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Agricultural Economics

Rural World in Transition

In a new book, experts examine technological and economic strategies applied in the countryside that are productive and promote inclusion of the small farmer

Irrigation of soybean field in Luziânia, Goiás State: in 2013 alone, Brazil racked up $30.96 billion in exports of soybeans, soybean meal, and oil

SERGIO AMARAL / OLHAR IMAGEMIrrigation of soybean field in Luziânia, Goiás State: in 2013 alone, Brazil racked up $30.96 billion in exports of soybeans, soybean meal, and oilSERGIO AMARAL / OLHAR IMAGEM

In just over three decades Brazil, once a food importer, has become a leading global actor in agribusiness. That the transformation has created prosperity in the rural areas is true, but the opportunities are perceived and exploited quite unequally among the different participants in the rural economy. Analysts of Brazil’s agriculture say that developing technological and economic strategies that would both ensure progress in production and foster the inclusion of a greater number of workers and small farmers in the benefits generated by that expansion is one of the biggest challenges facing public policymakers.

A new book, O mundo rural no Brasil do século 21 [The Rural World in 21st Century Brazil]—a joint publication of the Brazilian Agricultural Research Corporation (Embrapa) and the Institute of Economics at the University of Campinas (Unicamp)—is not intended to offer a prescription for how to deal with those questions. Rather, it presents technical analyses that may contribute to the development of appropriate policies. The recently-published work was edited by Professors Antônio Márcio Buainain and José Maria da Silveira (from the Institute of Economics at Unicamp) and researchers Eliseu Alves and Zander Navarro (both from Embrapa). It has 1,182 pages, 37 chapters, and features articles by 51 social scientists who are affiliated with more than 20 public and private institutions. The goal of the four editors is expressed in the first sentence of the introduction: “Understand the times!”

As Navarro observes, that basic task of the social sciences has been made difficult by the adoption of a narrow vision of what should be the academic debate, now dominated by the opinions of researchers who are isolating themselves in closed communities formed around ideologies classified as either left or right. The book offers a challenge to this paradigm. “We brought in researchers who have different ideological biases in order to establish a multilateral debate,” he says.

O mundo rural no Brasil do século 21 is organized around a discussion of questions posed by the four editors in the article Seven Theories About the Brazilian Rural World published in May 2013 in Revista de Política Agrícola. Two conditioning factors are introduced to help the reader understand the new realities of the countryside: the financial structure that has prevailed in agriculture since 1990, and innovation as its principal challenge. Five factors stem from these: the deepening of the difference among social classes in the countryside; the space occupied by small farmers; the flight of population from the countryside, accompanied by the mechanization of farming, a process the authors refer to as the “Argentine way;” the contemporaneity of the proposed agrarian reform; and the government’s role in developing Brazil’s rural regions.

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In his article Some Factors Conditioning the New Pattern of Accumulation of Wealth in Brazilian Agriculture, Antônio Buainain argues that no producer today, regardless of size, location, or specialization, is unaffected by a combination of production factors and institutional elements. There is an ever-increasing body of rules and regulations, both formal and informal, that dictates standards for marketing or food safety, or relate to the sustainable use of natural resources (for example: new Forestry Code). There has also been an evolution in the pattern of consumer demand, and the supply of products has been globalized.

All these factors make it necessary to modernize production, which involves investments and costs incurred with the purchase of more and better inputs, like fertilizers and latest-generation seeds, farm machinery, and information technology tools. As a result, there is a new standard of business and financial demands that must be met to make production viable and, therefore, greater vulnerability in regard to both climate risk and fluctuations in a market where prices, especially for commodities, are increasingly dictated by global events. All these can sorely test a farmer’s management skills.

Land ownership, historically the primary source of wealth generated in the countryside, and data on the number of workers employed in agriculture fade in importance when compared with the factors that lead to success in rural activities. Between 2000 and 2012, the acreage of land and volume of human labor employed in agriculture fell by 9.7% and 9%, respectively, while the per-year productivity of labor, land, and capital grew, respectively, by 5.4%, 4.94%, and 3.13%, mainly due to more intensive use of fertilizers, machinery, and equipment—and, in certain areas, irrigation. Land has given way to capital, in all its modes, as the central factor in agricultural and agrarian development.

