Brazilian Biofuels Programmes from the WEL Nexus Perspective

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Brazil’s biofuel programmes viewed from the WEL-nexus perspectivepreparation. This is medium- and high-productivity land, machine-workable, flat, andwith deep, well-drained soil.2 Second-class cropland: though potentially suitable for annual and perennial crops, it hasmuch more serious limitations than first-class cropland. It may present mechanisationproblems due to steep slopes. However, the soil is deep, well drained, with good fertility,though sometimes with a need for some soil correction.3 Pastureland: unsuitable for farm crops in the short term, it is potentially suitable forpasture and forestry. It is low-fertility land, flat or uneven, with simple to moderaterequirements regarding preservation and management practices to produce biofuelcrops.4 Rough land (‘Terra de Campo’): land with natural vegetation, whether or not primary,and with limited possibilities for use for pasture or forestry; the best use is for shelteringflora and fauna.Ideally, sugar cane production requires first-class cropland, but second-class land can also beused, using non-mechanised harvesting and improving the soil. One might therefore expectthat the pressure on land prices placed by sugar cane production, among other factors, wouldbe greater on these two land categories. However, a strong correlation was observed (Figure4.3) among the prices of all four categories. This is, therefore, a Ricardian rent differential,whereby the price of more productive land is given by the marginal land price (Sandroni,1999), in this case second-class land, pasture and rough land. This dynamic results from theincrease both in the price of sugar in the international market and in the demand for ethanol inthe domestic market, which makes it possible to include less fertile lands for growing sugarcane. 6In addition, the acceleration in the price of preferential land for the production of sugar cane inSP is significant, especially after the inclusion of flex-fuel vehicles in the national car fleet.Taking the most productive land (first-class land) as an example, the price per hectare risesfrom R$4,600 in 2002 to R$14,600 in 2010 (Figure 4.3). Finally, it should be pointed out that56% of arable land in the state of SP is leased, and that 72% of such areas are owned by largeeconomic groups, thus reducing the supply of rural areas in the state and contributing to theincrease in land prices (Olivette et al., 2011).In fact, the increasing sugar cane production in SP led to a sharp rise in land prices. Accordingto Marques (2009), in the case of sugar cane production both by rural producers and by sugarfactories, leasing prevails to the detriment of farmers cultivating their own land. For example,in 2008, approximately 60% of the total area allocated to sugar cane production in SP wasleased.6 In fact, although the best soils for sugar cane are deep, well structured, fertile soils with a good retention capacity,due to its hardiness sugar cane develops even in less fertile soils, such as pasture and rough land soils, provided thesoil is improved (EMBRAPA, 2011a).22
Brazil’s biofuel programmes viewed from the WEL-nexus perspectiveFigure 4.3 Evolution of land prices in preferential areas for sugarcane production inthe State of São Paulo between 1996 and 2010 (R$/ha)Note: * resent value as of 1 August 2011.Source: The authors based on IEA, 2011b.In MT, arable land is classified as cropland, pastureland and rough land. The last twocategories have the same characteristics as the land found in SP, i.e. not very fertile, andunsuitable for cultivation in the short term; for that reason it is considered marginal land inrelation to soybean production. Moreover, in the case of MT, pastureland and rough land isgenerally found in water-scarce regions, while water is fundamental for growing soy, especiallyduring germination-emergence and flowering-formation of beans (EMBRAPA, 2011b). 7This aspect contributes to a lower correlation than that observed between the different typesof land for sugar cane production in SP, with the exception of rough land and pastureland(Figure 4.4). Even so, there is a significant correlation between the three types of land until2006, when there is an increasing gap between the prices of cropland and the other types.This occurs because of the increased production of bio-diesel, the concentration of farmland inthe hands of few owners, and the rise in international soy prices (Gasques et al., 2008).Where soybean is allocated to the production of bio-diesel, there is a significant growth in localdemand thanks to the start-up of bio-diesel plants in MT. In 2006 and 2007, seven plantsstarted up, with an annual production capacity of 113 million litres of bio-diesel; this required aproduction of 632,000 tons of soybeans per year, and a cropland area of approximately203,000 ha, that is, 4% of the total arable land in MT in 2007 (ANP, 2011b; CONAB, 2011).A significant impact on the price of cropland may also be attributed to the fact that 50% ofagricultural areas in MT are leased, and 20% of such properties are concentrated in the handsof large groups (IMEA, 2011). In the 2009/10 crop, the 20 largest soy-producing groups wereresponsible for the cultivation of 1.2 million ha of soybeans, that is, 20% of the total area of6.1 million ha planted (ibid.). In 2004, these groups were cultivating 533,000 ha, which7 During the first period, both excess and shortage of water are harmful in terms of obtaining good uniformity in theplant population. Soy seed needs to absorb at least 50% of its weight in water to ensure good germination. In thisphase, the water content in the soil should not exceed 85% of the maximum water available, nor should it be below50%.23
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Brazilian Biofuels Programmes from the WEL Nexus Perspective

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