RESTRICTED Report No. PA-52a Public Disclosure Authorized This report was prepared for use within the Bank and its affiliated organizations. They do not accept responsibility for its accuracy or completeness. The report may not be published nor may it be quoted as representing their views. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION Public Disclosure Authorized AGRICULTURAL SECTOR SURVEY BRAZIL (in four volumes) VOLUME III Public Disclosure Authorized ANNEXES 11 THROUGH 18, AND STATISTICAL ANNEX August 19, 1970 Public Disclosure Authorized Agriculture Projects Department TABLE OF CONTENTS Page No. VOLUNT I (MAIN REPORT) PREFACE .................. ............................ SIt-!ARY ............................................... iv I. THE RECENT PERFORMANCE AND OUTLOOK ............... 1 Output and Exports ................................... 1 Sources of Growth ................. 5 The Resource Base ................................ 7 Forestry and Fisheries ..... ...................... 9 The Northeast ....... ............................. 10 II. PRICE AND COST FACTORS ............. .. ............ 12 Land ............ 12 The Price of Farm Finance .................... .... 14 Taxes ............................................ 15 Product Pricing and Marketing .................. .. 17 Input Prices and Distribution ................ ... 19 III. PUBLIC EXPENDITURES .............................. 21 Grain Storage .... 21 Land and Water Development ..... .................. 21 Research ......................................... 23 Extension ........................................ 25 Seed Production and Multiplication ............... 27 Transportation ................................... 28 IV. CRISIS IN COFFEE? ....... .*... # .............. 30 The Outlook for Supply ..... ...................... 30 Irrigation ................................................. 31 V. THE RURAL UNDERPRIVILEGED ..... ................... 33 The Demand for Labor ...... ....................... 33 Land Tenure and Tenancy ...... .................... 35 VI. GOVERNNENT ORGANIZATION AND DEVELOPMENT PLANNING . 38 The Public Servicesrto Agriculture ...... .......... 38 Planning ..... ....................................... 39 Preinvestment Studies .............. .. ............ 40 ANNEX 11 CROPS OTHER THAN COFFEE This Annex discusses some of the more important technical and economic phenomena which affect the outlook for higher yields and expanded output of the main crops. Maize Maize accounts for about 9 percent of the gross value of agricul- tural production, occupies some 9.5 million hectares or 25 percent of the total cultivated land, and is grown in all states. Minas Gerais, Sao Paulo, Parana, Santa Catarina and Rio Grande do Sul provide 65 percent of the total maize area and more than 70 percent of the production. The crop is normally grown rainfed in upland areas as a single crop, with yields rang- ing from about 850 kilograms per hectare in the northeast to over 1,500 kilo- grams per hectare in the center south. Production has increased from an annual level of slightly above nine million tons in 1961-1964 to over 12 million tons in 1967-1968 (drought in 1969 caused reductions in yields). Growth in output has been achieved largely through expansion of area cropped. This will continue in some states, but high yielding varieties and improved agronomic practices, notably sole cropping with closer spacing and fertili- zer, are becoming more important. The demand for corn for feed for the expanding poultry and pig industries has been strong, and will continue to grow rapidly. The pig industry, presently extensive and lard-oriented, will shift to more effi- cient meat-type hogs and intensive production methods. This could lead to a reduction in the price of pork relative to beef and a stronger demand for pork. This means an increased domestic demand for maize. Maize exports averaged US$27 million (540,000 tons) per year in the 1965-1967 period. A major constraint on exports has been inadequate storage and handling facilities in main producing areas and at the ports. These inadequacies have led to sharp seasonal and inter-year variations in the price of maize, and have greatly retarded maize expansion. Given im- provements in these bottlenecks, it is feasible to increase maize area from the 1968 level of 9.5 million hectares to 10.2 million hectares in 1975 to 11.2 million hectares in 1979 or 1980. This is a 17.5 percent expansion in the decade. The average yield can be raised from 1.5 tons per hectare to 2.2 tons hectare by 1980 if efforts are intensified on research, seed production and extension, particularly in the south of the woodland savan- nah region. 