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To increase profits, some farmers change what they grow. But some farmers in the American Midwest are changing where they grow.
The Midwest is the traditional center of American agriculture. Yet some farmers from Iowa have recently made news by moving to Brazil. And not only from Iowa, it seems. Why such a big move? In Brazil, undeveloped land can cost US$ 240 a hectare, or less. That is a little more than one-tenth the cost of land in the Midwest. Some of the farmers see low-cost land in Brazil as a way to expand their operations. And it may serve other purposes. It may help keep farming in the family, by letting other family members have their own farm. Crops like soybeans and cotton grow well in Brazil's climate. The South American country has grown into a major agricultural exporter. It is the second largest exporter of soybeans after the United States. In the last five years, millions of hectares have been newly planted in Brazil. Growth has been especially high in central states with grassland known as cerrado [pronounced ser-HAH-due]. It usually gets rain in summer and is dry in winter. A company based in Iowa called Brazil Iowa Farms helps American investors and farmers invest in Brazil. David Kruse is the company president. He says it makes sense to invest in Brazil, and to do it with money borrowed in the United States. He says farming in Brazil is more profitable than in the Midwest, but borrowing costs in Brazil are high. John Zulk is chief financial officer of Brazil Iowa Farms. Mister Zulk says that his company has 300 investors. But he says he knows of only about 10 or 12 American families that have moved to Brazil to start farms. Farming in undeveloped areas is not easy. Many areas lack roads and railways to transport crops. Plus, laws and customs are different in Brazil. And the Portuguese language can be a barrier. American farmers must also consider other issues. Changes in the exchange rate of the Brazilian real can shrink profits. Also, while Brazil is open to foreign investors, in most cases they must have a local partner. And farmers will not have the government protections or price supports they might have in the United States. VoA
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.-.this was true in 2003 early 2004. At that time grains prices were much higher but the Reais was much weaker, making a doubling of profits compared to now.
Brazil Iowa Farms doesnt borrow money in the U.S. as explained, they have found U.S. investors 2 years ago, not lenders. It is an investment with all the risk involved not money lent without risk. The difference is very important to mention.
Furthermore if investing in farms and lands in Brazil is so profitable, why are 40 % of brazilian farmers just unable to repay loans and the interests since the end of 2004 ????
They even made a large street demonstrations in Brasilia last summer with 5000 tractors
Loan rates are not that high in Brazil for farmers as they can borrow at around 9 %, 80 % of their needs through the BNDES !
It is also strange that Brazil Iowa farms say they can buy land now at US$ 240.- per hectare, when in 2004 and early 2005 they said the cost was Us$ 400. for good cleared land. During that time land price not only increased but the Reais also increased by around 30 %. Therefore no doubt that the actual price of Us$ 240.- per hectare is for uncleared land compared to Us$ 400.- just 2 years ago BUT for good cleared land. that is a huge difference when expolained properly.
Finally what Brazil Iowa Farms do is just the same as the investments in the past in the Ostriches raising or the Teak or the jojoba with limited partnership investors.
The end results being that more than95 % of investors lost 100 % of their investments as most of the money disappeared in hidden costs, fees, wrong accounting, fraud etc. when the partnership were bankrupts, the managment bought back everything for a few cents to the US$ with the stolen money, became 100 % owners, legally, and continued successfully to invest money that was stolen to investors as explained earlier.
BUT THE INVESTORS HAD A 100 % LOSS OR CLOSE TO, ON THEIR INVESTMENTS.
This is a familiar game in the USA as most the losses can be deducted from taxes anyway.
Strange as it may be but thousands of similarcompanies have been created in the early 1980's for investing in oil exploration in ther USA.
This type of investments are not new ! Most go sour in a 2 tor 4 years time.
Be aware, you have been warned !