* Increase in soy planting changing way of life on ranches
* Brazil to shoulder greater share of world food output
* Country to replace United States as top soybean producer
By Caroline Stauffer and Reese Ewing
NOVA XAVANTINA, Brazil, Oct 23 Farmers like Endrigo Dalcin are so keen to plant Brazil's biggest-ever soybean crop that they are tearing down the fences around once-sacred territory: pastures that feed the world's largest commercial cattle herd.
After the worst drought in 56 years roasted U.S. crops and drove soy prices to an all-time high of almost $18 a bushel, sowing soybeans promises landowners such as Dalcin three times the returns that grazing cattle on grass can.
On an eight-hour drive across Mato Grosso - a Venezuela-sized state in the heart of Brazil's grain belt - he points out the potential in every hectare of unsown land.
"All those termite mounds mean the soil is too acidic to support cattle or crops," said the 38-year-old agricultural economist, who talks with a convert's passion about transforming more of the tropical grasslands into row crops.
"But if you invest 1,200 reais ($600) a hectare in lime and fertilizer, it could be a productive field."
After three decades of farming in the area, Dalcin this year for the first time leased a neighbor's pastureland on a scale he had never attempted before - 700 hectares (1,730 acres) - to plant soy in a bet that the current boom will last longer than past cycles. He has already watched his father go bust twice.
He is also advising hundreds of cattle producers on how to free more land by consolidating their herds as Brazil prepares to shoulder a bigger burden of supplying the world's food at a level few countries have the potential to match.
Other ranchers are pushing more steers into feedlots where they can be fattened more quickly, a trend that is helping drive the biggest expansion in soybean area in a decade but may also quietly add to domestic grain demand.
For the moment, the clearest victim of the drive for agricultural efficiency is the romantic image of gauchos on horseback and steers roaming seemingly endless jungle savannah, rather than Brazil's status as the world's top beef exporter.
"The idea of 'The West' is over," said Rui Carlos Prado, president of Mato Grosso state's powerful farming and ranching federation Famato. "The time of settlement of the center-west has passed for Brazil as it did for the United States."
The gaucho is the latest casualty of three decades of breakneck economic expansion in Brazil. Pastureland has shrunk more than 11 percent since a 1985 peak of 179.3 million hectares, an area almost as big as Mexico.
Most of the loss was caused by environmental restrictions requiring some land to be reforested, while degraded pastures were abandoned.
For families like Dalcin's, who moved to Nova Xavantina - in eastern Mato Grosso - to plant soy in 1982, the years of plowing into virgin cropland are ending as land prices skyrocket and new laws slow encroachment onto forests, encouraging soy growers to seek more-accessible pastures.
RANCHERS TURN TO PLANTING
One of those heeding Dalcin's advice is Elyson Ricardo Ricci, a 32-year-old trained accountant and computer systems technician who came to Nova Xavantina in 2004 from the metropolis of Sao Paulo.
Convinced he'll never go back, Ricci looks over a map of the Fazenda Felicidade ranch that he manages outside of town for the Brazilian industrial group Facchini, explaining how he plans to plant soybeans for the first time, with the help of Dalcin. Soil enriched by soy planting will eventually allow him to produce three to four times the number of cattle currently on the ranch.
"I never imagined I'd be planting 1,200 hectares of soybeans and spending millions of reais on farm equipment," Ricci said, adding that he is not giving up on ranching, a profession that increasingly overlaps with farming.
By planting soy in a field, Ricci and other ranchers following the same strategy are improving the soil, which will then be able to produce enough grass to support far more head of cattle per hectare than otherwise possible, while still opening land for soybean production.
Today, Mato Grosso has nearly 8 million hectares of soy area and 27 million hectares of pasture. Nearly half of the pasture is degraded and unable to support cattle - but with lime and tilling, it can yield soybeans.
Rotating soy onto pasture every five to 10 years helps pastureland recover nutrients. Selling soybeans pays the cost of recuperating the land and then some, leaving farmers the option to go back to grazing cattle.
"Cattle aren't going to cover that tab," Ricci said, referring to the cost of recovering land.
Staying off the soybean bandwagon makes no financial sense at today's prices. Chicago futures have come off 16 percent from the record $17.94 a bushel set in September, but are still up 38 percent from a year ago. Choice cut-out beef prices are nearly unchanged from the beginning of the year at $196.68 per 100 pounds.
For global consumers once again anxious over rising grain prices and scarce supplies, the trend is good news.
Brazil has not increased planting by so much since 2003, with expectations of a record 82-million-tonne crop that would put the country ahead of the United States as the top soybean grower for the first time.
The farm economics institute Imea of Mato Grosso, which will lead Brazil's expansion in area, estimates the state's soy output will nearly double by 2022 to 39 million tonnes on a 51 percent increase in area from converted pasture.
WAY OF LIFE
Jerry O'Callaghan, who likes to escape the urban gridlock of Sao Paulo to his cattle ranch in the center-west state of Goias, is literally losing sleep over the rapid transformation as his neighbors lease pastureland to soy farmers.
"I was woken up by the tractor on the neighbor's land - they were still preparing for soybean plantation at 1 o'clock in the morning Saturday to Sunday. They are working almost 24 hours a day," O'Callaghan said over a steak at Sao Paulo's Barbacoa restaurant, one of thousands of traditional barbecue joints in a country that loves beef so much it eats 80 percent of its output and still leads global exports.
O'Callaghan, also the head of investor relations for JBS , the world's largest beef producer, says running a cattle-only ranch is his hobby, and a way of life that is dying out as ranchers combine their operations with grains farming.
"These guys are making a fortune," said O'Callaghan, referring to ranchers who have converted pasture to farmland.
Feedlots, crowded corrals where cattle can quickly be fattened before slaughter, have long been standard in the United States and Europe. Even Argentina, the No. 3 exporter of beef and soybeans, had confined 40 percent of its herd by 2008.
They are now growing quickly in Brazil, one of the world's last holdouts for grass-fed beef. Access to cheap grazing land is being curtailed as the government reins in deforestation, and competition from farmers has intensified.
The number of the 200-million-head herd on feed is soon expected to approach 4 million, or 2 percent, according to Brazilian feedlot association Assocon.
In theory that means increased demand for corn and soy, with more cattle moving to high-protein feeds from pasture grasses.
Cattle destined for slaughter are expected to eat 5.3 percent more soy and 5.5 percent more corn this year than in 2011, the national feed industry association says. Brazilian cattle, however, rely little on grain compared with animals in the United States or other countries that depend on feedlots.
And while livestock producers in other countries cringe at rising grains prices, those in Brazil enjoy an advantage: agricultural scientists have discovered they can plant two corn crops a year, making mountains of the grain available at a time cattle on pastures risk losing weight - the dry season.
Though some lament the changes to Brazil's traditional ranch culture, for many pragmatists the efforts to free land for soy and corn is a natural response to supply and demand.
"It's all a question of economics," said Ricardo Shirota, a professor at the University of Sao Paulo College of Agriculture.
"Realistically, in the modern world, where we have to feed 7 billion people, this idyllic concept of completely naturally produced food is no longer feasible." (Additional reporting by Hugh Bronstein in Buenos Aires and Peter Murphy in Brasilia; Editing by Todd Benson, Jonathan Leff and Dale Hudson)
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