Cheap land and labour key to Brazilian agricultural exports – DWS
Brazilian agricultural exports will continue to rise despite infrastructure problems, said Ralf Oberbannscheidt, portfolio manager at DWS Invest Global Agribusiness.
Oberbannscheidt (pictured) believes that Brazil’s lower labour costs and land values, and its favourable climate that allows for multiple crops per year, provide a foundation for further growth to production and exports.
However, Oberbannscheidt warns that Brazilian agribusiness is currently constrained by the state of the country’s road and rail infrastructure, placing it at a disadvantage next to US exporters.
“As only a small portion of Brazil’s roads are paved and roads are the principal mode of grain transportation, Brazil is in need of significant private investment into infrastructure and road improvements if it is to remain internationally competitive in grains and oilseeds. The cost to improve roads to a sufficient state is 19 times more than the government’s current budget so they are still far away from the investment required.”
Oberbannscheidt links recent volatility in food and commodity prices to global population and per capita income growth, increasing animal product consumption, rising energy prices and growing global bio-fuel production, depreciation of the dollar and slower agricultural productivity growth. He believes that these problems can be overcome through research and education.
The DWS Invest Global Agribusiness fund sees strong performance among mid-stream agribusiness activity of supply chain managers, mid-size seed producers and fertilizer manufacturers, and fertilizer assets.