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Interactions between Global Supply Chains, Land Use, & Governance: The Case of Soybean Production in South America Rachael D. Garrett Postdoctoral Fellow in Sustainability Science Harvard University rachael_garrett@hks.harvard.edu

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Data: FAO STAT Population & income growth & urbanization are increasing demand for livestock products

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Notes: Yields are country averages. Data: FAOSTAT Soybean area and yields by country -1986 & 2010 Increased demand met both by increased yields & increased area, esp. in Argentina & Brazil Garrett, Rueda, Lambin Environ. Research Letters, Forthcoming

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( KM 2 ) 2000-2010 500 Clark et al. 2010 Land cover change in South America from Agricultural Expansion Woody Vegetation AreaAgriculture & Herbaceous Area Counties w/ 50,000 ha or more of agricultural expansion in last 10 years

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What can be done to halt land cover change in the Amazon, Cerrado, and Chaco for cropland expansion, while still allowing Brazil to develop (via agricultural intensification & value added activities)? Motivating question

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Interactions between the supply chain actors, institutions, land use Knowledge gaps Non-linear feedbacks that can lead to rapid and unexpected changes

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Questions Addressed How do consumer preferences in Europe influence trade & supply chain infrastructure in Brazil? How does supply chain infrastructure influence Brazilian farmers ability to access premiums for environmentally responsible soy? How does competition & diversity in the supply chain influence prices, rules, & information faced by farmers, thereby influencing incentives to expand cropland?

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Questions Addressed How do consumer preferences in Europe influence trade & supply chain infrastructure in Brazil? How does supply chain infrastructure influence Brazilian farmers ability to access premiums for environmentally responsible soy? How does competition & diversity in the supply chain influence prices, rules, & information faced by farmers, thereby influencing incentives to expand cropland?

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European Soy Preferences > 70% of Japanese & European consumers prefer foods that do not contain GM materials GM imports are not banned, but must be labeled Meat & dairy products are excluded Total demand for certified non-GM soy is about 10% of world export market Now also asking for soybeans that do not result in deforestation Environmentally Responsible Shift trade patterns Incentivize land use through price premiums Non-GM & eco-certification programs Potential Effects of Preferences

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Notes: Total includes only North and South America. Data: Isaaa.org Total Non-GM soy area by country 1996 & 2010 80% decrease Non-GM soy area as % of total soy area Production of non-GM soy Garrett, Rueda, Lambin Environ. Research Letters, Forthcoming

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Many EU countries with a strong non-GM preference shifted their imports to Brazil and away from countries that decreased their non- GM soy area, despite prices favoring US & Argentina Garrett, Rueda, Lambin Environ. Research Letters, Forthcoming

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RTRS area by state - 2012 Data sources: Responsiblesoy.org, proterrafoundation.org, & direct communication >160,000 hectares controlled by Maggi Group CountryArgentinaBoliviaBrazilParaguayUruguayCanadaChinaIndiaUSA ProTerra Ha --1,100,000------ RTRS123,687-230,7682,765372--29,801- Total eco-certified area by country - 2012

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Brazils continued production of non-GM caused EU importers to shift trade to this country The development of supply chains able to segregate GM from non-GM soybeans gave Brazil an advantage in producing eco-certified soy Mato Grosso has been state most able to capitalize on certifications; especially large traders that have highly vertically integrated supply chains Ironic because Mato Grosso is the state that experienced highest levels of direct deforestation for soy in 2000-2010 period (Macedo et al 2012) Conclusions

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Question Addressed How does competition & diversity in the supply chain influence prices, rules, & information faced by farmers, thereby influencing incentives to expand cropland?

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Output & Prices Ricardian & Thunian theories of rent (profit) Biophysical conditions Distance from markets Technology Incentives to expand

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New economic geography theory - Process of agglomeration Agglomeration creates positive externalities -Better prices, info, technology Influences incentives to expand Profit from existing biophysical conditions & transportation costs Number of producers that location in region Number of specialized agricultural firms that can be supported Variety of technology & services produced in the city Garrett, Lambin, Naylor Land Use Policy, 2013; (based on Fujitsa & Krugman 1996)

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Garrett, Lambin, Naylor Land Use Policy, 2013 Case studies Input reseller 1 Farmer networks & access to services Input reseller Sojeiro Cargill Aves Para Syndicate HSBC Sojeiro Cargill Nideira ADM Bunge Noble Caramuru COOP. Sorriso APROSOJA Syndicate EMBRAPA FIAGRIL Dreyfus Maggi Group SICRED Rabobank Bank of Brazil Input reseller 2 Santarm: good biophysical condtions low transport costs Sorriso: good biophysical conditions high transport costs

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Santarm Sorriso Crop Area in Case Studies Source: IBGE 63% of area in soy