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Production
Estimates and Crop Assessment Division |
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Production
Estimates and Crop Assessment Division |
The vast and remote Brazilian territory described as the
“Legal Amazon” encompasses over five million square kilometers, or nearly 60
percent of the nation’s total land area. It is a region of global environmental
importance with uniquely diverse and invaluable natural ecosystems, including
one of the world’s largest tropical rainforests and extensive savannahs called “Cerrado.”
It is also home to a significant and growing portion of Brazil’s agricultural
economy, including 31 percent of the nation’s pasture, 30 percent of its beef
cattle herd, 21 percent of its total agricultural land, and 27 percent of its
cultivated soybean acreage. Despite its remote location and the relative lack
of physical and economic development, the Amazon region is already an important
agricultural zone in Brazil. As a follow-up to our earlier investigations
concerning the outlook for agricultural expansion, (http://www.fas.usda.gov/pecad2/highlights/2003/01/Ag_expansion/index.htm),
USDA’s Foreign Agricultural Service (FAS) has been evaluating the status of
agriculture in the remote frontiers of the Legal Amazon to help determine the
potential for soybean cultivation in the region.
Brazil’s cultivated soybean area has nearly doubled in the last decade, rising from 11.7 million hectares in 1994 to 21.0 million in 2003. This phenomenal expansion was driven largely by external demand, as world consumption of soybeans and soybean products rose by 52 percent or nearly 70 million tons during this time. The combination of attractive soybean export prices, ample supply of public and private agricultural financing, and the ready availability of vast tracts of relatively inexpensive arable land catalyzed explosive growth in commercial soybean farming across Brazil – with some of the highest growth rates currently occurring in the frontier states encompassing the Legal Amazon. As discovered elsewhere in Brazil, it is apparent that there is enormous potential for continued growth in soybean cultivation in the Amazon region and that there are few natural limits to future expansion which cannot be overcome by astute planning, research, and adequate investment capital. It is conservatively estimated that cultivated soybean acreage in the region could increase by more than 40 million hectares through the conversion of existing pasture and native savannah lands, and that even greater acreage would be available in the future should current Amazonian deforestation trends continue. In fact, pioneering commercial farmers are already making inroads in converting frontier cattle ranches to soybean farms in remote tropical areas of northeastern Mato Grosso and southeastern Para where enormous pasture resources exist and land prices are favorably low. These efforts are being supported by the country’s national agricultural research institute, Embrapa, which is actively experimenting with farming systems and crop varieties in these areas with plans to foster sustainable commercial farming enterprises. FAS expects this pattern of land conversion and expansion of the soybean crop to be sustained in the Legal Amazon over the next few decades as world demand for soybeans continues to rise, the agricultural export economy grows, and major highways are improved – lowering costs and granting access to greater amounts of arable land. The inevitable and unfortunate side-effect of this expansion, and the wealth it will generate, will be considerable pressure on the Amazon rainforest and continued high rates of deforestation. Unless the Brazilian government radically expands the number and size of federal forest preserves and severely restricts further penetration of the Amazon region by cattle ranchers, deforestation rates will remain high, pasture acreage will continue to grow, and the opportunity for expanded soybean cultivation in the region will increase.
Amazonian Deforestation and Agriculture
Since 1978, the Brazilian government has estimated that roughly 60 million hectares of forest land have been cleared from the Legal Amazon region, the result of logging, mining, human settlement, construction of transportation infrastructure, and the establishment of both subsistence and large-scale commercial agricultural enterprises. This level of deforestation represents a loss of over 13 percent of the original ecosystem, as well as the fragmentation of a much larger portion of the rainforest. This said, Brazil still maintains vast areas of intact tropical forest, with the northern Amazon Basin and Guyana Shield estimated to be the largest tropical frontier forest anywhere in the world.
The Brazilian Amazon is a perennial battleground for parties interested in harvesting its natural resources and those who wish to conserve or preserve its original environmental and ecological condition. The pressures to develop or extract resources from this fragile environment are manifold and ongoing, with less than 4 percent of the region officially set aside in Federally-protected status - in the Cerrado the figure drops to only 1.5 percent. The Amazon basin has been extensively surveyed and contains substantial volumes of natural resources or raw materials with significant economic value, such as timber, hydropower, bauxite, iron, copper, gold, petroleum, natural gas, as well as land for agriculture. The lure of these resources and the wealth, jobs, or land they offer has led to periods of intense colonization and migration into the region. As a result, the population of the Legal Amazon has risen dramatically in the last 30 years, increasing roughly 180 percent from a little over 7 million in 1970 to over 20 million today.
