Brazil’s Beef And Soy Moratoria On Deforestation: Lessons From Supply Chain Governance In The Amazon

Abstract

Brazil’s Amazon Soy Moratorium (ASM) and Zero-deforestation Cattle Agreements (CA) have helped increase supply chain transparency and monitoring across the Amazon though the impacts on forest conservation have been mixed. Because the ASM and the CA have been in place for more than a decade, they offer an unparalleled opportunity to understand the conditions in which supply chain governance can emerge and persist. Here we interrogate the development of these agreements as well as their actual and perceived outcomes and offer lessons for the governance of commodity production in Brazil and elsewhere. Our assessment indicates that several factors aligned to support the ASM including simultaneous and cooperative commitment and implementation by a highly consolidated market, straightforward monitoring of suppliers, and relatively low demands for producers. Brazil’s cattle sector, on the other hand, must contend with a less consolidated market, more complex supply chains that require company-specific monitoring efforts that go beyond easily accessible data, and a higher bar for farmers to be compliant. Regardless of current challenges, both policies have led to durable and significant changes in Brazil’s, and indeed the world’s, forest conservation policy landscape.

Generated Summary

This study examines the Amazon Soy Moratorium (ASM) and Zero-deforestation Cattle Agreements (CA) in Brazil, analyzing their development, outcomes, and the factors that influenced their success. The research employs a political economy framework, exploring the roles of interest groups, institutions, and ideas/information (‘3 Is’) in shaping supply chain governance. The study investigates how these agreements, which have been in place for over a decade, offer insights into the conditions under which supply chain governance can emerge and persist. The methodology involves a review of academic and informal literature to understand the evolution and outcomes of the ASM and CA. The research also explores the impact of socio-political and material realities on institutions, interest groups, and ideas related to commodity production governance in the Brazilian Amazon.

