The success case of Soy Agribusiness in Brazil The Farmers Club

Transcription

1 The success case of Soy Agribusiness in Brazil The Farmers Club Carlo Lovatelli President ABIOVE - Associação Brasileira das Indústrias de óleos Vegetais March

2 Brazil s potential is huge 2

3 The Soy Complex in Brazil Second largest world producer and processor of soybeans Second largest world exporter of soybeans. soymeal and soy oil One of Brazil s main sources of foreign currency (about 10% of the country s total exports) Over producers The industry generates a total of approximately 1.4 million jobs It promotes sustainable development and moves wealth to the Country s inlands Products of the soy complex can be used to produce meat. oil for human and industrial consumption. biodiesel and chemicals 3

4 Soybean Production Evolution in Brazil Annual Average Growth Área (milhões de Ha) Produção (milhões de ton) 58,1 8% + 3.2% a year in productivity ,5 12,1 6,9 1976/ / / / / / / / / / / / / / / / /09 Source: CONAB / ABIOVE Productivity is the main growth vector 4

5 5 Main producing states in Brazil 2008 STATE OF MATO GROSSO km 2 11% of the Brazilian territory POP: 2.7 million (1.6%) 17.8 MMT MT PRODUCTION 1 O MATO GROSSO 26.3% 6.5 MMT 26% OF BRAZILIAN SOY 8% OF WORLD SOY 5 O MATO GROSSO DO SUL 8.4 % 4.6 MMT 11.9 MMT 4 O GOIÁS 10.5% 7.7 MMT 2 O PARANÁ 20.4% Source: APROSOJA 3 O RIO GRANDE DO SUL 17.0% 5

6 Brazil: The Soy Complex 2009 In million tons (Estimate) 25 Soybeans 58.1 Raw materials Source: ABIOVE Exports Processing Industry 32.2 Soymeal 24.6 Oil 6.15 Exports 12.8 Domestic Consumption 11.8 Exports 1.8 Domestic Consumption 4.4 6

7 Brazil: Soybean processing evolution In million tons ,8 28,9 29,7 31,5 32,1 32,2 28,8 25,8 21,6 22, (E) Average Averageconsumption consumptionapprox. 11 liter literof ofsolvent // ton tonof ofprocessed processedsoy soy Source ABIOVE (E) - Estimate 7

8 Soy Complex Export Revenues US$ billion ,5 5,7 4,8 3,8 4,2 5,3 6,0 8, ,5 9,3 11,3 13, Source SECEX Prepared by ABIOVE (P) (P) Forecasted 8

9 Soy Complex Exports Main Markets Brazilian Exports - Soybean 2008 China 48% 24.5 million tons Outros 16% U.E. 36% Brazilian Exports - Soybean Oil million tons Outros 18% Asia 6% Brazilian Exports Soybean Meal million tons U.E. 76% Source: SECEX Outros 50% Irã 8% Asia 42% Prepared by: ABIOVE 9

10 Brazil s direct contribution to meat production in the EU Brazil is one of the largest suppliers of vegetal proteins worldwide Source: FEFAC 10

11 Soybean Production Strong Points: Leading-edge technology: High quality products and leadership in low production costs Economies of scale Professional management Competitive processing industry Partnership between Producer and Industry 11

12 Rain Forest Preservation A Top Brazilian Concern Legal Amazon: An administrative concept Amazon Biome: An environmental concept 510 million hectares 9 states 61% Brazilian territory 8 different biomes 23.5 million inhabitants Source: IBGE A Rain Forest with 367 million hectares is contained within the Amazon Biome 420 million hectares Soybean plantations occupy less than 0.4% 49% of the Brazilian territory Equivalent to 101 times the area of The Netherlands 18.8 million inhabitants 12

13 Soy Agribusiness in Brazil Efficiency 13

14 Efficiency Average Soybean Productivity Three-year moving average Kg/ha Argentina Brasil EUA Research and Development: Cultivation techniques evolution with the tropicalization of soybeans contributed to the growth of a culture based on an efficient partnership system and in productivity gains Brazil uses state-of-the art technology 30 years of research 14

15 Soy Agribusiness in Brazil Environment- friendly Production 15

16 Riparian Woods Preservation Permanent Preservation Area (PPA) (Riparian Woods) and Soybean Producing Regions ZERO Meters 50 Meters * ZERO Meters 30 Meters * *for rivers up to fifty (50) meters wide Source Aprosoja 16

17 Soybeans renovate degraded pastures and reduce demand for clearing new land 30 million ha of pastures will be made available for agriculture until 2020 LIVESTOCK FARMING PASTURES AREA 1 Degraded pastures open the way to soybean plantations o and soil correction CROP ROTATION CROP LIVESTOCK FARMING INTEGRATION SOYBEANS CULTIVATION AREA With recovered pasture areas more cattle can be fed than before After some harvests. the area can be converted again into pastures 2 Soybeans retain nitrogen. Heaping to improve soils 17

