AN OUTLOOK ON GROWTH IN BRAZILIAN SOY INDUSTRY Presented by Fabio Trigueirinho Secretary General Brazilian Vegetable Oil Industries Association 1 st Roundtable on Sustainable Soy Conference
Why participate in the Roundtable on Sustainable Soy Conference Pillars of Sustainable Development Sustainable Development Environment Economic Soybean Social Brazilian Vegetable Oil Industries Association 2
Soybean is complex PALM Rural Producers Processors Oil Exporters SOYBEAN Rural Producers Processors Exporters Brazilian Vegetable Oil Industries Association 3
The Planet s Biggest Polluters Share in emissions in thousand tons of carbon/year, in 1990 36.1% 4,957 17.4% 2,389 TOTAL 13,728 8.5% 7.4% 1,173 1,012 4.3% 584 3.3% 3. 1% 457 428 415 3.0% 2.7% 367 2.1% 1. 9% 1.2% 289 261 168 1.2% 1.2% 170 171 USA Russia n Japa Germany UK Canada Italy Poland France Australia Spain Netherlands Czechoslovakia Brazilian Vegetable Oil Industries Association 4 Romania
Forest areas in the U.S. Brazilian Vegetable Oil Industries Association 5
Forest Areas in Brazil Brazilian Vegetable Oil Industries Association 6
Legal Amazonia A Continent FRANCE ITALY GERMANY SPAIN Territory Brazil: 8.5 million km 2 Legal Amazonia: 5.1 million km 2 Brazilian Vegetable Oil Industries Association 7
Protected National Areas Indigenous Lands Parks and National Reserves Brazilian Vegetable Oil Industries Association 8
Protected National Areas ITALY ITALY ITALY 554 indigenous territories totalling 950,000 km 2 11% of the national territory Brazilian Vegetable Oil Industries Association 9
Environmental Advantages of the Energy Matrix Clean energy matrix: Electric Energy more than 90% is renewable Fuel - ¼ of all gasoline consumed is replaced by ethanol Biodiesel Program Brazilian Vegetable Oil Industries Association 10
Environmental Policy in Legal Amazonia In addition to the expansion of the permanent conservation areas on the banks of the rivers, the use of the soil in Legal Amazonia is very restricted. LEGAL RESERVE Area Up to 1998 After 1998 Available for Planting Forest 50% 80% 20% Cerrado 20% 35% 65% Brazilian Vegetable Oil Industries Association 11
Soybean Complex in Brazil ABIOVE Economic and Social Importance Soybeans are Brazil s main agricultural crop, in volume and revenues Over 243,000 producers (small, medium and large), scattered over 17 states Agricultural Income in 2003 Soybeans 19% Others 81% Source: CNA Brazilian Vegetable Oil Industries Association 12
Soybean Complex in Brazil National soybean production grew at an average rate of 11% over the last 6 years and has the potential to continue growing at high rates over the next years. 70,000 61,500 60,000 51,875 50,100 1.000 tons 50,000 40,000 30,000 34,127 39,058 42,769 20,000 10,000 Source: ABIOVE - 2000 2001 2002 2003 2004 2005(F) (F) Forecast Jan/05 Brazilian Vegetable Oil Industries Association 13
Soybean Complex in Brazil Brazil is the world s second largest producer and exporter of soybeans, soybean meal and soybean oil The soybean complex is one of Brazil s main sources of foreign exchange (US$10 billion in 2004 = 12% of total exports) 12,000 US$ million 10,000 8,000 6,000 4,000 4,195 5,297 6,009 8,125 10,048 9,099 2,000 Source: ABIOVE - 2000 2001 2002 2003 2004 2005(F) (F) Forecast Jan/05 Brazilian Vegetable Oil Industries Association 14
Soybean crop as a vector of sustained development The evolution of crop techniques and the tropicalization of soybeans allowed the extensive and rudimentary occupation of the cerrado to be replaced by an activity based on technology, with economic, social and environmental sustainability. The soybean crop development brought about an improvement in the quality of life and the development of infrastructure in the areas of transport, education and health. Brazilian Vegetable Oil Industries Association 15