Key Findings & Statistics

• The agricultural area in the Amazon is used primarily for cattle ranching (64%; 49 Mha) and soybeans (7%; 5 Mha).
• Brazil’s Forest Code (FC) requires 80% of a property in the Amazon biome to be managed as a forest reserve (reserva legal, or LR).
• Current compliance with the FC in the Amazon is low, with approximately 3% of registered properties having intact on-property LRs.
• The Amazon Soy Moratorium (ASM) was implemented in 2006.
• The ASM limits the purchase of soybeans from land in the Amazon biome cleared since July 2008.
• The Zero-Deforestation Cattle Agreements (CA) require cattle-supplying properties to be free of deforestation after 2008.
• Deforestation linked to soy production has decreased since 2006, while deforestation linked to cattle production continues to be widespread.
• In 2008, the GTS hired a consulting firm to assess areas of new deforestation planted to soybeans in three Mato Grosso municipalities, finding no soybeans grown in the surveyed regions.
• In the 2000s, the Greenpeace published a provocative report entitled Eating up the Amazon.
• After two months of negotiations between Cargill and Greenpeace, a critical mass of soybean buyers and processors announced a moratorium on purchases from newly deforested farmland in the Brazilian Amazon, starting June 24, 2006.
• The term supply chain agreements describes the focused application of requirements stemming from company commitments, which may be compelled by sectoral commitments or federal and state laws, as a contingency for relationships that make up all or part of a supplier network.
• Prior to the 1960s, agricultural development in Brazil was centered on family-run farms mainly in the country’s south and northeast but beginning in the 1960s, migrants from these regions began to move into the western parts of the Cerrado as well as into the Amazon in search of more lands to use for farming and ranching (Figure 1).
• Today, most agricultural area is used for cattle ranching (64%; 49 Mha) or soybeans (7%; 5 Mha), and takes place on farms that average 165 ha, though the distribution of farm sizes has a long tail and both ranches and soybean farms may be thousands or even tens of thousands of hectares in size (Mapbiomas 2022; IBGE 2017; Figure 2).
• Production of other crops like cotton or corn occurs primarily in a double cropping regime on farms that are also used for soybean production, due to the high returns offered by soybean relative to other crops.
• Figure 2: Annual area of soy and pasture in the Amazon biome (Mapbiomas 2022).
• By the mid-2000s, deforestation in the Brazilian Amazon was at record levels and was increasingly recognized as being closely linked to the production of cattle and soybeans in response to growing market demand (Barona et al. 2010).
• Since then, the importance of reducing deforestation has gained increasing attention, including billions of dollars committed to support forests by the private sector, increasing focus by NGOs on the commodity and finance sectors, and dozens of new zero deforestation commitments (ZDCs) and several new collective action initiatives announced at the COP26
• By the mid-2000s, deforestation in the Brazilian Amazon was at record levels and was increasingly recognized as being closely linked to the production of cattle and soybeans in response to growing market demand (Barona et al. 2010).
• In April 2006, the Greenpeace published a provocative report entitled Eating up the Amazon, which documented the role of soybean production in Amazon deforestation and placed the blame on Cargill, as well as other leading traders like Bunge and Archer Daniels Midland (ADM), for their role in both buying and financing soy linked to deforestation, and on European processors and retailers such as McDonald’s and Burger King for turning a blind eye (Greenpeace 2006a).
• A second report, focused specifically on the role of McDonalds in deforestation related to soy expansion in the Amazon (Greenpeace 2006b).
• Within hours of the protests, McDonalds agreed to cease the use of soybeans sourced from the Amazon in its Chicken McNuggets in Europe, a practice highlighted in the Greenpeace report.
• Similarly, Cargill released a response in May 2006 claiming that the role of soy in Amazon deforestation was less than suggested by Greenpeace, but also pledged to ensure that all suppliers met the legal requirements set out by Brazil’s FC moving forward (Boucher et al. 2013; Barbosa 2015)
• The GTS divided its work among three different subgroups: Mapping and Monitoring; Education, Information and FC; and Institutional Relations. Of these, the work of the Mapping and Monitoring group has been the most obviously consequential.
• The Education, Information and FC subgroup promoted knowledge about making soy more productive and sustainable to farmers, such as overviews of legal obligations including environmental registration and FC compliance (Abiove 2007).
• The GTS also took on the annual production of a “blacklist” of farms identified as violating the ASM by the monitoring efforts, which traders use to avoid buying soy from non-compliant farms.
• The 2009 GTS report also announced the support of Brazil’s Ministry of the Environment (MMA) for the ASM which had been formalized at the agreement’s renewal the previous year.
• Annual reports have consistently shown low levels of violations in terms of total deforested area planted to soybean and number of properties with noncompliant plantings.
• Various studies have found that deforestation and soy expansion became “uncoupled” (Macedo et al. 2012), that deforestation for soy decreased (Gibbs et al. 2015; Kastens et al. 2017), and that deforestation in soy producing regions decreased following the ASM (Kastens et al. 2017).
• Indeed, recent research shows that the ASM was responsible for sizeable reductions in the overall deforestation rate in the so-called Arc of Deforestation region in the southern and eastern Amazon (Heilmayr et al. 2020, Gollnow et al. 2022).
• The MPFs initially aimed incorporate the full supply chain, from farm to store, but later phases have focused more narrowly on the slaughterhouses that buy from ranchers.
• Over time many more meatpacking companies have signed TACs and nearly 75% of those with state-level or federal-level inspections have now signed on (Figure 3; Barreto et al. 2015; Amaral 2016).
• Figure 3: Slaughterhouses in the Amazon that signed the CA over time. 23 additional slaughterhouses have signed the agreement but information on the date of signing was unavailable.
• The TAC also technically applies in the entire Legal Amazon — both the Amazon and Cerrado biome — while the G4 applies only in the Amazon biome (see Figure 1); in practice the TAC is mainly enforced in the Amazon biome.
• A formal partnership among some meatpackers, NGOs, and the MPF was formed under the name “Beef on Track” (Beef on Track 2021).
• Cattle typically move between 2-3 farms prior to sale to slaughterhouses, and this complexity had made monitoring difficult (Pereira et al 2020).

