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Exchange Rates, Soybean Supply Response, and Deforestation in South America

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  • Richards, Peter D.
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    Abstract

    The advancement of South America’s agro-pastoral frontier has been widely linked to losses in biodiversity and tropical forests, with particular impacts on the Brazilian cerrado, the Atlantic Forest, and the Amazon. Here I consider an important, yet largely overlooked, driver of South America’s soybean expansion, namely the devaluation of local currencies against the US dollar in the late 1990s and early 2000s. Much interest has emerged in recent years over the environmental implications of soybean production in Brazil, with evidence of both direct incursions into moist tropical forest by soybean producers and of potential indirect effects, via the displacement of existing ranching operations. In this research I utilize historical trends in soybean prices, exchange rates, and cropland dedicated to soybean production in Bolivia, Paraguay, and Brazil to estimate the impact of currency devaluations on area of production. The results suggest that approximately 80,000km2, or 31 percent of the current extent of soybean production in these countries, emerged as a supply area response to the devaluation of local currencies in the late 1990s. The results also indicate that the more recent depreciation of the dollar and appreciation of the Brazilian real have counteracted a recent rise in global soybean prices, in the process sparing an estimated nearly 90,000 km2 from new cropland, 40,000 km2 of this in the Amazon alone.

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    Bibliographic Info

    Paper provided by Michigan State University, Department of Agricultural, Food, and Resource Economics in its series Graduate Research Masters Degree Plan B Papers with number 138606.

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    Date of creation: 2012
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    Handle: RePEc:ags:midagr:138606

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    Keywords: Soybeans; Amazon; Exchange Rates; Environmental Economics and Policy; International Development; Land Economics/Use; Political Economy;

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    1. Pfaff, Alexander S. P., 1999. "What Drives Deforestation in the Brazilian Amazon?: Evidence from Satellite and Socioeconomic Data," Journal of Environmental Economics and Management, Elsevier, vol. 37(1), pages 26-43, January.
    2. Masuda, Tadayoshi & Goldsmith, Peter D., 2009. "World Soybean Demand: An Elasticity Analysis and Long-Term Projections," 2009 Annual Meeting, July 26-28, 2009, Milwaukee, Wisconsin 49490, Agricultural and Applied Economics Association.
    3. Torre Ugarte, Daniel de la & Sanford, Scott & Skinner, Robert A. & Westcott, Paul C. & Lin, William W., 2000. "Supply Response Under The 1996 Farm Act And Implications For The U.S. Field Crops Sector," Technical Bulletins 33568, United States Department of Agriculture, Economic Research Service.
    4. Barr, Kanlaya Jintanakul & Babcock, Bruce A. & Carriquiry, Miguel A. & Nassar, Andre M & Harfuch, Leila, 2012. "Agricultural Land Elasticities in the United States and Brazil," Staff General Research Papers 35043, Iowa State University, Department of Economics.
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    6. Mattson, Jeremy W. & Wachenheim, Cheryl J. & Koo, Won W. & Petry, Timothy A., 2001. "Canadian Exports Of Livestock And Meat To The United States," Agribusiness & Applied Economics Report 23610, North Dakota State University, Department of Agribusiness and Applied Economics.
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    8. Kost, William E., 1976. "Effects Of An Exchange Rate Change On Agricultural Trade," Agricultural Economics Research, United States Department of Agriculture, Economic Research Service, issue 3.
    9. Darius M. Adams & Ralph J. Alig & DBruce A. McCarl & John M. Callaway & Steven M. Winnett, 1999. "Minimum Cost Strategies for Sequestering Carbon in Forests," Land Economics, University of Wisconsin Press, vol. 75(3), pages 360-374.
    10. Andersen,Lykke E. & Granger,Clive W. J. & Reis,Eustaquio J. & Weinhold,Diana & Wunder,Sven, 2002. "The Dynamics of Deforestation and Economic Growth in the Brazilian Amazon," Cambridge Books, Cambridge University Press, number 9780521811972, October.
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    Cited by:
    1. Mann, Michael L. & Kaufmann, Robert K. & Bauer, Dana Marie & Gopal, Sucharita & Nomack, Mallory & Womack, Jesse Y. & Sullivan, Kerry & Soares-Filho, Britaldo S., 2014. "Pasture conversion and competitive cattle rents in the Amazon," Ecological Economics, Elsevier, vol. 97(C), pages 182-190.

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