Total Factor Productivity Growth in Brazilian Agriculture (1985-2017): The Roles of Climate Change and Public Policy

Brazil ranks among the worlds top four agricultural producers and exporters, and continued growth is important for domestic and global food security. Sustained productivity growth is essential to support this expansion. This study estimates a stochastic frontier production function and calculates total factor productivity (TFP) growth in Brazilian agriculture. TFP is decomposed into components related to technology, weather (growing degree days), policy variables, and other factors. The analysis uses municipal Agricultural Census data from 1985 to 2017. TFP increased at 1.56% per year, accounting for 60% of output growth. The decomposition highlights the slowing effect of climatic factors, alongside the accelerating influence of investments in R&D and education. A key finding is the pronounced divergence in outcomes across many dimensions. Output and TFP growth were fastest in the Cerrado biome, characterized by large farms, and slowest in the Caatinga. Output became increasingly concentrated in a small number of municipalities, which tended to exhibit faster TFP growth and specialization in annual crops such as soybeans. Conversely, about one-third of municipalities experienced decline in output and TFP. The findings have significant policy implications for addressing climate change, guiding investments in R&D, and managing the growing divergence of outcomes.