In a Wednesday securities filing, Sao Paulo-based JBS said that BNDES Participacoes SA, the investment arm of Brazil’s state development bank BNDES, opposed the plan, which included separating the company’s global operations and moving them to Ireland.

BNDES did not explain why it challenged the reorganization plan, JBS CEO Wesley Batista told analysts on a call from Colorado. A BNDES representative said the state agency will comment later Wednesday.

“The bank thought it was not the best road ahead for the company,” said Batista, adding that the current shareholder agreement with BNDES would end in 2019, which would then free it to reorganize operations.

Shares of the world’s No. 1 meatpacker plunged nearly 18 per cent on Wednesday, the most in eight years, signalling frustration with the end of a plan aimed at accelerating JBS’s growth, reducing fundraising costs, optimizing taxes and attracting a wider base of investors.

“This is a major negative surprise. The listing process had already been moving since May and a veto from this shareholder was totally unexpected,” said Pedro Leduc, an analyst with JPMorgan Securities. BNDESPar holds 20 per cent of JBS, making it the company’s No. 2 shareholder, after the Batista family’s 45 per cent stake.

Batista said there were alternatives to the reorganization but did not elaborate, except to say that listing North American assets on the New York Stock Exchange was one possibility. The region is the biggest source of revenue for JBS globally.

Among JBS USA’s businesses are one of the biggest beef packing plants in Canada — the former XL Lakeside plant at Brooks, Alta., with capacity to process about 4,000 head of cattle per day — and a cattle feeding operation nearby.

Under terms of the plan proposed in May, the JBS Foods International unit was to be listed in New York. Investors saw the move as the best way for JBS to become the first Brazilian multinational with a clear division of local and global assets.

The billionaire Batista brothers Wesley and Joesley, who are JBS’s CEO and chairman, respectively, expected the reorganization to be ready by November.

Change of command

The company’s shares fell as much as 17.6 per cent to 9.72 reais in Sao Paulo, their biggest drop since Oct. 15, 2008, cutting into their gains this year. Since the reorganization was announced, JBS had risen 43 per cent.

The reorganization was devised before a new Brazilian government swapped the senior management of BNDES. President Michel Temer tapped economist Maria Silvia Bastos to run BNDES and BNDESPar, replacing Luciano Coutinho, who was for years seen as a supporter of the Batistas’ push to internationalize JBS.

The idea of splitting Brazil-based and global assets gained traction because most of JBS’s revenues now come from overseas units, especially from North America. According to people with knowledge of the situation, executives had told investors in several road shows promoting the reorganization that BNDESPar was on board with the plan.

Abandoning the reorganization plan comes at a time when JBS has fallen under increased scrutiny from prosecutors and government auditors for allegedly providing Brazil’s former ruling Workers Party with illegal donations in the 2014 presidential campaign. JBS denied making any undeclared donations to the party or ruling coalition allies.

— Reporting for Reuters by Reese Ewing and Guillermo Parra-Bernal; additional reporting for Reuters by Tatiana Bautzer in Sao Paulo.

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The steadily widening blockades have sparked growing fuel and supply shortages and disrupted the harvest of a record soybean crop across at least 10 of Brazil’s 26 states.

Officials were set to meet with truckers late Wednesday in Brasilia to seek an end to the protests, but a presidential spokesman on Tuesday evening rejected a key demand of the protests to reduce the price of diesel fuel.

The widespread protests come as President Dilma Rousseff’s popularity has slumped to an all-time low because of a massive corruption scandal at state-run oil company Petrobras and an economic downturn.

The truckers’ strike has added to the economic malaise, slowing the delivery of parts and raw materials to factories while also forcing some farmers to idle harvesting machinery because of a lack of diesel fuel.

“There’s a lot of concern from buyers (of soybeans), especially the Chinese,” said a local trader working for a large multinational commodities company.

