LUIS EDUARDO MAGALHAES, Brazil (DTN) -- Young American farmer Scott Harker has had a roller coaster experience in Brazil during the past two years. Unfortunately for him, it has been mostly downhill.

Harker migrated to Brazil in 2007 to start life as a frontier farmer in the sweltering outback of Bahia state. Little did he imagine that just 15 months later he would brave Alaska's cold to make ends meet.

"I guess I reached too far," said 31-year-old Harker, from Melba, Idaho. "Everything that could go wrong, went wrong, in Brazil, and then some."

It all started back in 2005. Disillusioned with the lack of farming opportunities in the U.S., and prompted by four straight years of financial losses, Harker went on a tour of Brazil's frontier region and liked what he saw.

"I was very impressed with the scale and opportunities in Brazil," said Harker who tried everything from edible beans to sugarbeets on his 600-acre farm in Idaho. "It was a big risk to take, but I couldn't make money from farming in the U.S. and I wanted to build something for my children."

Following several more trips to Brazil, Harker took the plunge in 2007 and sold his U.S. property. The recently-wed Harkers, along with their two infant sons and family sheep dog, moved to Brazil for the adventure of a lifetime.

"It was a do-or-die situation. We sold everything, so there was no going back," said the ever-cheerful Harker. "We bet our whole future on Brazil."

The Harkers moved to the rugged outback of western Bahia, which at the time was a booming agricultural frontier, and even had a small community of American expatriate farmers.

Harker got a good deal on a 2,300-acre farm near the town of Luis Eduardo Magalhaes, but there were early signs of trouble when his illusive local accountant took much longer than expected to process the paperwork and get funds transferred.

"It was all supposed to take just a few weeks," said Harker. "The reality was much different and I had to postpone payment on the farm a number of times."

Harker underestimated the slow pace of doing business in Brazil's frontier region, but luckily for him, farm owner Raul Botelho, one of the region's pioneers, was a patient and generous man.

LATE PLANTING

Harker finally got done with transferring funds and closed the deal on the farm in late August 2007. Soybean planting in Bahia runs from November to December, which may seem like plenty of time to get ready, but not so in slow-paced Bahia.

"The logistics are much different here," said American Brian Willott, who has farmed in Bahia for the past five years. "Inputs have to be ordered months in advance to guarantee supply. There is also soil correction and many other details that take time."

Harker would also soon encounter a recurring problem that would mark his time in Brazil -- lack of credit and working capital.

"The dollar was weakening and the delay in transferring funds meant I didn't have as much capital as I thought," said Harker. "I always seemed to be short of money in Brazil."

With no local financial history, he found it very difficult to purchase inputs on credit and nearly everything had to be paid for in cash. His biggest difficulty was finding machinery.

"The region was really booming back in 2007 and there was no used-machinery and I couldn't get credit or afford new equipment," said Harker. "There was also a shortage of contractors and service providers."

According to local consultants ORO, Harker's small-scale operation was not economically feasible in a high-cost frontier region like Bahia.

"Scott was farming just over a thousand acres (the remainder of the farm had not been cleared)," said Jefferson Oliveira, a consultant with ORO. "Our studies show that you need at least 2,000 acres to justify machinery and infrastructure investments here."

Harker did eventually manage to get some machinery and with the help of a neighbor, he planted 1,000 acres of soybeans in mid-January of 2008.

"Nobody plants that late and expects to get a good crop," said Oliveira. "Planting should be finished by around Dec. 20 at the latest, or there is a serious risk of weather problems."

As expected, Harker had a very poor crop of beans, averaging just 25 bushels an acre, or around half the state average that season.

MORE PAPERWORK WOES

Harker's problems didn't end with poor soybean yields. Several weeks before harvest, the trading company he pre-sold his crop to called up to inquire about the invoice for the merchandise.

"I had no idea what they were talking about," said Harker. "My accountant never mentioned anything about an invoice and obviously he hadn't ordered any. With no storage space, we had to delay the harvest until a solution was found."

The answer was to deliver the beans using an invoice issued in the accountant's name. This quick fix solution, however, would later come back to haunt him.

"By this stage, things were slowly getting out of hand," said Harker. "I wanted to change accountants, but it would have been very complicated with everything in his name. I didn't have a lot of alternatives."

