- The six largest soy traders accounted for over half of soy exports from Brazil in 2016 and two-thirds of the total deforestation risk associated with soy expansion in the preceding decade.
- Sourcing patterns of trading companies determine exposure to deforestation risk.
- Companies sourcing soy from Matopiba are exposed to the highest deforestation risk.
- Half of the total deforestation risk associated with exports of Brazilian soy in 2016 was linked to Chinese imports.
- Despite importing lower volumes EU countries are exposed to a higher relative deforestation risk– ha per tonne – than China.
Today, soy fields cover more than 33 million hectares (Mha) in Brazil – an area the size of Malaysia – up from 13 million ha in 2000. The expansion of soy (see Chapter 3) has transformed the countryside in much of South America, delivering both economic gains – soybeans made up 10% of total exports (US$ 20 billion in Brazil in 2016) – and environmental and social impacts.
Soy expansion is both a direct and indirect cause of the large-scale conversion of biodiverse forests and savannahs in Brazil, and disentangling the links between soy expansion and the loss of forests and other native vegetation is complicated.
Direct deforestation occurs when native vegetation is cleared and planted with soy within a short period of time. Between 2005 and 2016, at least 1.1Mha (an area larger than seven times the size of London) of native vegetation in the Amazon and Cerrado biomes were directly cleared for soy. This is 3% of the total area that soy now covers across Brazil, and 1% and 7% of the total area of soy in the Amazon and Cerrado biomes, respectively.
Indirect conversion occurs on an even larger scale. The arrival of high-value cash crops like soy can drive land speculation, pushing up the price of surrounding land and incentivising further clearance. Newly cleared land is often first used as cattle pasture before eventually being sold or rented out for soy production. This expansion of soy onto pasture can lead, in turn, to further deforestation as cattle ranching moves into frontier regions where deforestation continues. Identifying the precise role that soy played in driving deforestation in years before soy was planted is complex.
What is possible to measure is the area of land currently planted with soy that was under native vegetation in the recent past. In the Amazon, 0.94 million ha of soy cropland in 2016 was under native forest in 2003, and similarly, 1.2 million ha of soy cropland in the Cerrado was under native vegetation in 2003. These numbers are even larger if the time-series is extended back to 2000 and government PRODES data is used to estimate deforestation in the Cerrado rather than the more conservative estimates from the LAPIG sensor. In this case approximately 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 first Trase Yearbook focuses, however, on deforestation risk associated with direct conversion for soy in each year. Future analyses of Trase data will include assessments of conversion in preceding years, including the impacts of indirect conversion.
It is important to note that this measure of direct conversion is conservative. Preparation of land for planting can occur over multiple years. Also, we use annual deforestation alert data from the LAPIG alert system, which often underestimates clearance in the Cerrado biome.
Shifting patterns of soy expansion and deforestation across Brazil
Today, direct deforestation for soy is particularly low in the Amazon, having fallen from 30% to less than 1% between 2006 and 2014. This is partly due to the impact of the Soy Moratorium which, together with a combination of other governance measures focused on curbing deforestation in the biome, has helped reduce the proportion of soy expansion directly associated with deforestation.
In the last decade, most soy deforestation in Brazil has instead occurred in the transition area between the Amazon and the Cerrado in Mato Grosso state, and in the Matopiba region of the Cerrado – arguably the world’s fastest growing soy frontier. Beyond Brazil, deforestation for soy in South America is most notable in the dry subtropical forests of the Gran Chaco of Argentina, Paraguay and Bolivia – another of the world’s ‘forgotten biomes’ that is home to a unique biodiversity, as well as a large number of indigenous groups. Future editions of the Trase Yearbook also plan to assess the sustainability of soy supply chains originating in the Chaco, in addition to the Brazilian Amazon and Cerrado.
Municipalities are divided into four categories: high soy expansion with high direct soy deforestation; high soy expansion with low direct soy deforestation; low soy expansion with high direct soy deforestation; and low soy expansion with low direct soy deforestation. High soy expansion is defined as >1% growth in the proportion of the municipality that is planted with soy each year. High direct soy deforestation is defined as >200 ha direct soy deforestation per 1,000 ha soy cropland (20%). In regions of high expansion and low deforestation, soy expansion tends to occur into cattle pasture or other crops, where its environmental impacts are lower, though it may still cause indirect deforestation. The main regions of high expansion and high deforestation are shown in red (concentrated in the Cerrado and particularly Matopiba). The older deforestation frontiers of the Cerrado, where soy is predominantly expanding into previously cleared areas, are shaded in blue.
