Oklahoma Agricultural Leadership ProgramClass XII Scribe Notes

Brazil International Experience

February 4-16, 2006

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From/To Atlanta, GA

Oklahoma Agricultural Leadership ProgramBrazil International Experience

Scribe NotesFebruary 4-16, 2006

Saturday, February 4 Scribes: Brett Porter and Brian Wiles

FMD Discussion – Dr. Leslie ColeDr. Leslie Cole from the Oklahoma Department of Agriculture, Food and Forestry met us at the OKC airport and spoke briefly to the class about Foot & Mouth disease in Brazil. She mentioned there are 7 different types and over 60 sub-types of this disease and it represents one of the most infectious diseases on the planet. While Brazil is affected, some contamination could be crossing the border from either Paraguay or Uruguay.

FMD poses its biggest threat to US livestock through further cross-border contamination. While the organisms can be killed with either high or low PH, it can survive in products such as meat, sausage or cheese. Class members were advised to avoid bringing back such products, as well as items made with animal skins. Tanned leather was described not to be a threat.

The last case in the US was in 1929 and the last case in North America was in Canada and Mexico in 1953. The most recent outbreak in Great Britain cost an estimated 6 billion Pounds Sterling.

Dr. Cole described a scenario of a US outbreak. It is estimated that US exports would immediately decline 20% and cost the US over 6.6 billion dollars. It would primarily affect beef, dairy and pork production but other areas would also be affected. Sheep and goats can have the virus yet not show any outward signs of symptoms. Pigs can shed huge amounts of the virus. When cattle are affected, decreased production and ultimately death will occur. However, non-traditional livestock such as deer, antelope, llama and even hedgehogs still pose a transmission risk.

The class was advised to always practice good bio-security such as disinfecting footwear, making sure all clothing is either discarded or laundered and using boot covers while visiting farms and ranches in the risky areas.

Sunday, February 5Scribe: Brian Wiles

Oliver Flake – Importance of Brazilian AgricultureWith Michael Sheeann

Mr. Flake is employed by the USDA with the Foreign Ag Service. Their goal is to promote and expand US agricultural opportunities throughout the world and eliminate world hunger. Oliver described the country of Brazil as a vibrant and successful agricultural nation with a tremendous amount of further potential. Brazil’s area is roughly the same size as the US. Agriculture in Brazil makes up 13% of the gross domestic product and comprises 42% of all exports. They currently rank # 1 in the world in orange juice, sugar and coffee production. In tobacco, they are the #1

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producer as well as the #1 exporter. Out of the total land allocated in Brazil to agriculture, 83% is currently used as pasture. They are major players in cotton and beef exports. Ethanol production went from 10 million tons to 16 million tons. In Brazil, 52% of all new cars are “flex fuel” vehicles. That is, vehicles that can run on either gas or ethanol.

The main problems present in Brazil today stem from uncertain currency and exchange rates (weak dollar) and lack of infrastructure. The Brazilian Real has strengthened against the dollar recently. There is very little rail system investment from the government in the country and a huge lack of ports and waterway infrastructure. Most roads in Brazil are either overused and in poor condition or non-existent. It was mentioned that some large producers are not waiting for the government to assist them in shipping routes and are instead building rails and roads themselves. While some farmers are favored in Brazil with low interest rate loans, most are not able to secure inexpensive financing. Interest rates from Brazilian banks are astronomical compared to US interest rates. There is also some concern over squatters and the free land movement (MST).

Mr. Flake described the Brazilian government as willing to take a stand, but having little ability or desire to enforce laws. The judicial system was not spoken of in a positive light and land ownership rights were noted as somewhat arbitrary.

A brief follow up presentation was presented by Jose Luis Campos. Mr. Campos studied agronomy in Brazil and has a very large ranch in the area. A powerpoint presentation was shown which focused on additional information regarding Brazilian agriculture.

Monday, February 6Scribes: Jake Nelson and Steven Clay

AGCOWe departed our hotel in Porto Alegre en route to Canoas city for a tour of the AGCO tractor manufacturing facility. Most of us (American Okies) pronounce AGCO like it is spelled (ág-kōh), but our tour guide (Geraldine) had a habit of pronouncing it differently (ágee-kōh), thus producing some of our chuckles. Canoas city has a heavy industrial presence and much of its labor force commutes from Porto Alegre by train.

Upon our arrival at AGCO, a table of pastries and snacks greeted us along with our hosts Mr. Gregory Riordan, Ms. Thais Carsten da Rosa, and Mr. Naiger. Mr. Riordan began the program with a video presentation (in English) summarizing AGCO’s general operations. AGCO is headquartered in Atlanta, Georgia, USA. Gross sales for AGCO-Canoas are approximately $4.5 million annually. In Brazil, the Canoas facility is the largest for AGCO, and 60% of its production is exported. This contributes to AGCO’s large export capabilities, as evidenced by their product distribution having destinations in 52 countries, which includes the United States. The number one importer of AGCO tractors is Argentina. AGCO manufactures 25% of the world’s tractors under numerous brands including Massey Ferguson, which is the top selling tractor in Brazil. Brazilian production of Massey Ferguson tractors in 2003 reached 500,000. The Massey Ferguson 275 is the highest selling model in Brazil. A second AGCO facility in Santa Rosa manufactures Massey Ferguson combines at the rate of 250 per month.

AGCO asserts they possess and distribute indispensable technology for today’s farmers. This is accomplished in part by the many brands and subsidiaries within the AGCO name. These include Fieldstar, Soilteq, and Auto-Guide. Fieldstar is a GPS-based guidance system, which has components that are physically transferable between various equipment (e.g. - tractor to the combine). This reduces the farmer’s hardware and component purchases.

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Mr. Naiger and Mr. Riordan guided us through the entire production process. Specialized equipment for hardening steel and making precise and accurate measurements was common. The AGCO-Canoas labor force is trained, skilled, and possesses a starting monthly wage of R$1,500/month. The work culture in the facility is evidently more relaxed and “worker-friendly” than most U.S. factories. We observed numerous ping-pong tables located throughout the floor, often adjacent to where much of the work was performed. This allowed recreational time during breaks throughout the day. Conversely, many workers were found to be contently napping during their break. This observation was not too strange, but seeing them nap directly in their work area (e.g. – on the seat of a tractor in the final assembly area) was a bit different. The final portion of the facility tour was at the wastewater treatment area, where the effluent from the restrooms and production processes is collected, treated, and used to maintain a small jungle of reeds and trees near the facility. While we did not actually see any monkeys, Curtis Liles was certain that some resided in the trees.

After the tour the bus drove us a few blocks to a yellow, tin-roofed building surrounded by palm trees, and were served a lunch sponsored by AGCO. The lunch was typical of our trip; a buffet comprised of salads, grilled beef, sausage, rice, beans, some kind of flour that you are supposed to sprinkle on everything, Pepsi, Guarana’, and bottled water (sem gas e com gas both available).

Señor Astor Tornquist’s FarmFollowing the lunch we climbed back onto the bus and rode to Santa Cruz do Sul (do Sul translates ‘of the South’). Similar to Canoas city, Santa Cruz do Sul has a heavy industrial presence, which is due to the success of the tobacco industry in the region. In Brazil, where tobacco thrives, there do other industries thrive. While the bus passed through the town, we were told that the Virginia variety of tobacco is better than the Burley variety, but is tough to manage its production because the curing process coincides with the Christmas and New Years holidays. Accordingly, tobacco farmers growing Virginia varieties assume long hours during the holidays, as the curing process requires 24-hour monitoring.

Our second tour destination was the farm of Señor Astor Tornquist, who is the 55-year-old son of a farmer. Soybeans, corn, rice, winter wheat, oats (cover crop) and black beans are the crops produced. He surface irrigates 53 hectares (133 acres) of land for rice production. Typical yields include 3,000 kg/hectare for beans and 8,280 kg/hectare for corn. The price for corn during our visit was R$17.00/60 kg. Farm-land in this region is apparently a valuable commodity due to location near Santa Cruz do Sul, as Señor Tornquist claimed he would not sell his farm if he were offered R$20,000/hectare. Señor Tornquist was quick to say that the Brazilian government likes to ask the U.S. government not to subsidize U.S. farmers. A technical question regarding his soil fertilization practices was asked, and it was learned that 650 kg of nitrogen (in the form of urea) is added to each hectare as a normal procedure.

