ASSUMPTION - Phil Corzine thinks he has a way for central Illinois farmers to compete with South American soybean growers.

His idea? Invest in the competition.

Corzine and farmers Kent Sorrells of Raymond and Brad Glenn of Stanford have formed South American Soy LLC, which invests in Brazilian soybean production.

In 1998, Corzine traveled to South America with an Illinois Ag Leadership class.

“I thought at the time, we were going to have a hard time competing with them,” Corzine said. “We didn’t know what to do about it, what role we could play. We were simply aware that Brazil might overtake us. Then all of a sudden we realized it had happened. They were the leading soybean producers.”

That led to Corzine’s heightened interest in what Brazilian farmers were doing.

“They had a major advantage in labor costs, and their production was better. In Brazil, soybean yields are at least two bushels better than our averages.”

He had expected Brazil to be like Mexico, which took a smaller-scale approach to farming. Instead, he found Brazilian agriculture to be every bit as advanced as farming in the United States.

What’s more, land values in the United States have skyrocketed to as much as $4,500 to $4,700 an acre. That makes the low cost of Brazilian farmland, $100 to $200 per acre, more attractive.

In February 2003, Corzine and Sorrells visited Brazil and began looking at investing in farmland.

“All the pieces started coming together,” Corzine said. “We started thinking there might be something to the Brazilian opportunities.”

On that trip, they contacted two consultants, James Thompson and Neige Caiapo, both of Brazil, who could help with the project. Thompson is a native of Mount Olive, and Caiapo is his wife and business partner. Thompson has worked with the American Soybean Association and with Fleshman-Hilliard.

Caiapo’s brother, Silvio Caiapo, is running a 56-acre soybean research farm for Corzine’s group. Those soybeans currently are being harvested.

“The key to doing this is to have someone there in Brazil,” Corzine said.

Once the project is fully funded, Corzine expects to travel to Brazil three to four times a year.

In August 2003, the three farmers formed a corporation, which allows other farmers to invest. The offer opened in January and closes at the end of April.

Investment units are priced $10,000, which give participants a percentage of ownership. The money will be used to buy virgin Brazilian farmland, which will be planted in soybeans.

"This is a longer-term kind of investment," Corzine said. "We're looking at seven to 10 years. Participants have to stay 10 years to get the maximum return. If there's any drawback, it's that some people don't like the long-term nature.

"We're hoping to get farmers, small investors and agribusinesses of all types. I've been there and see the potential of Brazil's agribusiness."

Returns on the investment are expected to come from both appreciation in the value of the farmland and profits from raising soybeans.

"We're buying virgin land, like the plains were here, except they get much more rainfall," Corzine said. "There's a lot of virgin land there, a lot of land to be brought into production."

He estimates the company will spend about $110 per acre.

"Once we develop the land, the big costs will be in lime and fertilizer to get the pH brought up," he added. "Clearing the land isn't a big expense, because there's not a lot of brush. This isn't rain forest. That's in the Amazon. Some parts of where we are looking, you'd think you were in South Dakota. It's land like that."

Despite the heavy rainfall in the area - the total since December has been 73 inches (central Illinois averages about 36 inches over a full year) - the high-clay soils drain well.

"It's red soil, with very little organic matter," Corzine said. "The nutrients are washed out by the high rainfall. In the area we're looking at, in the state of Tocantins, rainfalls are very consistent. They get 60 to 70 inches of rain every year. Farmers there say they've never seen a drought."

Last year, 136,000 new acres were brought into production in Tocantins, a 38 percent increase.

Corzine and his group need to sell 75 units to start buying or leasing land.

"When someone subscribes, they only pay 10 percent," Corzine said. "If we don't hit 75 units by the closing time, then we return all that's invested."

He's been surprised that many of those who own farmland in Brazil are Brazilians who have worked in the city and buy land to start farming it, rather than generational farmers like in the United States.

"They buy land, set up the farming operation and hire inexpensive labor," Corzine said. "You're really a manager more than a farmer down there."

The area the group is focusing on is north of the major expansion area.

One of the big areas of concern is rust, a disease that has damaged some of the Brazilian crop this year.

"We finally got rust two weeks ago on our research farm, so we sprayed," Corzine said. "We've been very concerned about it. It's a matter of cost - it raises your production cost. So far, we've spent about $5 an acre. That may be the only application we have to do, or we may have to do more. You don't know. You do have to apply fungicides every year down there, because of the higher rainfall, but that ends up taking care of other problems as well."

He projects profits will come because of the low cost of land and labor. Farm machinery (built in South America) also is half the price of U.S. farm machinery.

Brazilians have been surprisingly warm to the idea of U.S. investment, Corzine said.

"They need other people to help build their system," he said. "It means another machinery dealer or grain buyer is needed, and that helps develop the country. It's different than here in the U.S. where all farmers are competing against each other for farmland. Their attitude is, everyone is making money and there's plenty of land. It's how it used to be here."

Corzine plans to be back on the research farm by April or May.

"As soon as I get my corn planted here, I'll go down and set up what we're farming this fall on the research farm. We'll probably add 600 acres that we'll lease.

"I'd like to buy more farmland myself in Brazil. I so believe this will work. Ideally, if I had a 40- or 80-acre piece of farmland here, I'd sell it and invest in farmland in Brazil.

"It's a lot like settling the Midwest was here. People moved from the East and bought farmland. There wasn't roads or railroads. They cleared it and learned to farm. Here, they were turning black ground. There, it's red clay. But we're seeing the same thing in Brazil. We're kind of the second wave."

Seminars

Seminars on investing in South American Soy LLC are scheduled for 7 p.m. April 1 at the Carlinville Holiday Inn; 7 p.m. April 5 at the Urbana Holiday Inn and 7 p.m. April 6 at the Interstate Center in Bloomington. To register for a meeting or for more information, call (866) 711-2769 or e-mail [email protected].

 

Charlyn Fargo can be reached at 788-1521 or [email protected].