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The global power of Brazilian agribusiness – CMAE | Commodities Corn, Soybeans, Soybean Meal, Suppliers and Exporters.

The global power of Brazilian agribusiness

The global power of Brazilian agribusiness
Brazilian farmers don’t need wait for Government to solve the problems of infrastructure or credit to become “world leaders unattainable”, according to a study from the Economist Intelligence Unit, a British research Company linked to the magazine “The Economist”.
The study, titled “The global power of Brazilian agribusiness”, points out the challenges of infrastructure and other difficulties of rural producer such as to obtaining credit, but adopts a positive tone. Instead of lamenting, suggests ways for the farmer to overcome these problems, improving management techniques.

Brazil is world’s fi fth-largest country by geographical area and the largest in terms of arable land.
Although only a fraction of its land is exploited, the country produces a highly diverse array of
agricultural goods. This puts Brazil in a unique position to lead the global agricultural sector in the
medium to long term. With an abundant supply of natural resources—water, land and a favourable
climate—it has the opportunity to be the largest agribusiness superpower, supplying the world market while also providing affordable food for its own population.
The country already ranks as the top global supplier of products as diverse as beef, orange juice and
ethanol, and is expected to continue to expand its exports in other areas as well, such as cotton, soybean oil and cellulose. Its markets are also diverse: China is now the largest market for Brazilian agribusiness products, and sales to Eastern Europe, the Middle East and Africa are also growing rapidly.
To maintain this trajectory, Brazil must build on the signifi cant improvements in productivity that
underpin its current success and overcome the barriers to full realisation of its potential. Obstacles range from scarcity of credit to logistical logjams, from protectionist measures in key markets to environmental concerns.
Frontier regions are a testament to what is right, and wrong, with Brazil’s agribusiness sector. The rich
harvests from the country’s vast hinterland have more than paid back public and private investment in research to create new plant varieties adapted to the region’s soil and climate. Large-scale production and professional management have helped to offset the high costs and tight margins of farming such areas.
Attracted by the promise of growth, investors have both fi nanced agriculture’s expansion and provided technological know-how. Yet agricultural endeavours in these regions are burdened by inadequate transport and insuffi cient storage capacity. Productivity in such segments as beef production and corn remains low. Margins remain tight.
The industry’s strong performance today is based on changes in business models, farming practices and technology over the past 30 years. For Brazil to fulfi l its potential as a global agribusiness powerhouse in the coming decades, companies must continue to innovate, transforming how and where they do business.
Leading companies have successfully tested different paths to expanding Brazil’s agribusiness beyond
the country’s borders. To overcome protectionist barriers in the US and Europe, they have diversifi ed their offerings, improved sanitary controls and acquired foreign competitors. They have increased the value of products sold in developed markets, but also have penetrated emerging markets worldwide.

Further investments and transformations are needed so that the agribusiness sector can thrive in the
coming decades. These include:

  • l Infrastructure—transport, port and storage—must be upgraded to meet current and future needs.
  • l Land must be used more productively through innovative farming techniques. Growth will come through better use of existing crop and pasture land, not just the opening of new areas.
  • l Research must continue to ensure development of crop varieties adapted to Brazil’s climate and soil conditions.
The EIU study was sponsored by Accenture.
The report is available for download in English and Portuguese

The global power of Brazilian agribusiness – CMAE | Commodities Corn, Soybeans, Soybean Meal, Suppliers and Exporters.

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M & A: Worries Grow About BHP Deal for Potash

Worries Grow About BHP Deal for Potash
will the deal go through?  If not, CAD 130/share is the target! –
From the NYTimes.com- DealBook
Potash Corporation of Saskatchewan investors seem to fear that the Canadian government may block BHP Billiton’s hostile bid for the company, analysts said.
Go to Article from The New York Times:
Potash chief Bill Doyle urged patience for investors expecting an alternative to BHP Billiton’s $40 billion bid, two months after starting talks with potential suitors, Bloomberg News reported.
Go to Article from Bloomberg News:
Read More