Shortly after this conversation, a yellow New Holland corn combine made its presence known in the corn field, which resulted in a near stampede of Okies running to take pictures of the process; as if, they had never seen a combine. Our guide and our translator (Geraldine and Carla) have no agricultural background or experience, and were quite confused by this reaction. Meanwhile, Señor Tornquist rolled his eyes at the Okies as he puffed on his cigarette. The dangers of photographing working combines quickly became evident, as our own Curtis Liles (yes-the same fellow who was watching for monkeys back at AggieCo) received a near fatal blow to his back from a naked corncob that was thrown from the combine at approximately 98 miles per hour. The Okie farmers who were more experienced in chasing working combines laughed hysterically while covering their crotch with one hand and taking pictures with the other. Fortunately, Mr. Liles’ only injuries were a sore back, a pulled groin, suffered while running from the cobs, and subsequent mental distress from monkey nightmares that were to come later in the night.

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Once this excitement was over, we viewed additional combines, tractors and planting equipment. The planting equipment appeared to be modified to fit the requirements of his soil, which impressed Matt Gard, Steven Clay and Brent Rendel. Finally, and on a more serious note, we had a lesson in perseverance, with particular emphasis on personal safety. Before we loaded the bus, Señor Tornquist held up his right arm, which revealed a gnarled resemblance of what once was a hand. He told us that after 40 years of farming, he lost his hand in a combine. At the time of our visit, the injury occurred 1 ½ years ago.

Cachace distilleryWe loaded the bus and headed to our hotel for a quick break, before loading back onto 3 mini-buses for our final trip of the day to a local Cachace distillery. Cachace is an alcoholic beverage derived from sugar cane (recall that ethanol vehicle fuel can also be derived from sugar cane, so . . .). Cachace reportedly has its origins from the Negro populations that came to Brazil from Africa. Straight Cachace (i.e. – shots) is robust, pungent, and quickly clears the sinus cavities. It can also help you reach the next fuel station should your vehicle’s guage reach the empty mark.

The distillery is owned and operated by Lizete and Ulrich Höllerman, with help from their son Alexondre. The name of their operation is Fingerhut (like a sewing thimble), because of the thimble-shaped mountain that must be conquered to reach their very remote location. The process is a typical fermentation process. The sugarcane initially is processed with a diesel powered press, and the resulting juice is approximately 15% sugar at the beginning of fermentation. Like all distillers, Fingerhut has its own and unique “special yeast” for converting the sugar into alcohol. Each specie of yeast contributes slightly varying flavor compounds. Once fermentation is complete, the ‘juice’ is placed in copper pots and heated (gas-fired with propanol) to boil off the alcohol, which is later condensed and collected. Copper is the material of choice for distilled products because of its ability to bind sulfur. If copper is not used, the sulfur is carried with the alcohol steam and bottled concurrently with the alcohol. If you have ever smelled or tasted sulfur you already understand the need for copper pots. The product is then aged for 3 years in oak barrels with a charcoal lining 3 mm thick. After aging, the product is bottled in clear bottles, and possesses a pale amber color. Because of their storage limitations, Fingerhut sells approximately 2 barrels worth of product per month. One metric ton of raw sugar cane produces approximately 40-45 liters of Cachace.

After touring the process, samples were provided for everyone, along with sausage, various breads, and cake desserts. Of course, the opportunity to purchase Fingerhut Cachace existed and was exploited. Finally we returned to Santa Cruz do Sul for meals and evening relaxation. After a round of Cachace, relaxation came easy for most.

Tuesday, February 7Scribes: Leslie McCuiston and Randy Squires

Pioneer Sementes Ltd.We began the morning in Santa Cruz do Sul with Miss Brecia Terra presenting information on the Pioneer seed company followed by general information on the country of Brazil. Pioneer Hi-Bred International is the largest seed company in the world with more than $2 billion in annual sales and a presence in 50 countries. Pioneer Hi-Bred is a part of the DuPont group and was established in Brazil in 1970. They provide a variety of seeds to the agricultural industry including corn, soybeans, sorghum, sunflower, alfalfa, canola and forage. Their presence in Brazil has grown over the last several years now with 370 full-time employees and 98 sales representatives. They boast of being the leader in high technology corn and hold nearly 40% of the current market share in this area.

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After a brief history of Pioneer, Brecia presented us with some facts and figures on the Brazilian agricultural economy.

Brazil holds 13% of the water on the planet Has 388 million hectares of fertile land with 90 million still not explored (these figures vary

widely depending on the presenter) Of R$3, R$1 is generated in 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 Population – 182 million GDP - $1.3 trillion GDP/capita - $7600 Consumer price inflation – 8.3% Unemployment rate – 6.4% Population below poverty line – 22.0%

Though Brazil currently lacks the infrastructure to move crops and livestock efficiently, there are many multi-national companies investing in railways and waterways to encourage production in certain areas. Because of generally lower input costs (with some exceptions in chemicals) the additional cost of transportation becomes less severe. For this reason, Brazil is a large competitor in the export market for many grains as well as fuels. The meat industry continues to flourish in Brazil with expansion specifically in the pork and poultry industries. Beef production is also seeing growth, with great strides made in export markets.

After the presentation, we joined Micaela Carrico and Ivanir Bedin on a short tour of the seed processing facility. This particular day they were bringing in seed corn. We watched the processes of unloading the trucks, shucking and removing seeds from the cob as well as the process of sizing and sorting. Many commented how the technology for seed sorting was identical to older methods used in the States.

Universal Leaf TobaccoOur next visit was to Universal Leaf Tobacco’s sorting and storage facility. Here we saw how producers will bring in approximately 320 bales per truck that can consist of more than 40 different grades for producer pay. Internally the company has more than 100 grades for tobacco. The particular facility we visited processes 800 tons/day in an 8-hour shift. Virginia and Burly tobaccos were produced in the region with harvest from November to March. We then moved on to the research facility for Universal. Here they produce more than 95% of the seed to be used by all of the 55,000 producers of Universal breed tobaccos. The facility produces 2000 pounds of seed and keeps a two-year inventory on hand in case of disaster. One gram of seed contains 11,000 tobacco seeds. On average each hectare will be planted with 2.5-3 grams of tobacco seeds. According to the representative from Universal the seed is very expensive, yet it only takes approximately 3 kg/hectare to pay for the seed and a good farm can produce 2500 kg/hectare. The seed is planted in beds and protected for the first 60 days until the seedlings are ready to be transplanted into the field. We were able to visit what would be considered an average size farm at Mr. Jose Afonso Rippler’s. He farms about 4 hectares though he sharecrops a total of 20 with his neighbors. One could see the determination and hard work in the faces and hands of Mr. Rippler and his family. Mr. Rippler had a simple walk behind plow and commented how he preferred to till the land with oxen as it did less damage to the earth. He was working diligently to improve his income on a potentially lower quality crop through his drying and sorting methods. His hope was to separate higher quality tobacco and deliver it separately from

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the more damaged portion of the crop to maximize his potential profit. One could see he took great care in both his work and his home.

Wednesday, February 8Scribes: Curtis Liles and Burke Covey

Pantano GrandeWe began the day with breakfast at 6:00 am and checking out of the hotel by 7:00 am. We left the beautiful city of Santa Cruz do Sul for Pantano Grande, to visit the cattle farm owned by the Jose Luiz Campos family. Jose had talked to us Sunday night in Porto Alegre. He works for a banking institution in Porto Alegre that specializes in agricultural loans, I would say similar to Ag Preference or the old Production Credit Association system in the U.S. Banks have to loan 25% of their portfolio to agriculture enterprises. The national interest rate is 18.5%; yes that is correct 18.5%. This is like our federal fund rate, which is currently 4.5%, then banks add on to that rate up to 100%. Bank CD’s pay 18%. Half of his Ag loan portfolio is on non-accrual basis due to the drought. We later learned that the Government has imposed a 5-year moratorium on farm foreclosures, trying to allow the farmers to work things out. As you can imagine, with these interest rates not many people can afford to borrow any money. Consumer debt is almost unheard of. We did notice in the shopping malls later in the week that most stores offered in store financing of 5 monthly payments for most items. We assumed the consumers use this instead of credit cards.

We drove about an hour and a half in our luxury coach to reach his farm. This farm and ranch, (they never use the word ranch; what we would consider a ranch is always called a farm in Brazil) is comprised of 7,500 acres. It has about 514 acres of soybeans, 450 acres of rice, and runs between 2,500 – 3,000 head of cattle. They have 419 sheep and 54 Creola horses, which are similar to the American Mustang. They have a stocking ratio of 1 cow to 2.5 acres. They run the cattle on the pasture for about 5 years then spray Round up and plant to soybeans or rice and then back to pasture. They plant rye grass and white clover. The last two years this area has suffered a drought, the worst in 60 years. We all laughed because it is very green and water is everywhere compared to bone dry Oklahoma. Jose explains that they have just had a large rain in the last few days. He explained that they have not made any money in soybeans over the last two years because of the dry conditions, but they did on the cattle and the soybeans work into their pasture rotation.

