Why Beans are so Expensive
It’s no surprise that the economy of China has become a concern to Curitibanos. After all, China is Brazil’s largest trading partner. When the Chinese economy is strong, Brazil benefits; or now, when the Chinese economy is slowing, Brazil suffers.
What comes as a surprise is learning that the lives of Chinese pigs have a direct effect on what Brazilians eat for lunch, and it has nothing to do with consuming pork.
China has a population of 1.35 billion people, many mouths to feed. As a result, China is home to more than half the world’s pigs, and one of the main foods for pigs is soybean meal. Helping to feed the half a billion Chinese pigs, Brazil’s soy production has been growing dramatically. Most of the soy that Brazil exports around the world is made into soybean meal, which is used for animal feed, not for feeding people.
Because of the increasing demand of China’s pigs, Brazilian farmers are planting soy on every available hectare. The largest producers of soy are the states of Mato Grosso, Paraná, and Goiás. Mato Grosso and Paraná alone produce half of Brazil’s soy crop, on average. Global soy prices are continuing to rise, and Brazil’s farmers are eager to capitalize on this demand. As soy production grows in Brazil, the question among farmers is, “How can I plant more soy?”
Thus we come to the bean dilemma. The answer to the farmers’ question of how to grow more soy has been to replace farmland normally used for beans with soy. In most cases, the lost land was being used to grow brown beans, known as carioca beans in Brazil (pinto beans in the US).
As a result, carioca beans are in short supply. The price has doubled in the past year, pushing inflation indices of food products to an eight-year high. Adding to the soy story, because of Brazil’s recession and the resulting weak currency exchange rates, exporting soy and other products is more attractive than in the past. Foreign buyers, purchasing in dollars or euros, get more soy product than they used to thanks to the weakened real.
When it comes to soybeans, Brazilian farmers “ran for security,” says Lincoln Campello, who was one of them. Campello has been farming his 870 hectares in Paraná for almost 30 years. He stopped growing carioca beans three years ago.
Brazil’s soy farms now cover 33.2 million hectares, an area bigger than Italy. They’ve expanded almost 50 percent in the past decade. Better productivity has offset some of the lost bean acreage, but when a drought hit this year, it wasn’t enough to maintain the previous levels of beans. Bean stockpiles are now about 15 percent of their 2011 level.
In São Paulo supermarkets, a one kilo bag of carioca beans costs as much as 15 reais (U$4.25), up from 5 reais a few months earlier. In Curitiba, the popular carioca beans are selling for 9 or 10 reais per kilo, while the price was only 4 reais a year ago. To be sure, part of the intense price inflation for these beans is due to the poor weather, and not just the farmers.
Now that carioca prices are higher, it will lure some farmers back to growing them. However, Farmer Campello says he won’t be one of the farmers to increase his carioca production. “My fear is that many farmers will choose to plant beans, and this increased production will cause prices to fall next year,” he said. “However, the soybean is a guarantee of good prices and buyers.”
Soybeans have been lucrative for their growers. Prices almost tripled in the decade through 2010, and soybean meal has been the hottest commodity on Chinese markets this year, jumping almost 40 percent. A globally traded foodstuff has other advantages, too. Futures markets are available to smooth out prices, and farmers have more borrowing options. For example, they can get credit from fertilizer or chemical companies or the international trading firms that buy the crop.
By contrast, there are very few export market opportunities for carioca beans. Bean farmers often depend on government loans, which have been harder to come by in recent years as the economy stalled, according to Valmir Brandalizze, who runs a firm of agricultural consultants.
Brandalizze says a credit expansion, targeted at irrigation projects, could solve the problem by enabling farmers to grow carioca beans as a third crop each year, in-between soybeans and corn. “It could be a great opportunity for farmers to increase their income and for the Brazilian government to guarantee domestic supply,” he said.
Acting President Michel Temer has pledged to trim the budget deficit, so increased credit from the federal government isn’t likely. Thus far, the only government response has been to suspend bean import taxes until November. Brazil already buys from Argentina and China, and the Agriculture Ministry is encouraging importers to check out other options.
“We’re bringing a beans shipment from the US for the first time in 20 years,” said Marcelo Luders, president of Brazil’s bean institute. He estimates that total imports may double this year to 300,000 tons. The problem with importing beans is other countries don’t grow enough carioca beans. “We can’t import a lot of carioca beans, so the price won’t fall until supply grows again,” says Luders.
The message from Alcido Wander of the state-run agricultural research institute Embrapa is bleak. He says Brazil needs to “increase production of carioca beans as well as increase the consumption of different bean varieties that are traded among other countries.” In other words, Embrapa hopes Brazilians voluntarily will start eating less carioca beans.
[Research for this article comes from Bloomberg News.]