Matopiba: one of the worlds most active frontiers of soy expansion
In the last decade, the Matopiba region in the northeast of the Cerrado, which covers around a third of the biome, has become one of the world’s major hotspots for soy-associated deforestation and habitat loss.
Matopiba owes its very identity to its emergence over the last decade as a new agricultural frontier – its name is made up of the initials of the four Brazilian states of Maranhão, Tocantins, Piauí and Bahia, which share borders in Matopiba. Between 2001 and 2017, soy expanded by 310% in Matopiba alone, and accounted for 14% – approximately 4 million ha – of all soy expansion in Brazil, although the relative rate of expansion has slowed in the last decade, with an increase of 135% between 2007 and 2017 from 1.7 to 4 million ha.
This expansion has been a major driver of economic growth in the region. In 2015 soy represented 17% of the GDP of soy producing municipalities as a whole, whilst amongst the top producers the contribution of soy to municipal GDP was more than half, and reaching more than two-thirds in epicentres of soy production like Formosa do Rio Preto in the state of Bahia and Baixa Grande de Ribeiro in Piaui. For municipalities with a large soy production (>100 million BRL) the contribution of soy to municipal GDP is approximately twice that in Matopiba as it is for municipalities in the rest of the Cerrado biome.
The environmental cost of the rapid expansion of soy in Matopiba is most visible in the clearance of native Cerrado vegetation. Using a conservative estimate of deforestation from the LAPIG alert system, 850,000 ha of Cerrado vegetation in Matopiba were cleared directly for soy between 2005 and 2016. This area is equivalent to 20% of the total area of soy planted in 2016 and 37% of the total area of soy expansion during that period, with the remainder expanding onto land that was initially cleared for some other land-use than soy. Most strikingly 76% of the total area of Cerrado vegetation that was directly cleared for soy between 2005 and 2016 was within the Matopiba region.
Looking ahead Matopiba is at particular risk of further soy-associated deforestation for a number of reasons.
Firstly, there is a large amount of ongoing investment in soy infrastructure in Matopiba, with over 100 new soy storage and wholesale facilities being opened between 2005 and 2015. While most of the total soy-crushing capacity (turning soybeans into soy oil and soy cake) is in Brazil is in the south of the country, Matopiba has seen a 75% increase in crushing capacity over the same period.
Secondly, Matopiba still has high levels of native vegetation cover, and some of the largest expanses of undisturbed savannah in the Cerrado.
Thirdly, compared to the Amazon, the Cerrado has relatively low levels of legal protection. Just 20–35% of the native vegetation in each individual private property in the Cerrado is protected from clearance by Brazil’s new Forest Code, compared to 80% in the Amazon. And only 7.7% of the Cerrado is in any kind of public protected reserve compared to almost 50% in the Amazon.
Finally, the Matopiba region includes some of the poorest areas of Brazil, with low levels of institutional and technical capacity in local government agencies, including in environmental enforcement.
These factors suggest that the already considerable momentum behind soy expansion in Matopiba will continue to grow. Reconciling the demand for this expansion with the importance of conserving remaining areas of Cerrado vegetation represents an immense challenge. Yet further loss is not inevitable given the existence of nearly 20 million hectares of already cleared land, much of which is degraded, low productivity pasture, that is classified as suitable for soy – and with appropriate territorial planning presents a strategic opportunity for both agricultural development and conservation.
Major companies and brands are increasingly exposed to legal and reputational risks associated with unsustainable soy expansion
Recent events have underscored the reputational, legal and even operational risks for soy traders and other downstream buyers that are linked to regions where soy is causing deforestation and land conversion. High-profile campaigns have targeted global brands that source soy from high-risk areas, including the Cerrado in Brazil, and the Argentinian and Paraguayan Chaco.
In May 2018, some of Brazil’s biggest soy traders, including Cargill and Bunge, alongside other transnational commodity companies ABC Indústria e Comércio, JJ Samar Agronegócios Eireli, and Uniggel Proteção de Plantas, were fined as part of the Brazilian Environment Agency’s Operation Soy Sauce. These companies were found to be sourcing soy from areas under embargo due to illegal deforestation, attracting fines of BRL 24.6 million (USD 6.7 million).
Such risks do not only apply to soy traders and consumer goods brands. In 2016 the Brazilian government fined the bank Santander BRL 50 million (USD 16 million) for financing the planting of soy and other grains in embargoed areas.