Special report: World’s workshop heads to inland China | Reuters

Special report: World’s workshop heads to inland China

Wed, Aug 25 2010

By James Pomfret
ZHENGZHOU, China (Reuters) – In a vast muddy cornfield scarred with the tracks of heavy vehicles, two young engineers pore over a construction blueprint showing a grid of 100 rectangular factory blocks.
Here on the outskirts of Zhengzhou, the provincial capital of Henan in China’s interior, Foxconn, the largest company and exporter in “the workshop of the world” has staked its future on a mammoth new industrial complex.
New powerlines are being erected and roads built to the site under the watchful eye of local farmers who daydream about the entrepreneurial opportunities that up to 200,000 new workers in the area might present.
Taiwan-based Foxconn Technology Group, which includes its flagship Hon Hai Precision Industry (2317.TW: Quote, Profile, Research, Stock Buzz), makes gadgets for a constellation of global brands including Apple APPL.O, Dell (DELL.O: Quote, Profile, Research, Stock Buzz), Nokia and Hewlett Packard (HPQ.N: Quote, Profile, Research, Stock Buzz).
Most of that production comes from its plants in Shenzhen, in the Pearl River Delta area, one of the three major Chinese coastal manufacturing hubs, along with the Yangtze River area around Shanghai and Bohai Bay north of Beijing.
With this leap into Henan province, 1,600 km (1,000 miles) from Shenzhen, Foxconn is expanding aggressively inland, where wages are lower and workers more plentiful, keeping mostly higher-value, engineering, and R&D work in China’s coastal areas. It will have as many as 1.3 million workers in China by the end of 2011, up from 920,000 now, company officials say.
Foxconn is by no means alone. Intel (INTC.O: Quote, Profile, Research, Stock Buzz), the world’s biggest chip maker, opened a $600 million plant this year in Chengdu and Hewlett-Packard built a laptop factory in Chongqing, both cities in the western province of Sichuan.
Cheaper labor is not the only attraction. The worker has become the consumer in China, with the government determined to raise household incomes and reduce wealth disparities. Locating factories nearer to markets makes dollars and sense.
“Most of the villagers here think it’s a good thing,” said Meng, Xiangting, 46, a farmer prying stones from a wall with a crowbar for use on his own crumbling home. “They’ve guaranteed jobs for anyone in the area between 18 to 50 years of age. I’m not interested. I’d like to open a small shop for the workers instead.”
With factories closer to home, children of farmers like Meng won’t have to make the annual trek to distant coastal regions and live desultory lives as migrant workers in factory towns.
A rash of suicides at Foxconn’s Shenzhen plant which the company said weren’t work-related but which victims’ families blamed on tough conditions, helped fuel a wave of labor unrest — and has become yet another motivation to move operations into the less volatile interior.
Foxconn’s move will touch off a mini-boom in an ancient Chinese capital perhaps best known for the 5th-century Shaolin temple that is home to its famous brand of Kung Fu.
Foxconn’s suppliers will have to relocate as well. The workers will need housing and places to shop. Some may even be able to afford cars to commute to work on the new highways being built to Foxconn’s mega-factory and its satellites.
A foreman supervising a team of men in straw hats working on a road linking to Zhengzhou’s highways and the international airport said they had paved 4 km in three weeks. “Foxconn is amazing,” he said. “They work extremely fast.”
A lot of people are working fast in China’s rapidly developing interior.
Manufacturers are building huge factories in the provinces to escape rising costs in the coastal zones that helped China become the world’s largest exporter. Big customers such as Wal-Mart (WMT.N: Quote, Profile, Research, Stock Buzz) are buying more goods from the new inland factories in a relentless quest to find low-cost suppliers.
New high-speed rail links are shrinking distances for shuttling goods in and out of China’s heartland.
The move inland by manufacturers coincides with a parallel trend in urbanization. Local governments are competing ferociously to build and expand cities on farmland to lure back millions of migrants from the coast in a project that could absorb more residents than the entire population of the United States in the coming decades.
The drive is part of a strategic economic shift to rebalance China’s economy — and by extension the rest of the world’s — to rely less on exports for future growth and more on domestic consumption. The Obama administration has been pressing China to do just that.
“Our lives will completely change,” said Meng, the farmer. “Next August, they’ll be able to bring in over 100,000 workers. With more people, there’ll be more businesses.”
While a smaller percentage of Chinese coastal manufacturers are moving operations offshore — garments to Bangladesh, shoes to Vietnam, some experts see a more pronounced move inland.
A recent survey by Hong Kong’s Trade Development Council of 2,400 manufacturers found a quarter would choose to set up new factories in inland China, twice that of those who would opt for cheaper alternatives in Asia. Around half said they would stay in China’s coastal hubs.
China’s industrial model has relied on efficient and nearby supply chains along with good transportation infrastructure that make it more efficient to keep operations onshore.