Re-settled family plants crops on their family farm at Fazenda Anoni, in Rio Grande do Sul State: land ownership has been declining in importance

EDUARDO CESARRe-settled family plants crops on their family farm at Fazenda Anoni, in Rio Grande do Sul State: land ownership has been declining in importanceEDUARDO CESAR

The book contains numerous analyses of the impact this new order is having on the rural world as observed by Buainain. The future of the land tenure issue is not the least controversial of them. Two opposite views are presented. Unicamp Professor Pedro Ramos, in An Unending Story- the Persistence of the Agrarian Question in Contemporary Brazil reaffirms the need for pursuing agrarian reform as a social and economic policy. Such reform, he argues, would lead to greater economic and social equality and a reduction in land tenure-related conflicts, would curb excessive migration into the cities (which between 1960 and 2000 totaled 50 million people) and would also support an increase in production.

Navarro writes, in Why Has There Never Been (Nor Ever Will Be) Agrarian Reform in Brazil? that agrarian reform in the strict sense, i.e., the compulsory transfer of land ownership rights from private parties to landless farmers is an action unlikely to be taken in a democratic society. Between 1994 and 2012, he writes, 1.26 million families were re-settled, but public lands acquired by the federal government were used for the purpose. This meant it was a government colonization initiative, not agrarian reform. The policy involved an area of 87.8 million hectares, larger than all the land cultivated in Brazil outside the program, but not enough is known about the results because few studies have been done. On the other hand, society’s demand for land has diminished because of the attractiveness of city life. In recent times there has been a reduction in use of land for its value as a component of wealth, and a financial/productive revolution that has made the realities of life in rural areas different than what motivated social pressure for agrarian reform in past decades has occurred. The author argues that agrarian reform is now a non-issue.

As the importance of technology and the various types of capital, including human capital, increase, the contribution of abundant cheap labor as a factor in productivity and competitiveness declines, compromising the viability and perhaps the survival of a large number of small rural producers. According to the 2006 Agricultural Census, 9.5% of rural establishments were responsible for more than 86% of production in that year, and it is believed that the concentration has increased since then.

Steven Helfamd (University of California/Riverside), Vanessa da Fonseca Pereira (Embrapa), and Wagner Lopes Soares (Brazilian Institute of Geography and Statistics—IBGE), argue in their article Small and Medium-Size Producers in Brazilian Agriculture – Current Situation and Prospects, that many of the obstacles facing small farmers could be mitigated by collective action and the development of appropriate institutions that would assist them in gaining access to technology and the markets for inputs and products, as is already the case in Brazil among poultry and hog producers. The trio believes that it is productivity rather than property size that will determine whether the farmers survive.

Some government programs have been put in place to generate productivity on smaller farms. The most well-known of these may be the National Program for Strengthening Family Farming (Pronaf), established in the 1990s and currently distributing around R$15 billion every year. The best intentions, however, do not always produce appropriate results. In some cases they can even be counterproductive.

Nelore cattle with identification tags in their ears (shown in yellow) on a ranch in Magda, interior of São Paulo State: Brazil has become the biggest exporter of meat

ALF RIBEIRO / OLHAR IMAGEMNelore cattle with identification tags in their ears (shown in yellow) on a ranch in Magda, interior of São Paulo State: Brazil has become the biggest exporter of meatALF RIBEIRO / OLHAR IMAGEM

Unicamp researcher Sergio Salles-Filho, assistant coordinator of Special Programs for the Office of the Scientific Director of FAPESP, emphasizes the need to associate non-technological innovations with technological innovations developed specifically for the small farmer. “What we have done is facilitate access by small farmers to the technology of crops like soy, rice, cotton, and corn, but they do not have the access to other factors that would enable them to appropriate the potential value a new technology could have. It does no good to improve the technical conditions of production for the small farmer if he is producing for markets that necessarily require scale,” says Salles-Filho. “In those markets, the requirements for scale will never be satisfied by making improvements in production methods, mainly because the major producers are also adopting improvements, increasing even further the scale required. In the near term, small farmers cannot succeed in those markets.”

