Tag Archives: farming

How better price risk policy in Brazil could improve agricultural productivity

February 24, 2015 | and

 

Clarissa Costalonga e Gandour and Pedro Hemsley co-authored this post.

In Brazil’s agricultural sector, fluctuations in crop prices that are not mitigated by insurance or public policy can hinder farmers’ productivity and income, as well as the agriculture sector’s economic growth. For example, a farmer who makes planting decisions under the expectation of high harvest prices, which then fall short, can suffer severe losses. Understanding agricultural price volatility and mitigation is important to improving relevant public policy.

As part of CPI’s series of work on how to improve agricultural productivity while reducing deforestation in Brazil, we recently looked at agricultural price volatility, current policy to mitigate price risks, and what Brazil could do differently.

Our main finding is that current policy in Brazil does not meet farmers’ needs. The policy for price risk mitigation is based on direct government intervention in the market: when prices fall below a threshold, the government takes part of total output and allocates it out of the market. In 2013, the federal budget for price risk mitigation totaled BRL 5.4 billion, with over two fifths of it being destined for government buyouts and storage expenses. However, we find this policy yields only 8.03% of total production value, or BRL 4 billion per year in gains to producers of the four most important crops in Brazil – soybean, sugarcane, maize, and coffee.

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How to spread new technology in agriculture: the importance of geographic conditions and learning-from-peers

November 7, 2013 |

 

In business, it is unusual to find a technology that proves to be better and costs less than the one in use. In theory, that technology should spread like wildfire and quickly replace current production methods. If it doesn’t, there is usually a barrier that prevents its spread.

In a new CPI study, we examine a farming technology called the Direct Planting System (DPS) which has proven to be one of the most important developments in agriculture in the past decades – however, after nearly forty years of its introduction in Southern Brazil, only 10% of Brazilian farmers reported using it in the 2006 Agricultural Census. The questions we address in this study are: What is keeping this technology from spreading and how do we overcome this barrier?

Our analysis reveals that soil composition is an important factor affecting the spread of the DPS. When soils are similar in a given municipality, it is easier for farmers to learn from the experience of peers who have already successfully adopted the system. Likewise, differences in the soil can act as a barrier to the expansion of DPS, since the system would have to be adapted to different soils. 

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