Economic Development

SLC Agrícola: reaping the benefits of corporate farming

Latin America

Latin America
Our Editors
Contributor, The Economist Intelligence Unit

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SLC Agrícola demonstrates how professional management and good use of technology and capital markets can lead to rapid growth. The company made history in 2007, when it became the world’s first grain and cotton producer to list shares on a stock exchange, raising more than R309m (US$181m) to help with its ambitious expansion plans. Since then, it has more than doubled planted area to 220,000 hectares, and plans to reach 450,000 hectares by 2015. Its net operating revenue grew from R269m (US$138.7m) in 2007 to R597m (US$303.4m) in 2009.

SLC was founded in 1945 by three German immigrant families. It produced agricultural machinery and later became a pioneer in automated grain harvesters in Brazil. The transition into farming only occurred in 1977, as soybean fever hit South America. The company continued to produce machinery, however. Its 20-year partnership with John Deere, starting in 1979, inspired SLC to create a professional management team.

In sharp contrast to the family-run, small-scale model common at the time, SLC implemented a model of “corporate farming” from a very early stage. “Our business model is based on high technology, research and state-of-the-art machinery,” explains Arlindo Moura, the company's CEO.

Part of the company’s strategy is to diversify production into different crops and regions in order to lower the production risk from drought and disease. SLC plants soybeans, corn and cotton in six states—Maranhão, Bahia, Mato Grosso, Goiás, Mato Grosso do Sul and Piauí.

Over the last five years, SLC’s average cotton yields have been 70% greater than those in the US—the world’s main cotton exporter—and 22% higher than average cotton yields in Brazil. Its soybean yields during the same period were 21% higher than those in the US and 29% higher than the Brazilian average. The company has also boosted overall production in recent years by leasing land bordering its existing farms and increasing the use of double cropping (producing two different crops on the same area during the same growing season, normally soybeans followed by corn or cotton). This reduces production unit costs and increases cash flow throughout the year.

Part of this impressive performance is a result of the company’s dedication to research. In the 2009-10 season, it had 190 experimental projects on 1,300 hectares of land, with a team of four agronomists, nine research technicians, and nine assistant technicians conducting proprietary research. It also participates in joint research projects with Embrapa, the government’s agricultural research institute, and state research foundations.

“We like to try out different plant varieties, different fertiliser applications, and different line spacings. Once we achieve satisfactory results, we immediately implement the change on a commercial scale,” explains Mr Moura. This openness to innovation, combined with professional management, provides a model other companies can follow.

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