These soils here are 2 feet deep. They do not have any soybean rust problems here in the South of Brazil because of the dryer conditions. They use P and K fertilizers, they put N on the 2nd – 4th years. They use about 220 pounds per acre. In Mato Grosso, where we will visit the huge farms next week, they use 2 –3 times as much but don’t have to irrigate like they do here in the South. Here they average about 36 bushels/acre for soybeans, in Mato Grosso they average around 40 – 50 bushels/acre. Jose does not have any on-farm storage capability but uses the local Co-op system. They use 18 inch row spacing in their planting. They have used no till practices for about 6 years now. He makes more money off of rice than anything else; sometimes 50% of the profit for the entire farm comes from the rice crop. They use gravity flow irrigation out of their own lakes. The field we visited had been in production for 28 years.

We moved on to look at this cattle production. They breed 2 yr heifers by artificial insemination (AI) with Hereford and Braham crosses the 1st year using Brazilian semen.Then with their own natural bulls the rest of their life, 10 or so years. They use the best 50 – 60 heifers mated with 1-year-old bulls and get about a 95% pregnancy ratio. They normally keep 70

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– 80 bulls, and then reduce down to about 35 to use for breeding and sell once the mating season is over. The bulls are sold at a Public Auction. Slaughterhouses purchase the steers; their representatives come to the farm to buy.

Jose can trace the genetics of his herd back for the past 25 years. They just watch the heifers during a 60-day breeding cycle to AI; they don’t use any artificial cycling inducements. The Hereford bloodlines are used looking for small birth weight and early puberty for females. AI is used to bring in new blood to the farm. They start weaning in January, separated by weights, feeding the smaller one’s grain; the very smallest are put back with their mothers for a couple more weeks. They use ear tags and paper records in the pasture and the keep everything on a computer. The Government has their own electronic tags for trace back I.D., they cost about $1.50 each. They do have pink eye problems but not flies. They dip the cattle about once a month to control the flies. The pastures here look like around Sulphur, Okla., with rolling hills, small lakes and a few trees.

We moved on to the rice fields, he has 450 acres of rice. They have just started to use no-till in the rice production. Jose produces about 2.4 tons per acre. The average for Brazil is around 1 ton per acre, but most is non-irrigated, while Jose’s is all irrigated. They planted this rice crop in October, about 4 months ago, they plant on dry land, and after 10 – 12 days they start flooding to control the weeds. The rice is not genetically modified (GMO), but his soybeans are. They use a laser leveler from a neighbor. By using no-till the berms are still in place when they rotate back into rice after 4 years of pasture. Seed, fertilizer, water and herbicide are the main inputs for this crop. They will harvest this rice crop in about a month, during March. They usually plant around 60 pounds to the acre, 80 pounds if pre-germinated.

While we were looking at the rice crop our bus tried to turn around in the pasture and got stuck. So here we are in the middle of nowhere, hours from the closest town and our bus is stuck in the mud. Never fear, they got a tractor to come pull us out and back upon the road.

We asked Jose about the history of his farm, we always found this interesting everywhere we visited. He said 4 or 5 generations ago it was a much larger farm, around 75,000 acres. It was divided up between 3 brothers. One brother needed money and sold his part to an outsider, causing a division in the family. His Grandfather and Grandmother were 1st cousins and married joining their portions of the farm back together. Other cousins still own the rest of the original holdings. His Grandfather was a doctor, his father was a lawyer. The Grandfather got sick when his father was fairly young and had to come back to run the farm. He knew nothing about the farming operation and had to learn from the gaucho’s how to manage the farm. He first started farming rice and now soybeans. His father now lives in Porto Alegre. At one point they had 25 employees, now only 10. After the Real (Brazilian dollar) was devalued in 1999 they had to cut back and eliminated employees that were used to show cattle, horses, and sheep at the Southern Brazil Expo. We asked Jose how the family originally got the farm; he thought they had conquered it, we thought this was unique. I was also surprised by how little he knew about the origins of the farm, it was if he was guessing.

Jose has a separate manager for both the farming operation and the cattle. Many times when we would ask a specific question he would have to refer to these managers for the answer. I would call him a gentleman farmer. Jose was dressed in fancy gaucho pants, high boots and a flat brimmed hat. His cattle manager was dressed similarly, but not in as nice of pants and his pants were tucked inside his high boots. His farm manager was dressed like all of the true farmers we met, shorts, a tee shirt and flip flops with a ball cap on his head. I couldn’t believe it.

Calanha Catanduva farmAfter we left the Campos farm we drove towards the Calanha Catanduva farm. We stopped at a truck stop to have lunch, special BBQ. Now if you didn’t know it... Brazilian BBQ is different from American BBQ. There is no sauce, just a variety of meats grilled over a flame. Beef, lamb, pork,

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and chicken hearts on skewers are brought to your table and sliced off onto your plate. First you help yourself to the buffet of lettuce and sliced tomatoes, green beans, carrot slices, cole slaw, potato salad, white rice, black beans, beets, fried banana, corn, pea, and carrot vegetable mixture, half of a boiled egg, papaya, watermelon, spaghetti noodles, liver and onions, baked chicken, pineapple and many other things I couldn’t identify.

Another Farm VisitAfter lunch we went on to another town to meet the next farmer. All the farmers drive little cars, not pick-up trucks like we have in the U.S. We followed him out to his ranch, which was about 45 miles from town on a dirt road, but first we had to cross a river on a ferry. Now when I heard the day before that we were going to cross a river on a ferry I just assumed it would be a large ferry that would haul 15 or 20 vehicles. In fact I had studied the map trying to figure out where the highway would cross a large river that would need a ferry; little did I know that when we reached the river on a dirt road the ferry was not much bigger than our bus - this was the ferry we had been told about. Now my background is an Insurance Underwriting Manager, you know the type, I always think of the absolute worst case scenario, that is my job as a risk manager, to identify all types of risk and then analyze the way to avoid or transfer the risk. I can’t sleep most nights because I am worrying about bird flu, tornados, hail storms, wild fires, and lawyers. As we slowly pull the bus onto the ferry I am thinking, this is like putting an elephant in a canoe, we need to get off of the bus NOW!!!! I don’t want to be inside this bus when the ferry capsizes and I am upside down underwater in this bus looking for a way out. Finally when we are about a third of the way across the river they let us out of the bus onto the ferry. I think Dr. Joe was afraid if he let us out any sooner we might have refused to cross the river at all, now it was too late. We had to pay $5.00; the normal fare was 50 cents. The sign said there was a 33 ton and 12 passenger maximum limit, I am sure we exceeded both, but oh well, this is Brazil, where rules are just suggestions not expected to be followed, that was one of the differences that our tour guides told us about Americans and Brazilians, just like stop signs. Brazilians think that means stop if no one else is coming.

At the Calanha Catanduva farm they raise champion Red Angus. This farm has been in operation for about 15 years. It contains 2,500 acres and is owned by a lawyer that lives in Porto Alegre. Our tour guide told us that he won a large case and purchased this farm with his earnings from that one case. This farm reminded me of Express Ranches in Yukon. He also owned another 5,000 acres in Uruguay, which is not too far South of here.

They have 300 pure bred cattle. They have King Rob’s son, which is the Grand Champion of Brazil. They produce bulls, semen, and embryos for sale; no cattle are exported from Brazil. They use the genetics that produce the best meat in the world and that are adaptive to this hot weather climate. They also have 150 acres of rice and corn. They conduct 2 auctions a year and bring in about $500,000 in revenue a year. The farm manager said he would like to reduce his herd to about 100 and use it exclusively for embryo transfers. They raise the cattle on improved pastures with fertilizer; they plant milo and corn for silage in the summer, alfalfa, legumes, and rye grass for winter.

Their top selling bull was sold for $50,000, but now are trying to sell a 50% interest in a bull for $37,500. Their top selling cow was sold for $75,000. The farm manager thinks that this is one of the top three ranches in Brazil. He thinks the property is worth $2.5 million and the animals are worth $1 million.

This farm is a showplace. All of the barns and cattle shades have red Spanish tile roofs. The main house is two-story stucco with the same red Spanish tile roof. They have a swimming pool and a pool house where we were served refreshments. There is no air conditioning. I noticed one small window unit in an upstairs window, probably a bedroom. The doors are all open and slide shut, no flies or bugs to speak of.

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The manager is dressed in boots with his jeans on the outside, a polo shirt with no hat. The gaucho’s all have on traditional gaucho pants tucked in knee high boots, and flat brimmed hats. The manager’s two sons are home from college, they look very urban with cargo shorts, sport shoes, polo shirts, and dark sunglasses.