Historically, agricultural interests (cattle ranchers, colonists, and migratory subsistence farmers) have had a preeminent role in the overall deforestation of the Amazon region. Deforestation for agricultural use is estimated to be occurring at a rate of nearly 2.0 million hectares per year, largely due to demands from cattle ranchers and small-scale subsistence farmers. Environmental and social scientists estimate that there are approximately 600,000 small-scale subsistence farmers in the Brazilian Amazon, and that on average they clear about 0.6 million hectares of forest each year to cultivate crops. Large-scale commercial ranchers, though far fewer in number, are thought to be responsible for the remaining 1.4 million hectares of deforestation each year. The subsistence farmers are generally very poor and practice a migratory slash and burn farming system. Forest soils in the Amazon are typically low in fertility, and the resulting cropland is only viable for farming for a period of 2-3 years without intensive fertilization and management. Colonized land is often sown with the region's staple crops of manioc, rice, and beans with little to no fertilizers or soil amendments. After several growing seasons the lands fertility ebbs away and crop yields falter, leading the farmer to abandon it altogether or turn it into cattle pasture. Although the carrying-capacity of natural pasture is relatively low, pasture tends to be more sustainable over the long term . As a result, livestock enterprises are well established throughout the Amazon, and are reasonably profitable and productive. Evidence of this is the growth of improved pasture management, with the acreage of sown pasture in the past 20 years far outstripping that of non-improved or native pasture. Ranchers have widely adopted intensified pasture management techniques developed in other regions of Brazil, and the practice has allowed them to sustain or improve the carrying capacity of the land.
Over the past 10 years the Brazilian government estimates that roughly 19.0 million hectares of rainforest has been cleared by agriculturalists, and that the vast majority of the land was converted to cattle pasture. Brazil’s pasture resources, however, have not been officially surveyed by the government since 1995 when the last agricultural census was carried out, and therefore the scope of actual pasture development is unknown. In the current context of the nation’s soybean expansion, it is reported by both agricultural and environmental scientists that significant amounts of idle, unproductive, or less-profitable pasture land in the Legal Amazon is being converted to soybean cultivation. As soybean farmers overtake and convert existing cattle ranches to crop land, the displaced livestock producers are migrating to more remote frontier areas of the Amazon to clear new land and re-establish their beef cattle enterprises. It has also been reported that soybean farmers in some regions are buying land from groups of non-migratory small-scale farmers, and consolidating the properties into larger more efficient commercial enterprises. The displaced small farmers are in turn moving within the Amazon and clearing additional land. Some are reportedly acting in a speculative fashion, clearing land in anticipation of future demand from soybean farmers. The cycle of deforestation and agricultural expansion is therefore becoming more entrenched and self-reinforcing owing to the influence of soybeans. Given the potential for profits from soybeans under current market conditions, and the scope for improving future crop yields in the region, deforestation and agricultural expansion rates could feasibly accelerate.
To
date, deforestation in the Brazilian Amazon has largely occurred over a broad
swath of territory fringing the eastern and southern boundaries of the
rainforest. With the advent of new or improved road networks within the region
since the 1970’s the encroachment of agriculture has been persistent, with
widespread land clearing activities fragmenting large areas of the southern
forest. The agricultural boundary is gradually moving northward, facilitated by
primary and secondary access roads. Over time, large collections of farms have
been consolidated in the frontier as forest fragments are gradually reduced.
Deforestation has also occurred in more contained or isolated areas in the
Amazon, where colonization or agricultural development programs gave residents
or migrants access to substantial tracts of forest. Notable of these is the
sizable swath deforested in Rondonia by colonists and the land cleared for
agriculture near Roraima’s capital city of Boa Vista. In addition, a substantial
number of small-scale farms and cleared land exists along the banks of the
Amazon River in Para’s Santarem region.
Amazonia’s Agricultural Land Resources
Brazil has an “ocean” of arable land resources, including an estimated 177 million hectares of pasture, 140 million hectares of Cerrado grassland, and 444 million hectares of forests. A significant majority of this untapped resource lies inside the Legal Amazon. The extent to which it is developed for agriculture will remain a contentious political, environmental, and economic issue far into the future. Meanwhile, with less than 4 percent of the Amazon currently protected by Federal law, it is not surprising that this frontier region with vast agricultural potential is becoming the new epicenter of expanding soybean production in Brazil. A critical mass of professional farmers and multinational agribusiness companies already exist in the region, and they are transforming it into a tropical agricultural powerhouse. What is certain is that there is enormous room to grow.
