The Biodiesel Program in Brazil : opportunities and challenges for family agriculture

The Biodiesel Program in Brazil: opportunities and challengesforfamilyagriculture 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 • 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 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: relating contracts to debt, without credit not interested Contracted: interest in access to credit or other incentives Planted: no access to capital, irregular rainfall Commercialization: low productivity, selling earlier

Inclusion of family farmers • 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 (pH 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

The Biodiesel Program in Brazil : opportunities and challenges for family agriculture