1. 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 rachael_garrett@hks.harvard.edu

2. Data: FAO STAT Population & income growth & urbanization are increasing demand for livestock products

3. 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

4. (Δ KM 2 ) 2000-2010 <-4000 -3999 to - 500 -499 to -250 -249 to 0 1 to 250 251 to 500 >500 Clark et al. 2010 Land cover change in South America from Agricultural Expansion Woody Vegetation AreaAgriculture & Herbaceous Area Counties w/ 50,000 ha or more of agricultural expansion in last 10 years

5. 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

6. Interactions between the supply chain actors, institutions, land use Knowledge gaps Non-linear feedbacks that can lead to rapid and unexpected changes

7. 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?

8. 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?

9. 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

10. 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

11. 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

12. RTRS area by state - 2012 Data sources: Responsiblesoy.org, proterrafoundation.org, & direct communication >160,000 hectares controlled by Maggi Group CountryArgentinaBoliviaBrazilParaguayUruguayCanadaChinaIndiaUSA ProTerra Ha --1,100,000------ RTRS123,687-230,7682,765372--29,801- Total eco-certified area by country - 2012

13. 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

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

15. Output & Prices Ricardian & Thunian theories of rent (profit) Biophysical conditions Distance from markets Technology Incentives to expand

16. 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)

17. Garrett, Lambin, Naylor – Land Use Policy, 2013 Case studies Input reseller 1 Farmer networks & access to services Input reseller Sojeiro Cargill Aves Para Syndicate HSBC Sojeiro Cargill Nideira ADM Bunge Noble Caramuru COOP. Sorriso APROSOJA Syndicate EMBRAPA FIAGRIL Dreyfus Maggi Group SICRED Rabobank Bank of Brazil Input reseller 2 Santarém: good biophysical condtions low transport costs Sorriso: good biophysical conditions high transport costs

18. Santarém Sorriso Crop Area in Case Studies Source: IBGE 63% of area in soy<1% of area in soy 2011 1990 Garrett, Lambin, Naylor – Land Use Policy, 2013

19. Case studies Input reseller 1 Farmer networks & access to services Input reseller Sojeiro Cargill Aves Para Syndicate HSBC Sojeiro Cargill Nideira ADM Bunge Noble Caramuru COOP. Sorriso APROSOJA Syndicate EMBRAPA FIAGRIL Dreyfus Maggi Group SICRED Rabobank Bank of Brazil Input reseller 2 Santarém: good biophysical condtions low transport costs Sorriso: good biophysical conditions high transport costs enabling institutions constraining institutions

20. 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 - 1990 Sorriso - 2010

21. 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

22. Questions? Rachael D. Garrett Postdoctoral Fellow in Sustainability Science  Harvard University rachael_garrett@hks.harvard.edu