Despite
its remote location and the relative lack of physical and economic development,
the Amazon region is already an important agricultural zone.
There are an estimated 54 million hectares of pasture in the Legal
Amazon region (IBGE 1995/96), supporting 52 million head of beef cattle.
The cattle population represents 30 percent of the Brazilian herd, which is the
largest in the world. The actual pasture acreage in Amazonia is likely to
be higher than indicated, as known deforestation and clearing of Cerrado lands
for pasture in key states like Para and Mato Grosso has exceeded official
government pasture estimates. There were also over 9 million hectares of
cultivated crops in the Legal Amazon in 2002/03, including 4.9 million of
soybeans. The total cropped area in Amazonia represented 21 percent of total
national agricultural area last year, while the soybean area represented nearly
30 percent of the national total.
Given the prodigious amounts of available arable land in the Legal Amazon, it is apparent that there is substantial room for growth of all manner of cultivated agricultural crops, agro-forestry products, tropical fruits, and livestock. Land conversion activities by both deforestation and clearing of native Cerrado savannah lands are reportedly occurring at a rapid pace, generally leading to ever higher amounts of pasture land that can in turn be converted to cultivated crops like soybeans, corn, rice, beans, and coffee at a later stage. FAS has conservatively estimated that tropical soybean production in the Amazon could expand by more than 40 million hectares on existing non-forested lands, by utilizing a portion of current pasture and savannah land resources. Even greater acreage would be available in the future for soybean expansion should current Amazonian deforestation trends continue. The long-term demand for land in the Amazon is expected to remain strong, given forecast growth in world demand for key Brazilian export products like soybeans and beef. The relative affordability of undeveloped or under-utilized land in the Amazon is also a factor, where arable land can be bought for a fraction of the cost of agricultural land in established farming zones of nearby states. The Amazon offers aspiring farmers reasonable opportunities to amass sizable land holdings and an economy of scale they could not afford elsewhere. As long as world demand keeps rising, and Brazilian farmers are able to maintain attractive profit margins for commodities like soybeans and beef, the Amazon region will remain attractive for commercial farmers, agribusiness, transport and export marketing companies.
Soybean Farming in the Legal Amazon
The
Legal Amazon is already a thriving soybean producer, largely owing to massive
investments by commercial farmers in Mato Grosso and the success of farming
systems and crop breeding research by the Brazilian government and private
foundations. The advent and spread of high-yielding tropical soybean varieties
in the 1990’s that are capable of being grown anywhere in the Amazon region has
acted to “let the Genie out of the bottle,” creating the potential for
substantially higher production in a region long thought inhospitable to
soybeans. The scope for a radical expansion of cultivated row crops in the
region is now a reality and the Amazon has effectively become Brazil’s final
frontier for commercial soybean farming. Only time will tell how great a
contribution the region will make to the country’s agricultural economy and
export capacity, but as you travel the region it is apparent farmers sense the
beginning of boom times ahead for soybeans.
The climate throughout the Amazon region varies, but it is generally hot, wet, and humid. Annual rainfall is prodigious, ranging from 120 inches (10 feet) in the west to 64 inches (over 5 feet) in the east. The soils devoted to agriculture are generally very deep and well-drained, though low in natural fertility and high in acidity. The levels of lime required as a soil amendment to neutralize acidity in the root zone varies from 2.0 tons per hectare in Roraima to 5.0 tons in Mato Grosso. The growing season for soybeans varies by latitude, with distinctly different rainy seasons separating the crop seasons. Soybeans grown in southern and eastern areas (Mato Grosso, Rondonia, Maranhao) have a distinct summer rainy season with crops generally planted in October/November and harvested in January/February. This season coincides with the rest of the main Brazilian crop grown as far south as Rio Grande do Sul along the Argentinean border. In contrast, the northern Amazon soybean region (Roraima, Para – along the Amazon River) straddles the equator and has a winter rainy season. Soybean crops in the far north are planted in May/June and harvested in September/October, essentially matching the growing season in the United States. As a result of the soybean expansion into the country’s equatorial tropics, the crop is now effectively grown throughout the calendar year in Brazil. If production expands in key states like Roraima and Para which are in close vicinity to export infrastructure on the Amazon River, Brazilian producers will be able to take advantage of substantially lower transportation costs and export soybeans well into the traditional North American marketing season. Soybean yields in virtually all Amazonian states are quite high after the newly cleared land has had several years of progressive fertilization and liming. Established soybean crops in Roraima, Maranhao, and Para often yield in a range of 2.5-3.0 tons/ha, compared to over 3.0 tons/ha in Mato Grosso and a Brazil-wide average yield of 2.6 tons/ha. Agricultural land prices are comparatively low, ranging from US$100 per hectare in Roraima to US$300 in Para and Maranhao. Uncleared or unimproved savannah or forest land is far cheaper, in some regions going for the equivilant of $US50 per hectare. The combination of low land prices and high crop yields gives farmers a healthy average gross margin estimated at 15-30 percent, despite some of the country’s highest transport costs.
