1.

Agricultural commodities and tropical deforestation

Highlights:

  • Production and trade of agricultural commodities has exploded in recent decades and exports from tropical regions continue to grow rapidly. Much of this activity is directly or indirectly driving deforestation and conversion of vulnerable habitats.
  • South America is a powerhouse of agricultural production, and is increasingly linked to emerging economies such as China which are rapidly increasing their dependence on the region. 80% of global soy production comes from just three countries, two of which are Brazil and Argentina, and China is the world´s largest consumer of soy with over half of its imports coming from Brazil.
  • The high-resolution supply chain data and analyses provided by Trase helps go beyond national-scale analyses of the sustainability of global commodity trade to provide actionable information for tackling environmental and social risks in supply chains.

 

In recent decades, the map of global trade in agricultural commodities has been dramatically redrawn.

Today, almost every country relies on commodity imports from distant corners of the planet. In particular, so-called flex crops such as soy, oil palm oil, maize and sugarcane are growing ever more important in a globalised economy that prizes their versatility: for food, for feed, for biofuels and for an increasing number of other commercial applications.

Demand for these commodities has been met by a remarkable increase in agricultural output. Crop production has risen from around 2.5 trillion tonnes in the early 1960s, to over 9 trillion tonnes today. This has been achieved by a combination of intensifying production on existing farmland and the conversion of large tracts of the world’s remaining wilderness areas to agriculture.

While cutting food waste and improving access to agricultural produce will help, the reality is that intensification and expansion of farming will probably continue in the face of a growing and increasingly affluent global population.

 

The environmental impacts of agricultural expansion

Unfortunately, global increases in agricultural production have often been achieved in ways that are anything but sustainable. Health and environmental risks linked to agro-chemicals, veterinary antibiotics, fertiliser run-off, and soil degradation and more have become major concerns, and agricultural expansion remains the greatest threat to biodiversity worldwide.

Nowhere is this more true than in tropical countries. The tropics include many important habitats that provide vital environmental services at local and global scales, and are among the most biodiverse in the world. However, many large tropical countries are emerging as powerhouses of global commodity production, vital to the global economy.

Tropical deforestation brings the challenge into sharp focus. Two-thirds of tropical deforestation in recent years has been driven by expansion for a handful of agricultural commodities, such as soy, beef, palm oil and timber that are consumed worldwide in countless forms. As well as the local damage to forests and other natural habitats, this is also affecting the rights and livelihoods of local communities, and accelerating climate change.

Agriculture has expanded rapidly across the tropics in recent decades. Photo credit:istock.com/phototreat

But is real progress towards these commitments being made? Who are the key players that must act and how are they connected to landscapes on the ground? And where and how can they achieve the greatest impact?

These are the questions this Trase Yearbook 2018 sets out to answer, drawing on the unique data and insights provided by the Trase initiative. This chapter offers a bird’s eye view of the global trade in agricultural commodities – limited here to croplands – before zooming in to South American soy (see Chapter 3), and a more detailed assessment of how Trase data can help in bringing about change.

 

Tropical regions are critical to the production and export of many commercially important agricultural commodities

Forest-risk commodities are traded and consumed the world over. But the bulk come from just a handful of producer countries. For example, according to FAO data, in 2016:

  • More than 80% of palm oil was produced in just two countries: Indonesia (53%) and Malaysia (29%).
  • More than 80% of soybean was produced in three countries: the United States (35%), Brazil (29%) and Argentina (18%). Although, in 2018, Brazil is expected to overtake the US in soy production.
  • Almost 40% of the world´s sugarcane was produced by Brazil alone.

Looking at trade linkages between producing and consuming countries, it becomes clear that there are some critical inter-dependencies.

China, in particular, stands out. It consumes around 60% of global soybean exports, with more than half of this coming from Brazil in 2017. More recent data suggest that China’s dominance in global markets has further increased. Meanwhile, the harvested area under soy production in China decreased by around 30% between 2000 and 2016. In essence, China is outsourcing its soybean production. And new trade tariffs on US soy mean that China’s dependence on Brazilian imports could increase dramatically.

The global map of production and trade of several of the world’s most important global commodities reveals interdependencies between sources of supply and demand and the important role of tropical regions in providing these materials.

The global trade map of several of the world’s most important global commodities reveals interdependencies between sources of supply and demand and the important role of tropical regions in providing these materials. Soy is the default commodity shown, but you can use the interface to select other commodities. Exported volumes per country are initially indicated but clicking on a country distributes these to the associated countries of import. Data sources: FAO and Thomas Kastner. Data is for 2013, is corrected for re-exports, accounts for trade in raw and derived crop commodities and is expressed in terms of raw commodity equivalents.

Global dependence on tropical producers is both beneficial and problematic

The production of major agricultural commodities is critically important to the economies of tropical countries. From a purely economic perspective, production for export is an attractive option. In Malaysia, for example, the gross production value of palm oil in 2016 was around USD 12.5 billion, contributing around 4.2% to GDP. In Brazil, sugarcane, soy and maize – the three largest crop commodities by production volume – had a gross production value of USD 60.6 billion, contributing 3.4% of GDP, and soybeans are Brazil’s most valuable export commodity, worth over USD 20 billion.

However, the fact that the demands of growing consumption are being met by a relatively small number of tropical regions has consequences. It is putting intense pressure on many biodiversity-rich and sensitive landscapes. Converting natural ecosystems to farmland may bring economic growth in the short term, but could fundamentally impact long-term human prosperity and well-being.

From the point of view of international food and resource security, dependence on a small number of producing countries is also a big concern. For example, as well as having a devastating effects on local economies and the livelihoods they support, climate change-related crop losses in key consumer countries would also indirectly impact global importers and consumers.

 

South America: an emerging powerhouse of commodity crop production and export

Brazil, Argentina and Paraguay, among other South American countries, have rapidly developed into important centres of production and trade in agricultural commodities. Together, they account for around 50% of global soy production (up from around 1% in 1961) and in 2017 exported almost 150 million tonnes globally.

Trade volumes of important agricultural commodities has increased rapidly in recent years. Use this infographic to explore this growth from exporter and importer perspectives. Data Source: FAO and Thomas Kastner. Data cover 1986-2013, are corrected for re-exports and account for trade in raw and derived crop commodities and are expressed in terms of raw commodity equivalents.

 

The area of harvested cropland and pasture in these countries has grown from 299 million hectares in 1961 (29% of total land area) to 453 million hectares in 2015 (39% of total land area). And, in contrast to many other areas of the world, there is significant potential for further expansion.

While yields per hectare have increased, largely as a result of intensified production, expansion remains an important concern. For example, while soy productivity in Brazil almost tripled between 1961 and 2016, this coincided with a 25-fold increase in soy cropland, with particularly rapid growth since 1990 (see Chapter 3).

Expansion of this type is playing a decisive role in deforestation and loss of sensitive habitats in critical areas including the Amazon and Cerrado landscapes of Brazil, and the Gran Chaco of Argentina and Paraguay.

 

Supply chain transparency can help increase the sustainability of tropical export crop production

For agricultural trade to become more sustainable, fast and effective action is required on a large scale. Supply chain transparency is a prerequisite for reliable analysis and intervention planning.

National-level production and trade data have enabled analyses like those presented in this chapter, painting in broad strokes the links between commodity production and deforestation. But these are of little practical use to most decision-makers – whether representing government or corporate interests, whether at home or abroad – who are concerned with tackling specific impacts in specific places.

Later chapters in this Trase Yearbook 2018 showcase the kinds of deep insights made available by Trase’s unique supply chain transparency data and tools.