Challenges and Opportunities for Conservation, Agricultural Production, and Social Inclusion in the Cerrado Biome Technical Annex: The Agriculture Sector, Agriculture Supply Chains, and Transportation Infrastructure August 2016 This technical annex accompanies the “Challenges and Opportunities for Conservation, Agricultural Production, and Social Inclusion in the Cerrado Biome” report, developed for the Climate and Land Use Alliance by CEA Consulting. The full report and associated materials can be found at: www.climateandlandusealliance.org/reports/cerrado/v Table of Contents Introduction 3 Overview of agriculture in Brazil 6 Overview of agriculture in the Cerrado 12 Agriculture in Matopiba 16 Soy and the soy supply chain 27 The beef and milk supply chain 40 Pasture intensification 55 Agricultural certifications 61 Transportation infrastructure 65 2 AGRICULTURE This section was produced in partnership with AgroIcone 3 Agriculture in the Cerrado Historical background and overview • Beginning in the mid 1970s, agricultural production in the Cerrado expanded greatly – through a large scale national investment in agricultural research and development. Today, it is one of the most intensive and productive agricultural regions in the world. • In the twenty years between 1991 and 2011, the value of Brazil’s agricultural exports increased ten-fold, from USD 7.9 billion to USD 81 billion.1 The Cerrado has been at the heart of this growth. Today, the biome accounts for about 40 percent of the total GDP from Brazil’s agricultural sector.2 Notes on this section: • Much of the agricultural data is provided by state rather than biome, so much of the information presented here is not perfectly aligned to the biome. • Comprehensive information on the agricultural sector is limited by the fact that the latest Agricultural Census was published in 2006 and there are no current plans for another census. As a result, a number of the charts in this chapter only provide data through 2006. Sources: (1) FAOSTAT, 2015. (2) MMA, 2014. 4 Agriculture in the Cerrado Soy • Soy production has grown at a rapid clip in the past few decades. Planted area has tripled since the mid 1990s and export value has quadrupled since 2006. Soy accounts for almost 40% of Brazil’s agricultural exports, by value.1 • Of the Cerrado states, Mato Grosso has by far the most land area planted with soy, but Matopiba is growing in importance for soy production.2 Beef • Brazil has the largest commercial cattle herd in the world and is the #2 producer and exporter of beef globally. However, the majority of Brazil’s beef is consumed domestically.3 • The processing segments of the supply chain is highly concentrated for both soy and beef. • The beef sector is not growing as quickly as the soy sector. Slower growth and a trend towards intensification could free up land for crop expansion onto former pasture lands. Sources: Photos by CEA, from western Bahia. (1) MDIC, AgroIcone. (2) IBGE - Produção Agrícola Municipal, via AgroIcone. (3) USDA, 2015. 5 AGRICULTURE OVERVIEW OF AGRICULTURE IN BRAZIL 6 Brazil is a top global producer and exporter of agricultural commodities Brazil’s agriculture, world share 2014/2015, %1 0% 20% 40% 60% 80% 100% 1 Orange juice 1 • Brazil is important to world food production. 1 Sugar • Brazil leads world production 1 and export of orange juice, 2 Soybeans sugar, and coffee. 2 • It is second for production and 4 export of soybeans, producing Chickens 1 30% of the world’s soybeans and accounting for almost 40% 1 Indicates Coffee x of global soybean exports. 1 world rank • 2 Brazil is the world’s second top Beef exporter of beef. 2 3 Corn 2 Production 5 Exports Cotton 3 4 Pork 4 Source: Data from USDA. 7 Agriculture exports account for over 40% of Brazil’s total exports by value Brazil’s trade balance 300 5 year increments 1-year increments • Brazil has exported 250 about $100 billion USD worth of agricultural 200 commodities, on an annual basis, over the past few 150 years, and billion imported about US$ US$ $30 billion. 100 • Brazil’s total exports are worth about $230 billion 50 USD. • The agriculture sector is important 0 for maintaining Brazil’s trade 1990 1995 2000 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 balance. Brazil Exp Total Brazil Imp Total Agribusiness Exp Agribusiness Imp Source: Ministério da Agricultura. Chart and text adapted from AgroIcone. 8 Agriculture is an important, but not leading, sector for foreign investment Foreign investment in Brazil $12 Metallic mineral extraction $10 Oil extraction and Brazil’s agriculture related services sector averaged USD $350 million in foreign $8 Agriculture, livestock and investment per year services related to these from 2007 to 2009, activities hitting almost USD Activities of suport the $6 $500 million in 2008. mineral extracion However, it lags far US $ Billion US behind mineral and oil Silviculture, Forest $4 exploitation extraction. Non-metallic mineral $2 extraction Fishing and acquaculture $0 Coal extraction Source: Bacen, http://www.bcb.gov.br/rex/ied/port/ingressos/htms/index1.asp?idpai=INVEDIR, via AgroIcone. 