Soybean futures traded down slightly at US$10.14 a bushel on Wednesday but traders speculated whether international buyers might be forced to the U.S. market if the trucker strike dragged on longer in Brazil.

Independent truckers and trucking companies are demanding lower diesel and toll prices, changes to new regulations on drivers’ mandatory downtime during long hauls and better road conditions.

Federal highway police said the protests that began on Feb. 18 in a few towns in Brazil’s top soybean state of Mato Grosso have grown to 97 blockages across 10 states.

Brazilian police in shields and riot gear clashed with protesters before dispersing truckers blocking access to the country’s main port of Santos early Wednesday. Passage to the port was cleared, but police are concerned protesters could return to block access this afternoon.

Dairy farmers are pouring milk down drains for lack of delivery services in the south and fuel distributors have also warned of potential jet fuel shortages at major airports.

Stocks of soybeans at Paranagua, Brazil’s main grain port, could run out in as little as four days for lack of new deliveries by truck, port spokesman Ceres Battistelli said.

Brazil, which is entering the peak of the soy harvest, still transports 70 percent of its grains to port by truck. The country in 2014 was the world’s No. 1 soybean exporter.

“Most of our warehouses in Goias and Minas (Gerais) states were affected and are not receiving soy or corn,” said Hugo Okumoto, who oversees delivery of grains for Louis Dreyfus.

For now, trucks breaking the strike and driving past protesters are still potential targets of vandals.

“If a trucker decides to run a road block to deliver his load, guys run alongside his trailer and pull the drop gates so soybeans run out,” said Kory Melby, an agricultural consultant.

— Marcelo Teixeira and Reese Ewing report for Reuters from Sao Paulo. Additional reporting for Reuters by Asher Levine, Roberto Samora, Gustavo Bonato and Paulo Whitaker.

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The global commodities boom and tougher competition are pushing more and more Brazilian farmers to take business degrees, even though some of them barely graduated from high school.

Firms offering MBAs say they have seen a surge in demand from Brazil s rural areas and they are now offering programs across the vast interior, far from the big coastal cities.

A combination of strong farm profits and the arrival of new competitors looking to take advantage of high grains prices is behind the demand for better business and management skills.

I m not an agronomist. I only made it through high school, said Jose Milton Falavinha, chief executive of a 80-square-mile integrated farm in Mato Grosso, Brazil s main soybean state.

Along with many other farming leaders across the state, Falavinha is flying to the capital Cuiaba on the weekends for classes in business management, economics and accounting.

In rural areas, private school alternatives are most often non-existent, so it s no wonder that Falavinha, like his father Geraldo who started the farm in 1986 and his grandfather a pig farmer ended his education at high school to run the family business.

Geraldo Falavinha says farmers in the region need to be better prepared for the competition from deep-pocketed rivals.

His concern is underscored by the spread of Argentina s El Tejar and Los Grobo groups which have expanded rapidly in Brazil over the past several years by leasing rather than buying land from farmers. With access to international credit, scale and bargaining power, they can squeeze smaller producers.

Brazil is the world s No. 1 exporter of beef, poultry, coffee,

sugar and is the world s No. 2 soybean exporter.

Farming is also becoming more sophisticated, requiring more rigorous and skilled management.

Falavinha s integrated farm has one of the more advanced cattle production operations in Brazil, operating its own cotton production and ginning business and planting two grain crops a year, mostly soybeans its main breadwinner.

One of Brazil s most prestigious

graduate schools, Sao Paulo s Getulio Vargas, has expanded agricultural economics and MBA programs into 20 satellite courses across the farm belt.

And business schools such as Kroton, Anhanguera, Unopar, and Estacio are also investing to bring their programs closer to their new students.

Professors in management and leadership at the global training company Franklin Covey, are piling up frequent flier points travelling 1,000 miles from Sao Paulo to bring MBA classes twice a month to Cuiaba, Mato Grosso.