Environmentally Friendly Technology Benefits of Direct Planting Lower carbon emissions Less erosion and leaching Reduction in the use of diesel Better use of inputs Greater retention of water Reduction of production costs Others Techniques Inoculation of Seeds Biological Control of Pests Brazilian Vegetable Oil Industries Association 16
Brazilian Vegetable Oil Industries Association 17 Source: USDA
Soybean crop as a vector of sustained development Source: IBGE Town 20 TOP TOWNS IN MATO GROSSO WITH BEST IDH IDH-M MT Class. Bzl Class. Economy Campos de Júlio 0.845 1 48 Agribusiness Sorriso 0.823 2 194 Agribusiness Cuiabá 0.821 3 221 Capital Lucas do Rio Verde 0.817 4 263 Agribusiness Cláudia 0.813 5 330 Agribusiness Campo Novo do Parecis 0.809 6 397 Agribusiness Sinop 0.807 7 424 Agribusiness Primavera do Leste 0.805 8 463 Agribusiness Alto Taquari 0.804 9 476 Agribusiness Sapezal 0.803 10 504 Agribusiness Nova Mutum 0.801 11 534 Agribusiness Campo Verde 0.800 12 563 Agribusiness Alto Garças 0.795 13 674 Agribusiness Rondonópolis 0.791 14 780 Agribusiness Barra do Garças 0.791 15 784 Livestock/Industrial Várzea Grande 0.790 16 816 Industrial Pontal do Araguaia 0.789 17 832 Livestock Jaciara 0.788 18 849 Diamantino 0.788 19 850 Santa Carmem 0.787 20 889 Lumber Agribusiness Agribusiness Brazilian Vegetable Oil Industries Association 18
Soybeans in Food and Energy It s the cheapest source of protein in the world. Proteic meal and vegetable oils are consumed in developing and developed countries. It is a high-grade food for human health (nutraceutic properties). Biodiesel Brazilian Vegetable Oil Industries Association 19
Agriculture in Legal Amazonia ABIOVE States Territory Open Area Agricultural Area Share % of % of km 2 % km 2 territory km 2 territory MATO GROSSO MT 906,807 17.7% 294,712 32.5% 68,625 7.6% MARANHÃO MA 333,366 6.5% 110,005 33.0% 13,736 4.1% TOCANTINS TO 278,430 5.4% 28,127 10.1% 5,736 2.1% SUB-TOTAL 1,518,602 29.7% 432,845 28.5% 88,097 5.8% RONDONIA RO 238,512 4.7% 63,239 26.5% 3,308 1.4% PARÁ PA 1,253,164 24.5% 215,717 17.2% 6,758 0.5% ACRE AC 153,149 3.0% 16,879 11.0% 754 0.5% RORAIMA RR 225,116 4.4% 7,570 3.4% 555 0.2% AMAPA AP 143,454 2.8% 2,415 1.7% 56 0.0% AMAZONAS AM 1,577,820 SUB-TOTAL 3,591,215 30.9% 32,560 2.1% 304 0.0% 70.3% 338,380 9.4% 11,735 0.3% TOTAL 5,109,817 100% 771,225 15% 99,832 2% Source: INPE 2002 and Conab 2005 Brazilian Vegetable Oil Industries Association 20
Land Ownership in Legal Amazonia, 1996-2001 States Territory 1,000km 2 Land Ownership (% of Legal Amazonia) Private Lands 2 Protected Areas 3 Lands in Dispute ACRE AC 153 22 36 43 AMAPA AP 143 5 53 42 AMAZONAS AM 1,578 2 34 64 MARANHÃO MA 333 38 11 51 MATO GROSSO MT 907 55 15 30 PARÁ PA 1,253 18 28 54 RONDONIA RO 239 38 45 17 RORAIMA RR 225 13 51 36 TOCANTINS TO 278 61 12 27 LEGAL AMAZONIA 5,110 24 29 47 1- Source: Ibama (2002), Ricardo and Capobianco (2001), ISA (1999) and IBGE (1996) 2- Total area of private properties declared in the Agriculture/Livestock Census (IBGE 1996) 3- Includes Conservation Units and Indigenous Lands Brazilian Vegetable Oil Industries Association 21
Agriculture in Legal Amazonia Open Area 15% Agriculture 2% Of the 2% planted area in Legal Amazonia, 88% are concentrated in the States of Mato Grosso, Tocantins and Maranhão. Legal Amazonia 85% Soybeans occupy only 1.2% of the total area in Legal Amazonia, concentrated in Mato Grosso (87%). Therefore, the impact of soybeans on Legal Amazonia is not significant. Brazilian Vegetable Oil Industries Association 22
Agriculture in Legal Amazonia ABIOVE LAND USE IN MATO GROSSO Destination Area Share km 2 % Agriculture 68.625 7,6% Livestock 227.761 25,1% SUB-TOTAL 296.386 32,7% Indigenous Areas 124.968 13,8% Ecological Reserves 54.408 6,0% Pantanal Marshlands 63.839 7,0% SUB-TOTAL 243.216 26,8% Cerrados e Forests 367.205 40,5% TOTAL 906.807 100% Even in Mato Grosso, where conditions for planting soybeans are ideal, this activity occupies only 6% of the state s total area. Environmental legislation allows 65% of the land in the cerrado and 20% in forest areas to be used. Brazilian Vegetable Oil Industries Association 23