While many of Harker's problems until then were a result of poor judgment and lack of planning, the next turn of events was sheer bad luck: the firm that purchased his beans, local trading company Agrenco, went bankrupt.

Agrenco closed after running up huge debts, mostly on the futures market, and some of the company's top executives were arrested for fraud and other criminal activities.

Harker wasn't the only farmer who sold to Agrenco, whose clients included American groups such as Carroll Farms and Brazil Iowa, but he was probably the only farmer in Bahia state not to get all his beans back.

Most farmers got a court order to retrieve their beans, but because Harker's beans had not been delivered in his name, the whole process took a lot longer, meaning he was last to arrive at Agrenco's warehouse.

"There was hardly anything left when I got there," said Harker. "I probably got about two-thirds of the beans back, but it wasn't even enough to pay my input costs."

At this stage desperation began to creep in.

LAST CHANCE

As is common in Brazil, where long-term bank loans are scarce, Harker purchased his farm with payment divided over eight yearly installments to be paid each harvest time.

Given his poor yields and problems with Agrenco, however, he was unable to meet his yearly land payment and had to negotiate a six-month extension. As a last resort, he decided to plant irrigated edible beans during Bahia's dry winter period.

"Everybody advised against it, even the seed seller. He was planting way too late," said ORO's Oliveira. "Even if he did manage a good harvest, the cost of running diesel pivots would eat up all the profit."

Most center pivots in the region are run on electricity, which cost around one-fifth less to run than their diesel equivalent. Harker didn't have this option, though, as his farm was not yet hooked up to the local power grid.

Despite the warnings, Harker went ahead and planted around 750 acres of edible beans at the end of June last year. His crop was developing nicely, when he received more untimely news.

There were problems with the paperwork on his visa -- being handled by his now predictable accountant -- and Harker had to return to the U.S. to try and sort it out. As a consequence, the crop was left in the hands of employees during the critical months of August and September.

"I was on the phone several times a day," said Harker. "I wasn't sure what to expect when I got back, but as it turned out they didn't do a bad job."

Harker actually had a good, although costly, crop of edible beans at harvest time in late October.

"I actually thought it was all going to work out in the end," said Harker. "I got a buyer offering a good price, but unfortunately bad luck struck again."

Just as the harvesters rolled into Harker's farm, it started to rain. It didn't stop again until 45 days later.

"We lost everything," said Harker. "We harvested some of the beans, but they were at 40-percent moisture and we didn't have dryers. It was a disaster."

TOUGH LESSON

The Harkers couldn't make the land payment and were forced to hand back the farm.

"We just ran out of options, there was no money left to pay for the land or to plant another crop," said Harker. "In the end, we were short a couple of hundred thousand dollars."

The Harkers moved back to the U.S. at the beginning of the year, living with in-laws in Rexburg, Idaho. Scott worked with his father-in-law over the winter months doing ecological clean up services in Alaska.

"It was a big change from the hot temperatures in Bahia," said Harker, "but I had to do something to put food on the table."

The Harkers' luck in the U.S. didn't improve. Their youngest son, two-year old Clyde, was diagnosed with autism and Scott's 26-year-old wife Mandy discovered she has thyroid cancer.

"We try to look at the positives. If we had been successful and stayed in Brazil, then maybe we wouldn't have discovered Mandy's problem in time," said the ever-optimistic Harker. "We also wouldn't have the care available for my son that we have here in the U.S."

Despite the stress and financial problems, the Harkers enjoyed their time in Brazil.

"It was a real test of our marriage. At least we know now that we can live together through anything," said Harker. "We also met some great people and made some friends for life."

Among them is farm owner Raul Botelho, who gave the Harkers back some of their downpayment on the land as a gesture of goodwill.

"I really wanted them to succeed," said Botelho. "In the end, though, I had to finish it for their own good. I was afraid they would just get deeper into debt."

Harker still thinks about farming and says some day he hopes to return to life in the countryside, maybe as a contractor, but most likely in the U.S.

"I still go to trade shows with my sons and we sit on the tractors and talk about Brazil," said Harker. "Despite everything that happened, we still miss it."

*****

This is the second of a four part series on American farmers' dreams and reality in Brazil.

Kieran Gartlan can be contacted at kieran.gartlan@dtn.com

(ES/CZ)

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