The impact of pasture recovery in the agricultural GPV of Brazil’s Cerrado

One of the main strategies to provide global food security is sustainable intensification, whereby technological improvements and specific management practices, increase agricultural yield without expanding agricultural area or causing significant negative environmental impacts. Brazil and its Cerrado biome have been prominent in these agricultural considerations, being the biome become known as “one of the world‘s great breadbaskets” (ECONOMIST, 2010). Agricultural production in the Cerrado has also posed relevant environmental issues and these have not gained as much attention as those in other Brazilian biomes, like the Amazon and Atlantic forest (NEPSTAD et al., 2014; SILVA; PERRIN; FULGINITI, 2019; SILVA et al., 2021). The Cerrado developments in modern agriculture have contributed to local development and have expanded food production but at the cost of a high conversion rate of native area (FILHO; COSTA, 2016; BOLFE; SANO; CAMPOS, 2020). Pasture accounts for 27% of 203.4 million hectares in the Brazilian Cerrado. In addition, the Cerrado has the highest potential for deforestation among Brazilian biomes, due to the absence of well-defined monitoring and surveillance programs (FILHO, 2018). Between 2006 and 2017, 11,555,342.43 ha was deforested in the Cerrado (PRODES/INPE, 2021). Sustainable intensification addresses this problem by recovering degraded pasture, allowing the continued increase in food and energy production without expanding into native areas, thus maintaining environmental equilibrium and reducing CO2 emission (FILHO; RIBERA; HORRIDGE, 2015). Therefore, the conversion of degraded pastures into productive agricultural areas is an important element in the intersection between agricultural expansion and environmental conservation. Nevertheless, it is also important to know, what additional income accrues when degraded pasture is converted into well-managed pasture? The improvement of pastures efficiency implies an increase in production (FELTRAN-BARBIERI; FERES ,2021), the slowdown of deforestation (AZEVEDO; RODRIGUES; SILVA, 2021) and reduction of the GHG emission (SILVA et al., 2015). Therefore, this research offers economic parameters for the adoption of public and private actions to mitigate environmental issues and support livestock production. The sizing of additional marginal gain from the pasture restoration can support the design of rural advisory services, indicating a direct incentive based on GPV gains. Considering the difference in pasture qualities over the elasticity of pasture productivity, this article measure income gains in livestock production from the conversion of degraded pasture into the good-planted pasture. To do this, we estimated an Output Distance Function associated with a technology-changing variable. The measure established is directly and objectively based on local productivity and livestock GPV. The analysis used data at the municipal level from the last two Brazilian agricultural censuses, which provide a pooled database on all municipalities from Cerrado. The production information is represented by a local agricultural GPV per activity: livestock, agriculture, and other activities. The input variables for Labor are measured by the number of farm workers, Capital is the number of tractors. The productive agricultural areas are divided into four: crops land, good planted pasture, degraded pasture, and Natural pasture. To control the productivity considering the soil characteristics, the frontier is parameterized by the mean soil Suitability Index from each municipality. Three exogenous determinants are included: Schooling represents the share of farm managers who have, at least, a bachelor’s degree; Social Capital, represents the amount of agricultural land area in production by a member of cooperatives. The Aridity Index (AI) is based on the method proposed by Davis, Giuseppe e Zezza (2014). The degraded pasture variable is obtained by self-report, so the information is not necessarily based on technical parameters. The average share of degraded pasture among of pastures increased from 6.66% in 2006 to 8.11% in 2017. Even with the dynamics from Census, these scenarios are very optimistic when compared with analyses based on technical classifications, obtained from satellite and remote sensing technology. To demonstrate the effectiveness of the agricultural technology used in reclaiming degraded pasture, we use this Output Distance Function. Applying the implicit function theorem as in Rada, Buccola e Fuglie (2011), Rada e Valdes (2012) and Rada (2013) we can analyze the transformation of the region degraded pasture area into good planted pastures with the same yields average from the region, obtaining a semi-elasticity for good planted pastures to livestock production,. The technology change variable results show that a 10% change in the pasture area shifts the production function -0.2866. Complementary, the sum along with the other input coefficients shows the aggregated technology has constants return to scale. The effect of pasture degradation indicates a negative impact on the productivity of the land, while the increment of good pasture has a positive impact. Considering the huge stock of good and natural pasture, the direct marginal contribution of good pasture can be short. Although the impact of increment of pastures without management can result in a significant consequence, direct overproduction and also environmental. All the exogenous variables to control the inefficiency of the ODF behave working to increase local efficiency. The semi-elasticity of livestock GPV from good converted pastures where the livestock is a traditional and consolidated activity shows a short impact on the restoration of pastureland. In regions where the activity is consolidated the marginal conversion of one hectare has a small impact on production when compared with others. The economic impact to convert degraded pasture into a good planted pasture means a marginal increase of local GPV caused by the recovery of one hectare of degraded pasture. In regions, such as MATOPIBA, where the return of recovery is lower, the incentives to do deforestation are bigger. Considering the marginal GPV, to convert one hectare of degraded pasture into good planted pasture, in 2017 34% of municipalities from Cerrado showed average gains per hectare higher than R$ 652.46, while 61.8% showed marginal GPV higher than R$ 300.62. Therefore, the estimation of marginal gains to recovery pasture can support the development of actions, such as adjustments in rural credit lines focused on restoration, as developed by the ABC Plan, especially in regions with high levels of deforestation and a large area of degraded pasture.