Not all the farmers are newcomers to higher education but they are still keen to take advantage of the new supply of advanced business courses within easy reach by regional airlines.

I ve already got an MBA and an MS in agricultural economics, as well as in accounting, but I m enrolled in classes in Cuiaba every couple of weeks to work on some leadership training designed for my needs, said farm owner and manager Darci Getulio Ferrarin Jr. from Sorriso, Mato Grosso, Brazil s biggest soy-producing municipality.

———

I vealreadygotanMBAandanMSin agriculturaleconomics,aswellasinaccounting, butI menrolledinclassesinCuiabaevery coupleofweekstoworkonsomeleadership trainingdesignedformyneeds.

darci getulio ferrarin jr.

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Cassio Carvalho do Val is about to invest nearly $2 million to add 10,000 cattle to his ranch on the edge of the Amazon.

But instead of burning down forest for his growing herd to graze freely he will break with tradition, reducing his pasture land and adding grain to their diet.

Val is one of a growing number of farmers betting on so-called integrated farming by diversifying production and revenue. His move epitomizes a quiet and fragile revolution that marks a departure from Brazil s slash-and-burn past.

It is a trend that may also help ease the felling of the world s largest rainforest.

Soy growers are rotating fields with more corn and cotton, planting forest and raising cattle. Ranchers are planting corn to supplement their herd s traditional diet of grasses.

This tends toward greater and more efficient output while easing pressure for expanding area, and bodes well for the consumers struggling worldwide with higher food prices, as well as conservationists who see Brazil as a crucial battlefield.

Such investments in yield are not new in the United States or Europe. They are, however, in the tropical grain and cattle belt of Brazil, which means there are risks and uncertainties.

I lose 80 calves a year to jaguars, Val said from a dark hardwood- panelled farmhouse in southern Para state, where any movement more complex than breathing triggers perspiration.

Val, a Sao Paulo Universityeducated sociologist, is one of a growing number of farmers taking a more scientific view of production. He has hired consultants to help acquire a whole new set of skills in grain farming.

Yet, he still embodies many of the older ruralist sentiments that thrived here in an era defined by man-versus-nature. The jungle and the bush were the enemy.

Brazil, with its chronic social inequalities, relied on homesteading until the last decade to populate and secure its vast, United States-sized interior.

Val s father packed 40 days by burro to the area that is now Redencao in 1959 aging black and white photographs of that trek don the walls of his son s farmhouse.

He secured government financing to clear 220 square miles of forested land that he had bought title to and named Santa Teresa Ranch. The family has since sold off most of the farm.

The dictatorship of the time threatened to repossess homesteaders land if they failed to improve it, which meant clearing the forest to raise cattle and plant crops.

Unbridled expansionist policies eventually brought environmental and trade pressure to a head in the last decade, on fears the Amazon would be lost, hastening global warming.

Government efforts to rein in agriculture also threaten to derail the very investments needed by farmers to keep yields improving in existing areas and for orderly, legal expansion.

Brazil s 5.3-million-square-mile area still has over 625,000 square miles of unutilized land that could be legally converted to agricultural ends, according to the IBGE.

Katia Abreu, a senator and the head of the National Confederation of Agriculture, estimates that current laws governing land use criminalize 70-90 per cent of Brazil s five million growers and ranchers for cutting forest that had been state sponsored under previous governments.

Some are guilty of illegal clearing after the laws had forbidden such practices, she admits.

The bulk of them are more victims of bad enforcement of the law, Abreu said, adding that a new law before Congress should normalize most farmers legal status.

The implications for global food prices could be profound. China, Europe and the Middle East are Brazil s main buyers and a couple percentage points variation in its output of soy, beef, sugar and coffee could send market prices reeling.

Val plans to invest three million reais ($1.8 million) to plant corn on nine square miles of his 88 square miles of pasture. The remaining 94 square miles of his ranch must remain forested reserve in this part of the Amazon.

