THE BIODIESEL PROGRAM IN BRAZIL OPPORTUNITIES AND CHALLENGES

THE BIODIESEL PROGRAM IN BRAZIL: OPPORTUNITIES AND CHALLENGES FOR FAMILY AGRICULTURE Case Study: Pole of Biodiesel Serra da Capivara, Piauí

The Biodiesel program in Brazil Biofuel development in Brazil → History of bio-ethanol Large extension of mono-crops Bad labor conditions (slave labor) Policy response → The National Program for the Production and Use of Biodiesel (PNPB) Social objective: inclusion of family farmers Environmental objective: avoiding large extension of mono-crops

The Biodiesel program in Brazil Inter-ministerial Executive Commission (CEIB) → MDA family agriculture Creation of biodiesel market Normative increase in blending (2% in 2008 to 5% in 2013) Auctions: ANP buys biodiesel in anticipation Biofuel companies must hold Social Fuel Seal (SFS) to participate in auctions

Social Fuel Seal (SFS) SFS granted to biofuel companies by the MDA provided that Biodiesel companies have contracts with family farmers Contracts negotiated by labor unions and biofuel companies Contracts should stipulate price, location of buying and technical assistance Tax exemptions to Biodiesel companies holding SFS

Problem Statement Research has been conducted on why the PNPB has failed in its social objective (regional approach) Selection of crops, low price, breach of contract In recognition of the difficulties faced, the Project Poles of Biodiesel of the Northeast was launched Creation of Petrobras Biocombustíveis → Potential of these new efforts: unsettled and up for debate

Research objective To present a comprehensive description of the circumstances of family farmers in the Territory Serra da Capivara in the State of Piauí To assess the potential and challenges of the production of oleaginous based in family agriculture To contribute to the debate of the social inclusion of the PNPB

Research questions 1. 2. What have been the main challenges encountered by family farmers in joining the biodiesel chain in the Pole of Biodiesel Serra da Capivara? What is the potential to include family agriculture in the biodiesel sector?

Methodology Unit of analysis : micro-region of São Raimundo Nonato, Territory Serra da Capivara, Piauí Case study: interviews with local actors and family farmers Snowball sampling system Support of EMATER-PI (technical assistance provider)

Background Northeast region: targeted within the PNPB for regional development (largest concentration of family agriculture) Major challenges were encountered in this region Poles of Biodiesel of the Northeast

Micro-region São Raimundo Nonato Territory in the southeast region of Piauí 18 municipalities Castor seed production pole during the 70’s and 80’s

Implementation 2004 Partnership between several institutions Large implementation Micro-reion São Raimundo Nonato targeted Prefeituras Municipais Sindicatos Rurais Fetag-PI

Implementation 2004 Year # Municipalities # Farmers Area (ha) Implementation 2004/2005 14 1813 3626 Implementation 2005/2006 23 4485 9818 Implementation 2006/2007 42 7735 26842 (not executed) The bank faced a 90% default and little castor seed was commercialized

What happened? Massive provision of credit (PRONAF) Credit delayed (lack of operational capacity) Seed provision delayed after rainy season Distribution of grain instead of certified seed Eight technicians for 4000 farmers Low productivity → credit default

What happened? People who were not farmers accessed the loan Farmers who were interested in the credit but not in the cultivation of castor seed Few farmers for commercialization

Consequences Lack of trust in biodiesel company Relating contracts to debt Loan default “Certified seed it is not appropiate for our region. ” “Castor seed production is not economically viable. ”

Implementation 2008 Problems were identified with Project Production Poles of Biodiesel through working group Brasil Ecodiesel left, Petrobras entered Petrobras contracted EMATER-PI to accompany family farmers from mobilization until commercialization Includes 14 of the 18 municipalities in the territory

Process of inclusion of family farmers Goal Total Contracted Planted Commercialized 750 417 262 162 o Goal: relating contracts to debt, without credit not interested o Contracted: interest in access to credit or other incentives o Planted: no access to capital, irregular rainfall o Commercialization: low productivity, selling earlier

Inclusion of family farmers Harvest year 2009/2010 # of new farmers Total o 2008/2009 447 667 220 Farmers switching from BED to Petrobras

Potential Adaptability of the crop to the agro-climatic conditions of the semi-arid region Opportune harvest period: source of income in the driest period of the year Favoured by culture of 80’s and 90’s → But: family farmers’ food security The better-off farmer is the one with a diversified farm Only viable as part of a diversified system

Challenges Agro-ecological conditions Irregular rainfall Characteristics of the soil (p. H value, texture) Socio-economic conditions Transportation and storage infrastructure Lack of supporting services: credit, machinery, technology, technical assistance, extension Land ownership Research on the area

Challenges Family agriculture system characteristics Farm animals: toxity of castor seed Labor availability: priority staple crops Low productivity: low return on labor (soil) Intercropping system: varieties of castor seed and bean, other preferences for intercropping Other channesl of commercialization: middlemen Meaning of contract: independence, trust, literacy

Challenges of implementation Scattered distribution of farmers in the territory Nucleus of production: farmers do not identify with this Weakness of local organizations: low number of farmers, inactive producers’ associations DAP: making sure farmers are family farmers Banco do Brasil, Petrobras, Emater Agro-ecological zoning Obtaining seeds Ensure quality and quantity

The PNPB and social inclusion 18, 000 farmers in the region: 667 included in 2010 How can it be more inclusive? More incentives: machinery, re-open credit line But: 2004 great number of incentives, not positive results Orientation to quantity rather than quality Farmers need time and experimentation for decision making → Ceará: 30, 000 farmers included, aiming at improving productivity

Role of Petrobras Structuring the productive base of castor seed in the Northeast Increase in productivity, change of structure of costs Castor seed oil more expensive than processed biodiesel Investing in family agriculture today will pay off in the future

Conclusions Potential: drought tolerance, harvest time Only as part of a diversified system Challenges related to the structure of the program: Incentives Contracts Compatible with family agriculture Challenges related to implementation Large-scale implementation Challenges that the program is not meant to solve Infrastructure, additional stressors

Conclusions Inclusion of family farmers in the value chain of biodiesel? Better understanding of family agriculture systems Highly dependant on political agendas Orientation to quantity rather than quality: position of farmers in the value chain Political participation: role of labor unions is marginal

Recommendations Structure: other modalities of inclusion, acurracy of incentives Implementation: process small-medium, pilot projects Not only quantity of inclusion buy quality of inclusion: oil production Diminish the dependence of family farmers on the company Costs of incentives weighed against its benefits