Video: From scrubland to bread basket

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CNBC
updated 5/13/2008 8:55:33 PM ET 2008-05-14T00:55:33

It’s November 2007 and Tyler Bruch, the 28-year-old son of a farmer, is planting corn — the first seed of his planting season.

Bruch is an Iowa boy, born and bred — a true Midwesterner right down to the John Deere planter that seeds his fields. But this isn't Iowa corn, and Tyler Bruch isn't on American soil.

His farm is 6,000 miles from home — in Brazil.

"We've got 130 hectares here, roughly 280 acres of corn here," he said. "We've got corn going in up on the other farms, and then we'll jump in on soybeans."

"Nothing existed here," he said on a recent tour of his farm. "I came out here one day and said, well, this looks like a good place to put basically a building site, a place to have an establishment at, so marked some flags down and that was it."

Bruch's parents started farming in northwest Iowa in the mid-1970s. But the lure of cheap land and cheap labor drew him here in 2003, when he was fresh out of Iowa State University. At that time, you could buy land for $300 an acre that today costs upward of $2,000 an acre.

"It's been a pretty good ride so far," he said.

The ride has been pretty good not just for Bruch but for hundreds of American farmers for whom Brazil has become a field of dreams.

"We get between 60 and 80 inches of rainfall a year," he said. "And it's like this every day — you know, mid '80s, 12, 13 hours of sunlight. We grow some fantastic yields."

Video: Bumper crop A great place to grow crops — and a business. Bruch, who started with 2,500 acres, now farms 52,000. His farm in Brazil is 20 times larger than the one he left in Iowa. During the height of the growing season it's hard to tell which farm — or which continent — you're flying over.

"We can't expand anymore in the U.S.," he said. "There's probably a few places in the world where you can actually go into and expand. Brazil's one of them."

Larger than the continental United States, Brazil has a climate conducive to growing high-yield crops year round. The southern regions lead the world in coffee, sugar cane and orange juice production. But much of central Brazil — an area as large as Alaska — is dry land known as Cerrado.

Less than 10 years ago, this land was considered useless. The Cerrado was nothing more than scrub brush, and hardly fertile. Today, the region grows some of the world's most precious commodities and has made Brazil a farming superpower, according to Robert Thompson, an agricultural economist who worked with the USDA and the World Bank.

"Brazil has emerged as the world's bread basket," he said.

Thompson did his doctorate work in Brazil in the 1970s. Back then, he saw no future for the Cerrado.

"Driving out through there, you just couldn't imagine it being made productive," he said.

The Brazilian government created the Brazilian Enterprise for Research on Farming and Cattle Raising, known here by its Portuguese acronym Embrapa, a corporation dedicated to developing new farming frontiers.

Researchers studied the Cerrado's overly acidic ground, which is more sand than soil, and found a nutrient mix that turned a wasteland into one of the most productive agricultural areas in the world and helped transform Brazil into the ninth-largest economy overall. Today, it's the world's largest exporter of soybeans and products derived from the crop.

"This showed that if you developed a new technology, you can significantly expand production on land that previously you didn't think was potentially productive," said Thompson. "That changed world agriculture."

To fully appreciate the road Brazil has taken, it helps to drive from the capital city of Brasilia into the heart of its new farm belt. It's a six-hour ride, and a reminder that much of the country is still fighting its way out of poverty.

The two-lane road is spotted with miles of scrubland, dilapidated villages and the occasional 18-wheeler. Then, at Mile 337, the appearance of familiar John Deere tractor green makes it look a lot like the American Midwest.

Now, in Bahia, there's a boom going on. The explosion of farming in this region has transformed the once tiny town of Luis Eduardo Magalhaes, known as Lem, into a thriving agricultural center. It's now home to American giants like John Deere, Cargill and Archer Daniels Midland.

The growth potential is what has driven a new generation of American farmers to move thousands of miles from the U.S. heartland instead of continuing to farm the land worked by their families for generations.

"I looked at that; we were making a decent living," said Bruch. "One day I picked up a magazine and read about the place we're at in Bahia. And I told my dad, I said, 'You know what? I want to go. We've just got to go see if this thing is legit or not.'"

A hemisphere away in Iowa, Don Bruch saw promise in his son's move. A farmer since the 1970s, Don and his family pooled their money so they could bring Bruchside farms to Brazil.

