Courtesy of The Financial Times, an article on Brazil’s agricultural sector which is creating fast wealth and boosting the nation’s economy, but may be at risk from an increasingly extreme climate:

Dressed in a tailored suit, silver cufflinks and brown leather loafers, Marcelo Yamagata cuts an incongruous figure among the vast soyabean plantations and dusty dirt roads of Boa Esperança do Norte.

Originally from Rio de Janeiro, Yamagata grew up around some of the world’s most iconic beaches. But three years ago he traded them in to move more than 1,500km west to the remote town in the sweltering heart of Brazil.

“I made a bet,” says Yamagata from his notary office overlooking the main square. “This place is going to be huge one day.”

Like many before him, the 44-year-old is chasing a boom that is transforming not only Boa Esperança, but the entire central-west region of Brazil. It is a boom not of semiconductors or artificial intelligence, but of agriculture and agribusiness. Or as the locals simply call it: “agro”.

Fuelled by surging global demand for food, particularly from China, the sector has in recent years emerged as a key engine of Latin America’s largest economy, today accounting for about 25 per cent of gross domestic product. This is up from 18 per cent a decade ago. Indirectly or directly, it employs 27 per cent of the population, according to the Center for Applied Studies on Advanced Economics, at the University of São Paulo.

Agriculture is now almost single-handedly propping up the nation’s economic fortunes. In the first quarter of 2023, the sector grew by an extraordinary 21 per cent and by more than 15 per cent across the year. This growth — the strongest since 1996, according to available data — helped bolster overall national growth, which surpassed expectations at 2.9 per cent.

Nowhere is the boom in agro more visible than in Mato Grosso, a state larger than France and Germany combined, which has a western border with Bolivia and a northern frontier with the Amazon rainforest. Historically a desolate backwater, the state — which is home to Boa Esperança — is today one of Brazil’s richest, with a flourishing number of millionaires and billionaires.

“Here is the future,” says Francisco Pereira, who runs a shop in Sorriso, the self-styled “capital of Brazilian agriculture” in Mato Grosso. “There is just so much money. And every year it grows more.”

Neighbouring Boa Esperança is poised to be the next boomtown. After years of legal wrangling, the town — whose name translates as Good Hope — will next year become Brazil’s newest official municipality when the first ever administration takes office. 

This will entitle it to a share of government tax revenues and a slew of new public services and projects. It will also establish it as a zone for investments and locals are braced for an influx of cash and people into the soyabean and corn economy.

“Everyone is dazzled by the growth so far. But we believe more is to come,” says Calebe Francio, a local large landowner who is expected to contest — and win — Boa Esperança’s first mayoral elections in October. “With a local administration, it can be more dynamic.”

Looming on the horizon, however, is a potential threat to the success of Boa Esperança, Mato Grosso and Brazil’s agro boom: the changing climate.

Last year, Brazil had its hottest year on record and Mato Grosso and its central agricultural belt were the hottest locations, with temperatures 2C above average. The extreme temperatures, combined with a lack of rain, sharply hit production, with yields of soyabeans, the key cash crop, forecast to have fallen more than 20 per cent. In some parts of the state the drop is expected to be even worse.

Brazil’s agriculture minister called the situation, which coincided with low international soyabean prices, an “imminent crisis” for the sector.

Many local farmers — touchy about environmental issues due to global headlines about Brazilian deforestation — chalk it up to the ongoing El Niño, a natural and cyclical phenomenon, which results in warmer weather that they cannot control.

But large producers, as well as agronomists and scientists, are already bracing for a more unstable future, with investments in new technologies and farming methods.

“Global warming is intensifying weather events, so the droughts are stronger, the storms are stronger,” says Aurelio Pavinato, chief executive of SLC Agrícola, one of the world’s largest agricultural producers, which is investing in genetically modified seeds to protect against drought. “The weather events are becoming more intense, so the damage to our crops will become more intense.”

“Climate change was once something a bit ethereal,” says Fernando Rossi, a fazendeiro — or farmer — from the central-west state of Goiás. “But it has now become very concrete.”

