By Jane Monahan
Large investments have been made in soybean processing
A soybean boom has ignited in South America. It is fuelled largely by China's burgeoning demand for soy imports and projections that these will continue to surge, along with China's economic growth, for years to come.
So far, the countries caught up in the fever are Argentina and Brazil, South America's two largest nations, and Uruguay and Paraguay, two of the smallest.
All four have increased soybean acreage at a prodigious rate.
Between 1990 and 2004, Argentina and Brazil increased the land under soybean cultivation by more than 236%, according to the United States Department of Agriculture (USDA).
In contrast, the position of the US has declined.
In 1982 US farmers produced 80% of the world's soybeans.
Today they produce just 35%.
US production, on about 72 million acres, is dwarfed by Argentina and Brazil's 91 million acres.
Meanwhile the boom is changing lifestyles, ecosystems and economies.
What is happening in Paraguay is a dramatic example.
Despite symbols of modernity like the Itaipu hydroelectric dam on its eastern border, Paraguay is still largely an isolated, sleepy and pastoral place, where cattle graze beside the roads, carts piled with wood are ox-driven, and the central streets of Asuncion, the capital, are stunningly empty at siesta-time.
Sleepy towns in Paraguay are being transformed
But according to Cesar Barreto - director of Development and Democracy, an independent economic think-tank in Asuncion - the change has been dramatic.
"Such is the momentum of the soybean fever that just since 1997 the acreage, (which is all in the eastern part of the country) has grown 5 times," he says.
"Soy now represents 10% of Paraguay's GNP and it accounts for more than 50% of the country's exports."
Carlos Pegoraro, manager of a group of 8 soybean cooperatives located near Paraguay's border with Brazil called Unicoop, believes two phenomena are chiefly responsible for the boom.
The first is the arrival of multinational agribusiness firms, especially the US grains conglomerate, Cargill.
It distributes seeds to farmers, owns the country's largest soybean processing plant, buys 20% of the country's soybean production and is the leading exporter.
Secondly, Mr Pegoraro says, pioneering farmers from across the border - "gauchos" from Brazil's original soy-growing state, Rio Grande do Sul - are pushing the soybean trade forward.
They have pushed further and further inland, clearing land and extending production not only to other Brazilian states such as Santa Catarina, Parana and Mato Grosso but into eastern Paraguay as well.
"Countrywide, about 40% of the current 600,000 soybean producers in Paraguay are Brazilian; 36% are of German and Japanese descent, or are Mennonite farmers; and 24% are Paraguayans," he says.
Small wonder the boom's effects are far-reaching.
For instance, in previously cultivated areas in Eastern Paraguay, big soybean farms that are highly mechanised have replaced small cotton-producing farms, which employ large numbers of labourers.
Small farmers, who constitute many of Paraguay's 6.2 million population and who depend on subsistence farming, have been displaced by the production of soybeans.
Vast tracts of rain forest have been turned over to cultivation
Democracy and Development's Cesar Baretto says the situation is serious.
"It is not possible for these small farmers to use land in other parts of the country (for instance in the semi-arid Chaco area, west of Asuncion) to grow essential produce," he says.
Other consequences are environmental.
On the plus side, soybean farmers in Brazil and Paraguay differ from traditional farmers in their use of modern technology. They plant the seeds directly into the ground without ploughing the field and also rotate crops around their land.
Such methods reduce erosion.
But on the other hand, the rapid increase in soybean cultivation had led to the destruction of the rainforest.
"There is great concern about the loss of the Amazon rainforest and the deforestation that has been done to clear the land for soybean production in parts of Brazil and Paraguay, because of its possible effects on climate change," says Chris Hurt, an agricultural economist at Purdue University in the US state of Indiana.
The Amazon is the world's biggest source of fresh water, carbon absorption and bio-diversity.
The Brazilian government, in its most recent evaluation of the pace of the destruction of the Amazon rainforest, also sounded alarm bells.
It said in the 12 months to August 2004, the pace of destruction was at a 10-year high, and it attributed the destruction in the state of Mato Grosso - where nearly half of it occurred - to Brazil's economic recovery in general and its soybean export boom in particular.
And economic pressures for further development of soybean production are expected to intensify.
The US share of world markets is likely to decline further, because farmers in the US have virtually no more acreage left for planting, pushing the pace faster in Brazil, Argentina and Paraguay.