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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 [email protected]

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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 [email protected]. - PowerPoint PPT Presentation

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Page 1: Rachael  D. Garrett

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

[email protected]

Page 2: Rachael  D. Garrett

Data: FAO STAT

Population & income growth & urbanization are increasing demand for livestock products

90,000,000

140,000,000

190,000,000

240,000,000

290,000,000

Soybeans

19861988

19901992

19941996

19982000

20022004

20062008

201055,000,000

68,000,000

81,000,000

94,000,000

107,000,000

Pig Meat

Page 3: Rachael  D. Garrett

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

Page 4: Rachael  D. Garrett

(Δ KM2)

2000-2010

<-4000-3999 to -500-499 to -250-249 to 01 to 250251 to 500>500

Clark et al. 2010

Land cover change in South America from Agricultural Expansion

Woody Vegetation Area Agriculture & Herbaceous Area

Counties w/ 50,000 ha or more of agricultural expansion in last 10 years

Page 5: Rachael  D. Garrett

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

Page 6: Rachael  D. Garrett

• Interactions between the supply chain actors, institutions, land use

Knowledge gaps

• Non-linear feedbacks that can lead to rapid and unexpected changes

Page 7: Rachael  D. Garrett

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?

Page 8: Rachael  D. Garrett

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?

Page 9: Rachael  D. Garrett

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

Page 10: Rachael  D. Garrett

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

Page 11: Rachael  D. Garrett

• 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

Page 12: Rachael  D. Garrett

RTRS area by state - 2012

Data sources: Responsiblesoy.org, proterrafoundation.org, & direct communication

>160,000 hectares controlled by Maggi Group

Country Argentina Bolivia Brazil Paraguay Uruguay Canada China India USA

ProTerraHa

- - 1,100,000 - - - - - -RTRS 123,687 - 230,768 2,765 372 - - 29,801 -

Total eco-certified area by country - 2012

Page 13: Rachael  D. Garrett

• Brazil’s 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

Page 14: Rachael  D. Garrett

Question Addressed

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

Page 15: Rachael  D. Garrett

Output & Prices

Ricardian & Thunian theories of rent (profit)

Biophysical conditions

Distance from markets Technology

Incentives to expand

Page 16: Rachael  D. Garrett

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)

Page 17: Rachael  D. Garrett

Garrett, Lambin, Naylor – Land Use Policy, 2013

Case studies

Input reseller 1

Farmer networks & access to services

Input reseller

Sojeiro

CargillAves Para

Syndicate

HSBC

Sojeiro

Cargill

Nideira

ADM

Bunge

Noble

Caramuru

COOP. Sorriso

APROSOJA

Syndicate

EMBRAPAFIAGRIL

Dreyfus

Maggi Group

SICRED

RabobankBank of

Brazil

Input reseller 2

Santarém: good biophysical condtions low transport costs

Sorriso: good biophysical conditions high transport costs

Page 18: Rachael  D. Garrett

Santarém Sorriso

Crop Area in Case Studies

1990 1995 2000 2005 20100

100,000

200,000

300,000

400,000

500,000

600,000

700,000Soy

Corn

Rice

Area

(1,0

00 H

a)1990 1995 2000 2005 20100

10,000

20,000

30,000

40,000

50,000

60,000

70,000Rice

Soy

Corn

Area

(1,0

00 H

a)

Source: IBGE

63% of area in soy<1% of area in soy

20111990

Garrett, Lambin, Naylor – Land Use Policy, 2013

Page 19: Rachael  D. Garrett

Garrett, Lambin, Naylor – Land Use Policy, 2013

Case studies

Input reseller 1

Farmer networks & access to services

Input reseller

Sojeiro

CargillAves Para

Syndicate

HSBC

Sojeiro

Cargill

Nideira

ADM

Bunge

Noble

Caramuru

COOP. Sorriso

APROSOJA

Syndicate

EMBRAPAFIAGRIL

Dreyfus

Maggi Group

SICRED

RabobankBank of

Brazil

Input reseller 2

Santarém: good biophysical condtions low transport costs

Sorriso: good biophysical conditions high transport costs

enabling institutions

constraining institutions

Page 20: Rachael  D. Garrett

• Clustering of many related agribusiness firms together creates many positive externalities that can overcome disadvantages from high transportation costs – lead to rapid expansion

• Institutions influence how local supply chains develop

Garrett, Lambin, Naylor – Land Use Policy, 2013

Conclusions

Source: Google Earth

Sorriso - 1990Sorriso - 2010

Page 21: Rachael  D. Garrett

• Consumer preferences influence trade flows & supply chain structures, which influences producers ability to adopt eco-certifications

Conclusion

• Institutions help determine how supply chains develop, which influences profitability, compliance w/ rules, & incentives to expand cropland area

Non-linear process that amplify role of roads,

climate, policy interventions, etc..

Can lead to unexpected development patterns

Page 22: Rachael  D. Garrett

Questions?

Rachael D. Garrett Postdoctoral Fellow in Sustainability Science Harvard University

[email protected]