How to Invest in the Most Efficient Way To Feed the World

Last week, I visited the construction site of the largest slaughterhouse in Latin America.

This development is more like an industrial park. Once complete, there will be a chicken slaughterhouse and a pig slaughterhouse. Plus, I counted eight or nine more buildings under construction. I expect these will be feedlots, incubators, grain silos, and packaging plants.
 
This complex will "process" 325,000 chickens and 3,500 pigs every day. Production is scheduled to start in the first half of this year.
 
One of the mightiest food companies in the world owns this development. It's here because the farms in this part of Brazil produce the cheapest soybeans and corn anywhere in the world. This giant meatpacker will soon be able to produce the world's cheapest chicken... and export it all over the world.

To support its huge slaughterhouse complex, the company needs millions of pigs, chickens, and eggs. Building the complex is the first stage of the mega-project. Creating 368 new local pig and chicken farms is the second stage of the project.

This plant is in Lucas do Rio Verde. Lucas is the perfect farming town.

I can't adequately describe how big the growing area is around here. Nor can a photograph. The fields stretch as far as you can see in every direction. There are 2 million acres of farmland in a 150-mile radius around Lucas.
 
The weather is great. Farmers here get two harvests per year, or three if they use irrigation. Rain is only a problem when there's too much: The roads and fields get muddy and hamper the harvest. Yields are close to American levels. Labor costs are much lower. Despite the high transport costs, a farmer in Lucas can still get a ton of soybeans to China at 75% of the cost of American soybeans... with no government subsidies.
 
The region of Lucas do Rio Verde represents 0.04% of Brazil's total area. Yet according to Fortune magazine, it produces 1% of Brazil's soy crop, 10% of its corn, and 4% of its cotton.
 
"In Soylandia, where export commodities are king, Lucas is the jewel in the crown," Fortune says.

Lucas produces the cheapest grains in the world. But there's more to it than that...

Next door to the slaughterhouse is an enormous soybean-crushing plant. The Andre Maggi Group owns it. Maggi is the largest private soybean producer in the world. This huge factory receives soybeans from the farmers and separates them into soybean oil and soybean meal. The soybean meal travels straight to the slaughterhouse's feedlots across the road. It will fatten the animals.
 
On the other side of the soybean crusher is the Franz brothers' biodiesel plant. The soybean oil travels here in an underground pipeline. The government requires diesel fuel in Brazil to contain 2% biodiesel. It requires this mix to reach 12% by 2012. The Franz brothers can't produce it fast enough.
 
Paulo Franz calls this "integrated farming." You can't find anything else in the world this efficient. It's virtually a closed circuit where everything gets used.

To get to Lucas, I traveled for six hours up highway BR-163, the Soybean Highway. The soybeans take this route to port. One thousand trucks travel in either direction, each day.

It's a disaster. The potholes swallow motorcycles. The vegetation at the side of the highway is so thick you can't see the road signs. It costs $77 to ship a ton of soybeans from Iowa to Shanghai. It costs over twice as much to ship a ton of soybeans from this area of Brazil.
 
Integrated farming solves the transport problem. The Lucas complex turns soybeans into higher value products. The Franz brothers don't truck soybeans out of Lucas anymore. They turn half their harvest into biodiesel and use the other half to fatten their animals.
 
"One truck of meat replaces 15 trucks of soybeans," says Paulo.

Agriculture giants Archer Daniels Midland, Bunge, and Cargill all have huge operations in Lucas. Equipment makers John Deere and Case New Holland both have large dealerships.
 
The world needs more agriculture. Brazil is the solution. Lucas is ground zero. My conclusion, tiny little Lucas do Rio Verde is one of the most important towns on Earth. If you want to understand the future of agriculture, keep an eye on this area.

Good investing,

Tom

P.S. Adventurous investors might consider buying land in Brazil and learning how to farm. You should speak to Paulo Franz. He's one of the top businessmen in Lucas and he speaks English. You can e-mail him at [email protected].