Four hours south of Val s farm by twin-engine plane lies the 80-square-mile Falavinha integrated farm in Deciolandia, Mato Grosso. It was categorized as savanna biome, which means 20 to 35 per cent of the farm had to be forested reserve.

But, after authorities redrew Brazil s biomes, the region may be forced to comply with Amazon Basin requirements of 50 per cent reserve. The costs of replanting would be high.

Federal agencies are also notoriously slow to provide vital services. Farms bigger than three square miles must submit satellite maps of their land to agrarian reform agency Incra.

But farmers say Incra is understaffed for the workload as it is, and the government plans to eventually expand the number of farms to smaller properties that must submit maps.

We spent 10,000 reais to complete the farm s mapping and submitted it a year ago and still nothing, the owner of the farm, Geraldo Falavinha, said over the roar of cotton gins. We are locked out of government financing and need to invest.

The keystone to large-scale integrated farming in Brazil is cattle, especially as far as preservation of the Amazon and other tropical biomes are concerned.

In Para, Val says he will expand his herd to roughly 30,000 from 20,000.

A recent study by the Institute for Atmospheric Research singled out cattle ranching as the main agricultural source of pressure behind deforestation.

Brazil s beef production is grass fed, unlike in the United States and Europe where grain on feedlots is used mostly.

The U.S. writer on food Michael Pollan says cattle should be taken off their typical feedlot diet of grain and allowed to eat grass, to help bring down sky-high grain prices.

In Brazil the world s top exporter of beef and a major grain producer many ranchers and farmers would disagree.

Cattle need to eat more grain here to reach slaughter faster. There s less environmental impact, Darci Ferrarin Jr. said his DGF integrated farm in Sorriso, Mato Grosso.

Brazil could double or triple the cattle per hectare from the present average of nearly one head/ha simply by introducing grain to their diet, better breeding practices and fertilizing and replanting grasses in pastures, beef analysts say.

We make more money from this type of farming, but nature and consumers benefit, he added, while leaning on one of his sister s prize-winning white Nelore heifers that stands nearly seven feet tall and weighs as much as a mid-sized car.

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Helped by high futures prices and a sustained local agricultural boom, cotton and corn acreage is spreading fast, despite being twice as capital intensive as soybean crops.

The number of ship berths dedicated to these two crops at Brazil’s congested ports is growing, statistics show. And while soy will continue to reign on Brazil’s vast savanna, analysts say that even a modest shift toward corn and cotton could make a difference in global markets due to Brazil’s sheer size.

This nascent surge isn’t without challenges. Although farmers flush with cash are sinking money into sowing new acreage, investments outside the farm gates have not kept pace with the country’s agricultural expansion.

Record long lines of vessels waiting to load sugar and grains regularly clog southern ports. The lack of investment in local fertilizer output forces Brazil to import 80 per cent of its annual needs, pitting local farmers against other big importers such as China for the vital crop inputs.

Local fertilizer sales are on course for a record year, but another surge in prices for crop nutrients like in 2008 could clip farmers’ potential for boosting yields and output from Brazil’s nutrient-poor soils.

These problems will take decades to correct.

For the moment, however, the stars seem aligned for an expansion that could over the medium term help smooth out global prices for corn and cotton between North American harvests and squeeze market share for agricultural rivals in the Southern Hemisphere, namely Argentina and Australia.

“At these prices, Brazilian corn and cotton are better earners than soy, … which also means expansion isn’t over,” said Michael Cordonnier, head of Soybean and Corn Advisor in Hinsdale, Illinois and a South American grains specialist.

Brazil’s cotton expansion is still nascent compared to the weight it has put on in the corn sector over the past decades to feed its massive animal protein industries. Brazil is now growing surpluses of the coarse grain. Only five years ago, Brazil was an on-again off-again importer of corn.

The short-term impact is significant: Brazil’s cotton exports will double to a record 900,000 tonnes this harvest, vaulting the country from relative obscurity less than five years ago into the world’s fourth-largest exporter.

