The Soy Complex in Brazil
Brazilian Association of Vegetable Oil Industries
Soy Agribusiness in Brazil
NOPA’s 2010 Annual Meeting Carlo Lovatelli President Tucson, Arizona - USA February 09, 2010 1
Contents
• • • • • • •
The Soy Complex in Brazil Opportunities Challenges Environmental Sustainability Brazil’s Environmental Legislation Soy Moratorium Final considerations
2
The Soy Complex in Brazil • •
Second largest world producer and exporter One of Brazil’s main sources of foreign currency (about 11% of the country’s total exports)
• • •
Over 243.000 producers Generates approximately 1.4 million jobs Promotes sustainable development and moves wealth to the country’s inlands
•
Strong partnership between producer and industry with crop financing (historically 1/3 of the crop)
3
The Soy Complex in Brazil Brazil uses state-of-the art technology – 30 years of research
3-Year 3-Year Moving Moving Average Average
4
Source: USDA, 2010.
The Soy Complex in Brazil
5
Source: CONAB, 2010.
The Soy Complex in Brazil 5 main producing states in 2010
18.7 MMT
1st – MATO GROSSO
7.3 MMT
28.6% 4.8 MMT
5th – MATO GROSSO DO SUL
13.1 MMT
4th – GOIÁS 11.3%
7.3 %
8.4 MMT
2nd – PARANÁ 20.2% 3rd – RIO GRANDE DO SUL
12.9%
Source: APROSOJA, 2009.
6
The Soy Complex in Brazil Supply and Demand Balance Million tons Soybeans
Soybean meal
Soybean oil
Crop year Production
Crush
Exports
Domestic
Exports
Domestic
Exports
2007/08
59.9
31.9
24.5
11.9
12.5
4.1
2.1
2008/09
57.2
30.3
28.0
11.7
11.5
4.6
1.5
2009/10
65.2
32.2
27.1
11.9
12.7
5.1
1.1
7
Source: ABIOVE - January 2010.
The Soy Complex in Brazil Genetically Modified Organisms • Identification will be started with “you can count Live Modified Organisms - LMOs” according to the The Cartagena Protocol on Biosafety
Cartagena Protocol • Labeling soy oil with the symbol “T” – had no negative effects on consumption
T
• The CTNBio approved the soybean developed by Embrapa/Basf – not yet approved in the EC • ABIOVE negociates with developers for the commercialization of new events after approval by the EC and China 8
Opportunities Higher income will increase chicken consumption • Poultry consumption should rise by 20 million tons in the next eight years • 83% of this growth will occur outside the OECD Country
Per capita consumption in 2010 (Kg)
OECD
27
CIS
17
China
13
Brazil
38
World average
13 9
Source: OECD.
Opportunities Pork should also increase sales on developing countries • Pork consumption should increase by 14 million tons in the next eight years • 81% of this growth will occur outside the OECD Country
Source: OECD.
Per capita consumption in 2010 (Kg)
OECD
23
CIS
13
China
28
Brazil
11
World average
12 10
Opportunities Feeding determines most of the demand for vegetable oils • Use of biodiesel has increased recently • Biodiesel growth rate is greater than for other uses
11
Sources: USDA, Oil World, ANP, MME, EBB e NBB.
Opportunities Annual biodiesel production in Brazil Authoritative Authoritative
Mandatory Mandatory B5 B5
B3 B3 // B4 B4 B2 B2 // B3 B3
B2 B2
12
Source: ANP. 2010 projection ABIOVE.
Opportunities Livestock intensification will be the main source of new lands for soy expansion
Note: 1. Sugar from cane production increase to 45 million tons from 30 million, and of ethanol to 65 billion liters from 18 billion liters using crushed sugar cane. 13
Sources: ABIOVE, CONAB and UNICA.
