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Diversification of feedstock production in sugarcane landscapes:

the case of AFOCAPI – Piracicaba – SP - Brazil

Prof. Weber A. Neves do Amaral, PhDESALQ – USP - LCF

• The case of diversification of feedstock production in sugarcane landscapes: using a

• Introduction

Road map of the presentation

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• Discussion

• The SWOT Analysis

production in sugarcane landscapes: using a biodiesel plant as a driver

Gasoline/Diesel

Querosene

GHGs

Nuclear

Oil reserves

Hydro

Global awareness

Environmental

Climatechange

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Food versus fuel - understanding key drivers of energy supply and demand

Project context

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Roles and functions

of government,private sector

and NGOs

Food

Ethanol& biodiesel

Jobs

WindEnergydemand

r

Economic growth

+-Hydrogen

Trends inconsumption

altaxes & policies

Energysupply Land use

patternsNative

vegetation and

forests

Quality of jobs

Diversification

Biodiversity

Food safety

Quality of lifeand

livelihoods

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The brazilian energy matrix

Sugar Cane

14.6%

Other Renewables 3.0%

Hydroelectricity14,8%

Other Biomass12,4%

4

Petroleum and Derivatives

37.9%Natural Gas9,6%

Coal6,0%

Uranium1,6%

Brazilian main crops (MM Ha)

3,02,52,8 2,4

RiceWheat

CAGR 2001-2006

-1,5%6,7%

176185

196205 207 209

6,7%

Cattle (MM)Cattle

6,7%

Cattle 3,5%

5Source: MAPA; CONAB

14,0 16,3 18,5 21,4 23,3 22,7

13,012,3

13,212,8

12,2 13,05,05,2

5,45,6

5,8 6,6

3,94,3

4,44,3 3,9 4,2

3,23,2

3,23,7

3,9 3,0

1,72,1

2,52,5

2,8 2,4

2001 2002 2003 2004 2005 2006

Soybean

Corn

Sugarcane

Bean

Rice

10,2%

0,0%

5,8%

1,7%

-1,5%176

PA1-0.6

Equator

Location of mills and sugarcane production

MA3-2

6Source: AGRIANUAL / IDEA

Traditional

Frontier

New frontier

1-0.6

Capricornia

3-2

TO1-0,2

MT12-13

NE41-56

BA5-6

SP189-266

GO23-19

MS21-12

PR31-35

RJ11-7

MG37-32 ES

6-4

RS2-1

Nr mills – M ton

Agriculture productivity – evolution from 1960 until 2005 (%)

• Purpose: to diversify the production of crops in homogenous sugarcane landscapes, creating demand by installing a biodiesel pilot´s plant

Title: Diversification of feedstock production in sugarcane landscapes and adding value to commodity products in Piracicaba, SP, Brazil

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• Period: 2006 onwards

•Budget: 1,5 M dollars of investment in a new biodiesel plant, plus 500 k yearly to support farmer´s crop diversification

• Objectives: to reduce the vulnerability of farmer´s income due to single-crop dominance

installing a biodiesel pilot´s plant

How sugarcane small farmers could overcometrouble waters?

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• Piracicaba region• State of São Paulo, Brazil

Why?Why?

AFOCAPI

Project description and baseline prior to implementation

Whom? Where?Where?

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• Not an issue until project implementation

Livelihood conditionsLivelihood conditions

• Land tenure: very well defined• Land use history: over 50 years of experience on

“traditional” sugarcane prodution• Average property size: 28 ha• Over 3.000 producers.

• Need to diversify the production of crops• Reduce the vulnerability of farmer´s income• Need to comply with new environmental legislation

Bioenergy Production: baselineBioenergy Production: baseline

• Traditional sugarcane production• Minimum area of crop rotation• Single crop systems

Multi-functionality baselineMulti-functionality baseline

Source: Amaral et al. 2007

Biodiesel Pilot Plant´s Project

Sugarcane Supplier´s Association of Piracicaba

AFOCAPIMission and objetivesMission and objetives

• To support independent sugarcane producers´s interests• To provide technical assistance to its members

PrósPrósAFOCAPI

Sugarcane Supplier´s Association of Piracicaba RegionSugarcane Supplier´s Association of Piracicaba Region

The main stakeholder structure and set up

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• COPLACANA – farmer´s cooperative• Farmer´s Credit Bureau• Rural Labor Union

Main characteristicsMain characteristics

• Created in August 9, 1947• 4.604 independent producers• 2007/08 – 9,6 M tons of sugarcane was produced• Supply sugarcane to ca. 17 mills in the region

• Long history of farmer´s engagement with sugarcane production

• Guarantee of resources due to annul fee contribution

Cons.Cons.