As
of 2002/03, soybean production in the Legal Amazon was heavily concentrated in a
single major producing state. Mato Grosso on its own accounted for 90 percent of
total regional area and production, the result of over 20 years of gradual
development and agricultural experimentation. Mato Grosso has acted as a
regional laboratory, and the success and consolidation of soybean farming
throughout the state has made it a launch pad or gateway for growth and
expansion in other less-developed Amazonian states. The transport
infrastructure developed to move soybeans from Mato Grosso to market by road,
rail, and river is being expanded to include new production areas or export
corridors in adjoining Amazonian states. In addition, the ready availability of
technical expertise and private sector agricultural financing from a booming
soybean economy is aiding the spread and growth of support services to farmers
in more remote regions. International agribusinesses are establishing footholds
throughout the Amazon and rapidly supplying the growing demand for seed, crop
inputs, farm equipment, agronomic consulting, and export marketing. Though
soybean farming in the Amazonian states outside Mato Grosso is in its infancy,
they are experiencing the highest growth rates in the country and collectively
accounted for roughly 1.3 million tons of production in 2002/03. In the current
year their production is expected to grow to 1.8 million tons, or an increase of
38 percent. Over the past 10 years, newly emerging soybean production states
like Tocantins, Rondonia, Maranhao and Para have had annual increases in soybean
area of between 35-85 percent.
Ultimately,
the explosive growth in Brazil’s cultivated soybean area is being driven by a
host of factors, chief among them escalating world demand, the availability of
vast amounts of arable land, cutting-edge crop genetics, and ample agricultural
financing. Brazil is the world’s leading low-cost producer of high-quality
soybeans, and it is in an unparalleled position to feed a growing share of the
worlds increasing appetite for soybeans, meal, and oil. The Governor of Mato
Grosso and leading agribusiness executive Blairo Maggi has indicated he hopes to
see soybean production in his state rise to 50-60 million tons by 2007, a
five-fold increase on last year and equal to the total national crop in
2002/03. To support this level of growth, soybean area in Mato Grosso would
need to increase by 11.0 million hectares or over 200 percent in the next 4
years. If this kind of opportunity exists in Mato Grosso, where land costs
are roughly 5-15 times higher than other Amazonian states, it is reasonable to
assume investment and soybean expansion will be particularly strong throughout
the Legal Amazon in the next decade. As the above table illustrates there is
ample non-forested land available, and it appears soybean farmers are actively
pursuing it. At the pace at which the expansion is presently occurring, and is projected
to continue into the future, one can only describe the situation as a genuine
“land rush.”
Road to Riches – Development of Amazonian Transport Infrastructure
The real road to riches in regards to expanding soybean production in the Legal Amazon lies through improving the existing road and rail network and in maximizing the advantage offered by shipping exports via the Amazon River itself. Government officials, agribusiness executives, and producers alike recognize this, and are collectively working to ensure this happens. Consortiums have been formed to pave and maintain major highways and secondary roads throughout Mato Grosso, including the prime transport artery (BR-163) which runs from the state capital Cuiaba to the Amazon floating port of Santarem in the state of Para. At the same time, major agribusiness corporations such as Cargill and Groupo Andre Maggi are actively investing in expanding port and barge transport facilities on the Amazon and Madeira rivers at Porto Velho (Rondonia), Itacoatiara (Amazonas), and Santarem (Para). These investments are barely keeping pace with the growth in soybean production and the need to export it in as cost-effective a manner as possible. The Amazon River is an enormously underutilized transport corridor for soybeans, given the ease of navigation for even the largest oceangoing cargo vessels as far inland as Itacoateiara, some 1800 kilometers inside the Brazilian mainland. The Amazon, as far upstream as Manaus, is in places 20 miles wide while the rivers main shipping channel is upwards of 360 feet deep. But as of 2002/03 only about 2.0 million tons of soybeans were shipped via the Amazon River, or less than 10% of the country’s exports.