We look at several different herds of cattle and then Richard “Tex” Hall decides he wants to ride one of the horses. They let him mount up and we all take photos of a real American cowboy on the gaucho’s horse. Tex has made a new friend in Brazil and everyone has a good laugh.

BageWe leave this farm and drive the long way on to Bage. The bus driver decided he didn’t want to cross the river on the ferry again, thank God!!! We traveled for four and half hours before arriving in Bage. We have been warned that Bage is very dangerous and not to leave the hotel. We have another buffet dinner in the hotel. This town is very dirty and poor, very much like old Mexico. After dinner several people go across the street to a drug store. While Dr. Joe and Mrs. Williams are in the drug store Joe steps out and onto the foot of a man who was walking down the sidewalk. The man immediately starts complaining about his foot, he sits down and is rubbing his foot, asking for money so that he can get something to eat. I see an international incident coming. Carla, one of our tour guides is summoned to interpret and finally Joe is able to leave the drug store without being harassed by the man. We all had a good laugh at Joe‘s expense and continued to make jokes for the rest of the trip about Joe’s misfortune.

That was an exciting end to a long day!!!

Thursday, February 9Scribes: Tex Hall and Justin Rogers

BagéA reasonable wake up time after a long bus ride the prior evening found us ready to discover what the area in and around Bagé held for us. Bagé is an agricultural town with mostly low buildings instead of many high rises. It is a growing area and had several new apartment complexes on the edge of town. Interestingly enough, this was the first time that I noticed grain silos similar to what we’re used to seeing in the US. These silos were along railroad lines as we’re used to as well. Silos in other areas of the country that we’d seen up to this point were smaller single or double units, were privately held, and had no rail lines available. On this day we visited three places; MERCOSUL, EMBRAPA PECUARIA SUL, and the Guatambu Farm. We started our morning off with a tour of the MERCOSUL slaughter facilities with no apparent impact on our earlier breakfast activities.

MERCOSULAn operational packing plant since 1932, MERCOSUL took over these facilities in 1998. MERCOSUL has seven plants in this state – Rio Grande Do Sul – and many others nationwide. The company supplies meat for domestic and export markets. This facility is able to export beef to the European Union (EU). Capable of handling 750 head of cattle per day, the plant has about 150 employees. There are two processing shifts and one cleaning shift per day. The fabrication process is all by custom orders for different carcasses. The on sight processing that gets the cattle to fabrication is fairly straight forward. The MERCOSUL-to-farm relationships, various premiums, and political involvement are a little more convoluted.

Although there are live video auctions on television using live weights, the standard seems to be that farmers are paid for their cattle based on carcass weight instead of live weight. MERCOSUL pays ‘Quality Premiums’ for: larger cattle, a youth/size combination, and cattle type. They also pay a bonus to the farmer if the carcass weight is 130 kg (~285 lbs) per half or greater. Most of

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the cattle are an average of three years old when they are brought to slaughter. This factor has influenced some of the research done on a federal level. While English breeds of cattle are more marketable and have a better return, MERCOSUL also gives good prices for the Zebu breeds as well. Since there are many more Zebu and Zebu-cross cattle farmers than other breeds, those farmers have demanded higher prices for their cattle from the government. The government along with the international market influences cattle prices. Regardless of cattle type, the farmers can choose to have an exclusive contract with a packing plant, or they can shop each time they go to market. The exclusive contract gets the farmer a loyalty premium from the packer.

The packing plants schedule cattle for delivery four times a year for contracted cattle. These known cattle loads increase MERCOSUL’s efficiency and help to eliminate large surges or downswings in their processing schedule. They check all cattle documentation for traceability, whether they are contract cattle or not, twenty-four hours prior to slaughter. An Agriculture Ministry representative also conducts a federal inspection. Cattle trucks are sanitized after unloading with a special chemical to control foot and mouth disease. Upon arrival, MERCOSUL employees conduct a visual inspection. Then they sort the cattle by size and sex since the females tend to be more stressful if they’re in with the males. All cattle are held on the plant grounds without feed for twenty-four hours prior to slaughter. Downer cattle are transported off site and discarded. Any diseased animals are the last to be slaughtered during a production run to mitigate the risk of any possible contamination. Generally, a veterinarian will accompany cattle loads from the farm through the processing. He’ll observe processing and take pictures and video for further documentation for the farmer.

Processing is very similar to US methods from several years ago. The workers don’t appear to have some of the protective equipment that is common in the US. They do have a system to shock the animals after killing to help drain all the blood. There is another federal inspection station early in the processing sequence. All offal, minus Specified Risk Materials (SRM), is rendered for dog food. Because of BSE concerns, all SRM – spinal cord, brains, eyes, other organs – are removed and burned. The carcasses are stamped with codes for special fabrication or age and hung for at least eleven hours at 7° C before fabrication. The federal government seals the coolers and controls both time and temperature. In a flurry of activity at the magic time, the carcasses are brought out and the custom fabrication process begins.

The average price to the farmer is around 3.5 Brazilian Reals per Kilogram. Roughly $0.80 per pound if you use 2.2 Kilo/pound and assume $1.00 US = 2 Brazilian Reals. On the average, their dressed weight is about 50% of the live weight (they didn’t differentiate between Zebu and British cattle in their yield estimates). We didn’t get any information on MERCOSUL’s income from the offal. One interesting side note for me is that since Brazilian beef is primarily grass fed, there should be no risk of BSE in their herd. They have no animal proteins in their feed. The organs that are normally SRM should therefore be safe and available for a secondary market. Regardless, they discard all SRM. Paying the farmer for carcass weight increases the probability that he’ll work towards better performing genetics. It could eventually be one factor that changes feeding operations and genetic makeup in the future.

EMBRAPA PECUARIA SULAlthough part of the name translates roughly as “Southern Cattlemen”, EMBRAPA is a Federal Agricultural Research center for more than just cattle. With European style buildings at the headquarters, EMBRAPA traces its roots back to the “Five Crosses Farm” which was an experimental farm where the Brangus-Ibaje cattle started. Now with over 2700 Hectares (over 6900 acres) and 25 research scientists, EMBRAPA is one of the largest of 40 Agriculture Research units. Their program has expanded to include studies on tick born diseases, internal parasites, forages, gene identity for highly prolific sheep, conservation of the Crioula sheep, and an evaluation program for Hereford and Angus cattle. In addition to this research, they also do land transfer research which is very important to land owners given the past problems with establishing title. A primary focus on the farmers needs gets us to thinking of the services that

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our Extension Services provide us state side. Even though Brazil is still a developing country, EMBRAPA has an up-to-date satellite link with the other federal research stations. Their mission is to develop technological techniques to enhance sustainable agriculture. To work towards that goal, EMBRAPA owns some live stock and has farmers who are cooperators.

EMBRAPA has about 400 head of cattle used for breeding research only. They are doing genetic testing on pasture fed beef cattle that is similar to what is being done in the US on grain fed beef. The bottom line is looking for the best performing genetics on the desired feed. Our briefer mentioned his work in the past with an OSU researcher on the project. While the bulk of the research is done on the Experiment Station’s herd, the cooperating farmers have a technical representative on sight to get first hand information from EMBRAPA. Cattle in the test group can be in the program up to 550 days and range from 14 to 18 months of age at the end. Average daily gains have been about one Kilogram or 2.2 pounds per day. Focus recently has been on Brangus cattle. A genetic trait they’ve been tracking is sheath position in the Brangus bulls because of its importance to that breed. Red pigmentation in cattle is an advantage during the eight months of hot weather. In Argentina that has translated to more Brangus cattle than Braford, while Brazil has more Braford than Brangus. Regardless of the type of testing that EMBRAPA does, all test data is given to the farmers for them to make their own decisions. Since forage data is included, the farmers can also bring that variable into play on what works best for their particular herd.

In the field of pasture nutrition, they are working with 400 species of forage as well as 60 or so types of legumes. Their goal is to have the earliest possible production from their heifers. The majority of their cattle go to market as three year olds. Early production is very important to producers, and EMBRAPA is working toward heifers that calve at 18 months of age. To do this, they are providing some protein supplements and salt for the winter months at the rate of about 1 Kilogram/cow/day (~2.2 lbs/cow/day). The need for high quality pastures and the government requirements for keeping forested areas has driven research for shade tolerant forage grasses.

The forage crop test team is headed up by an agronomist who got his Masters degree in Brazil but went abroad to get his PhD in New Zealand. Since there is a growth of integrating trees such as Eucalyptus, Acacia, and Pine into croplands, the forage team has a facility that tests differing forages in full sun, 50% shade, and 80% shade using an artificial shade producing screen. Another test project uses only Pine trees for shade to test different forage. They expect to integrate grazing animals in that test in the next two years. Eucalyptus trees are another crop with a fifteen year cycle for wood products and an eight year cycle for pulp products. However, environmentalists don’t like the Eucalyptus tree plantations even though researchers, farmers and the government see tremendous value in them. With a density of around 1700 trees per hectare (680/acre), Eucalyptus plantations are a sustainable system that involves more people in agriculture. The government funded research on shade tolerant forages will enhance productivity of those lands if they can be grazed also.