18 Soy Agribusiness in Brazil Social and Economic Benefits 18

19 Social and Economic Benefits Social Development Vector: Human Development Index (HDI) indicates that soy cultivation provided improvements in the quality of life. education and health and in transportation infrastructure in the Country s interlands Note. The HDI for Brazil was in 2002 MUNICÍPALITY IDH-M CLASSIF. MT ECONOMY Campos de Júlio Agribusiness Sorriso Agribusiness Cuiabá Capital Lucas do Rio Verde Agribusiness Cláudia Agribusiness Campo Novo dos Parecis Agribusiness Sinop Agribusiness Primavera do Leste Agribusiness Alto Taquari Agribusiness Sapezal Agribusiness Nova Mutum Agribusiness Campo Verde Agribusiness Alto Graças Agribusiness Rondonópolis Agribusiness Barra do Garças Livestock/Industrial Várzea Grande Industrial Pontal do Araguaia Livestock Jaciara Agribusiiness Diamantino Agribusiness Santa Carmem Madeira 19

20 Soy Complex Driving Factors in the long range Biodiesel: Vegetal Oils 20

21 Social Focus of the Brazilian Biodiesel Program Major biodiesel producers worldwide Main Purpose Goals European Union Environmental Kyoto Protocol United States Energy Security To reduce dependence from oil imported from the Middle East Brazil Social To promote social inclusion creating jobs and income in rural areas Main strategies Causes / Objectives 1 Mandatory mixture Biodiesel price > Diesel price 2 Selective taxation Induce raw material purchase from family plantations 21

22 Mandatory mixture Regulatory Framework of Biodiesel Production in Brazil Market Development Market Consolidation Consolidated Market Up to 2% authoritative Up to 5% authoritative B2 B5 B3 B5 B5 B5 Jan 2005 Jan 2008 Jul Jan 2009 Jan 2010 Jan 2013 Market size 1.0 million t 1.4 million t 2.4 million t It will not demand increasing soybean production Brazil will export 25.0 million tons of soybeans in enough to produce 4.8 tons of oil /biodiesel 22

23 Biodiesel Selective Taxation Criterion % from family agriculture Raw Material Region N (10%**) NE/Semi-arid (30%) CW (10%**) S/SE (30%) N. NE & semi-arid (castor or palm) S. SE & CW (all) Raw material Taxes (R$/m 3 ) Reduction over full PIS/ COFINS All All Castor or palm All % 89.6% 77.5% 73.57% Source: Decreee 5297/04. Law 11116/05. Normative Instruction of the Ministry of Agrarian Development No. 01/2005. Decree 6458/08 and Decree 6608/08 * For all raw materials but soybeans, the expenses with family agriculture are multiplied by 1.5 ** 15% after 2009/10 crop year 23

24 Biodiesel Production Accelerated Growth Fonte: ANP 24

25 Raw materials used in 2008 High participation of soybean oil and tallow Source: ANP 25

26 Industrial capacity and demand in 2008 Excess capacity: ready to meet future demand Billion Liters Capacity Demand Fonte: ANP 26

27 2008 Oil and fat: production and availability Oleaginous (1.000 t) Oil and Fat (1.000 t) Regional Availability Soybean % All regions Cotton % Middle West/Northeast Palm n/a % North Castor Oil % Northeast Peanut oil % Southeast Rapeseed/Canola % South Sunflower % Middle West/South Other vegetal oils % All regions Tallow n/a % All regions Soybean oil and bovine suet are the only ones that have scale and broad regional distribution required to leverage short-term biodiesel production, opening the way for other vegetal oils Source: Oilworld 27

28 Oil content is higher in other oilseeds Soybean Sunflower Rapeseed Meal content(%) Oil content (%) Part. of meal in revenues (%) Part. of oil in revenues (%) Biodiesel is the key to develop other oilseeds Source: Oilworld. Elaboração: ABIOVE 28

29 Factors that will drive the Soy Complex in the long range Large Availability of Favorable Natural Resources (Land. Water. Climate) 29

30 Population. Economy and Natural Resources % 80% 60% 40% 20% China India Brazil USA EU(15) Rest of the World 0% Área suitable for Agriculture Water Total Population Population Exports Total GDP Fonte: FAOSTAT (2002). World Bank (2003) e African Development Bank (2003) Nota: PIB Total para

31 Structural Challenges Protecctionism 31

32 Protectionism Soybean Industry Tariffs are increasing China Soybeans: 3% 3% Soymeal:5% + 13% 13% IVA IVA Soy Soyoil: oil: 9% 9% quota quota Japan Soybeans: 0% 0% Soy Soyoil: oil: /Kg /Kg approx. 25% 25% European Union Soybeans: 0% 0% Soymeal: 0% 0% Soy Soyoil: oil: 6.4% USA --consumer Soybeans: 0% 0% Soymeal: US$4.50/ton. ± 2.5% 2.5% Soy Soyoil: oil: 19.1% 19.1% 32