Corn shipments could even ease slightly from last year’s record high of 11.6 million tonnes, but still secure Brazil as the world’s No. 3 exporter of the grain after the United States and Argentina, according to government projections.

Over the next decade, the prospects look even brighter. Brazil’s farm sector, with its ample land and decades of performing below its true potential, could confirm a seemingly unrivalled ability to expand compared to other countries.

The government expects cotton and corn production to soar 48 per cent and 24 per cent, respectively, according to a new 10-year forecast released recently. That growth would be enough to make Brazil the No. 3 cotton exporter after United States and India and bring it within striking distance to overtake Argentina in corn.

SWING SUPPLIER

The expansion is being driven in part by high prices due to strong demand in Europe and Asia. Corn futures prices are 13 per cent shy of record territory, and cotton futures, although 35 per cent off March highs, are still double a little more than a year ago.

“Prices are fuelling agricultural expansion and Brazil is right at the top of that list,” Barclays Capital’s global grains specialist Sudakshina Unnikrishnan said. “China is right on the edge of becoming net corn importer – it’s inevitable in the medium term. That favours Brazil.”

Yet local factors in Brazil are also crucial – and should help ensure that the expansion into cotton and corn continues, even when international prices inevitably slacken.

Due to nutrient-poor soils, large commercial Brazilian farmers, hoping to capture the high international prices of corn, will boost output from their fields by fertilizing more heavily with urea to reach similar yield levels of Iowa farms in the United States. But this runs costs up to twice that of a soy field.

Average Brazilian corn yields are just over four tonnes a hectare, though with enough fertilizer they can approximate the state-of-the-art U.S. yields of over seven tonnes/hectare.

Strong local demand from Brazil’s rising middle class, spreading federal farm credit and crop insurance, and government subsidies to offset the high cost of transport infrastructure are helping induce farmers to invest in capital intensive crops like corn and cotton in the hopes of bigger payoffs than soy has traditionally provided.

Although corn and cotton may take a growing share of total grain crop area in Brazil, soy will probably not lose acreage to the upstarts because the grain belt is set to expand due to the high prices of all three crops.

Plus local farmers won’t snub soybean futures, which at $13.50 a bushel are only eight per cent below three-year highs hit in February. Soy has a deep local market, lower input costs and strong profit margins.

“Soy is cash in Brazil,” said Kory Melby, an independent grains analyst based in the centre- west grain state of Goias.

Farmers can sell soy anywhere, any time. Brazilian doctors, lawyers and merchants with no background in farming or commodities trading, regularly buy physical soybeans as an investment through a local paper market at grain co-operatives.

Corn and cotton do not enjoy such appeal in Brazil yet.

“The expansion into new frontier areas and the turning of pasture into fields will be enough to lift all boats,” said Juliano Cunha, a grains specialist at analysts Celeres.

Indeed, although Brazil’s tropical grain belt could overtake U.S. soy output in the next decade, it is not on course to match the stunning exports of the top producers of corn and cotton such as the United States and India.

Cotton area in Brazil is still relatively small. Although acreage grew 66 per cent from last season, total area is still just 1.4 million hectares – minuscule compared with the 24.2-million- hectare soy belt.

Most of this current crop expansion was put in motion before the big rise in global prices, however, so the full effect of high prices on area has not been fully unveiled. Cordonnier estimates that tight ginning and harvester capacity for cotton would contain expansion to 15 per cent.

“Brazil is not going to hurt American farmers of these crops,” said Cordonnier. “The United States is the 800-pound gorilla here.”

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The 40-year-old chief executive of the world’s biggest meat producer, Brazil’s JBS, says his mother is always complaining that the family business was buying too many companies in its zeal to expand.

“My mom for years has been saying, ‘You’re expanding again? Why? You don’t spend any time at home. We don’t need more. We lead simple lives,’” Batista, who took the reins from his younger brother Joesley in February, said with a chuckle.