• Resistance to change and to adopt new technologies• Management structure and weak governance

Farmer´s Credit

Bureau

Structure – 3 supporting pilarsStructure – 3 supporting pilars

COPLACANARural LaborUnion

Source; Amaral, et ali. 2007

Project context and

opportunities

• New biodiesel law• Need to comply with environmental legislation

Farmer´s income and

supply

• Strongly dependent on sugarcane prices• No option of supply sugarcane besides existing sugar Mills

• Ca. 100.000 ha of sugarcane in the region

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Current land use

• Ca. 100.000 ha of sugarcane in the region• Diversification of crops – less than 5% of the area• Other dominant land use – ca. 30% - pasture lands with low productivity

• Some challenges… • How to induce crop diversification in traditional sugarcane´s dominant

landscapes?• Can a biodiesel pilot plant, as a driver, stimulate the demand for other

crops?

Project context, assumptions and potential of replication

Context• Global demand and awareness on biofuels potential and impacts raising• New biodiesel national law, creating a mandatory blending mandate of 2% and 5%

(2008 and 2012 respectively)• Locally: need to diversify farmer´s portfolio and to comply with environmental

legislation

Assumption• The main project assumption was that crop diversification should be driven by

creating a demand, which locally did not exist due to sugarcane strong historical baseline

• Demand could be stimulating by a new driver – a biodiesel plant, implemented and managed by farmers

• Biodiesel produced could be used by farmer´s operations• Mill´s by-products used as feedstock for animal nutrition

Potential of replication elsewhere• High, but capital and biodiesel policies dependent • The main risk – increase commodity prices, affecting the supply of crops to the

biodiesel plant – competition with large commodity traders

Sustainability:Economic, energy and climatic policies integrated Sustainability:

countries without clear targets - GHG

Market: higher growth rate with strong pressureon the resources

Higher oil prices

Market: higher growth rates

Diversification of the energy matrix

M

14Produção LQCE_draft_v1.ppt

Sustainability: social awareness and targets

Sustainability: A fragmented agenda; green investments not viable

Business as usual scenario

Market: effective policies, but not sufficient

Fiscal policies still not business friendlyMarket: same growth rate:, market regulations driven by government

Failure of a common international agenda:

S

SWOT Analysis: Where the organization set and project deployment merges …

• Farmer´s resistance to change –affecting the supply side

• Weak governance structure• Biodiesel conversion technologies not optimized

• Lack of experience o

• Long history of mobilization• Capacity to mobilize farmers• Access to capital• Strong adhesion to the project• Large number of farmers as potential biodiesel consumers

Strenghts Weaknesses

• Commodity prices• Biodiesel policiy still being implemented

• Not tax policies yet developed for trading biodiesel for self-consumption

• Increased national and glogaldemand for biofuels

• Global biofuels standards, requiring significant GHGs reduction

• New biodiesel national law

ThreatsOpportunities

...

Evolution of productivity of Brazilian ethanol: continuous investment in R&D – mainly in the public domain – How´s the future look likely with new investments from large groups?

IP rights – an issue of concern

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Productivity potential in the future versus current production technologies

• Market size• Levels of investment in applied research in sugarcane• Access to small farmers…

• Level of genetic improvement and the role of biotechnologiesEx: application of synthetic biology for novel crops and traitsca. 10 years for full deployment

The role of productivity and farmer´s access to technologies and resistance to change

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An issue of concern:How to leverage existing crop productivity?Sugar cane – 88 ton/ha – (45 - 120 ton/ha)Eucalyptus – 44 m3/ha/year – (27 – 110 m3/ha/year)

How?Precision farming and optimization of resourcesNew tools for monitoring productivity: nutrient efficiency and water

What about improving existing management regimes? And diversification ofcrops in rotation with sugar cane?

