Infrastructure, Finance, and Disease Issues Are Challenges Facing Brazil's Future Competitiveness

Brazil is one of the world's largest agricultural economies and has emerged as a leading global exporter of numerous agricultural commodities, but its direct competition with the United States for sales of soybeans, grains, and meats to third country markets has been somewhat limited, reports the U.S. International Trade Commission (USITC) in its publication Brazil: Competitive Factors in Brazil Affecting U.S. and Brazilian Agricultural Sales in Selected Third Country Markets.

The USITC, an independent, nonpartisan, factfinding federal agency, recently completed the investigation at the request of the U.S. Senate Committee on Finance. Highlights of the report follow.

• Brazil's agricultural sector has rapidly increased domestic production through land expansion and higher yields, thereby meeting rising food requirements for Brazilian consumers and creating opportunities to supply foreign customers. Over the past 20 years, Brazil has emerged as a leading global exporter of soybeans, soybean meal and oil, corn, beef, poultry, pork, cotton, and orange juice, in addition to traditional exports of sugar and coffee.
• Brazil's low-cost resource base, including ample land and water resources and weather patterns conducive to intensive land use, enables high-yield crop production across a wide range of agricultural products. Government-funded agricultural research has developed crop varieties that flourish in Brazil's previously untapped Center-West region. Low on-farm production costs have helped to make Brazil a competitive exporter.
• Despite tremendous potential, several important factors may serve to slow Brazil's expansion of agricultural production. Much of the available farmland is in areas that lack easy access to transportation infrastructure. Increasing demands for transportation, storage, and port infrastructure and capacity will likely outpace supply for quite some time. Relatively high-cost commercial credit could have the effect of discouraging investment. In addition, some livestock disease issues remain unresolved, and Brazil's labor laws and tax structures reportedly also increase costs.
• Although Brazil and the United States are both global exporters of grains and oilseeds, direct competition between the two countries currently is somewhat limited due to the substantial increase in global consumption. For example, both countries supply China with soybeans and soybean products. But given the rapid growth in Chinese soybean demand, increases in U.S. and Brazilian production have been readily consumed, and global prices remain strong.
• Limited competition between the U.S. and Brazil also exists in the meat sectors. Brazilian poultry exports are primarily produced and packaged for customers with exacting specifications, while U.S. poultry exports tend to be undifferentiated broiler cuts, such as leg quarters. In the beef sector, U.S. competition with Brazil is also limited because each country serves a different market segment. The United States supplies grain-fed beef destined for Canada, Mexico, Japan, and Korea, while Brazil supplies grass-fed beef used in processed products to other markets such as Russia. Because of import bans related to foot-and-mouth disease (FMD), market access for Brazilian beef and pork is restricted in many of the largest U.S. export markets.

Brazil: Competitive Factors in Brazil Affecting U.S. and Brazilian Agricultural Sales in Selected Third Country Markets (Investigation No. 332-524, USITC Publication 4310, May 2012) will be available on the USITC's Internet site at http://www.usitc.gov/publications/332/pub4310.pdf. A CD-ROM of the report may be requested by e-mailing pubrequest@usitc.gov, calling 202-205-2000, or contacting the Office of the Secretary, U.S. International Trade Commission, 500 E Street SW, Washington, DC 20436. Requests may also be faxed to 202-205-2104.

USITC general factfinding investigations, such as this one, cover matters related to tariffs or trade and are generally conducted at the request of the U.S. Trade Representative, the House Committee on Ways and Means, or the Senate Committee on Finance. The resulting reports convey the Commission's objective findings and independent analyses on the subjects investigated. The Commission makes no recommendations on policy or other matters in its general factfinding reports. Upon completion of each investigation, the USITC submits its findings and analyses to the requester. General factfinding investigation reports are subsequently released to the public unless they are classified by the requester for national security reasons.