Of course some deforestation in Brazil is legal, with farm owners entitled to clear between 20% and 80% of their land depending on the biome in which their property is located. But land clearance without the necessary permits and/or in excess of what is permitted is commonplace. In 2016 more than 80% of deforestation in the Amazon and one-third of native vegetation clearance in the Cerrado occurred in properties that had already cleared the maximum legally permissible area and is likely to be illegal. Moreover, in the Cerrado biome alone an estimated 60% of soy was planted on properties that had exceeded the legal limits for land conversion.
Assessing deforestation risks in supply chains of Brazilian soy
The risk that companies and consumer markets are exposed to deforestation in their supply chain is not uniform; it depends on where they source from and how their sourcing strategies change over time.
Identifying the connections between buyers and deforestation hotspots like Matopiba is the first step in identifying priorities for action. The complexity of soy supply chains has meant that it was not previously possible to reliably connect downstream actors to individual regions. However, Trase data systematically links all of Brazil’s soy-exporting municipalities to the companies and countries that trade with them, making it possible to assess exposure to the risk that the commodity being sourcing is associated with deforestation in the regions where it was produced – providing the indicator of supply chain ‘deforestation risk’ that is used by Trase. Because the assessment of risk given by Trase covers the entirety of exports of a given commodity it provides a unique and comprehensive risk profile that can help prioritise further analysis and action, and increase accountability for all.
Bubbles are scaled to show total exports, in tonnes of each country for the period 2006-2016. The name and volume of exports can be identified by hovering the mouse over each bubble. Total deforestation risk is measured in hectares and estimates a companies’ exposure to the risk that the soy it is trading is associated with deforestation in its sourcing regions, with amounts of deforestation risk being allocated to different traders in proportion to volumes sourced from each location. Relative deforestation risk is hectares of direct soy deforestation risk per tonne of exports, allowing comparison of relative impacts of companies that trade very different volumes of soy. Deforestation risk is shown only for the Amazon and Cerrado biomes, where most soy-associated deforestation is occurring.
The top six soy traders – Bunge, Cargill, ADM, Louis Dreyfus, Amaggi and COFCO – make up 58% of total Brazilian soy exports, and were exposed to 68% of deforestation risk due to soy between 2006 and 2016.
Companies’ deforestation risk (shown in the bar chart) varies as their sourcing shifts across the Brazilian landscape. Different companies can be selected to assess their total (ha) and relative (ha/tonne soy) deforestation risk . Deforestation risk is shown only for the Amazon and Cerrado biomes, where most soy-associated deforestation is occurring. Other bubbles are shown in grey. Total deforestation risk is measured in hectares and estimates a companies’ exposure to the risk that the soy it is trading is associated with deforestation in its sourcing regions, with amounts of deforestation risk being allocated to different traders in proportion to volumes sourced from each location.
However, companies handling comparatively small volumes of soy may be exposed to much greater levels of relative deforestation risk (hectares of risk per tonne of soy exported) than some of the bigger players, if they are sourcing from particularly high-risk areas.
This is important because many of these smaller and ‘riskier’ traders also play an active role in driving the expansion of the soy frontier – and could therefore be critical in shifting the production of soy in frontier regions onto a more sustainable footing.
Deforestation risk varies depending on sourcing patterns
A good illustration of how an actor’s sourcing strategies affect their exposure to deforestation risk is the case of Amaggi & LD Commodities, a joint venture between major soy traders Amaggi and Louis Dreyfus.
Louis Dreyfus exported 6.5% of Brazilian soy in 2006–2016. In this period it mostly sourced from the south of Brazil, where there has been little recent deforestation for soy. The company’s total deforestation risk in the period was 5,300 ha (equivalent to only 1% of the total deforestation associated with soy exports in that period). And because of its high volumes and its sourcing from areas with little soy deforestation risk, the company’s relative deforestation risk in the period was just 0.3 ha/1000 t.
The operations of Amaggi – the fifth-largest soy exporter in Brazil, with 6% of exports – are centred in Mato Grosso. There, direct soy deforestation is much greater than in southern Brazil (even though much of the land that is now planted with soy in Mato Grosso was cleared in the 1990s and 2000s).
Amaggi was therefore exposed to a higher relative deforestation risk than Louis Dreyfus, although still comparatively low – 0.8 ha/1000 t – and a total deforestation four times greater than that of Louis Dreyfus at 21,200 ha in the same period. This was still far less than the 256,000 ha of total combined deforestation risk exposure of the two largest soy traders, Bunge and Cargill.