Factory production in China will continue to move to the interior, said Bruce Rockowitz, president of Li & Fung, one of the world’s leading sourcing firms that caters to clients such as Wal-Mart. “That’s the future, and maybe we’ll get another 20 years out of that.”
Workers in Foxconn T-shirts, clocking in for the night shift along unlit paths at Foxconn’s temporary plant near Zhengzhou, say they are part of the advance guard of what is expected to be a massive redeployment of the company’s workforce.
The official Xinhua news agency reported recently that the Foxconn plant under construction would produce mainly Apple iPhones, generate more than $13 billion in annual exports and have a production capacity of 200,000 handsets a day.
Wei Wei, deputy director at Personnel Exchange Center, a major job recruitment center in Zhengzhou, said Foxconn had asked his firm to help recruit 100,000 workers within three months time in preparation for the first phase of the giant factory’s expected opening next year.
Factories in coastal China, such as Foxconn’s sprawling operations in Shenzen, have been powered by an army of 130 million or so migrant workers streaming in annually from inland Chinese provinces. They are not given permanent resident rights, however, and they often move on.
Labor shortages have begun to be a problem for these traditional export centers as the growth of the working-age population slows. Moreover, a younger generation of migrant workers, better educated, more tech-savvy, and less accepting than their parents were of life in the factories — low pay, grueling hours and sometimes martial workplace rules — have launched wildcat strikes and protests. Keywords: CHINA MANUFACTURING/
“To be very frank and open, I think we were caught by surprise by the structural changes in the worker composition,” Louis Woo, special assistant to Terry Gou — Foxconn’s reclusive and enigmatic Taiwanese chief executive — told reporters at a company-sponsored rally last week at its Shenzen plant.
“We haven’t changed fast enough to meet the changing needs and new aspirations of this new generation of workers,” said the silver-haired and rake-thin Woo, wearing blue suspenders and Prada glasses.
“China is changing and that’s why Foxconn is also changing.”
Recent strikes at Japanese car assembly plants in China, which resulted in a doubling of wages in some cases, have prompted other multinationals with intensive labor needs to seek a more stable and plentiful workforce inland.
“China has had a very unusual situation for a number of years with just this incredible supply of workers. That is now coming to an end,” said Arthur Kroeber of Beijing-based consultancy Dragonomics, who says the number of young Chinese workers aged 15-24 years of age will likely fall by a third in the next 12 years, giving more bargaining power to this younger blue-collar generation.
Labor is plentiful in provinces such as Henan, China’s most populous with over 100 million people — more than the population of Germany.
At a recent Foxconn recruitment fair in Zhengzhou, thousands of hopefuls clamored for places, excited at the prospect of working for the Fortune 500 firm.
Already, a fifth of Foxconn’s workers hail from Henan. By moving workers closer to their families it might help ease a problem that plagued the company during the first half of the year — the dozen suicides mostly involving young workers leaping off buildings at its Shenzhen complex.
Zeng Jundan, one of the workers at Foxconn’s temporary plant who previously worked for the company in Shenzhen, said he was happier. “It’s not bad here — my mom and dad can come see me every day if they want to,” he said.
Like all manufacturers, Foxconn depends on a network of suppliers. Unlike others, Foxconn is big enough to force a new ecosystem to develop around it.
Jackie Ho, a Taiwanese industrialist making TV screens and mobile phone accessories in Luohe town, an hour’s drive from Zhengzhou, said the new Foxconn facility would help foster fresh industrial clusters in Henan.
He is hoping to capitalize on what he terms the “Foxconn effect”, along with other downstream suppliers that will likely migrate up from the Pearl River Delta.
“Most suppliers to Foxconn have no choice,” Ho said. If Foxconn moves they have to follow or it will just buy from another factory. I believe that after two years Foxconn may not have to purchase and transport (its components) from the south anymore. Many firms will be here.”
Foxconn is what some supply chain experts describe as a “dragon head” industry. It can nurture and sustain small- and medium-sized firms that otherwise wouldn’t have the economies of scale or management mindset to move inland themselves.
“The key manufacturer is the dragon head, and there’s always a supply ecosystem that goes along with it,” said Edward Tse, the Greater China chairman of consultancy Booz & Co. and author of a book “The China Strategy” detailing the country’s business landscape and how multinationals might capitalize.
“Without a dragonhead like Foxconn it’s hard to get that kickstart,” Tse said.
In several villages ringing Foxconn’s Zhengzhou sites, red banners with pithy slogans were hung over roads and painted onto brick walls by local propaganda authorities, hailing the manufacturing giant as an economic savior.
“Welcome Foxconn. Swiftly move toward a well-off society” read one.
