- Argentina, Brazil and Paraguay now produce almost 50% of the world’s soy, up from just 3% fifty years ago.
- Much of this growth comes from a forty-fold increase in land farmed for soy, from 1.4m ha in 1970, to 56m ha today.
- Expansion into native vegetation threatens key habitats in these countries
The story of soy in South America is one of astounding growth.
Fifty years ago, Brazil, Argentina and Paraguay together accounted for just 3% of the world’s soy production. By 2016 that number had risen to almost 50%. Soy is now South America’s most traded agricultural commodity. This is in response to growing global demand, particularly for soy as an animal feed as the consumption of meat, eggs and dairy has soared. Today, these three countries account for more than 95% of the continent’s harvested area for soy.
Argentina, Brazil and Paraguay account for over 95% of the soy produced in South America. Expansion in area under soy production is shown in 10-year intervals between 1975 and 2015.
A brief history of an agricultural miracle
The 1970s saw the first big increases in soy production in South America. Global demand for soy was fuelled by the collapse of Peruvian anchovy fisheries, a major global source of protein for animal feed. In 1973, then by far the world’s biggest exporter of soy, the US imposed an embargo on soy exports, fearing that heightened overseas demand would disrupt its domestic feed supply chain. Soy prices in the world market tripled. Japan, then a major importer of US soy, was hit particularly hard and started to seek new suppliers. In 1980, the US would again embargo soy exports, this time to the Soviet Union on account of its invasion of Afghanistan.
These events sent a powerful signal to South American governments to ramp up soy production. They responded by promoting colonization and expansion of agricultural frontiers through subsidised credit, price support and technical assistance to producers, and increased investment in agricultural research and rural infrastructure.
Between 1970 and 1980, soy production in Brazil, Argentina and Paraguay increased twelvefold. At the same time, its cultivated area increased eightfold, from 1.4 million hectares (Mha) to 11.3 Mha, alongside a significant increase in yields.
In the next decades, continued growth was sustained by increasing global demand for animal feeds. In the 1990s and 2000s, global concern about “mad cow” disease (bovine spongiform encephalopathy, or BSE) led to stricter legislation on the use of animal products in livestock feed across Europe, creating extra demand for soy as a safer alternative protein source.
In just a few decades, a number of important ecosystems have come under threat from soy’s rapid expansion in South America
Soy expansion in South America was initially concentrated in the subtropical regions of northeastern Argentina, southern Brazil, and eastern Paraguay where conditions were most suited to existing soy varieties introduced from the US.
But from the mid-1970s, agronomic improvements, and government investment, quickly pushed agricultural expansion into tropical regions. Over the following decade, this opened up the centre of Brazil to the development of industrial-scale production of soy, rice, cotton, maize and sugarcane.
Soy expanded rapidly northwards into the Cerrado, with production by the mid-1990s across the states of Mato Grosso do Sul, Mato Grosso, Bahia and Goiás. Since then, public and private sector investment have continued to increase, and international companies have played an ever-more important role. The agribusiness sector has boomed, and soy has become the country’s most valuable export commodity – overtaking even oil and mineral exports.
Since the 1970s, the Cerrado has lost nearly half of its natural vegetation, originally covering some 200 Mha, to extensive cattle grazing and agricultural expansion. As one of the most profitable land uses, soy has been a major driver of speculative land clearance. Using the Brazilian government deforestation monitoring data from PRODES an estimated 1.8 million ha of soy in the Amazon in 2016 and 3.5 million a of soy in the Cerrado in 2015 were under native vegetation in the year 2000 – amounting to roughly 40 and 20% of the total area of soy in each biome respectively today. While it cannot be claimed that soy expansion was a factor in all this land conversion, it undoubtedly played a major role.
This has had severe impacts on biodiversity and environmental services, including climate control, hydrological cycling and pollination. And, hand in hand with economic growth, it has caused social displacement and an increase in social inequality.
A handful of dominant soy traders emerge
It was during this period of soy expansion, in the 1990s and early 2000s, that some of the best-known and biggest players in soy established their dominance, coming to invest in Brazilian soy for the first time in history.
Archer Daniels Midland (ADM), Bunge, Cargill and Louis Dreyfus all made large investments and grew rapidly in Brazil through a series of mergers and acquisitions, before continuing to expand significantly through to the early 2000s. After this period of massive expansion, the dominance of these four companies would become established for the next two decades.
Importantly, the investments they made in the late 1990s and 2000s established firm links between each of the companies and different geographic centres of soy production that continue to this day (see Chapter 4).
Investment in the soy industry at that time – including the building of production, storage and processing units in Brazil and other South American countries – was encouraged by rapidly rising demand for soy and the vast areas of land available for production. The Brazilian Government put in place favourable tax laws for the export of primary products, including soy. The most famous of these was the 1996 Kandir law that eliminated state taxes to stimulate export-oriented productive sectors and improve Brazil’s trade balance. These measures spurred Brazilian soy exports, alongside increased demand from China and the EU, particularly after Europe’s ban on the use of animal protein for feedstock in 2001.
Brazilian farmers, of all types of crop, could not have flourished as they did without access to cheap rural credit, price guarantees and insurances. During the 2015 crop year, for example, the Brazilian Government offered BRL 187.7 billion (USD 62.4 billion) in rural public credit to banks, cooperatives and Brazilian farmers – up from around BRL 50 billion (USD 17.3 billion) in 2003. In the Cerrado states, producers received around 70% of total public rural credits distributed in Brazil.
The introduction of genetically-modified (GM) crop technology in the 1990s in Argentina, and during the early 2000s in Brazil and Paraguay, further stimulated development of the soy sector. New seed varieties helped producers increase their yield and expand into areas that were not agriculturally viable before. Today, more than 90% of the soy production in the region is GM.
Brazil is the region’s – and, since 2018, the world’s – largest producer of soy, with average productivity rates having tripled since 1970, from 1.1 tonnes per hectare (t/ha) to 2.9 t/ha in 2016. During the same period, the area of the country cultivated for soy grew 25 times, from 1.3 Mha in 1970 to more than 33 Mha in 2016.
This upward trajectory looks set to continue with a more positive outlook for Brazilian soy than ever. In April 2018, Brazil’s vegetable oil association, ABIOVE, said it expects the nation’s 2018 soybean crop to reach a record 117.4m tonnes – up 2.3% on its previous estimate.
The price of Brazilian soy has also seen a marked rise in recent months due to severe droughts in Argentina and the first exchanges in a possible trade war between China and the US. The United States Department of Agriculture (USDA) now forecasts a 2% increase in the soy harvest area in Brazil this year to 35.8 Mha due to predicted higher prices and the growth in both Chinese demand and domestic consumption.
Soy expansion has helped create new agricultural frontiers within threatened ecosystems
In the last ten years, the Brazilian Cerrado, Argentine Gran Chaco and Paraguayan Atlantic Forest have been the major expansion zones of soy in South America. In Brazil, much of the soy expansion is now happening in the agricultural frontier area of Matopiba (see also Chapter 5).
Using the Trase data it is possible to assess, with a new level of precision, the role played by different companies in driving this rapid increase in the prominence of soy, including the markets that they serve, and the areas from which they source. Making these connections can transform our understanding as to the role different buying companies and countries play in shaping local development trajectories, and the future sustainability of soy.