1/ _/ See Richard Wheeler, Production and Export of Corn and Rice in Brazil - Prospects for the 1970's, U.S. Department of Agriculture, Foreign Agricultural Economic Report No. 54, September 1969. ANNEX 11 Page 2 Rice About 7,0 percent of the output of 6.7 million tons in 1968 was produced in Minas Gerais, Sao Paulo, Goias, Parana and Rio Grande do Sul. These states accounted for 70 percent of the 4.5 million hectares planted to rice in that:year. The state of Maranhao in northeast Brazil produced over 700,000 tonsion some 550,000 hectares (13 percent of the total national area under rice')., Rice area increased from two million hectares iii 1950 to 4.5 million h,ectares in 1968. This is almost wholly responsible for the increased.output. Rio Grande do Sul uses irrigated lowland gsolls for rice; elsewhere,,~Production is mainly rainfed. In Rio Grande do :;ul, aver- age vields i-ncredsed from two tons to about 2.8 tons between 1950 anld 3968, but in other areas they have remained at between 1.2 and 1.5 tons per hec- tare. Upl-and varieties responsive to fertilizers are lacking, and rice is often planted as the first crop on newly cleared land, witlhout fertilizer and with. poor husbandry practices. Brazililan plant breeders have not yet developed high yielding rice varieties, despite the importation and testing of a wide range of genetic material. i4lore intensiv:e agronomic renearch efforts are required, along with agro-economic studies to determine optimal cultivation te,zh- niques. The problems are severe. For example, in Rio Grande do Sul, poor water control, drainage and the grass weed hold yields down. The soils are heavy cracking clays and after one or two years of rice the only economic means of controlling grass weeds is by extensive cattle grazing. After several years the grass weeds are then sufficiently reduced by in- terspecies competition to permit another crop or two of rice. This system could be much improved by replacing the present tumble-down weed grass fallows with short term, planted grass/legume pastures fertilized with superphosphate. Research along these lines is essential. Another aspect of the outlook for rice involves the Pantanal area of Mato Grosso. Promising results are being obtained by farmers using low cost pump irrigation in the Pantanal where there are large areas of river flood plains and climatic conditions apparently suitable for double cropping with rice. The area may have interesting possibili- ties for large-scale rice production projects. On balance, there are prospects for considerable increases in rice production and exports in the next ten years. Area can increase from about 4.5 million hectares in 1968 to 4.95 million hectares in 1975 to about 5.2 million hectares in 1980. Yields can be increased by greater intensity of cropping in established areas, by heavier use of fertilizer and other inputs, and perhaps by opening up highly productive areas under low cost irrigation, as mentioned above. These developments could result in an increase in average yields from the present 1.5 tons of paddy per hectare to 1.8 tons per hectare in 1975 to 2.3 tons per hectare in 1980. The supply available for export would then be 600,000 tons in 1975, and 1.9 million.tons:in 1980 (probably worth about US$190 million). ANNEX 11 Page 3 Beans In 1968, with over 3.5 million hectares in beans (mainly Phaseolus Spp.) and a crop of 2.4 million tons, all for the domestic market, Brazil was the world's largest producer and consumer of beans. Production increased about 4 percent annually over the period 1950-68, mainly owing to expanded plantings. Beans are cultivated in association with other crops, especially maize, and generally are poorly tended. Yields are around 700 kilograms per hectare. Studies of crop associations and the establishment of economically optimal levels of manuring for the associated crops are needed. New varie- ties are likely to be resisted by consumers, but nonetheless merit emphasis. Groundnuts over 90 percent of area and production, estimated at 653,000 hec- tares and 770,000 tons of nuts in shell respectively in 1968, is in the centre south states. Area sown has increased at less than 3 percent annually since 1950, all in the north and northeastern regions, where average yields are about one-third of the 1,000 kilograms level reached in Minas Gerais, Sao Paulo and Parana. Almost all the crop is crushed to produce oil for domestic consumption, but a substantial proportion (estimates vary from 45 to 90 percent) of the meal and cake byproducts is exported. The Secretariat of Agriculture of Sao Paulo reports that profit from groundnuts has remained at a high level relative to other crops, in- cluding coffee, for the past 10 years. In 1968-69, for example, at over US$115 per hectare, groundnuts were six times more profitable