I was in Iowa City for the 15th Annual Farm Futures Business Summit. It was a special treat to have dinner with Dr. Barry Flinchbaugh, the famous agricultural economist and policy expert from Kansas State University. We, along with hundreds in the audience, listened to a panel of producers from below the equator moderated by Max Armstrong, host of This Week in Agribusiness. The following are some of the perspectives from this dynamic presentation and the engaged audience.

One of the Brazilian producers indicated that his EBITDA* to revenue ratio was approximately 30%, which is very profitable. During the commodity super cycle in the U.S. from 2007 to 2012, the EBITDA-to-revenue ratio of some U.S. producers was also around 30%. This Brazilian producer experienced the perfect profit situation. The trade wars in the U.S. and other countries were playing in their favor when marketing grain. This, along with a strong U.S. dollar, led to a positive bottom line. 

The panelists were focused on developing the best systems of production, marketing, capital management and financials for optimal outcomes. They are constantly tweaking their business systems to become more productive and profitable.

The Brazilian environmental rules outlined by this group are challenging. A certain amount of land, usually 12% to 20%, had to be forested. This law has driven up land values and increased the cost of production. One producer was required to place a microchip in each tree on his farm so any trees that were harvested were not linked to the Amazon rainforest.

The idea of triple cropping is becoming much more prominent in Brazil. Triple cropping will definitely impact the Brazilian agriculture industry’s global competitive edge.

Many of the farms’ major cost of labor was attributed to lawsuits based on hours worked and compensation. Legal and accounting fees are also a major cost of doing business there. One business hired 30 bookkeepers, accountants and compliance people to provide transparency and to meet state and federal government regulations.

Two of the panel participants attended university in Canada and New Zealand to major in agriculture and to learn English. As a result of their presentations, it was obvious they were successful at both; they were fluent in English and had a broad understanding of the agricultural economies in both countries.

This was an eye-opening panel that provided perspectives on our competition now and into the future. 

*EBITDA is an acronym for Earnings Before Interest, Taxes, Depreciation and
Amortization