The government is clearly hoping that as companies and their “ecosystems” move to the countryside, more of China’s 1.3 billion residents will progress from a life of subsistence to one of greater domestic and consumerist comforts in landlocked provinces, perhaps better described as mid-sized nations rather than regions.
“Manufacturing is something that a lot of local cities and regions can relate to because it’s hard; people can see that in terms of the plants, the laborers, the products and so on,” said Tse, who has advised multinationals on their China production and sourcing strategies.
“So a lot of inland areas see this as a natural area of growth. You need to find jobs for these people who’ve been urbanized, instead of them continuing to be peasants working on paddy fields. This is usually the first starting point like Shenzhen had done 20 years ago.”
Government statistics show industrialization in inland provinces has outpaced established manufacturing hubs such as Guangdong in recent years.
The number of enterprises with annual revenues of over five million yuan ($736,000) in Guangdong province near Hong Kong grew by an average of some 24 percent in 2008 to 52,574 firms. The same figures for Henan were 38 percent and 18, 700 firms. The year before it had only been 13.6 percent.
On the green northern rim of Guangdong, beyond the mountains and into the land-locked region of Ganzhou in Jiangxi province, LED factory owner Kong Xiangzhong is one of the new breed of industrialists who have staked a future away from the cluttered expensive coastal manufacturing regions of China.
A minnow compared with Foxconn with around 100 workers, Kong has nevertheless positioned his inland factory as a potential gateway to the mainland China market, spurning the usual export track. Almost all his energy-efficient LED lighting products will be trucked and sold entirely within China from Ganzhou.
“For us factories doing domestic demand, we hope that we can expand everywhere in China, to the west, the center and the east,” said Kong, a self-made businessman who started out as a production line worker in a Guangdong factory nearly 20 years ago.
Around 400 km (250 miles) north of the Pearl River Delta, Ganzhou sits at the crossroads of three of southern China’s most economically vibrant provinces; Guangdong, Fujian and Hunan. Besides its relative coastal proximity, Ganzhou’s surrounding counties are home to nearly 8 million residents with minimum wage levels around 40 percent cheaper than in Guangdong, making it a natural manufacturing spillover region for factories from the Pearl River Delta.
“The geographic location is good here,” said Kong, who recently set up his LED lights factory in Ganzhou. “We can get to the Yantian port (in Shenzhen) for shipping in about four hours. It’s also quite close to Shanghai,” added Kong, speaking slightly accented Mandarin Chinese in a sign of his provincial roots.
Like many ambitious inland areas, Ganzhou has invested millions in new infrastructure, including a new airport, highways and railways to bolster the transport and logistics infrastructure so crucial to businesses. Keywords: CHINA MANUFACTURING/
This region, too, has attracted a dragon head company — Nasdaq-listed contract manufacturer Flextronics (FLEX.O: Quote, Profile, Research, Stock Buzz). It will soon open a factory employing 11,000 in one of Ganzhou’s new industrial estates to make transformers and power adaptors.
Rob Roohparvar, president of the Flextronics unit running the plant, estimates costs will be at least 10 to 15 percent cheaper in Ganzhou than the southern coast where the conglomerate and key rival of Foxconn runs its flagship China facility.
In the next five years, Zeng Weilin, vice director of the Ganzhou Development Zone, expects the region’s GDP to quadruple and the number of factories to rise from 300 to over a thousand. Focusing on domestic buyers can help producers mitigate another risk: the appreciating yuan.
“The exchange rate has no effect on us, because our main market is 100 percent focused in mainland China,” said Simon Lu Xingping, the head of Maniform, a fast-growing Chinese lingerie manufacturer headquartered in Shenzhen, which is building a 6,000-worker factory in Ganzhou.
Maniform is one of a batch of emerging Chinese manufacturers that started off as exporters or producers for overseas brands, picking up skills and know-how until they reached a point where they felt they could develop a brand themselves.
These Chinese competitors, often nimbler, highly entrepreneurial and more flexible than multinationals, have almost all targeted their lucrative home markets and have begun to set up vast retail networks and factories across the country.
Notable examples include those in the sportswear industry including Li Ning (2331.HK: Quote, Profile, Research, Stock Buzz), Anta (2020.HK: Quote, Profile, Research, Stock Buzz) and Hongxing Sports (CHXS.SI: Quote, Profile, Research, Stock Buzz). Global brands like Spanish clothing giant Zara (ITX.MC: Quote, Profile, Research, Stock Buzz) — famed for the success of its rapid product development cycles — and sportswear firm Puma (PUMD.L: Quote, Profile, Research, Stock Buzz) are reportedly planning huge expansion plans to target China’s future middle class consumers.
“The internal business of consumption is competing now with the export business for space, for people, and it’s driving the costs up in China. So that party (of cheap labor and exports) that we’ve had in the last 15 years is going away,” said Rockowitz of Li & Fung.