In Mato Grosso, 24 regional consortiums have been formed by
local farmers to pave more than 2,400 kilometers of local highways during the
next four years. The consortiums will own a concession, and have the ability to
charge tolls. The government of Mato Grosso has allocated nearly $R900 million
to
the
effort, while farmers are contributing about $R350 million. The government funds
have actually been raised via a levy on soybeans, cotton, cattle and wood, so in
effect rural producers are funding their own road development. Once paved,
local producers estimate the roads will pay for themselves in a single year
through lower transportation costs and in credits they will earn as members of
the consortium. Farmers expect that the cost of shipping soybeans to port will
fall by about 20 percent on average, and that the price of their land will
rapidly appreciate in value.
In addition to the consortiums, it has been reported that the governments of Mato Grosso and Rondonia are actively seeking federal funds to improve the main highway (BR-364) linking the soybean production regions of western Mato Grosso and southern Rondonia to the barge facility at Porto Velho on the Madeira River. Barge facilities are maintained by both Gruppo Maggi and Cargill here, with roughly 1.7 million tons of soybeans transshipped to their respective floating ports at Itacoatiara and Santarem in 2002/03. With the completion of paving the other primary Amazonian artery, BR-163, in the next couple of years, Cargill estimates 2-3 million tons of soybeans will be transported to its port facility at Santarem from Mato Grosso. In addition to that potential cargo, there is an estimated 1.5-2.0 million hectares of land suitable for soybean production within 200 kilometers of Santarem, in the heart of the Amazon, that can be developed. This land is primarily pasture or small-scale permanent agricultural fields. With appropriate fertility, technology, and management the soybean crop yield potential in this region is estimated to be 3.6 tons per hectare, while the production capacity could reach between 5-7 million tons.
The
state of Maranhao is itself becoming a regional growth center for soybeans,
ranking as the second largest producer in the Legal Amazon. In 2002/03 its
production totaled nearly 700,000 tons from under 300,000 hectares. Soybean
area is projected to grow by nearly 30 percent in this year, with production
just under a million tons. Maranhao officials estimated that there were at
least 2.0 million hectares of land suitable to soybean cultivation in the state,
even without conversion of existing cattle pasture. Insofar as soybean
infrastructure is concerned, the state government has plans
to expand and pave roads in the south to connect the soybean producing plateau
areas to those in neighboring Tocantins and Piaui. The
improved roads are also
meant to encourage multinational agricultural investment in the Balsas region.
The state is also planning an additional rail line for the soy areas, to build a
link between Balsas and Estreito (where there is already a rail line running all
the way to the port at San Luis). It was estimated that 700,000 tons of
soybeans from the
Balsas region were
trucked to the Bunge grain terminal at Estreito in 2002/03 and put on the rail
line for export at San Luis.
While the costs of moving grain to port in Brazil remain high relative to North American and European standards, freight rates have reportedly declined an average 35 percent in the past few years in the major soybean regions, and could fall an additional 20 percent in the next few years according to Brazil’s Ministry of Agriculture (Top Producer, June/July 2001). In this regard, improvement and expansion of regional transport infrastructure would have a dramatic effect on opening up vast new areas of relatively remote land areas to potential agricultural production. Not only would overall soybean transport costs decline, but the secondary and tertiary road networks spawned from the initial highway improvements would increase the spatial extent of cultivatable acreage. In addition, real competition between road, rail, and river freight rates will bring added efficiencies and lower overall costs of getting product to market. Unfortunately, as road networks expand and returns from arable land increase, the rate of deforestation or land conversion in the Amazon region is expected to rise. Environmental scientists have modeled the likely outcomes of declining transportation costs, and their analysis concludes that deforestation rates would increase roughly 15 percent in the short term and 40 percent in the long term (equal to approximately 8.0 million hectares per year) given a 20 percent reduction in transport costs for agricultural products from the Amazon. The development of transportation, then, is a major determinant of the pace of deforestation and the subsequent growth of agriculture in the Legal Amazon region.
