November 28, 2014

Soybean Moratorium in Amazon Region Extended until May of 2016

Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.

The landmark decision in Brazil to prohibit the purchase of soybeans from recently deforested areas in the Amazon Region was extended earlier this week until May of 2016. The original agreement which took effect in 2007, prohibited the purchase of any soybeans produced in areas deforested after 2006.

The extension came after intense negotiations between all the stakeholders involved in the Soybean Working Group (GTS) which include: the Brazilian Vegetable Oil Producers Association (Abiove), the National Association of Grain Exporters (ANEC), the Brazilian Environmental Ministry, companies involved with soybean production and processing, state and federal governments, and non-governmental environmental organizations.

The extended Soybean Moratorium has been modified slightly to more closely correlate with the new Brazilian Forestry Code. The new agreement prohibits the purchase of soybeans from areas cleared after 2008 instead of 2006. The success of the negotiations took on even more urgency with the uptick in deforestation in 2013 after seven years of declines. The recent uptick is being attributed to an increase of squatter activity by subsidence farmers in the eastern Amazon region and not by commercial soybean farmers increasing their soybean production.

The Brazilian National Space Research Institute (Inpe) released data on November 26th indicating that after a 29% increase in deforestation in 2012/13, the rate of deforestation declined 18% in 2013/14. The Environmental Minister attributes the decline to renewed efforts to monitor the region and programs aimed at preventing illegal clearing.

Since the moratorium started in 2006, there have been 5.2 million hectares of land cleared in the Amazon Region. Approximately one million of those hectares (19.7%) are in the 73 municipalities monitored by the Soybean Working Group. These 73 municipalities are responsible for 98% of the soybeans grown in the Amazon Region. The Soybean Working Group estimates that there were only 47,000 hectares of soybeans produced in 2012/13 that were planted in areas deforested after 2006.

In the Amazon Region there were 3 million hectares of soybeans produced in 2012/13, with the majority of the production in the cerrado and transitional forest regions of Mato Grosso and Rondonia. While the vast majority of the Amazon Region is traditional rainforest, there are pockets of cerrado vegetation and what is classified as transitional forest, which is the transition from cerrado to rainforest. These are the areas where most of the soybeans are grown and these areas were generally cleared before 2006.

The Soybean Moratorium has been cited by the Union of Concerned Scientists (UCS) as a key factor in the reduction of deforestation in the Amazon. The success of this program is especially noteworthy since soybean prices have been near record highs during most of the time the moratorium has been in place.

As more of the Forestry Code provisions take effect, environmental groups and the Brazilian government expect further downward pressure on clearing activity in the Amazon Region. The ultimate goal is to be able to continue increasing agricultural production in Brazil without the necessity of deforestation in the Amazon Region. The principal way that goal can be met is by converting areas of degraded pastureland into new row crop production instead of the traditional way of clearing new land.