But challenges loom for those moving to inland China.
Yifan Hu, chief global economist at Citic Securities, said the inland business environment is hampered by poor infrastructure, high transportation costs and a lack of developed free markets.
Ho, the Henan factory owner is critical of inconsistent and discretionary government policies that make it difficult for businessmen to map out longer term strategies and commit investment to the region, particularly smaller firms without the clout of a Foxconn.
“The legal environment isn’t so good and everything is decided face to face with officials. You don’t really know what you’re getting. Their (preferential) policies need more clarity,” Ho said.
Ho’s transportation costs are almost double those in the Pearl River Delta, with the nearest port being the Lianyun port in Jiangsu province, almost 600 km (375 miles) away. Still, he says, transportation costs now only make up around 3.5 percent of his overall production costs so it’s still manageable.
“There will be some shifting of products away from southern China to both the interior of China and outside of China,” said Henry Tan, the CEO of Luen Thai Holdings, one of Hong Kong’s largest listed textiles groups.
“However there will still be a portion of products that stay in the Pearl River Delta and the Yangtze River Delta, purely because of the convenience of supply chains, because all the fabrics, all the trims, all the development are there.”
The waning of government stimulus efforts, which have done much to spur growth in China’s rural areas over the past year or so, could also hamper the move inland. Local governments with shrinking budgets have less scope to scatter sweeteners to attract industry, Hu said.
Zhengzhou like other cities borrowed heavily to bankroll a blitz of marquee infrastructure projects, such as a new convention center, renovation of the business district and high-end property developments.
China’s switch to a domestic consumption model will take time, even as exports contribute less and less to China’s GDP — now around 10 percent, Hu estimates.
“Some people think exports will not be the driver of China’s economy in the future. I agree,” Hu said. “But China’s exports are still very strong, accounting for 20 percent of the world’s exports. The share may remain the same but the growth may decline.” She said the export sector’s real contribution was to employment, rather than economic growth.
“No matter if it’s high value-added or low-value-added they have to recruit more people … so as exports slow down I think the employment issue will really become quite intensive, maybe in the next one to three years, before they really transform to a domestic consumption-oriented economy.”
Back at Foxconn’s headquarters in the Shenzhen district of Longhua on a late sunny afternoon last week, tens of thousands of young workers cast off their uniforms and inhibitions, put on costumes, glitzy bikinis and bright wigs for the company-sponsored “Treasure Life” celebration.
At the rally, aimed at mending the company’s image and improving worker morale after the suicides, Foxconn unveiled the “transformation” of its human resources management and new industrial strategy in China.
Hosting reporters for a rare visit inside the factory, Woo said the usually secretive Foxconn would now “open up”. As China’s largest employer, Woo said he hoped this new approach to Chinese industrial management would influence other firms.
Besides pledging to improve the lives of its workers through measures including wage hikes, capping overtime work at 36 hours a month from 80 and setting up 24-hour counseling services, Woo said the future for Foxconn lay in moving its factories closer to China’s workers.
“We want to take out the ‘migrant’ from migrant worker,” he said. Besides its Henan plant, Foxconn is also building new factories in Chengdu and Chongqing in Sichuan province, while it is negotiating with several other Chinese provinces about building other industrial campuses.
As the workers wended their way through the 3.3 square kilometer Longhua industrial fortress that pioneered the manufacture of some of Apple’s iPhones and iPods, there was the sense of an era coming to an end.
The self-contained industrial city with its banks, bakeries, post offices, restaurants, shops, parks and dormitories catering to more than a quarter of a million workers, will eventually evolve into a higher-end research and development campus.
“Shenzhen will have more engineers than (production) line workers” in the future, said Woo, a development resonating with Shenzhen’s overall economic blueprint to upgrade its industrial base and move up the value-added chain.
Some workers in the crowd that gathered for an open-air concert on a large artificial grass sports ground spoke of new hope for the future — away from the coast.
“Everyone’s talking about the new factories. If they move, I definitely want to move with them,” said Yang Ning, a chirpy 22-year-old factory girl from Chongqing, one of the sites of a new Foxconn factory.
“Life here in the Pearl River Delta has been tough,” she added as workers chanted effusively behind her. “I’ll be glad to leave”.
(Editing by Bill Tarrant)

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Special report: World’s workshop heads to inland China | Reuters

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