Environmental Conservation in Mato Grosso ABIOVE PEPE - State Program for Ecosystem Conservation Campaigns to reduce burn-slash clearance GEF - Integrated Management of the Upper Paraguay Basin and Strategy for Conservation of the Biodiversity of its Aquatic Ecosystem PGAI - Pilot Program for Protection of Brazil s Tropical Forests PPG7 - Total Environment Management Program PRODEAGRO - Agroenvironment Development Program for Mato Grosso State PEA/MT - Recovery Project for the Cuiabá River Basin Piracema - Fish Spawning Period Brazilian Vegetable Oil Industries Association 24
Competitivity in Soybean Production ABIOVE Description Mato Grosso USA Argentina FOB Port (US$5/bushel) 184 184 184 Freight from farm to port -50-15 -14 Port expenses -7-3 -3 Sub-Total 127 166 167 Taxes / Subsidies 0 47-43 Producer Revenues 127 213 124 Source: ABIOVE Brazilian Vegetable Oil Industries Association 25
Trade Barriers to Brazilian Exports (%) ABIOVE Product EU USA JAPAN Raw Sugar 161* 167* 154* Ethanol 47* 48* 83 Powder Milk 69* 49* 197* Frozen Chicken Cuts 95* 17* 12 Frozen Pork 51* 0 310* Frozen Beef 177* 26 50 Corn 85* 2* 95* Tobacco 25* 350 0 Orange Juice 15 45* 21 (*) indicates that specific tariffs were converted into their Ad Valorem Equivalent (AVE). Underlined numbers indicate the existence of Special Safeguard Measures (SSG). Shaded cells indicate sanitary restrictions that act as a barrier to trade. Source: WTO, APEC, COMTRADE, USITC and TARIC12 and ICONE Brazilian Vegetable Oil Industries Association 26
Evolution of Soy Production 140 120 100 80 60 Production (million tons) Acreage (million ha) 87 92 94 97 99 102 105 78 82 72 59 57 58 61 66 62 40 20 21 22 24 25 27 28 29 29 29 30 30 30 22 21 20 20 210 180 150 120 90 Production (2005=100) Acreage (2005=100) 149153158162166 170 142 126134 96 99 107117 131133134136 137 100 93 94 120 125130 96 91 90 94 100108115 0 60 2005 2008 2011 2014 2017 2020 2005 2008 2011 2014 2017 2020 In 2020, Brazil should be producing about 105 million tons of soybeans, occupying an additional 8 million hectares, distributed throughout the country. The 70% increase in production will require an increase of only 37% in area, thanks to estimated gains in productivity (1.5% per year). Brazilian Vegetable Oil Industries Association 27
Integration of Soybeans with Livestock LIVESTOCK PASTURE AREA Degraded pastures give way to soybean plantations The area receives fertilizers and soil correction ROTATION INTEGRATION CROPS-LIVESTOCK SOYBEANS CROP AREA With recovered pastures, more cattle can be fattened than before After some harvests, the area can again be converted into pasture Soybeans retain nitrogen, helping improve the soil Brazilian Vegetable Oil Industries Association 28
Integration of Soybeans with Livestock ABIOVE Advantages of the Integration System: Livestock farmers don t spend money on pasture recovery and even have gains with soybeans (leasing). There are environmental and economic benefits in adopting the integration of both activities. The property is used more intensively, reducing the pressure to get new areas for agricultural production. There are about 30 million hectares of low productivity pastures that could be replaced by agriculture. Brazilian Vegetable Oil Industries Association 29
Conclusions ABIOVE Brazil does not pollute the environment to the same extent as developed countries. Soybeans are environmentally friendly and are not devasting the Amazon Forest. The processing industry does not produce soybeans, but will collaborate in discussing voluntary certification for the sustainability of soybeans which requires: The production chain is adequately remunerated (consumers) It is accepted by the soybean producer and other players (feasible conditions) No discrimination between countries Brazilian Vegetable Oil Industries Association 30