After we sampled the local forage in the cafeteria, we visited the sheep reproduction facility. EMBRAPA researchers are working on increasing the reproductive rates of sheep through genetics. The primary method for this is through studying and testing the BooRoola mutation. This is one among several naturally occurring genetic mutations in sheep. The BooRoola mutation causes increased ovulation rates though more but smaller follicles. It was found among sheep in Australia in the 60’s, migrated to New Zealand, and was then imported to Brazil. Researchers at EMBRAPA have a ewe with a homozygous BooRoola mutation that birthed four lambs. This ewe is kept for research only as the homozygous trait itself isn’t specifically desirable. While triplet lambs increase herd size and income, research has shown that most farmers have problems if more than 10% of their herd has triplets. Research yielded the ability to conduct DNA testing on lambs for the presence of this mutation. New Zealand data indicates that ewes with the genetic mutation for BooRoola are worth about $15 (New Zealand) more than those without the mutation. To conduct all of the research on lambs, EMBRAPA relies heavily on

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Artificial Insemination (AI). This made their AI system very efficient and easy. They can inseminate 20 ewes from the semen of one ram in about ten minutes in a non-surgical procedure. A combination of sponges and prostaglandin bring the ewes into heat so that they can AI 20 to 40 ewes per day. They have about a 70% conception rate with their program which provides an efficient group for testing. Some members of our class took the opportunity to count some sheep on the bus ride from EMBRAPA to our next stop.

GUATAMBU FARMWe were greeted at GUATAMBU Farm by the owner, Walter Potter. Since being founded by his father in 1944, Polled Hereford cattle have been a mainstay at GUATAMBU. Born there in 1948, Potter came back to the 10,600 Hectare (~26,500 acres) farm after his studies in Veterinary medicine. In addition to his two daughters who are both agronomists, the farm has about 40 employees. The employees live in town and the farm provides transportation to and from work because that’s just the way it’s been done – he seems to feel it’s his responsibility to make sure the workers have a way to get between work and home. In addition to cattle, they farm rice, soybeans, forages, and sorghum. He also has a feedlot for younger cattle during the winter months. His cattle are for slaughter as well as for reproduction, and provide around 50% of the total farm income. Of the 1500 Hectares (~3750 acres) of rice in production, Potter fully owns half and has a partner who co-owns the other half. He irrigates the soybean and rice crops, but the sorghum does well without irrigation. The past two years have been drought-like conditions in the area. While the average rainfall is normally 1700 mm per year (~67 inches), they had had only about 100 mm (~4 inches) during one six month period. The “Socialist Government” trying for cheap food and driving prices down added more pressure to farmers because of decreased margins for the farmers, according to Mr. Potter.

Potter says the key to his business is the successful integration of cattle and crops. His cropland is nearly exclusively no-till, and he practices stringent rotation of crops and cattle. The rice paddies become pastureland after harvest. Ryegrass and legumes are planted and that land becomes pastureland for three years before going back into crop production. In this way he can run about 200 Kilograms of beef/Hectare/year (~175 lbs/acre/year). His heifers get bred at around 14 months of age so that they are around two-year-olds for their first calves, similar to most operations in the US. He has two lines of cattle for the slaughter market: twelve to fifteen month old cattle that have spent some time in his feed lot, and fifteen to twenty-four month old cattle that are strictly pasture fed cattle. He gets good premiums for his quality cattle at slaughter. His top animals generally get five to six percent more. Potter says the average payment is about $0.80 per pound of carcass weight – same as the information we got from MERCOSUL. His Hereford cattle are destined mainly for the export market, while his Zebu are primarily for domestic consumption. Potter grows the grains that are fed to the cattle in his feedlot. He stated that those who grain cattle do so from their own production and are not bought feeds primarily because of costs. Diversity is a repeated theme on this farm.

While his rice is all irrigated cropland, some of the other crops are dry land farmed. Irrigating his excellent soils give him a soybean yield of 3000-3600 Kilos/Hectare (~2600 to 3200 pounds/acre) while his dry land soybeans get about half that yield. He averages around 9 tons/Hectare (~3.6 tons/acre) from his rice fields. He believes that the state funded research program will allow him to increase production to 10 tons/Hectare (~ 4 tons/acre) very soon. As an increase in the planned diversity of the farm, GUATAMU added grapes three year ago. The region is one of the best in the state for wine production, so they expect their 2 Hectares (~ 5 acres) of grapes to increase in the near future. All of these crops have one common element that is essential for good production: water.

One of the ponds that Potter had built not far from the main house is 160 Hectares (~400 acres). They use surface water for irrigation since the ground water is too salty. He irrigates about 500 Hectares (~1250 acres) of rice and 1500 Hectares (~3750 acres) of soybeans. His four Center Pivot (CP) irrigation systems had high upfront costs, but one large advantage to having a CP

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system is that the parts dealer is close. The electrical cost for the CP systems is around $0.50/mm/Hectare (~$5.10 per acre-inch). But the irrigated lands have yields of nearly twice that of non-irrigated soybeans. The crop-to-pastureland rotations are evident throughout the farm. This particular part of the farm has 30 paddocks of about 30 Hectares (~75 acres) each. Potter has a very stringent and disciplined pasture monitoring program. Cattle are on a paddock either from five to seven days, or from seven to ten days. Some of the variables in that decision process are the pasture’s status in the crop rotation program and actual pasture conditions as evident through inspections. Paddocks in the rice crop area are around 150 Hectares (~375 acres) and have similar conditions for rotating crops and pastureland. The only crop land not mentioned to be in any kind of rotation is for grapes.

GUATAMBU Farm expects this first year of grape harvest to be exceptional. They are predicting high sugar content and therefore will command a high price because of that quality. They started grape production three years ago in an area that is the best region for wine production and expect to expand in the coming years. Right now they are just selling the grapes to other wine producers. About 1000 Kilograms (~2200 lbs) will go to a local producer and another 2000K (~4400 pounds) are for a large wine business some 600KM (~360 miles) away. We can expect to see future growth in number of Hectares and other operations related to grape production based on what they’ve done with other crops. For example, GUATAMBU has their own silos to dry and store some 5000 metric tons of soybeans from their own crop. Wood fires provide the heat for drying the beans. About 90% of their soybean buyers are exporters, whereas only about 10% of their rice buyers are exporters.

The rice paddocks are about 150 Hectares (~375 acres). Economy of scale drives paddock sizes with water being the main costs. We were able to see fields that were nearing harvest as well as those being built for rice production. Fields are prepped with herbicides, terraces are formed, and then Potter uses GPS and laser levelers for final preparation before planting. Irrigation of the crop is done by pumping water to the highest part. Gravity flow in the fields that have about a five centimeter (~2 inches) difference between ponds gets the water to the entire crop. The fields that will be harvested at the end of March will be sown for winter pasture for some 8000 head of cattle. Potter uses his own tracked machinery with a 16ft wide header to harvest. Production costs are an estimated $1000 - $1100 per Hectare ($400 - $440 per acre). Recent prices have been about $9 per 50K bag (110 pounds) down from $12 per bag. Rice is hard to export because, in Potter’s perception, it is the most government protected crop in the world. About 40% of those selling prices go to the government in the form of taxes for “roads that we don’t have, and schools that we don’t have” according to Potter. While many of Potter’s comments on the federal governments’ role in farming were less than favorable – another universal perception – he commented on recent favorable government actions dealing with a group of landless people called the Movimento Sem Terra (MST).

A group of local farmers organized to repel the MST from Potter’s land. In the first ever injunction against the MST, the Minister of Justice authorized use of force to remove them. A group of about 1500 farmers with police support were able to remove the MST from his farm. Potter stated that the MST looks for premier properties to invade in order to garner headlines for their cause. The farmer organizations are multi-level and have other purposes other than to fight against the MST. Local cooperatives of three or four towns with about 1,000 farmers per town are the local level associations. There are also local level unions for cattle, rice, soybeans, etc. Above each of these types of organizations are state level federations. On a national level, the National Confederation for Agriculture (CNA) is in the Federal Capital to better voice farmers concerns and needs to the federal government. In a tremendously cooperative effort from all levels of these organizations, about 25,000 farmers formed a “tractorcade” to the Federal Capital. That first event resulted in the federal government buying half of all the excess rice that is produced above what’s needed for export. Potter is one of the organizers of the farmer organizations and states that Joset Serra is the next presidential candidate that they support.