7 M ha

72 thousand growers

400 mills & distilleries

(Operation & projects)Harvest

400 M tons

ETHANOL22 billion liters

SUGAR30 million tons

BAGASSE

Sugar cane value chain: where are the opportunities for small holders?

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Carbon Carbon

creditscredits

22 billion liters 30 million tonsBAGASSE

BioplasticBioplastic

Ethanol

Food

PharmacyLysine

Derived

The main resolutions and suitable areas for planting sugarcane are shown below:

• Protect the areas with original native vegetation and the prohibition of the planting in the Amazonia,Pantanal e Bacia do Alto Paraguai biomes;

Sugarcane zoning and revision of the Forestry Code (1965)

Pantanal e Bacia do Alto Paraguai biomes;

• Sugarcane planting in areas where the use of water is minimum as possible (rain feed primarily);

• A draft law project to recommend the growth of the planting based in the food safety without harming food production;

• Look for new places to produce sugarcane, usingpasture areas or those occupied by cattle raising.

Source: EMBRAPA 1

Subtitles:-Suitable areas- Amazonia, Pantanal and Bacia do Alto Paraguai biomas

One of the main targets of this protocol is related with the anticipation of sugar cane burning regime from 2017 to 2014 in flat areas, and from 2031 to 2017 in slope areas*

Mecanized areas Non-mecanized areas

% o

f h

arv

es

ted

su

ga

rca

ne

wit

ho

ut

bu

rn

Environmentally friendly protocol of the sugarcane industry : the Green Protocol of the Secretary of Environment – São Paulo State - 1/2

* Are considered sloping areas, when the inclinaiton is more than 12%Source: Única 2

% o

f h

arv

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ted

su

ga

rca

ne

wit

ho

ut

bu

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Environmental servicesEcological tax (ICMS ecologico and Pro-ambiente)REDD and market instrumentsAlianca Brasileira para Mudancas Climaticas – several stakeholders

Pasture

Degraded Area of Permanent

Preservation (APP)

Eucalypt

Restored APP

Feedstock diversity

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Feedstock diversity

250

140

160SojaPR-BR $

...

Indice100=dez/04

K-TonPoint of

inflection -

corn impact

Market context and indirect impacts of the US ethanol program on commodity prices

23-

50

100

150

200

mar/01 mar/02 mar/03 mar/04 mar/05 mar/06 mar/07 mar/08

-

20

40

60

80

100

120

140CanaBR

MilhoEUA $

EtanolUSA

PetroleoWTI $

Est. MilhoEUA

Est. MilhoMundo

8% do milho

21% do milho

Nota: A produção de cana teve seus valores ajustados para médias de 12 meses para reduzir impacto da sazonalidade; Preço em US$.Fonte: EIA; Abiove; FNP; Oxy Fuel; DTN; USDA; Unica; análise VPB

Crop options for rotation

• Focus on oil crops in rotation

•Peanuts and soybeans are the ones being produced

•Other options for ethanol production still under deployed

•Eucalytus plantations are being stimulated for multiple purpose – energy and

fiber, but not yet for ethanol second generation

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fiber, but not yet for ethanol second generation

Market driven environmentally friendly products and

landscape management

Eucalytus plantationsNative forests

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al demand for energy: still not yet assessed properly

Food Production

Systems

BioenergyProduction

Systems

ForestrySystems

Food systems

Energy systems

How to integrate these systems at landscape level?

Remaining challenges and discussions

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• Managing landscapes sustainably

• Multiple products with value added and environmental services

• Increase farmer´s income

• Improve GHGs balances of current ethanol´s benchmark

• Reduce the dependence on ethanol´s market price and supply options

Thanks to:

FAO – Olivier Dubois

AFOCAPI team

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My students at my Lab.

Contact info:

Weber A. Neves do Amaral, PhD

University of São Paulo – ESALQ

Email: wamaral@esalq.usp.br