Crop Expansion in Paraguay

Explosive growth of soybeans is changing the face of the country in Paraguay.  Paraguay comprises a total of 40.6 million hectares (over 100 million acres) of land with one-fifth of the area (a little over 8 million hectares or 20 million acres) set as highly suitable for crop production, but much more is being tilled.  The trend has been to expand cultivation since 1956 when only two percent of the land was cropped.  During the 1960's and 1970's Mennonite colonies engaged in crop production in the semiarid Chaco area of the country (the Occidental Region) more suitable to livestock production.  During the 1980’s within the central, fertile region small farms or minifundios were replaced by larger, more efficient farms with access to rich, varied soils and well distributed rainfall.  The focus of agricultural expansion from the late 1980s until recently has been in the east (the Oriental Region) within the main departments of Alto Parana, Itapua and Canindeyu.  Eighty percent of national soybean production and planted areas now reside in these three departments.  This development has been a westward extension of agriculture from the Brazilian states of Rio Grande do Sul, Parana, and Santa Catarina.  

Recent westward expansion continues, into the departments of Caazapa, San Pedro and Caaguazu replacing forests and pastureland.  Pressure to expand is causing soybeans to replace pastureland in the north-east departments as well as to spread into more central and south-eastern regions.  Deforestation has virtually reached its conclusion in eastern Paraguay where only about seven percent of Paraguay’s Interior Atlantic Forest remains. 

Picture 1.  Soybean fields are continuing to be carved out of the remaining forest area in Paraguay as shown in the Google Earth image shown below.

Foreign investment in the 1970s-1980s as well as favorable commodity prices and availability of government services has contributed to the expansion of cropping in the country.  As of the late 1980s, soybean production grew to 1.1 million hectares and contributed over 60 percent of Paraguayan exports.  Now, soybean producers expect to surpass last year’s record crop and increase soybean harvest by 10 percent, according to the Federation of Production Cooperatives (FECOPROD).  The goal for 2007 was to harvest 6.2 million tons of soybeans and increase that to 6.8 million tons in 2008. 

One project on the banks of the Paraguay River, called Puerto Union, is a joint venture by Cargill and a local Paraguayan company, Puerto Zevollos.  Puerto Union became operational in April 2008 with the construction of a soybean processing plant and a port terminal with the capacity to dry, store and process 1.3 million tons of soybeans a year.  Soybeans are, and are expected to continue to be, by far Paraguay’s biggest export.  Central Bank statistics up to July of 2007 showed that soy brought in 787 million dollars in foreign exchange.  This investment in the new soybean complex is the first in a series of planned investments which will total some 180 million dollars by Cargill in Paraguay.  In 2004, ABN Amro, a local bank, approved structures for short-term working-capital funding to finance production and export of $15 million of soybeans.  One group that benefited from this investment was Agro Silo Santa Catalina, the core company of the Favero Group, one of the largest soy producers in Paraguay.  The Favero Group finances about a $40 million investment in an average year and expects to continue expanding its business. 

Agribusiness now accounts for 20 percent of Paraguay’s GDP, and soybeans are almost 70 percent of annual agricultural production.  About 70 percent of the beans is exported whole, 28 percent is processed by local industry (of which 90 percent is exported), and 2 percent is retained for seed production.  As of 2003, soy accounted for $800 million of Paraguay’s $1.3 billion total exports and now is even more.

Graph 1.  Planned land use for soybean in eastern Paraguay, with red and pink areas not as suitable for production and the yellow areas marginal production with the green areas good for production and the very dark green areas excellent for soybean production.

Current USDA area and production estimates for grains and other agricultural commodities are available on IPAD's Agricultural Production page or at PSD Online.