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Our political discussions ended at the rice field and we traveled to his young bull pasture for one last look at his diverse operations.

Potter has a separate pasture for his young 2 ½ year old bulls. He usually sells about 200 bulls a year as two year olds. He gets an average of $2000 (BR or about $4500 US in his estimation) for those bulls that he sells. He keeps the top 50 of the 250 for production using natural cover. His bulls are usually in production for about 60 days, and he keeps them until they are three year olds. One bull has 30 cows to service on average. Twenty-one years of working with EPD data has put some scientific objectivity into his decision making process on which bulls to keep. GUATAMBU has recently started AI on their own heifers using their own genetics. He pointed out the Yellow Hopper – a cousin to alfalfa – in the young bull pasture. This crop is seeded by airplane. We didn’t get the production costs of that part of the operation.

Overall the visit to GUATAMBU Farms was extremely interesting and informative. While many of us had seen the video clip about the MST sent out by Brent Rendell before the visit, it was good to hear a perspective from someone who had been targeted by their actions. But overall, diversity seemed to be the defining word for GUATAMBU. Diverse crops and diverse actions with and among those crops keeps the farm moving forward.

Friday, February 10Scribes: Barbara Gilbertson and Julia Laughlin

Bage’ – Porto Alegre – Rio De Janiero

Friday was mostly a day of traveling and shopping for us.

At 7:00 am we checked out of our hotel and departed for Porto Alegre. We traveled by bus for approximately 5 hours and arrived at a shopping mall in Porto Alegre around 1:00 pm. At this point we separated into smaller groups for lunch in the mall and souvenir shopping.

Many of our class, although experimenting with and enjoying the traditional foods of Brazil, headed straight for McDonalds. It tasted just like home!

We left the mall about 3:45 and visited a small stone, gem and crystal shop in Porto Alegre. Many class members found amethysts, sapphires, citrine, aquamarine, topaz and emeralds to take home from beautiful Brazil.

After shopping, we loaded on the bus again and left for the Porto Allegre airport. Our flight into Rio De Janeiro left at 7:20 pm.

We arrived in Rio at 9:10, picked up our luggage and checked into our hotel. We stayed about one block from the Copacabana beach at the Hotel Copa Sul. We once again split into smaller groups and found various restaurants on the beachfront to have a late dinner.

Saturday, February 11Scribes: Matt Gard and Nikki Snider

Tourists in Rio de JaneiroThe group woke to a cloudy, rainy day for the tour of Rio de Janeiro. Some of the main crops for Rio was gold, coffee, and of course sugar cane. We were just 25 of the over 2 millions visitors when we started with a bus tour of some city sites and made our way to Sugar Loaf Mountain. We took a cable car to the top of a smaller hill, Morro da Urca, and then took a second cable car across to Sugar Loaf. Urca is just 220m above sea level and Sugar loaf is 396m. The cable car

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system was the first cable cars in the world. Now there are only about 32 active cable cars left. The view of Rio from the Mountain was incredible, at least what we could see through the clouds. At the top of the mountain there was time for some shopping and we left just as the rain really started coming down.

Sugar Loaf Mountain was named as such when there were a great deal of sugar cane production in the area and locals thought the shape of the mountain looked like the ‘loaves’ of sugar they were producing.

Our next stop was the Maracana Futebol (Soccer) Stadium. This stadium was built for the 1950 world cup soccer games. This is one of the world’s largest stadiums and seats 90,000 people comfortably, but held over 180,000 in 1969 when Pele made his 1,000th goal. We toured the Feet of the Famous, (think Hollywood Walk of Fame Brazil style) where the footprints of the greatest soccer players were put in the cement around the stadium. Several group members then toured inside the stadium and enjoyed a soccer exhibition by a former member of the Rio team.

On our way to lunch we saw more sites of Rio including the old ministry of War from the Portuguese monarchy, local parks, and the parliament of Rio (the city government).

We also visited the main fareway for the Carnival. This was like a narrow street where carnival would start with the lavisous costumes and the King and Queen of the party. I think this area was called the sambadrome. There we visited a gift shop and had some pictures made in a cardboard cut out pretending to be the King, or in some cases the Queen!

A BBQ lunch was served at Estrella do Sul (means the Star of the South). What a great gastronomical pleasure this meal provided. The restaurant was very fancy and included a large salad bar and, as usual, the waiters bringing BBQ meat to our tables on skewers. There was also a live piano player.

After lunch, we made our way to Christ the Redeemer statue. We enjoyed a reprieve from the rain and the beautiful scenery during a twenty minute train ride up the side of Corcovado Mountain. The statue sits at an elevation of 710 meters and the black granite base is 8 meters tall with the statue reaching another 30 meters tall.

The size of the statue was quite overwhelming. Luckily the clouds cleared out just long enough for us to get some photos with the statue but we were not able to see the wonderful view of Rio from this elevation.

The statue was built in 1931 with donations from the local catholic community. The purpose of the statue is to protect the city.

The visit to the statue concluded our tour of Rio. Upon returning to Copacabana we enjoyed an evening of dining along the beach and shopping at a local craft fair.

Sunday, February 12Scribes: Scott Engelbrecht and Mike Schulte

Travel from Rio de Janeiro to Cuiabá to RondonópolisAfter two long days (and nights) in Rio a 4:30 a.m. departure was, to say the least, unpopular. However, with several hours of bus and air travel ahead of us, our belief was that there would be plenty of opportunity to catch up on sleep. Little did we know at this point that the air and bus travel in store for the day would be remarkably eventful. Stress levels began their upward climb

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when we encountered two failed attempts at landing in Campo Grande due to heavy fog and had to return to Sao Paulo. Upon arrival at Sao Paulo, we were very efficiently re-routed to another flight that would take us to Cuiaba by way of Brasilia. Nearly twelve hours after departing from Rio de Janeiro, we finally touched down in Cuiaba.

As we disembarked from our plane, we encountered the intense 93° heat and humidity of the capitol city of Mato Grosso do Sol. However, even this felt comfortable after climbing into our 98° bus! After a short drive through town we arrived at the Hans Bier Restaurant, an outdoor German restaurant and microbrewery. The opportunity to relax, enjoy non-airplane food and have a cold drink was a pleasure.

After dinner, we again boarded to bus to travel to Rondonopolis to check into our hotel. After a long day of traveling, the popular intent was to catch up on much needed sleep during the commute. However, it quickly became very evident that the Mato Grosso department of transportation was severely under-funded as our bus driver weaved his way over, around and through a virtual land mine field of potholes for nearly two hours. Audible gasps were often heard from the group as our seemingly top heavy bus swayed rather violently from side to side. Needless to say, there was little rest acquired on this leg of our journey. Finally we arrived at our hotel in Cuiaba extremely travel weary but in one piece. For the first time during our trip, everyone went directly to their room and retired for the night.

Monday, February 13Scribe: Scott Eisenhauer and Jeremy Scherler

Rondonopolis AreaRegina Ward, wife of Chris Ward who we would visit later in the day, met us at the hotel to begin our tour of the Rondonopolis area. She began by giving us some history of Rondonopolis and the surrounding area. Following are some of the key points:

The town of Rondonopolis is 53 years old It began with cattle farming, and was a small community until the 1970’s when soybeans

began to be produced, and the town flourished. It now has a population of over 160,000. The area we traveled to in the afternoon, Serra da Petrovina, produces 70% of all the

soybeans produced in Mato Grosso. Cotton is also grown in the area. Over 80% of the production of Mato Grosso is transported by truck. Other industries developed in the area because of agriculture—Bunge soybean crushing

plant in Rondonopolis is the largest in South America. Regarding the pasture areas, most of this is unproductive ground that has been planted to

grasses. In Mato Grosso, a person would need to have a minimum of 1000 hectares to be able to

farm and survive. By law, 20% of the land in this area must be kept in natural vegetation.

We then had an extremely scenic drive from Rondonopolis to the Serra da Petrovina, stopping to take some photos of the mountains and valleys.

Rainha da Serra FarmNext, we met Chris Ward, owner of this farm and wife of Regina, to tour the farm. He farms 16,000 hectares (primarily soybeans and cotton) and has about 500 head of cattle. He began his operation in the cattle business in 1984. He reports that this has been the worst economic year in farming in the area since 1995.

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He bought this property for 430,000 bags of soybeans (approx. $4.3 million). Banks do not lend money to buy land—you buy land from the owner and pay it off in 3-5 years. He owns all of his land now, and does not rent. He also reports that in this area, it is easier to get financing from international banks. Apparently, there are many corporate farms in this area. He made the statement that “Farming is an administration of your balance sheet.” He has 22 employees on the farm.

