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DEFORESTATION AND THE BRAZILIAN BEEF VALUE CHAIN 4 The Intersection of Beef and Palm Oil To meet anticipated demand of 10.5 million additional hectares of farmland, the Brazilian government realizes it must encourage planting on already-degraded lands. Beef ranchers have millions of hectares of underutilized ranchland that could be devoted to palm oil and other high-demand commodities. Accordingly, several public and private sector programs now encourage ranchers to also plant crops—efforts that, if managed well, can help avoid further land clearing. Still, a positive outcome will not be automatic. To ensure that palm oil is an environmental win for the Amazon and an economic one for ranchers and farmers, it is necessary to ensure that only already-degraded land is used. It is also necessary to make certain that small producers capture economic value, to avoid the pitfalls of mono-cropping, and to step up the role of the public sector. Planting on degraded ranch land Although Brazil currently accounts for just 0.5% of global palm oil production, the government anticipates, and is actively encouraging, substantial growth (UNEP, 2011). In 2010, EMBRAPA identified 32 million hectares of land suitable for palm oil cultivation, 29 million of which are located in the Amazon biome (EMBRAPA, 2010). The Brazilian government considers palm oil a win-win opportunity, frequently citing the crop’s potential returns as green fuel, green jobs, and a carbon sink ideal for reforesting lost segments of the Amazon (Frayssinet, 2013; SAGRI, 2013; UNEP, 2011). Of course, the key to realizing these green benefits is preventing further clearing of forest land. Fortunately, several private and public sector incentive programs are in place, each prohibiting any expansion of new crops on forested land. A description of programs that incentivize the integration of palm oil and other crops with ranchland is found in Table 5. One of the largest public initiatives is the Low Carbon Agriculture (ABC) program. ABC actively supports the integration of cattle and other agricultural activities, providing low-interest financing (EMBRAPA, 2011). The program aims to convert 15 million hectares of degraded ranchland to crops as a means to improve agricultural productivity without expanding into new areas (Marques, 2013). To promote the expansion of palm oil, the government has implemented two complementary social inclusion programs: the Social Fuel Seal (SFS) and the Program for Strengthening Family Agriculture (Pronaf EcoDendê). The SFS is a certification private biofuel companies must earn in order to participate in the majority of biodiesel auctions, and it requires a certain minimum percentage of raw materials to be sourced from small producers (Cesar et al., 2013; Glass, 2013a; Secretaria da Agricultura Familiar, 2013). Pronaf EcoDendê—a subprogram recently developed under the broader Pronaf program—provides 2% financing to small family farmers to expand palm oil production (Glass, 2013b; MDA, 2012). Palm oil has become a priority for Pronaf. In the 2013/2014 budget, Pronaf allocated nearly R$ 125 million for palm oil projects in its EcoDendê 31 DATURESEARCH.COM
DEFORESTATION AND THE BRAZILIAN BEEF VALUE CHAIN program, nearly 93% of all Pronaf spending in 2012 (Glass, 2013b). The government has linked these two programs, requiring that firms wishing to qualify for benefits in the Social Fuel Seal program collaborate with small family farmers in Pronaf EcoDende. Private sector initiatives are equally ambitious. Firms that source products for Bunge and Cargill are already contracting directly with ranchers to grow soy and corn on their ranchland. The companies supply ranchers with inputs such as seeds and fertilizers in exchange for an agreed-upon bushel-per-hectare return at the end of the growing season. In interviews with Datu researchers, ranchers reported in 2013 paying the companies 21 bushels per hectare. In 2014, they will pay 22.8 bushels per hectare. In these agreements, ranchers keep any yield in excess of the agreed-upon share. TABLE 4. Programs that promote the integration of commodity production into ranching SOURCE: (Glass, 2013a, 2013b; MAPA, 2012; PalmOilHQ, 2011) ASSISTANCE PROGRAM CORN SOY SUGARCANE PALM OIL Low Carbon Agriculture (ABC) program—Provides financing up to $500,000, 5.5% interest, 5-15 year terms to help ranchers integrate agriculture into their operations PUBLIC SECTOR ASSISTANCE Pronaf EcoDendê—Provides financing up to R$ 80,000 per family over 14 years to cultivate palm oil Petrobras Biocombustîvel—Set a goal to contract 2,250 farmers to grow palm oil PRIVATE SECTOR ASSISTANCE Bungee, Cargill—Provide ranchers inputs such as seed & fertilizer in exchange for an agreed upon bushel/hectare return on the investment ADM, Agropalma, Biopalma Vale—Provide a mix of low interest loans and technical assistance to ranchers interested in growing palm oil Similar to public sector initiatives, the largest private sector programs target palm oil. Backed by government incentives to work with family farmers, Agropalma, Archer Daniels Midland (ADM), Petrobras, and Biopalma each have initiated programs to engage small producers. In exchange for exclusive access to future harvest, each company offers producers a different mix of incentives, such as input materials at-cost, fees for rural licenses such as the CAR, transport of goods, technical assistance, and low-interest loans. These incentives are very effective. According to a private industry report, as a result of these programs, more than 80 percent of newly-initiated palm oil farmers now have access to credit for the first time. 32 DATURESEARCH.COM
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