Batista may not have totally shaken acquisition fever – he says expansion is in JBS’s DNA – but he is easing off the deals for now while the company focuses on getting the most out of the flurry of takeovers it made in recent years.

That may be good news to shareholders, as well as his mom.

Speaking at the Reuters Latin American Investment Summit in Sao Paulo, Batista said that JBS – which just a decade ago was a little-known meat packer in rural Brazil – had reached a critical mass and was entering a new phase.

JBS is now focused on maximizing profit for shareholders, ending a six-year expansion that left some investors wondering whether it had grown too big, too fast.

“It’s now time for JBS to start reaping what it has sown,” Batista said, adding that the big costs of integrating takeovers were over and that the company was well positioned for a global economic recovery.

SHOPPING SPREE

In a rare interview, Batista defended the company’s shopping spree in recent years, calling the takeovers “fantastic opportunities” that gave JBS a major footprint in the United States, the world’s most important meat market.

Fol lowing more than 14 major acquisitions in the last six years – including U.S. rivals Swift, Smithfield Beef, Pilgrim’s Pride and local meat packer Bertin – JBS has now reached a size that allows for efficiency of scale, he said.

Batista also said the company in 2010 spent 400 million to 500 million reais (US$245 million to 306 million) to integrate new acquisitions. Although it will continue “fine tuning,” such costs will be more in the range of 10 million reais ($6 million) a year going forward.

Batista has his work cut out for him. With annual revenue now topping $33 billion, JBS recently posted a fourth-quarter loss of $325 million recently mainly due to costs of integrating Pilgrim’s and Bertin and postponing a U.S. share offering.

The company recently exited a partnership with Italian firm Cremonini, and is struggling with money-losing plants in Argentina that have been hurt by government price caps and export limits. Earlier this year, JBS also failed to win a bidding war for U.S.-based SaraLee Corp.

Despite the focus on getting its house in order, Batista stressed that JBS would not turn its back on a good opportunity for another acquisition.

“It’s part of our DNA to expand. It’s in the blood,” he said, much to his mother’s chagrin.

The fourth of six siblings, Batista quit high school at 17 to manage a small meat packing plant in the farming town of Luziania that his father, a former butcher, bought in 1988. The plant slaughtered 40 head of cattle a day.

He is the last of the three brothers to run the company, with Junior and Joesley preceding him. Batista had been running JBS’s U.S. division until his brother Joesley stepped back to be chairman of the board.

U.S. MARKET

Today, JBS slaughters millions of cattle a year and roughly 70 per cent of its revenue comes from its U.S. operations. Batista sees JBS’s presence in the U.S. market as essential to being a global meats company.

He expects the U.S. economy to return to growth more robustly than the current consensus and sees the potential for the country to become more competitive globally.

“With the size of the deficit, the dollar is going to continue weakening for a long time. It’s not temporary,” Batista said. “In 10 to 20 years, the United States will return to competing with the emerging markets in the production of commodities, in all areas.”

Batista, who speaks Portuguese with an unmistakable country accent from rural Brazil, said meat-packing is a business that lives or dies in the details. It has been 20 years since he worked on the cutting floor but what he learned in his youth has helped him improve profit margins at the company’s plants.

“My father is a butcher, so we learned as kids,” Batista said. “In our business, you better know the details. Any scrap of beef left on the bone can add up to millions. Imagine, we slaughter 15 million head of cattle a year.”

Down to earth and casual, Batista has adapted as quickly to the boardroom as he did working the feedlots or the cutting floors. But he still enjoys the trappings that come with the power of his post, commuting by helicopter in Sao Paulo to avoid traffic jams.

Batista said he used to go down on the floor in some of the U.S. plants, watch the cutters and step in and show them how to trim just a little more flesh from the bone.

———

“Myfatherisabutcher,sowelearnedaskids.”

– WESLEY BATISTA

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