Challenges Agriculture X GGE emissions trade-off? More can be produced emitting less • Agriculture can and should contribute to reducing GGE emissions • 22% of the reduction in Brazilian emissions will come from implanting better agricultural practices and biofuels 14
Challenges Logistic cost comparison (US$/ton of soybeans) Description
USA
Argentina
Brazil
Mato-Grosso
350
350
350
350
Freigh to the port
-15
-17
-40
-872
Fobbing
-3
-3
-10
-10
Tax / Subsidy
163
-1224
0
0
Net revenue
348
208
300
253
FOB Price
1
1. Port FOB price in 2010. Average price US$ 350/ton in 2010 (US$ 9.52/bushel) 2. Considering freight from Sorriso and port destination 3. U.S. subsidies equivalent to 44 cents/bushel (Direct Payments) 4. Retenciones in Argentina equivalent to 35% of export tax 15
Sources: ABIOVE, APROSOJA and IMEA.
Challenges Opening of the international markets
• It is essential to open the meat and biodiesel markets by reducing tarif, technical and health barriers • The conclusion of the Doha Development Round and regional agreements are important steps in this direction
16
Environmental Sustainability World Untouched Forests (Areas above 500 km2) 84% of North America
Europa 6.4%
intact forests are in
sendo 90% na Rú Rússia
Canada Brazil has the world’s largest untouched
Amé América Tropical 34%
Brasil 18.7%
forest of the world Brazil
Amazon Forest
Million ha
Part %
Forest Areas Deforestation
298 69
81% 19%
Original Forest
367
100%
maintains 81% of the Amazon Forest
17
Sources: Greenpeace (2006) and INPE (2009).
Environmental Sustainability Deforestation in the Amazon Biome Brazil is doing its part to reduce deforestation • Policies to regularize land use
-74%
• Creation of Conservation Units • Greater monitoring and control • Soy Moratorium and other sectorial initiatives • Funds for environmental financing 18
Source: INPE.
Brazil’s Environmental Legislation Legal Reserve and Permanent Preservation Areas protects HCVA’s and perform other environmental functions Legal Reserve Area (20% to 80%) and Permanent Preservation Areas (riparian areas, hilltops, areas with slope greater than 45º)
19
Brazil’s Environmental Legislation Permanent Preservation Area (PPA) (Riparian Woods) at Soybean Producing Regions
• Brazil: 198 to 333 feet • USA and Argentina: zero 20
Source: APROSOJA 2008.
Soy Moratorium What is the Amazon Biome’s Soy Moratorium? Started July 24, 2006 Objective To reconcile economic development and socioenvironmental preservation in the Amazon Biome, complying with consumers’ demands Commitment Not to trade soy from areas of the Amazon Biome deforested after July 2006 21
Soy Moratorium Results of the Monitorings Soy is not an important factor in the deforestation of the Amazon Biome Monitored Polygons
Monitored Area (hectares)
Soy Area (hectares)
% with Soy
2007/08
295
49,809
0
0.00%
2008/09
630
157,896
1,385
0.88%
Year
22
Soy Moratorium Conclusions • Only 0.67% of the monitored area is planted with soy • Companies that signed the Moratorium did not acquire the product from these areas • Properties not complying with the Moratorium will not receive prefinancing for the next crop
23
Soy Moratorium Capacity building and Verification of Brazilian Soy Soy Plus Partnership with soybean producers for continuous improvement of environmental, social and economic sustainability indices Enforcement of the strict Brazilian environmental legislation The process will involve: Collection of data and preparation of diagnostics Technical assistance and environmental education Implementation and monitoring of best agricultural practices Voluntary Soy Plus Verification
24
Soy Moratorium Capacity building and Verification of Brazilian Soy Soy Plus Opportunity to develop joint sustainability actions, such as ISGA cooperation among Brazil, Argentina and USA: Data collection on social and environmental conditions of soy production Researches on the environmental sustainability: carbon and water foot print, impacts on soil and water, GMOs, etc International coordination regarding legislative and regulatory issues on third markets Dissemination of best agricultural practices, e.g., no till, crop rotation Creation of mechanisms of Payments for Environmental Services 25
Final considerations The soy complex in Brazil is successful in the technological and economic areas The perspectives for growth are positive and should meet the demands for meal and oil for human consumption and biodiesel Logistics and the opening of international meat and biodiesel markets are important challenges The Brazilian environmental legislation is strict and the soy complex is making increasing efforts to apply it The Soy Moratorium and the Soybean Plus Program are important initiatives to promote sustainability They are also an opportunity to create partnerships and mechanisms for Payment for Environmental Services 26
www.abiove.com.br Members
Soy Agribusiness in Brazil
NOPA’s 2010 Annual Meeting Carlo Lovatelli President Tucson, Arizona - USA February 09, 2010 1
Contents
• • • • • • •
The Soy Complex in Brazil Opportunities Challenges Environmental Sustainability Brazil’s Environmental Legislation Soy Moratorium Final considerations
2
The Soy Complex in Brazil • •
Second largest world producer and exporter One of Brazil’s main sources of foreign currency (about 11% of the country’s total exports)
• • •
Over 243.000 producers Generates approximately 1.4 million jobs Promotes sustainable development and moves wealth to the country’s inlands
•
Strong partnership between producer and industry with crop financing (historically 1/3 of the crop)
3
The Soy Complex in Brazil Brazil uses state-of-the art technology – 30 years of research
3-Year 3-Year Moving Moving Average Average
4
Source: USDA, 2010.