Brazil leads the world in the production of a vast number of foodstuffs from beef and chicken to coffee, orange juice and many fruits and vegetables. Agricultural exports have powered the nation’s record trade surplus, which last year reached almost $100bn, up 60 per cent from the previous year.

In the yawning fields surrounding Boa Esperança and Sorriso, the crop of choice is soyabeans, which the farmers typically rotate with corn over the course of two harvests per year.

Last year, soyabeans were Brazil’s biggest export, representing about 16 per cent of the total in dollar terms. The Latin American country is also the world’s biggest exporter of the oilseed, having overtaken the US about a decade ago. 

The lion’s share of the produce goes to China, where it is mixed with corn to feed chicken and pigs, which are in turn consumed by the country’s increasingly carnivorous population. But soyabeans can also be used for a variety of oils and soy-based products, such as tofu.

Before the recent downturn in prices, the crop was so lucrative that denizens of Mato Grosso called it “green gold”. Alongside cotton and corn, the bean has transformed the state.

“When we arrived, there wasn’t even a city. Today we have practically everything,” says Sadi Beledelli, a local farmer who moved to the Sorriso region in the 1980s from Brazil’s southernmost state of Rio Grande do Sul.

Migration, particularly from the country’s southern states, fuelled the growth of Mato Grosso’s agricultural belt. But none of it would have been possible without technological advancements, including the genetic modification of crops and new methods of soil fertilisation, which turned once hardscrabble lands into some of the world’s most bountiful.

“It is a land of opportunities. We are growing in leaps and bounds,” says Ari Lafin, mayor of Sorriso, which is home to about 110,000 people.

Sipping chimarrão, a herbal drink popular in Brazil’s south, Lafin says the population of Sorriso is growing at 20 per cent a year. GDP, he adds, jumped from some $800mn in 2017 to almost $3bn in 2022.

This new wealth is evident. New mansions dot the city’s manicured boulevards. Imported pick-up trucks cruise its wide streets.

“In my hometown [in the south of Brazil] I never saw a Ram,” says João, a recent arrival in Sorriso, referring to the large pick-up trucks that can sell for $100,000. “Here I see five on my way home from work.”

A recent study of an elite group within Brazil’s richest people — those in the 0.1 per cent — found that the highest earners were from Mato Grosso, according to the Fiscal Policy Observatory at the Getulio Vargas Foundation.

“In terms of state GDP per capita, today it is among the highest in the country,” says Sérgio Gobetti, an economist who authored the study. But he highlights that inequality is also growing, with the wealth heavily concentrated among the landowners — typically from Brazil’s south — and not the workers, usually from the country’s poorer north-east. 

Two hours east of Sorriso through vast, flat soy plantations, Boa Esperança is beginning to experience its boom. The town still retains a frontier quality; its entrance is dominated by a large silo complex, where dozens of articulated lorries idle, waiting for the next shipment of soyabeans. The population at 7,000 is small.

But locals expect the economy to surge once its status as an official municipality is formalised at the beginning of next year.

“It has already developed a lot and it should develop more with the establishment of the city,” says Gabriela Arquaz, who moved to Boa Esperança five years ago. “For those who come to invest in real estate, it is great. Growth is certain.”

The optimism is echoed by Francio, the local landowner. “Think about the people waiting decades for this moment. Everyone is excited, everyone is ready to make investments.”

Amid the excitement, few in the region seem perturbed by Brazil’s increasingly extreme climate. A common refrain is the “stability” of Mato Grosso’s weather.

Aware of their portrayal in Europe and elsewhere as environmental villains, the region’s politicians and producers go to great lengths to underline their commitment to ecological regulations and preserving forests and waterways.

“Macron needs to come here and know the reality,” says Lafin, referring to French President Emmanuel Macron, who is a source of popular derision because of his criticisms linking Brazilian agribusiness to deforestation.

Despite the mayor’s comments, however, Mato Grosso — which translates as thick forest — has historically had one of the highest rates of deforestation in Brazil. Last year, deforestation in the savannah biome that dominates the wider region rose by 43 per cent, according to official data. 

