The effects of crop-to-beef relative prices on deforestation: evidence from the Tapajós Basin

Abstract

This paper examines the impact of changes in agricultural land use on deforestation at the local level in the Tapajós Basin in the Brazilian Amazon. It uses exogenous variation in crop-to-beef relative prices to investigate the effects of pasture-to-cropland conversion on deforestation. The findings indicate that increases in crop-to-beef relative prices increase the rate of pasture-to-cropland conversion and reduce the rate of deforestation. The magnitude of the effects implies that land conversion reduced deforestation at the local level by 5,300 square kilometers from 2002 to 2012. This reduction is the equivalent of almost 15 per cent of the total deforestation observed in the region during this period. These results are consistent with a land use model in which cattle ranching and crop cultivation have different input-intensities and there is imperfect mobility of productive factors between municipalities. This model highlights the fact that changes in relative prices affect deforestation through its effect on input prices.

A systematic comparison of deforestation drivers and policy effectiveness across the Amazon biome

“…Since the 1990s, corresponding to the growth in commodity agriculture for export markets, temporal variations in commodity prices have increasingly affected deforestation for agriculture and mining, especially in Brazil [94][95][96]. However, one study suggests that where pasture and cattle ranching are already present, an increase in the relative crop-tobeef price index has been associated with a reduction in deforestation by raising agricultural input prices, driving low productivity cattle ranchers out of agriculture [97]. Conversely, high wood prices were correlated with decreased deforestation in the Brazilian Amazon, as forests had investment value and were not fully cleared for agriculture (rather selectively logged) [95,98,99].…”

Forest Wars: A Trilogy on Combating Deforestation in the Brazilian Amazon

“…Despite being relatively small in comparison to pasture, cropland can be regionally relevant, and the interaction between commodity prices can affect land use. Exploring exogenous variation in crop-to-beef prices, Bragança (2018) finds that a relative increase in crop prices promotes an expansion in farmland for soybean production alongside reductions in cattle ranching and deforestation. The author interprets this pasture-to-cropland conversion as evidence that land use changes that are input-intensive from an agricultural perspective can have local environmental externalities.…”