Other Important Findings

• The ASM has helped increase supply chain transparency and monitoring across the Amazon, although impacts on forest conservation have been mixed.
• The ASM and CA offer an opportunity to understand the conditions in which supply chain governance can emerge and persist.
• The ASM and CA are examples of supply chain governance, with the term supply chain agreements describing the focused application of requirements stemming from company commitments.
• Key factors supporting the ASM included a consolidated market, straightforward monitoring, and low demands for producers.
• The cattle sector faces a less consolidated market, complex supply chains, and higher compliance standards.
• Both policies have led to durable and significant changes in Brazil’s forest conservation policy landscape.
• Deforestation linked to soy production has plummeted in the Amazon, while deforestation linked to cattle production remains widespread.
• Examining these moratoria can offer lessons for governance of commodity production in Brazil and elsewhere.
• The ASM, which was implemented in 2006, limits the purchase of soybeans from land cleared since July 2008.
• The Zero-Deforestation Cattle Agreements (CA) require properties to be free of deforestation after 2008.
• Since 2006, deforestation linked to soy has decreased, while deforestation linked to cattle production remains widespread.
• The GTS tasked itself with two goals: developing a governance structure for the responsible production of soy and to respond to the growing concern of customers.
• The GTS also took on the annual production of a “blacklist” of farms identified as violating the ASM by the monitoring efforts, which traders use to avoid buying soy from non-compliant farms.
• Over time, the GTS also took on the annual production of a “blacklist” of farms identified as violating the ASM by the monitoring efforts, which traders use to avoid buying soy from non-compliant farms.
• Overall, the ASM has been widely viewed as successful in terms of its reduction of deforestation in the soy supply chain, its acceptance by major stakeholders, and its longevity.
• The ASM does not prohibit deforestation per se, but prohibits the use of recently cleared areas for soy.
• Loopholes and opportunities for leakage remain, as the ASM does not ascribe any consequences for clearing and planting commodities other than soy on soy-producing farms.
• The ASM has also served as a conduit for a political and symbolic convergence of groups with varied objectives and interests from NGOs to soy trading companies to government agencies.
• Companies that did not have sustainability officers in the early 2000s now have sustainability teams.
• The ASM also opened the door for the currently-stalled negotiations among NGOs and companies about the Cerrado.
• The MPF undertook an investigation of illegal activities in the cattle sector (Peinado Gomes and Alves 2017).
• The Carne Legal campaign also featured social and traditional media campaigns aimed at raising the conscientiousness of the Brazilian consumer about the origins of the beef that they consume (MPF 2009).
• While the nature of the relationship between the companies and Greenpeace remained somewhat adversarial until Greenpeace withdrew from the G4 in 2017, in the case of the TAC, companies now have open channels of communication and generally cooperative relationships with the MPF (Cammelli et al 2022).

Limitations Noted in the Document

• The ASM’s success is that compliance is relatively easy for farmers in established soy production regions.
• Deforestation in the main soy-producing regions of the Amazon was so widespread prior to 2008 that most farms have areas on or nearby to their farms that they can expand their soy fields onto without violating the ASM, and few soy farms have forested areas suitable for soy (Rausch & Gibbs 2021).
• The study notes that there are loopholes and opportunities for leakage in the ASM.
• The study acknowledges that the outcomes of the CA are less clear-cut than those of the ASM.
• The study notes that the impacts of the CA on forests may be transitory or slow to accrue.
• The research acknowledges that the success of the ASM has proven elusive.
• The study highlights the challenges in addressing deforestation in supply chains of animals that move between farms.
• The research notes the limitations of these agreements can be overcome with public sector support.

Conclusion

The study concludes that the ASM and CA represent crucial examples of sectoral commitments for deforestation-risk commodities, highlighting the potential of supply chain governance to address environmental challenges. “The term supply chain agreements describes the focused application of requirements stemming from company commitments, which may be compelled by sectoral commitments or federal and state laws, as a contingency for relationships that make up all or part of a supplier network.” The differences in the structures of the soy and cattle supply chains influence the effectiveness of governance. The ASM, with its relatively simple supply chains, has seen greater success compared to the CA, which faces complexities in tracing cattle from various farms to slaughterhouses. The ASM’s success is also associated with its voluntary nature and the pressure from consumers and media, versus the technically mandatory but often negotiated TACs. The study’s findings suggest that while replicating the ASM’s success has proven difficult, both initiatives offer valuable lessons for policymakers and activists. “Replicating the success of the ASM has proven elusive, but both the ASM and the CA offer numerous lessons for policymakers and activists regarding the design of pressure campaigns, technical considerations around monitoring and verification, and the limits that private sector-led supply chain initiatives can face.” The research suggests that transparency, public sector support, and positive and negative incentives are crucial for ensuring the success of supply chain governance in the face of ongoing deforestation challenges in the Amazon and beyond.