“Understanding Agricultural Intensification and the Environmental Tradeoff Question: The Case of Mato Grosso

Brazil”

Peter GoldsmithDirector, Food and Agribusiness Program, University of

Illinois

Lemann DialogueNovember, 2013

A scientific debate• Green et al. (2005)

– Feeding the planet in 2050– Relieving poverty and malnutrition among developing countries

• Agricultural Intensification and Tradeoffs: A Faustian Bargain?– Direct effect

• Biome change- plant and wildlife• Pollution

– Indirect effect• Medium term

– Land sparing local– Land sparing global

• Long term development allows for investment in wild nature

– Indirect effect• Human development index

– Van Wey et al, 2013

– Indirect effect• Positive Feedback from profitability and productivity

– Get more when more productive

• Negative feedback– Greater productivity from other inputs, besides land

P.D. Goldsmith, Department of Agricultural and Consumer Economics, University of Illinois

19481954

19601966

19721978

19841990

19962002

2008-500%

0%

500%

1000%

1500%

2000%

2500%

3000%

3500%

Factor Productivity of U.S. Agriculture: 1948-2011

OutputLandLaborEnergyFertilizer and limePesticides

Year

Perc

enat

ge In

crea

se s

ince

194

8

P.D. Goldsmith, Department of Agricultural and Consumer Economics, University of Illinois

19481954

19601966

19721978

19841990

19962002

2008

-200%

-100%

0%

100%

200%

300%

400%

500%

Factor Productivity of U.S. Agriculture: 1948-2011 Output

LandLaborEnergyFertilizer and limePesticides

Year

Perc

enat

ge In

crea

se s

ince

194

8

+156%

+190%

+3022%

+32%

-26%

-78%

P.D. Goldsmith, Department of Agricultural and Consumer Economics, University of Illinois

Mato Grosso as a Laboratory

• Fastest Growing and Largest agricultural state in the world

• Rain forest biome accounts for 25% of the state land.– Dominant biomes are dryland forest and cerrado

• Public and third part institutions are central to the Mato Grosso intensification story

P.D. Goldsmith, Department of Agricultural and Consumer Economics, University of Illinois

1976/77

1978/79

1980/81

1982/83

1984/85

1986/87

1988/89

1990/91

1992/93

1994/95

1996/97

1998/99

2000/01

2002/03

2004/05

2006/07

2008/09

2010/11

2012/13

-

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

Crop Production over Time in Mato Grosso: 1977-2013

RiceSoybeanCottonSafrinha Maize

Crop Year

Thou

sand

s of

Hec

tare

s 90 million hectares of land

10% crop ground CAGR = 6.5%24% pasture

P.D. Goldsmith, Department of Agricultural and Consumer Economics, University of Illinois

Various Biomes of Mato Grosso

Key Issues for Tradeoff Analysis1) Ranking biomes2) Not distinct boundaries3) Hard to enforce

Source: Arvor et al. 2010

P.D. Goldsmith, Department of Agricultural and Consumer Economics, University of Illinois

1980's 1990's 2000's 2010's-5%

0%

5%

10%

15%

20%

25%

30%

35%

Soybean Compound Average Growth Rate By Decade: 1980-Present

HectaresYieldProduction

Decade

Aver

age

Annu

al C

hang

e

P.D. Goldsmith, Department of Agricultural and Consumer Economics, University of Illinois

For agricultural businesses where will they find growth: a relentless economic force

• Grow through – Lower costs

• Technology adoption• Capital intensification• Costly

– Prices are exogenous– Soybean yield increases

• Flat• Costly

– Land expansion• “MAPITOBA”• But extensive, non land sparing

– Intensification through succession cropping• Generally only available to tropical zones

P.D. Goldsmith, Department of Agricultural and Consumer Economics, University of Illinois

Agricultural Intensification through Safrinha Production

• Double cropping system for humid low latitude regions of the world– Important welfare question about the land sparing

effects of safrinha• Specific questions as to the factor productivity of:– Land– Labor– Capital– Chemicals– Energy

P.D. Goldsmith, Department of Agricultural and Consumer Economics, University of Illinois

20002001

20022003

20042005

20062007

20082009

20102011

20122013

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

0.00

2.00

4.00

6.00

8.00

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20.00

Safrinha Miracle: Mato Grosso, Brazil

HectaresYieldProduction

Year

Hec

tare

s an

d Yi

eld

(mt/

hect

ares

)

Prod

uctio

n (m

etri

c to

ns)

Annual Growth Rate: Hectares = 12%Annual Growth Rate: Production = 20%

Annual Growth Rate: Yield = 7%

P.D. Goldsmith, Department of Agricultural and Consumer Economics, University of Illinois

Area Planted Production Yield Starch Protein Oil

(ha) (mt) (mt/ha) (mt) (mt) (mt)

Maize IL 5,099,144 49,448,720 9.70 38,021,121 4,015,236 1,775,209

Mato Grosso 2,504,820 15,586,846 6.24 11,984,726 1,265,652 559,568

Soybean

IL 3,622,011 11,698,720 3.20 3,528,334 4,268,863 2,332,725

Mato Grosso 7,072,270 21,341,337 3.00 6,436,547 7,787,454 4,255,463

IL 8,721,156

Mato Grosso 7,072,270 IL Total Production (mt) 41,549,455 8,284,099 4,107,934

23% IL Total Yield (mt/ha) 4.76 0.95 0.47MT Total Production (mt) 18,421,273 9,053,106 4,815,030

MT Total Yield (mt/ha) 2.60 1.28 0.6835% Safrinha/64% of the Yield Mato Grosso vs. Illinois (%) -45% 35% 45%

50% Safrinha/75% of the Yield Mato Grosso vs. Illinois (%) -22% 47% 55%

75% Safrinha/90% of the Yield Mato Grosso vs. Illinois (%) 25% 72% 78%

Land Factor Productivity: Total Starch/Protein/Oil per Hectare

Mato Grosso (Low Lat) vs. Illinois (High Lat)

P.D. Goldsmith, Department of Agricultural and Consumer Economics, University of Illinois

Safrinha/Intensification Implications

• Profitability leads to land use– High prices “fence rows to fence rows”– A case where demand outstrips supply– So significant pressure to expand production

• But the price elasticity of supply is elastic– Prices will fall– Investment will slow– Capital will shift– Land (ceteris paribus) will be spared

• Comparable Biomes in Africa– Significant increase in HDI with intensification

• Van Wey et al, 2013

– Land sparing• Forested lands

• So do we bring these technologies to Africa?– University of Illinois' “FEED THE FUTURE INNOVATION LABORATORY FOR SOYBEAN VALUE CHAIN

RESEARCH”– 5 year/$25m USAID Project 2013-2018

• Is it a Faustian bargain?

P.D. Goldsmith, Department of Agricultural and Consumer Economics, University of Illinois