Land institutions and supply chain configurations as determinants of soybean planted area and yields in Brazil

Soybean production has become a significant force for economic development in Brazil. It has also received considerable attention from environmental and social non-governmental organizations as a driver of deforestation and land consolidation. While many researchers have examined the impacts of soybean production on human and environmental landscapes, there has been little investigation into the economic and institutional context of Brazilian soybean production or the relationship between soy yields and planted area. This study examines the influence of land tenure, land use policy, cooperatives, and credit access on soy production in Brazil. Using county level data we provide statistical evidence that soy planted area and yields are higher in regions where cooperative membership and credit levels are high, and cheap credit sources are more accessible. This result suggests that soybean production and profitability will increase as supply chain infrastructure improves in the Cerrado and Amazon biomes in Brazil. The yields of competing land uses, wheat, coffee, and cattle production and a complementary use, corn production, also help to determine the location of soybean planted area in Brazil. We do not find a significant relationship between land tenure and planted area or land tenure and yields. Soy yields decline as transportation costs increase, but planted area as a proportion of arable land is highest in some of the areas with very high transportation costs. In particular, counties located within Mato Grosso and counties within the Amazon biome have a larger proportion of their arable, legally available land planted in soy than counties outside of the biome. Finally, we provide evidence that soy yields are positively associated with planted area, implying that policies intending to spare land through yield improvements could actually lead to land expansion in the absence of strong land use regulations. While this study focuses on Brazil, the results underscore the importance of understanding how supply chains influence land use associated with cash crops in other countries.

► We examine the role of institutions and supply chain conditions on soy production.
► Soy area and yields are higher in areas with high coop membership and credit levels.
► Yields decline, but planted area increases as transportation costs increase.
► Counties with higher yields have a higher proportion of land planted in soy.
► Soy is planted at very high levels on non-protected land in the Amazon biome.