There is also broader reluctance among the typically conservative farmers to acknowledge — and prepare for — a globally changing climate. Last year, Brazil experienced an unprecedented nationwide heatwave, serious flooding in the south and a historic, punishing drought in the Amazon. The rainforest is particularly important because its water-recycling ecosystem creates the rainfall necessary to nourish the fields of Mato Grosso.

The effects of these weather events on agro were immediate. In Mato Grosso, farmers are forecast to report their lowest soyabean yield in at least 15 years, with an average 52.12 bags per hectare, 10 bags fewer than the previous harvest, according to data from EarthDaily Agro, an analytics group.

National soyabean production is projected to have fallen to about 150mn metric tonnes this year, down from 162mn last year, according to data from MD Commodities. Final official data will be available next month.

“Agro is already being impacted by climate change,” says Paula Packer, head of environment at Embrapa, an agricultural research and development agency widely credited with laying the foundations for Brazil’s agricultural boom.

While farmers in Mato Grosso will acknowledge the impact of El Niño, they shy away from scientific assessments that the weather phenomenon is being exacerbated by rising global temperatures.

“Farmers are conservative,” says Packer. “But in the medium or long term they will [act] to prevent losses in their harvests.”

She says one option is the use of biologicals, or bacteria that can be added to the crop during planting to act as a type of moisturiser “so the plant can survive when you have drought”. The market is not static.

Another is the development of more weather-resistant genetically modified crops. This is the approach being taken by SLC Agrícola, which runs huge soy, corn and cotton plantations in Mato Grosso and across the nation.

“HB4 is the name of the technology. It is a genetically modified crop, which consumes less water and is more resilient,” says Pavinato. “During a drought, with the normal variety, we might lose 30 per cent of the yield. With HB4, we might lose 15 per cent and save 15 per cent.”

Pavinato also highlights the importance of soil management. Simpler techniques, such as the use of cover crops and no-till farming, can prevent erosion, improve soil health and make it more resilient to a harsher climate.

“I don’t think climate change will reverse all the gains that Mato Grosso has achieved, but the challenge will be to maintain the pace of development,” says Felippe Serigati, a professor at the Getulio Vargas Foundation’s centre of agribusiness studies.

“The future that we see today for the region we may not be able to achieve, precisely due to climate change.”

There are other risks, albeit indirect, facing Mato Grosso.

For a start, countries that previously could not efficiently produce soyabeans will start increasing their productivity as a result of the changing climate. 

Serigati says increased competition could come from Russia or parts of eastern Europe, where land is already “becoming more productive and there are regions with complete conditions to produce”.

“The market is not static. Brazil used to export chicken to Russia. Today Russia is an exporter,” he says.

The economic slowdown in China presents another challenge. Of Brazil’s total 101mn metric tonnes of soyabean exports last year, 70 per cent went to the Asian nation. But agricultural analysts say Beijing is seeking both to diversify its suppliers as well as replace soyabeans with a cheaper alternative, such as a greater corn mix.

“In my view, the major boom in Chinese demand is over, at least for now,” says Pedro Dejneka, partner at MD Commodities.

“Chinese soy demand has been relatively ‘static’ since around 2015. It is a completely different picture from the growth of more than 600 per cent that we saw between 2000 and 2015.”

Such assessments do not cloud the optimism of the mato grossense, however. Lafin, the mayor, is confident that demand from China will continue. He also cites India as a potential new growth market, although analysts caution that the world’s most populous nation does not yet have the income level nor industrialised meat sector to handle Brazil’s massive production.

“Brazil’s vocation is agriculture. It is to feed the world,” says Lafin. “Eating better will require business, so I’m sure [the Brazilian agro sector] will continue to grow.”

This faith is shared by Yamagata, the notary in Boa Esperança, whose belief in the future of Brazil’s new boomtown is unshakeable.

“I came here never to leave,” he says. “I made a bet and I am fully committed to it.”