However, the relative deforestation risk of the joint venture Amaggi & LD Commodities – which, since 2017, is one-third owned by Japanese cooperative Zen-Noh – dwarfs that of both its parent companies. Amaggi & LD Commodities with the purpose of gaining a foothold in Matopiba. In the words of Amaggi Chairman Pedro Jacyr Bongiolo: ‘Since the region of Bahia, Maranhão, Piauí and Tocantins is the new agricultural frontier of the country, we believe there is a great possibility of expansion of our business in these states’.
Between 2009 and 2016, the joint-venture exported 2.6 million tonnes of soy from Matopiba (9% of all soy exported from the region), and was exposed to much higher relative deforestation risk than the parent companies: 8 ha per 1,000 tonnes. It is important to note that in absolute terms, the total deforestation risk associated with Amaggi & LD Commodities between 2011-2016 stands out less, at 21,165 ha – still within the top ten, but an order of magnitude less than that of the largest companies.
By considering the case of Louis Dreyfus, Amaggi, and their joint-venture Amaggi & LD Commodities, we can see how traders’ sourcing strategies influence their deforestation risk.
Amaggi & LD Commodities are of course not alone in sourcing from Matopiba. Indeed, 16 of the 20 companies with the highest relative deforestation risk exposure were actively sourcing soy – more than 10,000 tonnes per year – from Matopiba, and many of these same companies also had comparably high total levels of deforestation risk exposure.
The point shows the mean deforestation risk per trader per year, identifying companies that are active (> 10,000 tonnes) in Matopiba. The error bars show the minimum and maximum between 2006–2016. Major traders are defined as those that export more than 1% of total soy exports in at least one year. Of the 36 companies that satisfy this criterion 32 are shown in the figure, with the remaining four either sourcing exclusively from outside the Amazon and Cerrado or source from regions that have not been detected by Trase.
Risk exposure is transmitted along supply chains to consumer markets
Deforestation risk exposure associated with soy exports does not end with the traders operating in Brazil. Buyers like consumer goods companies and big retailers that sell thousands of products that contain soy are also exposed to deforestation risk through their supply chains. These companies, as well as many national governments in consumer markets, are showing increasing concern for the deforestation ‘embedded’ in their imports.
Given their large market share, China and Brazil are exposed to the most soy-associated deforestation risk. In total, Chinese soy imports, which made up 60% of Brazilian exports in 2016, were potentially associated with 50% (around 10,000 ha) of the deforestation associated with exported soy in that year, mainly in the Cerrado. However, other countries are also importing soy with a high risk of associated soy deforestation, and have some of the highest levels of relative deforestation risk exposure. This includes many EU members and Japan, due to their supply chains being linked to particularly active areas of soy expansion.
Points show the mean deforestation risk (total or relative) linked directly to soy expansion per country for the period 2006-2016. The error bars show the minimum and maximum between 2006–2016. Total deforestation risk is measured in hectares and estimates a countries’ exposure to the risk that the soy it is importing is associated with deforestation in its sourcing regions, with amounts of deforestation risk being allocated to different countries in proportion to volumes sourced from each location. Relative deforestation risk is hectares of direct soy deforestation risk per tonne of exports, allowing comparison of relative impacts of countries that trade very different volumes of soy. Deforestation risk is shown only for the Amazon and Cerrado biomes, where most soy-associated deforestation is occurring.
Expansion without deforestation – an opportunity for more sustainable soy production in Brazil?
Government projections of soy production in Brazil indicate that around 10 Mha of land may be converted to soy within the next decade. Much of this will be concentrated in the already vulnerable Cerrado biome. Ensuring that this projected expansion does not drive more deforestation is an immense challenge. Yet further loss is not inevitable, when, in the Cerrado alone, nearly 20 million hectares of already cleared land, much of which is degraded, low productivity pasture, is classified as suitable for soy – of which some 2 million hectares are in Matopiba.
By linking soy traders and buyers to the places where soy is grown, Trase data can help to identify and manage risks, highlight opportunities for new partnerships and investment to improve sustainability – including, and most importantly in high risk regions, and monitor progress over time. This provides a critical missing part of the puzzle of shifting soy to a more sustainable footing, and can help harness rising levels of concern in the private sector for strengthening the conservation of the Cerrado more broadly.