"Yeah, it's kind of risky," he said "But land there is a lot cheaper than it is here, too. I think it was like $400 an acre. And here, it would be at least maybe $4,000 or more. So I guess it's a risk that we thought we could try."

Today, fueled by demand from China and other countries, prices for commodities like corn, wheat and soybeans have never been higher. That's been a boon to the Bruch family's bottom line, both in Brazil and in Iowa.

"The price of corn is good, better than in all the years that we've farmed here," said Don Bruch. "I've never sold corn for the price it is today. Corn has taken a lot of acres away from soybeans, which has raised the price of soybeans."

On the other side of the equator, soybeans are his son's main crop.

"Four years ago when I started here, soybeans were almost at historical lows, and it was pretty tough going," said Tyler Bruch. "But now, they've doubled in price."

Though he still thinks of himself as a farmer, the growth in the Bruch farm in Brazil has transformed the work he does and the way he looks at the job.

"Most anybody can go out and raise a decent crop," said Tyler Bruch. "It's the business side of it — I think that's what will set companies apart, farmers apart. I don't see tractors too often. It's sitting in the office, being behind the business."

His success in Brazil has generated great interest back home in the U.S. At the 2008 Commodities Classic, the annual meeting for corn, wheat and soybean growers, Bruch was the hottest commodity. His 7 a.m. seminar on farming in Brazil brought crowds.

"We're growing; we're putting up about another 20,000 acres for next year," he told the audience. "Today, with costs as high as they are, we have to be better marketers now than we had to be three years ago."

His story and experience drew the attention of growers twice his age, especially when he described a return on investment of more than 25 percent a year.

While some farmers see the explosion in Brazil as an opportunity, others believe it's a threat to their very existence. One of those is Tom Buis, president of the National Farmers Union. He fears Brazil's rise as a farming superpower may soon come at the expense of the U.S. growers he represents.

"Certainly Brazil has become a huge competitor on most everything that we grow in the United States," he said. "Whatever business you're in, you're concerned about your competitors."

And while American farmers are benefitting from the current surge in food prices, Buis worries that those good times may not last.

"You're looking at this recent run-up in commodity prices," he said. "What you have to be cautious about is how long they will stay there. And so if these prices don't stay, we'll be probably in a more severe financial situation in rural America than we've ever been in."

But Tyler Bruch said he doesn't think American farmers in Brazil are being unpatriotic.

"You can't say that to somebody from Wal-mart because they have a store in Germany," he said. "We're a global business. Patriotic? We still have our farms in Iowa. We still farm there, 100 percent."

Robert Thompson, who has followed Brazil's agricultural ascent for more than 3 decades, believes there's enough demand to satisfy everyone. In a 1987 article, he wrote that he wasn't worried about competition from Brazil and Argentina, and didn't share the "sense of alarm that a lot of observers do." Thompson says he still feels that way.

"Absolutely, even more strongly than I did then," he said. "With the global commodity market boom that we have, with the rapidly market growing import demand in China, other Asian countries — for me, the world market for food is growing at a sufficient rate that we have nothing to worry about."

Tyler Bruch believe that to be competitive on a global scale, farmers need to be global too "People five, 10 years ago didn't think of that from an agriculture standpoint," he said. "I think you're starting to see it now."

In 2003, Bruch co-founded Global AG Investments, a firm that raises money from American investors which Bruch then uses to lease more land and plant more crops in Brazil. Global AG holds annual tours so its 30-plus backers can see where their money is going.

"Back in the United States, the returns just weren't there compared to Brazil," said Sean Beaclair, one of those investors. "In other words, I wanted my money to be down here and me not."

Beauclair, who farms wheat in Stevens, Minn., says he's pleased his investment in Brazil.

"I live in northwest Minnesota," he said. "A little away from my house, I'm 100 feet from a river — a nice river. But five months out of the year, there's ice on that river. Five months out of the year, we can't grow anything out there. You come down to this region and you get excited because 365 days a year you can produce something. I mean, that's exciting."

For Tyler Bruch, the adventure as a young farmer has become a serious family business.

"It's grown into one," he said. "When we started down here, it was my brothers and my parents that started the investment role. Granted, we're not the small thousand-acre family farm in Iowa. But we're much a family business here. We're just doing it on a larger scale."

Tyler Bruch's Global AG Investments is going even more global. The company is planting roots in the Ukraine and is expanding its operations in Brazil from 52,000 acres to more than 80,000 acres in the next year.

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