33 Structural Challenges Logistics 33

34 2 Logistics: Soy Agribusiness Transportation Matrix Average distance to Port: km > > Rodovia Highway % Ferrovia Railway Hidrovia Waterway Intensive use of waterways Short distances make highways viable Inadequate Transportation Matrix Predominance of highway transportation modal for long distances Source: ABIOVE Under utilization of waterways potential 34

35 Logistics Cost Comparison Soybean exports Largest Producers/Exporters (US$/t) Description U.S.A Argentina Brazil Mato-Grosso 2 FOB Price Freight to the port Fobbing Sub-Total Tax / Subsidy Net Revenue Exchange Rate 1,00 3,49 2,3 2,3 Revenue in local currency Source: ABIOVE. APROSOJA. IMEA 1. Brazil Port FOB price in Average price US$ 330/ton in Considering freight from Sorriso and port destination 3. U.S. subsidies equivalent to 44 cents/bushel 4. Retenciones in Argentina equivalent to 35% of export tax 5. Freight in Argentina at US$ 0.067/ton.km, according to the Rosário. Exchange. Distance estimated at 250 Km 35

36 Structural Challenges Environmental Sustainability 36

37 Environmental Sustainability Deforestation in the World and in the Legal Amazon World Untouched Forests (Areas above 500 km 2 ) Brazil Brazil has has 18.7% 18.7% of of the the untouched untouched forests forests of of the the world world (Greenpeace) (Greenpeace) América Tropical 34% Floresta Amazônica (2007) Milhões de Ha Part % Forest Areas Deforestation Source: Mapa - Greenpeace Data: Instituto Nacional de Pesquisas Espaciais INPE 2007 Brasil 18.7% Europa 6.4% sendo 90% na Rússia R Brazil has the largest area of untouched forests worldwide % 19% Original Forest % Brazil Brazil maintains maintains 81% 81% of of the the Amazon Amazon Forest Forest 37

38 Important causes of the Amazon Biome Deforestation 1. Institutional weaknesses of federal and public bodies 2. Roads that were opened and other infrastructure works without appropriate policies for territorial order and environmental management 3. Absence of public policies to encorage forest enhancement and better use of the areas that are already deforestated 4. Landgrab of public lands 5. Creation of rural settlements in inadequate areas Source: Ministério do Meio Ambiente 38

39 Environmental Policy in the Legal Amazon In addition to permanent conservation areas expansion on the margin of rivers, the soil use in the Legal Amazon is very restricted Legal Reserve Area Until 1998 After 1998 Available for Plantations Rainforest 50% 80% 20% Cerrado 20% 35% 65% 39

40 100% 80% 60% 40% 20% 0% 40% 30% 20% 10% 0% Privete Legal Reserves Land Forest in Private Reserve Areas 80% 0% Amazon (Br) US EUA ProtectedAreas 33% 2% Amazon (Br) US EUA Mandatory Minimum Riparian Width Reserve of Riparian Width Forests (meters) 60 0 Amazon (Br) US EUA Brazilian Amazon vs. the grain belt In the USA Drastic differences in environmental laws = Competitive unbalance Are there other countries with such a strict environmental policy as Brazil? Source: IPAM - Daniel Nepstad 40

41 Costs of Brazil s Environmental Policy Buenos Aires Córdoba Iowa Illinois Assumed RL 20% 20% 20% 20% US$/Ha Source: FNP 2008 Agrianual. Banco Central do Brasil. Central Bank of Argentina, Federal Reserve. Elaboração: ABIOVE 41

42 Sustainability Actions in the Soy Chain 1. Soy Moratorium 2. Roundtable on Responsible Soy 3. National Agreement to Erradicate Labor Degrading Conditions 4. ARES Institute Support 5. Environmental Agreement: Soy + Green Areas 6. Rural Work Enhancement Program 7. Instituto Ação Verde 42

43 Soy Moratorium in the Amazon Biome Starting date: July 24, 2006 Objective: Harmonize economic development and Social & Environmental preservation in the Amazon Biome Commitment not to trade soybeans from the deforested areas of the Amazon Biome Signatories: ABIOVE. ANEC. Associated companies and NGO s International Conservation. Greenpeace. IPAM. TNC and WWF- Brazil 43

44 Soy Moratorium in the Amazon Biome 44

45 Education, Information and Forest Code Subgroup Booklet to inform soybean producers about the Soy Moratorium Focus: Growers of the region. Local technical services. School entities and other interested parties Channels: Field teams of the companies. ABIOVE. ANEC. NGOs and the Web 45

