp contrast between the parties and their presidential candidates.
In the heart of the Corn Belt that August day, Obama argued that embracing ethanol as a substitute for gasoline "ultimately helps our national security, because right now we're sending billions of dollars to some of the most hostile nations on earth."
America's oil dependence, he added, "makes it more difficult for us to shape a foreign policy that is intelligent and is creating security for the long term."

Nowadays, when Obama travels in farm country, he is sometimes accompanied by his friend and surrogate, Tom Daschle. A former Senate majority leader from South Dakota, Daschle serves on the boards of three ethanol companies and works at a Washington law firm where, according to his online job description, "he spends a substantial amount of time providing strategic and policy advice to clients in renewable energy."
Obama's lead adviser on energy and environmental issues, Jason Grumet, came to the campaign from the National Commission on Energy Policy, an initiative associated with Daschle and with Bob Dole, also a former Senate majority leader and big ethanol backer, who had close ties to the agribusiness giant Archer Daniels Midland, or ADM.

http://www.iht.com/articles/2008/06/23/america/ethanol.php






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Agribusiness companies merge in the United States

NEW YORK: Bunge, a producer of fertilizers and a processor of oilseeds, said Monday that it would buy Corn Products International for $4.4 billion to gain a leading position in the market for finished corn products like starches and sweeteners.
The deal, which unites two of the oldest agricultural businesses in the United States, comes as ethanol production, as well as demand for food in developing economies like India and China, is driving up prices for corn.
The agreement calls for the exchange of one share of Corn Products for a percentage of Bunge shares that will have a value of $56 at the closing of the deal. The offer represents a 31 percent premium to the closing price of Bunge stock on Friday.
Bunge said it expected the transaction to lead to annual savings of $100 million to $120 million. Corn Products shareholders will own about 21 percent of Bunge once the deal closes. http://www.iht.com/articles/2008/06/23/business/bunge.php






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Yes, we will have no bananas

OPINION
FIRST OIL, NOW BANANASYes, we will have no bananas
Dan Koeppel is the author of "Banana: The Fate of the Fruit That Changed the World."

Once you become accustomed to gas at $4 a gallon, brace yourself for the next shocking retail threshold: bananas reaching $1 a pound. At that price, Americans may stop thinking of bananas as a cheap staple, and then a strategy that has served the big banana companies for more than a century - enabling them to turn an exotic, tropical fruit into an everyday favorite - will begin to unravel.The immediate reasons for the price increase are the rising cost of oil and reduced supply caused by floods in Ecuador, the world's biggest banana exporter. But something larger is going on that will affect prices for years to come.That bananas have long been the cheapest fruit at the grocery store is astonishing. They're grown thousands of miles away, they must be transported in cooled containers and even then they survive no more than two weeks after they're cut off the tree. Apples, in contrast, are typically grown within a few hundred miles of the store and keep for months in a basket out in the garage. Yet apples traditionally have cost at least twice as much per pound as bananas.Americans eat as many bananas as apples and oranges combined, which is especially amazing when you consider that not so long ago, bananas were virtually unknown here.
http://www.iht.com/articles/2008/06/18/opinion/edkoeppel.php











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