The Soy Complex in Brazil
5
Source: CONAB, 2010.
The Soy Complex in Brazil 5 main producing states in 2010
18.7 MMT
1st – MATO GROSSO
7.3 MMT
28.6% 4.8 MMT
5th – MATO GROSSO DO SUL
13.1 MMT
4th – GOIÁS 11.3%
7.3 %
8.4 MMT
2nd – PARANÁ 20.2% 3rd – RIO GRANDE DO SUL
12.9%
Source: APROSOJA, 2009.
6
The Soy Complex in Brazil Supply and Demand Balance Million tons Soybeans
Soybean meal
Soybean oil
Crop year Production
Crush
Exports
Domestic
Exports
Domestic
Exports
2007/08
59.9
31.9
24.5
11.9
12.5
4.1
2.1
2008/09
57.2
30.3
28.0
11.7
11.5
4.6
1.5
2009/10
65.2
32.2
27.1
11.9
12.7
5.1
1.1
7
Source: ABIOVE - January 2010.
The Soy Complex in Brazil Genetically Modified Organisms • Identification will be started with “you can count Live Modified Organisms - LMOs” according to the The Cartagena Protocol on Biosafety
Cartagena Protocol • Labeling soy oil with the symbol “T” – had no negative effects on consumption
T
• The CTNBio approved the soybean developed by Embrapa/Basf – not yet approved in the EC • ABIOVE negociates with developers for the commercialization of new events after approval by the EC and China 8
Opportunities Higher income will increase chicken consumption • Poultry consumption should rise by 20 million tons in the next eight years • 83% of this growth will occur outside the OECD Country
Per capita consumption in 2010 (Kg)
OECD
27
CIS
17
China
13
Brazil
38
World average
13 9
Source: OECD.
Opportunities Pork should also increase sales on developing countries • Pork consumption should increase by 14 million tons in the next eight years • 81% of this growth will occur outside the OECD Country
Source: OECD.
Per capita consumption in 2010 (Kg)
OECD
23
CIS
13
China
28
Brazil
11
World average
12 10
Opportunities Feeding determines most of the demand for vegetable oils • Use of biodiesel has increased recently • Biodiesel growth rate is greater than for other uses
11
Sources: USDA, Oil World, ANP, MME, EBB e NBB.
Opportunities Annual biodiesel production in Brazil Authoritative Authoritative
Mandatory Mandatory B5 B5
B3 B3 // B4 B4 B2 B2 // B3 B3
B2 B2
12
Source: ANP. 2010 projection ABIOVE.
Opportunities Livestock intensification will be the main source of new lands for soy expansion
Note: 1. Sugar from cane production increase to 45 million tons from 30 million, and of ethanol to 65 billion liters from 18 billion liters using crushed sugar cane. 13
Sources: ABIOVE, CONAB and UNICA.