9 Soy and beef are the commodities most linked to deforestation, especially in Matopiba Soy export value - all of Brazil 35 30 Soy 25 • Soy production has grown at a rapid clip in the last 20 Soybean oil few decades. Planted 15 Soybean meal US $ Billions $ US area has tripled since the 10 Soybean mid-1990s. Soy accounts 5 for almost 40% of Brazil’s agricultural exports, by 0 value. 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 1997 Beef export value - all of Brazil 8 7 6 Beef Salted meat 5 • Brazil has the largest Casings 4 commercial cattle herd in Offals US $ Billions $ US 3 the world and is the #2 Processed meat 2 producer and exporter of Fresh beef beef globally. 1 0 2006 1997 1998 1999 2000 2001 2002 2003 2004 2005 2007 2008 2009 2010 2011 2012 2013 2014 Source: MDIC, via AgroIcone. 10 Pesticides, nutrient pollution, soil erosion, and genetic engineering are significant concerns for Brazilian agriculture • Pesticides are a major concern in the Cerrado because of the human and ecosystem health impact. Brazil is now the world’s largest buyer of pesticides, and some pesticides that are outlawed in the United States and/or Europe are still allowed in the Cerrado, with pesticide companies and users arguing that the needs in the Cerrado’s tropical climate differ from those of more temperate regions. However, cases such as an accidental crop-dusting of a school which sent 30 children and teachers to the hospital have fueled a strong anti-pesticide movement.1 • Nutrient pollution from excess nitrogen and phosphorous from crop agriculture, is a growing concern in the Cerrado. These nutrients can pollute surface and groundwater (aquifers) and causing algae blooms that strangle aquatic ecosystems. Left unchecked, nitrogen pollution of drinking water sources can lead to major health effects such as “blue baby syndrome.”2 • Soil erosion impacts the long-term productivity of crops and pastures. Unchecked overgrazing in particular can cause erosion, compaction, and destruction, especially in sensitive riparian areas. Soil erosion also leads to significant carbon loss in the Cerrado. • Genetic engineering is a concern for many Brazilians because of its possible effects on human health and its potential to contaminate non-GMO crops. 60% of cotton, 54% of corn, and 91.8% of soy grown in Brazil are now genetically engineered.3,4 Sources: (1) Prade 2015. (2) Neto et al. 2011. (3) Thuswol 2013. (4) Reuters Brasil 2014. 11 AGRICULTURE OVERVIEW OF AGRICULTURE IN THE CERRADO 12 Cropland and pastureland currently account for almost half of the land cover in the Cerrado • The southern Cerrado states of Mato Grosso do Sul, Sao Paulo, and Goiás are dominated by pasture and croplands. • Minas Gerais and Mato Grosso are also used extensively for pasture and cropland. • The northern part of the biome is still largely covered with natural vegetation. Source: CEA and Greeninfo Network, using data from LAPIG Maps. 13 Agricultural production in the Cerrado states nearly doubled between 2005 and 2010 Total agricultural production in Cerrado states 900 800 700 • Major increases in crop 600 500 production occurred in the 400 Cerrado states between 2005 and 2010. 300 Millions of tonnesMillions 200 • Soy is one of the main 100 growth crops in the Cerrado, - and its planted area has 1990 1995 2000 2005 2010 2011 2012 2013 more than tripled since 1990. • The southern Cerrado’s Planted soy area by states - Cerrado planted soy area is far larger than Matopiba’s, but both 20 São Paulo are growing. 18 Minas Gerais 16 • Matopiba accounts for about Mato Grosso do Sul 14 16% of planted soy area in 12 Goiás the Cerrado. 10 Mato Grosso 8 Tocantins 6 Maranhão Millions of hectaresMillions 4 2 Piauí 0 Bahia 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 Source: Pesquisa Agrícola Municipal, <http://www.sidra.ibge.gov.br/bda/tabela/listabl.asp?c=1612&z=p&o=28> via AgroIcone, April 2015. 14 For sugarcane and soy, planted area (rather than productivity gains) has driven yield growth in recent years Soybean productivity in Cerrado and planted area Corn productivity in Cerrado and planted area 5 20 6 12 Yield: 108% Yield: 16% 18 Yield: 72% Yield: 39% 4 Area: 3% Area: 78% 16 5 10 Area: 3% Area: 28% 14 4 8 3 12 10 million hectares 3 6 thousandkg/ha million million hectares - - thousandkg/ha - - 2 8 2 4 6 1 4 1 2 2 Planted areaPlanted Productivity 0 0 areaPlanted 0 0 Productivity 2003 2010 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2004 2005 2006 2007 2008 2009 2011 2012 2013 1999 2010 1990 1991 1992 1993 1994 1995 1996 1997 1998 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2011 2012 2013 Soybean planted area Soybean productivity Corn planted area Corn productivity Sugarcane productivity in Cerrado and planted area 100 9 Yield: 14% • Soybeans have the greatest planted area 90 Yield: -2% 8 Area: 31% Area: 113% in Brazil among the agricultural crops.