Concerning spraying of the crops, Chris said they do preventative spraying of soybeans for rust 3-4 times per crop. They may also spray their cotton up to 14 times per season. They do still have the boll weevil. Chemical theft is a problem; therefore, they have 24 hour security.

Some figures on costs and prices from Mr. Ward: Price of soybeans is $10.40 per bag (60 kilo bag). This equates to approx. $4.85 per

bushel. Cotton averages 1800-2100 kilos of lint per hectare. This equates to 3.5-4 bales per acre. Right now, cotton is selling for $0.54 per pound. Land prices in the area are currently $1600-$2000 per acre There is no capital gains tax on land after it is owned 20 years. They pay 10% sales tax on equipment purchases.

This farm has its own cotton gin, which is fairly common of many larger farming operations to reduce transportation costs. Their gin was purchased used, and it has 11-15 bales/hr. capacity. During season, they operate it 20 hrs. a day. Their cotton seed cost is $43/metric ton—very inexpensive. It is picker cotton.

Following our visit at Rainha da Serra, we had lunch at a local restaurant at a truck stop.

After lunch, we visited ARCO-IRIS FARMSElton Hammer, General Manager, visited with us. Arco-Iris has 6000 hectares in this area, but farms a total of 14,500 hectares. They are in the soybean seed business, and also grow corn as a second crop.

A few comments from Elton concerning their soybean seed production operation in Mato Grosso:

They use 31 combines to harvest their soybeans. January-March is the typical soybean harvest window. Nematodes, Asian Rust, and Stink bugs are common issues. One problem with producing soybeans for seed is the different levels of maturity on the

same plant and throughout the field. Currently, there is an average of 15 days maturity difference on the same plant.

They do their own field tests/trial studies at the farm. Arco-Iris dries over 50% of the seeds after harvested (propane and wood dryers) Average yield is 4000 kilos per hectare They sell seed directly to producers.

Chris Ward, owner Rainha da Serra FarmLater that evening, we met back up with Chris Ward in Rondonopolis at his office to hear a few more details on agriculture in Brazil, and specifically Mato Grosso and the Cerrado.

A few of the highlights from his PowerPoint presentation (which we also received):

Brazil is the 5th largest country in the world. Prime interest rate is about 17.25% currently.

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There are over 80 million acres of pasture land in the central west/south (The Cerrado)—NOT in the Amazon—that could yet be turned into productive cropland.

Mato Grosso is a larger landmass than Texas and Arkansas combined—It is 7.7% of Brazil.

This area produces 50% of Brazil’s soybeans and 50% of Brazil’s cotton Annual rainfall in Mato Grosso is 62 inches June through August is the dry season They have large planting windows: Soybeans—15 October through 10 December Cotton—25 November through 10 February The restricting factor on planting and harvesting is rainfall. Soybean rust arrived in the area in 2001. Crop insurance in Brazil costs about 8% of income and a farmer can only insure what you

have borrowed from the bank—Most producers carry their own risk. Cotton productivity is higher in Mato Grosso than the rest of Brazil—Harvest is June—

August.

Mato Grosso Foundationo Try to improve quality of lifeo Field days/seminarso Have a foundation research center in Londrina PRo Have a seed laboratory

Cattleo Have a traceability/tracking program in placeo The Cerrado has over 100 million head of grass-fed cattle

In closing, Chris Ward commented that in order for Brazil to grow, they need roads, rail, and infrastructure. There are currently governmental regulations on using barges on waterways—they need to get these removed. He also noted that their environmentalists do not want infrastructure.

Following the presentation, we enjoyed a fine pizza dinner together in Rondonopolis!

Tuesday, February 14Scribes: Jamie Allen and Brent Rendel

Aprosmat Seed Lab, Rondolopolis, Mato Grosso, BrazilOur host for the visit was Dr. Maria de Fatima Zorato, PhD in Seed Science. She came from Embrapa, in 1989, to become the director at the seed lab. Several area seed producers created the lab in 1980 and the group makes every major decision for the seed lab. All former presidents of Aprosmat were founding members of the seed association.

The seed lab purpose is to give support, set quality standards and other requirements necessary for certification to the seed industry, worldwide, and Mato Grosso. The tropical climate makes it difficult for seed developed for other growing regions to thrive, so the aim of the regional seed producers is to generate seed well-adapted to Mato Grosso. Each prospective seed-producing field must take a representative sample the day before full harvest is scheduled to take place. Aprosmat then receives the sample, evaluates it overnight and gets the results back to the producer the next morning so that they know whether or not the crop is adequate for seed use.

The seed lab consists of 2 teams, one a technical team, the other, the operational team. The certification process starts with the producer bringing his sample into the reception room. One of

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the team members then places the seeds into a machine to mix the seeds to ensure a uniform sample is generated, and then the sample is placed into a small box with an identifying bar code. No producer names exist on the samples, leading to an objective analysis, without the possibility of politics influencing the results. The lab looks for mechanical damage, insect damage, excess moisture (which leads to deterioration of the seed and its quality), and many other external and internal seed qualities as part of the overnight seed quality evaluation. The facility has been certified to ISO standards for seed inspection. They have provided a successful methodology to the producers, thus becoming the largest lab in Latin America. The lab is certified by the CQB (Biosecurity) to work with GMO’s as well. In 2004, the lab conducted testing and certification services for over 38,000 samples of seed growing to over 40,000 for 2005. Aprosmat also has small seed plots used for testing emergence on seeds, such as cotton, corn, and soybeans.

The newest development process is a hands-on training clinic for producers that introduces typical problematic situations encountered and how to address the different diseases and pests. The seed lab is constantly training employees from the standpoint of involvement from harvest to placement of seeds into bags for sale. The training consists of four years, and the lab has a very low employee turnover. The seed lab currently employees 31 people including biologists, agronomists, and specialized technicians. The staff also employees two Ph. Degrees, one in Field Pathology, and the other in Soil Science. The lab is continually working on the improvement of working conditions, so employees are more productive and efficient.

The seed lab is totally funded by fees collected for analysis on each sample sent, so when harvest is not going on, the MG Foundation funds the employee’s salaries, and other benefits, thus enabling the seed lab to continue in the training and development process.

We viewed the germination chambers where the temperature is kept at 35 degrees Celsius, and 100 percent humidity. The seeds are placed in plastic containers in cabinets to speed up the process of germination, and see seed infractions. We also viewed the cold storage room as well, where all seed samples are kept for a one year period to allow for retesting if questions arise during the following growing season. This concluded our tour of the Aprosmat Seed Lab. Our next stop was the Iguacu Maquinas John Deere Dealership.

Iguacu Maquinas John Deere DealershipThe Iguacu Maquinas John Deere Dealership began in 1989. The owner has 3 other branches located in the state of Mato Grasso, and 3 in the neighboring state of Para. In 2004, the dealership was named the #1 dealership in the world. The shop in Rondonopolis sells primarily 240 hp tractors, whereas, the average size which sells the most is 140 hp. Lawn equipment is mostly imported into the different shops. The cost of labor is R$100 per hour for the field technician plus parts, and mileage, ($50 US), which is comparable to the US. The number of Cotton pickers sold last year by the dealership was 59. So far this year they have only sold 41 with harvest approaching. The decline was due to the drought, and low R$ to US currency ratio. The width of the headers on soybean harvest is 30 foot. Also 15-foot headers can be purchased. A yield map and GPS systems are available for the combine equipment, but is not in wide use on tractors. All sprayers are typically equipped with a GPS system. Due to the vast expanse of their sales area, the farmers typically require the dealership to provide in-field service, instead of shop. Parts ordered generally arrive within 2 days, thus they do not keep a large inventory of repair parts on-hand. The dealership has a training center, which educates producers and equipment operators on updated equipment and how to obtain maximum efficiency. Next, it was back to the bus to continue the tour.

Rodrigo de Morais (Guest)

The group stopped at one of Rondonopolis’ shopping malls for a mid-day stop to relax a bit and to eat lunch. One of our class members, Jake Nelson, invited his college roommate to join us. Rodrigo de Morais came to Wilberton, Oklahoma to complete his college education and then

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returned to Brazil to the family farm in Parana. He offered the class a slightly different perspective of Brazilian agriculture from the ones we had seen so far. Rodrigo has a 6000-hectare farm and ranch with 2000 head of Nelore and Brangus cattle. He also grows around 3000 hectares of soybeans and 500 hectares of corn each year. Unlike the large farms seen the previous day, Rodrigo only has 14 farm employees and 3 ranch employees for his operation. A major concern of his has been echoed throughout the entire visit to Brazil: the last 2 years have been very hard for farmers in Brazil. Due to dry conditions and the strong Real verses the U.S. dollar have taken all profit out of his farm. At the end of this crop year, Rodrigo expects that he will only have enough sales to cover employee expenses and some supply expenses. He will not be able to pay off his bank loan and this will be the second year in a row for that result. In a few weeks, he is going along with a large group of farmers and ag lenders to Brazilia to lobby the government for relief.