Salles-Filho believes that, “innovation for small farmers should focus on special products and be accompanied by non-technological innovations as well as technological ones.” It is not enough for small farmers to adopt technologies; they need to adopt commercial strategies that add lasting value, such as establishing a brand, adopting certificates of origin, or qualifying for sustainable agriculture seals, for example. “Without the type of innovation that complements technology, it is not the farmer who appropriates the value of the innovation but someone else along the commercial chain,” he says.

Salles-Filho, along with Adriana Bin, also a Unicamp researcher, wrote the article Reflections on the Course of Agricultural Research. They point out how public research institutions have been measuring their economic and social impacts in a very positive manner. Research institutions in the state of São Paulo have in recent years obtained returns on the order of 15 to 17 times the funds invested. Embrapa’s balance sheet for 2012 confirms these benefits, showing a company profit of R$17.7 billion, representing a return of R$7.8 for every R$1 invested. The authors say that we have to go beyond that type of measuring and begin to identify two complementary dimensions: finding out who is appropriating those values and whether public research organizations are playing an increasing or decreasing role in the agricultural innovation and research system.

It is known that private research entities are gaining ground in the market, at least when the subject is development of solutions for the major players in agribusiness, where the potential for a financial return is greater. This situation has led to questions as to the role public research centers should play. The authors submitted examples of how different institutions in other countries are dealing with the problem and suggested an agenda for discussion among Brazilian institutions. “Our special competence has been and continues to be in genetic engineering. However, today big corporations are taking a leading role in allocating large sums for investments, and government institutions are facing the kind of competition that previously didn’t exist, at least not as strong as it is today.”

074-079_Mundo rural_223-02Technological innovation is at the foundation of the tremendous advances achieved by Brazilian agriculture in recent decades. José Eustáquio Ribeiro Vieira Filho, of the Institute for Applied Economic Research (Ipea), wrote in his article, Historical Transformation and Technological Standards in Brazil that starting at the end of the 1970s, Brazilian agricultural productivity began to evolve more intensely than the world average. This evolution became even more evident in the 1990s (see infographic).

On one hectare of land, Brazil was producing 14,000 kilos of legumes in 1990 but by 2012 was producing 23,100 kilos on that same hectare. The world average rate of progress during the same period was from 14,600 to 19,300 kilos. And that world average would be even lower if Brazilian output had been removed from the calculation. In beef, production per animal in Brazil rose from 182.9 kilos to 231.5 kilos between 1990 and 2012. The trend in the global average was more modest, from 208.5 to 213.6 kilos.

The result is that grain harvest in Brazil soared from 58 million tons in 1990 to 187 million in 2013. In soy alone, Brazil exported 42.8 million tons in 2013. Adding up the shipments of soybeans, soybean meal, and soybean oil, i.e., the so-called “soybean complex,” Brazil took in $30.96 billion in revenues from exports. Beef production more than doubled between 1990 and 2013, jumping from 4.1 million tons to 9.3 million, making Brazil the world’s largest beef exporter. In all, the balance of agricultural trade grew sevenfold, from $7 billion in 1990 to $85 billion in 2013.

Looking toward the future, José Maria da Silveira says that there are several challenges ahead as regards technological development. On the global agenda for researchers are subjects such as new functional foods, functional transgenics, bio-fertilizers and bio-insecticides, and techniques for precision agriculture that can reduce the spraying of pollutants and lessen the environmental impact of crops. These are factors, according to Silveira, that will decide who will be the new world champions of food production. “Brazil needs to integrate itself more and more with global research and production chains if it wants to remain among leaders in farm production,” he says.

According to the Ministry of the Environment, Brazil has 140 million hectares—an area twice the size of France—of degraded land that could be used for crops. It also has a climate that permits two harvests a year. Without clearing forests, but using only technology, Brazil has the potential to become the world’s largest supplier of food and bioenergy, surpassing the United States.

Actually realizing such potential is not guaranteed. “It will depend on the ability of Brazilian society and its public and private managers to understand the factors that led to our recent success and to correctly interpret the new economic, technological, and social challenges,” says Antônio Buainain. That does not always happen. “Eight years ago we revolutionized the world energy market. We were slated to become the Saudi Arabia of ethanol. Now, ethanol production is in crisis,” he says. By presenting different interpretations of both the right decisions and the mistakes of Brazil’s recent agricultural expansion, O mundo rural no Brasil do século 21 may be a good starting point for those who are interested in overcoming the challenges that Buainain identified.