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International Institute for Sustainability (IIS)

Economic Analysis of more Sustainable Cattle Ranching

The expansion of cattle ranching in the Amazon has come under pressure for environmental adaptation and improvement in socio-economic performance. Low implementation of best practices in the field and the lack of robust analyses of production and financial performance are hindering investments in productivity and sustainable management. In addition, there is a lack of targeted rural credit for intensification practices. This study evaluated the impact of intensification from a financial perspective, measuring risks and the role of rural credit in leveraging the adoption of best practices, among other benefits resulting from the intensification of cattle ranching.

Traditionally, cattle ranching has been environmentally and economically inefficient. Currently, cattle ranching occupies 75% of the deforested area in the Amazon and contributes about 40% of CO2 emissions in Brazil, but generated less than 3% of GDP in the last decade. Some producers are already investing in improving productivity. However, isolated investments are insufficient to transform the cattle sector on a regional scale.

The results of the model developed in this study demonstrate that intensification increases Net Present Value (NPV) up to R$ 1,940 per hectare (compared to R$ 463/ha from business as usual cattle ranching), and substantially reduces the risk of losses, from 99% to 15%. These results confirm the economic viability of productive activity and increased competitiveness with other land uses. In addition to the positive impacts on natural resources, there is also the potential to increase production and income without the need for further deforestation.

Link to the full report (only available in Portuguese)

Contributions to the Development of Large-scale Sustainable Cattle Ranching in the Micro-region of Alta Floresta, Mato Grosso

The Brazilian cattle industry uses on average only 30% of the sustainable productivity potential of pastures. This means that it is possible to maintain or even increase the volume of production without opening new pasture areas. This process, however, needs to be analyzed in models that consider bio-economic factors. The micro-region of Alta Floresta, Mato Grosso, sets an extremely favorable context for increasing livestock and soybean yields, without the need to clear a single hectare of forest. In this sense, this report presents the fundamental analyses for the sustainable development of the micro-region of Alta Floresta, through an integrated land use approach.

The projection of the current production scenario (business as usual) results in an estimated 200,000 hectares of planted soybean area in the micro-region in 2030, and an increase of approximately 23% in the cattle herd in the region. Such agricultural expansion would result in the deforestation of 446,000 new hectares in the region. On the other hand, a zero deforestation scenario would require the intensification of 300,000 hectares (less than the current cleared area in the region). This effort would require a total investment of approximately R$740 million in the next 15 years. Spread evenly across the next fifteen years, the annual cost of implementing intensification practices would reach a value that is 40% higher than the current capacity to obtain credit for livestock in the region. However, over the last ten years, credit for livestock in Alta Floresta has increase at a pace that if maintained, would be just enough to cover these costs over this period.

The cost of transitioning to more sustainable livestock production could be covered by REDD+ programs. The structuring of a State Program for REDD+, through the implementation of the State Law No. 9878/2013, can contribute to the creation of financial mechanisms for this transition. The estimated amount to cover the increased cost is US$1.50/ t CO2e. The actions and programs of the Amazon Fund (which provides the fixed value of US$5.00/ t CO2e) could also finance complementary policies, technical assistance and control of deforestation. A transition to a more sustainable scenario could mitigate 203 million tons of CO2 emissions.

Link to the full report (only available in Portuguese)

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