Challenges Agriculture X GGE emissions trade-off? More can be produced emitting less • Agriculture can and should contribute to reducing GGE emissions • 22% of the reduction in Brazilian emissions will come from implanting better agricultural practices and biofuels 14
Challenges Logistic cost comparison (US$/ton of soybeans) Description
USA
Argentina
Brazil
Mato-Grosso
350
350
350
350
Freigh to the port
-15
-17
-40
-872
Fobbing
-3
-3
-10
-10
Tax / Subsidy
163
-1224
0
0
Net revenue
348
208
300
253
FOB Price
1
1. Port FOB price in 2010. Average price US$ 350/ton in 2010 (US$ 9.52/bushel) 2. Considering freight from Sorriso and port destination 3. U.S. subsidies equivalent to 44 cents/bushel (Direct Payments) 4. Retenciones in Argentina equivalent to 35% of export tax 15
Sources: ABIOVE, APROSOJA and IMEA.
Challenges Opening of the international markets
• It is essential to open the meat and biodiesel markets by reducing tarif, technical and health barriers • The conclusion of the Doha Development Round and regional agreements are important steps in this direction
16
Environmental Sustainability World Untouched Forests (Areas above 500 km2) 84% of North America
Europa 6.4%
intact forests are in
sendo 90% na Rú Rússia
Canada Brazil has the world’s largest untouched
Amé América Tropical 34%
Brasil 18.7%
forest of the world Brazil
Amazon Forest
Million ha
Part %
Forest Areas Deforestation
298 69
81% 19%
Original Forest
367
100%
maintains 81% of the Amazon Forest
17
Sources: Greenpeace (2006) and INPE (2009).
Environmental Sustainability Deforestation in the Amazon Biome Brazil is doing its part to reduce deforestation • Policies to regularize land use
-74%
• Creation of Conservation Units • Greater monitoring and control • Soy Moratorium and other sectorial initiatives • Funds for environmental financing 18
Source: INPE.
Brazil’s Environmental Legislation Legal Reserve and Permanent Preservation Areas protects HCVA’s and perform other environmental functions Legal Reserve Area (20% to 80%) and Permanent Preservation Areas (riparian areas, hilltops, areas with slope greater than 45º)
19
Brazil’s Environmental Legislation Permanent Preservation Area (PPA) (Riparian Woods) at Soybean Producing Regions
• Brazil: 198 to 333 feet • USA and Argentina: zero 20
Source: APROSOJA 2008.
Soy Moratorium What is the Amazon Biome’s Soy Moratorium? Started July 24, 2006 Objective To reconcile economic development and socioenvironmental preservation in the Amazon Biome, complying with consumers’ demands Commitment Not to trade soy from areas of the Amazon Biome deforested after July 2006 21
Soy Moratorium Results of the Monitorings Soy is not an important factor in the deforestation of the Amazon Biome Monitored Polygons
Monitored Area (hectares)
Soy Area (hectares)
% with Soy
2007/08
295
49,809
0
0.00%
2008/09
630
157,896
1,385
0.88%
Year
22
Soy Moratorium Conclusions • Only 0.67% of the monitored area is planted with soy • Companies that signed the Moratorium did not acquire the product from these areas • Properties not complying with the Moratorium will not receive prefinancing for the next crop
23
Soy Moratorium Capacity building and Verification of Brazilian Soy Soy Plus Partnership with soybean producers for continuous improvement of environmental, social and economic sustainability indices Enforcement of the strict Brazilian environmental legislation The process will involve: Collection of data and preparation of diagnostics Technical assistance and environmental education Implementation and monitoring of best agricultural practices Voluntary Soy Plus Verification
24
Soy Moratorium Capacity building and Verification of Brazilian Soy Soy Plus Opportunity to develop joint sustainability actions, such as ISGA cooperation among Brazil, Argentina and USA: Data collection on social and environmental conditions of soy production Researches on the environmental sustainability: carbon and water foot print, impacts on soil and water, GMOs, etc International coordination regarding legislative and regulatory issues on third markets Dissemination of best agricultural practices, e.g., no till, crop rotation Creation of mechanisms of Payments for Environmental Services 25
Final considerations The soy complex in Brazil is successful in the technological and economic areas The perspectives for growth are positive and should meet the demands for meal and oil for human consumption and biodiesel Logistics and the opening of international meat and biodiesel markets are important challenges The Brazilian environmental legislation is strict and the soy complex is making increasing efforts to apply it The Soy Moratorium and the Soybean Plus Program are important initiatives to promote sustainability They are also an opportunity to create partnerships and mechanisms for Payment for Environmental Services 26
www.abiove.com.br Members
