Transportation Cost, Agricultural Production and Cropland Expansion in Brazil: A Multi-scale Analysis

Transportation cost has played an increasingly important role in Brazil agriculture, as the agricultural production frontier expands to inland area with less developed transportation network. High transportation cost would result in less agricultural profitability, which further reduces input use and causes lower yield. To deal with this problem, Brazil has set ambitious plan on improving transportation infrastructure, but its impact on agricultural production and deforestation remains unknown. To research the implications of transportation cost for Brazil agriculture and environment, we developed an innovation method of estimating transportation cost on spatial level for Brazil, and research the impact of projected transportation cost reduction with a grid-resolving partial equilibrium model on Brazilian agriculture, on national, state level and spatial level. Results indicates that the reduction of transportation cost causes moderate increase in both crop production and cropland expansion. However, that impact shows strong variance on State level, causing concentration of input allocations and output production to states of Mato Grosso and Bahia. Finally, spatial pattern within each state are also identified, which would contribute to local-targeted agricultural and transportation policy making.