Following lunch, the group came together for a lively synthesis session to discuss our observations of what we had seen and done since leaving Rio Grande do Sul. Notes of that session are provided following the scribe notes.

Grupo Andre MaggiAnother short bus trip lead to our final stop in Rondonopolis at the headquarters of Grupo Andre Maggi. Started by Andre Maggi and now continued by his widow and 4 children, the farm owns approximately 180,000 hectares of farmland and native land. Additionally, they lease another 45,000 hectares of farmland. During this past year, the agriculture production division grew 140,000 hectares of soybeans, 12,000 hectares of cotton, and 40,000 hectares of cotton. Over the years, A. Maggi has developed three additional business divisions to aid in marketing and processing its crops. In addition to the crop production division, there are divisions for export/import, water grain transportation (Hermasa), and energy production.

While it appears A. Maggi is large, by Brazilian standards they are only 5th. Brazil’s leading grain marketers are referred to as the “ABCD” group, which stands for ADM, Bunge, Cargill, and Dreyfus. A. Maggi is close behind them, but is the only major player who grow a significant percent of what they market.

Three key concepts are the vision for the Amaggi group of companies, 1] technology, 2] fertilizers (the correct use) and 3] workers being trained. The group has increased soybean production by 37 bushels per hectare over the last 30 years. They also are very knowledgeable in soil conservation and water conservation, thus leading to the preservation of natural rain forest and natural land vegetation. They are active in the Futures and Exchanges of soybeans, soybean meal, and soybean oil. The group exports these items to Europe and Asia. Last year they exported 2.5 million metric tons and sold US$400 million.

As amazing as this operation appears, its commitment to the well being of its over 4000 employees surpassed anything we had observed during our time in Brazil. Local facilities included a swimming pool, indoor gymnasium, and a soccer field. The group continually trains and develops incentives for the staff, making safety the first priority. Rondonopolis is the Headquarters for the group, and the group has invested in a navigational school, in day nurseries, hospital, and dentistry clinics for the community. The group is currently involved in over two-dozen projects and programs to improve the community. They have helped replant eucalyptus trees and promoted permanent preservation of the rainforest near waterways. They are partners with several major national and international university agronomy programs, thus allowing students to work on environmental diagnosis. They are also funding a research project dealing with Fire on forestlands into the savannah lands, with Harvard and Yale Universities. In 1999, the group began looking at a social development program, which enables employees to participate in more leisure time, with the development of a health club, various recreational teams, a low-interest loan program for employees to purchase housing, and child care.

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The group then departed Rondonopolis heading northwest for the 4-hour journey towards our final overnight stay of the trip in Cuiaba.

Group Synthesis notes:Topic 1, Randy Squires and Nikki Snider Chairs, day of travel for the group.

Topic 2, Tackett, Chair, the group was touring Rio. Comment made that Rio is a city, whose economic basis is tourism. There needs to be some type of diversity and another type of economy besides.

Also the discussion of the Landless people came up. The comment by our guide, was that landless people squatted on others land to gain ownership of the land, then would sell the land as soon as it was given to them by the government. After they sell the land, they go back into the community to live. This is how the MST funded their group. The government gives the group food stamps, gas stamps for cooking, and also money for having children. So why would they want to do anything else, when their sole existence is not to work.

Topic 3, the group traveled from Rio to Sao Paulo, and then to Cuiaba. After 2 aborted landings by the airplane, we returned to Sao Paulo, and spent most the day traveling. To our surprise, no one seemed to get upset with the delayed plans, which is the difference in our cultures.

Topic 4, we toured Ward and Aprosmat Seed Lab. Ward was the best speaker; we had up to that point. The comment was made that, “if Brazil had more producers like him, America would be in danger of Brazil, being a competitor with the US.”

The point of cheap labor also arose. The myth of cheap labor needs to be dispelled. With 14 to 15 employees, Rodrigo, a friend of Jake’s, spoke to the group at a break, he made the statement that he pays $1000 per month, and also pays $1000 per month to the government for pensions, etc. Housing is generally provided, whereas, in the US, housing is not always provided. Also point of the exchange rate was brought up, and how important that rate is for Ag. Cut margins by 50% the last 2 years and yet still increase production. Compute 1 employee to every 50 hectares. The norm is 1 employee for every 500 hectares. Ward made the comment, that borrowing against equity on land, and coming off of 2 productive years, to 2 years with drought, and the fluctuating R$ compared to US currency. And a 2 year payout on electrical upgrades. Ward also mentioned that his balance sheet was his payroll. A different thought process from the corporation to the place of the family farm. “Don’t let the tax tail wag the dog.”

Topic 5, Arco Iris, means a rainbow. In the beginning the grandfather sold timber, eggs, chickens, pork, and whatever else they could in order to make a living for the family. Then moved to Mato Grosso, and began selling those other entities off, and became a large seed producer in the state. Topic 6, comment Chris Ward had a very good presentation, and the land value was based on production, and the reflection of the instability of the currency in the state of Brazil. One of the best speakers the group had listened to.

Wednesday and Thursday, February 15 and 16Scribes: Jeff Ball and Dustin Tackett

The final day of our trip began with the group checking out of our fifth hotel and heading for a final bus ride. Before we could get started, we washed our shoes with vinegar so that we would minimize the risk exposure to our home areas after having traveled on the different farms. After performing the cleansing task, which the Brazilian hotel bellmen were very perplexed by, we boarded the bus for FAMATO, the federal farm federation.

FAMATO21

Upon arrival at FAMATO, we were greeted by the staff and were then given a presentation by Paulo Oliveira from the International Relations Department.

Mr. Oliveira told the group that the goal of his department was to increase exports. He then gave us figures depicting the cost and average production of the various agricultural commodities. He said that cattle and soybeans were the largest product of the country.

CROP COST: $/Hectare AVG. PRODUCTION: KG/HASOYBEANS 610.3 3000

COTTON 1722.7 3.3CORN 736.7 6000RICE 712.1 4000

He said that the biggest threat to soybean production was Asian Rust. If it is not treated, it can reduce the soybean crop by 46%.

Mr. Oliveira then addressed the exports of Mato Grosso. He said that soybeans and cattle accounted for 99% of the exports of the area. The major export markets are China, Holland, Italy, Iran, Spain, Thailand, and Germany. The exports of the area rose 33.84% from 2004 to 2005.

The area is an importer of fertilizers, machines, minerals, and airplane parts.

The presenter then shared with us charts depicting employment and transportation.

EMPLOYMENT

VOCATION%

EMPLOYMENTAG & CATTLE 32.4SERVICES 19INDUSTRIAL 15COMMERCE 12.3SOCIAL 7.6PUBLIC ADMIN 5.2TRANSPORT & COMM 4.6OTHERS 3.9

Brazil has a tremendous need for infrastructure. From 1990-2005, agricultural production increased 125% while storage only increased 5.7%. Also, rail transportation has not increased in 80 years. In regards to highway transportation the amount of roadways has increased slightly in the last 15 years.

After the presentation Rosemaire Christine dos Santos gave the group a tour and explained some of the FAMATO structure. She said that FAMATO helped producers through a mentor program as well as teaching 100,000 farm workers per year.

She said that in 1943 a law was passed that required producers to be part of a farm organization. FAMATO is a way to bring those organizations together to have a unified voice. One of the ways that FAMATO helps is to protect the rights of farm workers.

Homeward Bound

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After the tour, we took one last group picture before departing for lunch. Again we had one last buffet meal before heading to the airport. At the airport, the group made its way to the airport security to make one last pass through Brazilian security. We were surprised to find that the metal detector and baggage check were not working. No problem though, they let everyone through without checking anyone. We headed out on our first flight to Sao Paulo at approximately 2:00 pm Oklahoma time. After a short flight to Sao Paulo, it was time for the group to split up. Most of us headed for Atlanta, Burke headed to Rio to meet his wife, while a small group stayed a few extra days to do some exploring of their own.

It looked like we were on the home stretch of the trip, until Lee was called to the desk. Nothing to worry about though, after some smooth talking by Lone Wolf’s fire chief, we were all on our way down the ramp for the Atlanta flight. After a short nine hour flight and several pictures by Matt Gard and Curtis Liles, we made it to Atlanta. Since we left the shady characters back in Sao Paulo, we made it through customs with ease. Then we were on our way to OKC. We arrived in Oklahoma City a little after 10:00 am and then it was back to work for some of us, nap time for others and American food time for all.

Overall a great trip for the group and definitely the experience of a lifetime.

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