46 Mapping and Monitoring Subgroup Information sources: Map of Brazilian Biomes. Mural Map series (IBGE. 2004). 1: IBGE s digital map base IBAMA and FUNAI (websites) Deforestation Polygons: INPE (PRODES digital. Aug/06 Aug/07) 46

47 Results 263 polygons identified in 2008 em MT. PA e RO: no soybean found In 2009 we are monitoring 630 polygons 47

48 Field Verification Photos of all the polygons to confirm soil use Photo 1 Photo 2 ID-10 Municipality: Feliz Natal (MT) Use and occupation: open area and part currently used for pastures Area: Ha Photo 3 48

49 Roundtable on Responsible Soy What it is An international (?) forum to promote the responsible production and commercialization of soy Multistakeholder process Objectives To develop and promote a standard (principles and criteria) for responsible soybean production To promote dialogue between the economic and social & environmental points of view 49

50 Zero Tolerance in relation to Degrading Work Conditions The industry signed the National Agreement to Erradicate Labor analogous to Slave Labor. Promoted by the Instituto Ethos and by the International Labor Organization (ILO) Zero Tolerance Policy includes clause that provides for the termination of soy contracts if degrading labor conditions are determined 50

51 The Industry supported ARES creation Mission statement: Knowlege Dialogue Communication 51

52 How to improve environmental preservation? Current Production Model in the Middle West Production to export in natura? (Freight costs) Adding value to bean/grain production (soybeans and corn) in the Cerrado by producing meat (birds and pork) to Integrated Production Model export Sustainability Producing to export Reduces the pressure on new areas for agriculture Makes it possible to rotate cultures Reduces monoculture The success of this model depends on the Reduces pest propagation (Asiatic blight) opening of an international market for meats Reduces the use of agrochemicals Creates income for small and large rural producers Resources to preserve the environment (Legal Reservesl) Makes the existence of small Cerrado producers possible 52

53 Structural Challenges Taxation 53

54 V.A.T Taxation: Soybean export products Kandir Law Unburdened only raw material exports, but tax burdens on products remained Source: USDA 54

55 Brazilian Soy Complex: Soybean Exports Increase Exports Soybeans Base Brasil Argentina EUA Source: USDA 55

56 Brazilian Soy Complex: Loss in Value Added Exports Exports Soymeal Base 100 Exports Soy Oil Base Brasil Argentina EUA Brasil Argentina EUA Source: USDA 56

57 Challenges for the Brazilian Processing Industry To improve its Operational Flexibility: Industry production for exports is burdened raw material transferred between states Tax Reform probably will be voted in

58 Soy Complex in Brazil Perspectives for the future 58

59 World Population Growth Billions 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000-7,197 6,071 6,454 6,830 7, Years 1. The world population will increase approximately 17% in the next 15 years (1,1 billion inhabitants) 2. Developing countries will have an increasingly larger weight in world population Source: United Nations 59

60 World Economic Development GDP Annual Average Growth (%) 4,00 3,50 3,00 2,50 Developed Countries World Developing Countries 2,89 2,74 2,44 2,98 3,18 2,90 3,03 3,23 2,00 1,75 1,50 1,00 0, A one percent increase in income generates an approximate increment of 0.75% in per capita demand for proteic meal (Source: LMC) Source: Developing Countries United Nations / Developed Countries - OCDE 60

61 Consumption Trends Soymeal Annual World Meet Consumption (kg per capita) World Developing countries Countries Developed countries Countries = 54 kg per capita Source: United Nations and FAO 61

62 Evolution of Soy Production in Brazil In Millions In 2020, Brazil will produce about 105 million tons of soy, using and additional area of 8 million hectares Brazilwide. Source: AGROCONSULT/ABIOVE Soymeal (78%), and non-soy oil/biodiesel (19%) are the drivers for soy growth ,7 21,7 22,1 25,3 27,5 29,0 29,6 30,2 22,2 20,7 22,8 23,7 26,4 28,6 29,3 29, Produção (ton) Área (Ha)

63 Agricultural Area in Use in Brazil: Sugar cane Soybeans Livestock Total Sugar cane Soybeans Livestock Total Area (Million Ha) Production (Million Tons) No. of Animals (Million) Animals/ Há (1) (2) Notes: 1. Sugar cane production increase to 45 million tons from 30 million, and of ethanol to 65 billion liters from 18 billion liters using crushed sugar cane 2. Forecast considering an annual growth rate of 1.1% (demographic growth) Source: UNICA / ABIOVE / IBGE / FAO / ONU 63

64 Conclusions: 1) Prospects for oilseeds production is very favourable to the soy complex 2) Probable reduction of protectionist practices in the meat market and oil price increases generate new opportunities for the soy complex 3) Brazilian soybean production will continue to be competitive and may contribute to meet the world demand increase. 64

65 Thank you For more information, please visit: 65