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Cerrado Deforestation Disrupts Water Systems and Poses Business Risks for Soy Producers

Aidenvironment, as part of Chain Reaction Research, published a thematic paper on the impacts of the soy sector on deforestation and water availability in the Brazilian Cerrado, and how water issues in turn can impact soy production. 

The report shows that soy production in the Cerrado, and most notably in the Matopiba region, is driving deforestation of native vegetation. This Cerrado vegetation is crucial for Brazil’s water systems through a process called evapotranspiration, and its deep root system that maintains the regional water balance. Deforestation contributes to increased droughts, facilitating a 8.4 percent drop in yearly rainfall in the Cerrado over the last 30 years. This impacts agricultural droughts, and (rainfed) soy production in the Matopiba. In 2012/2013 and 2015/2016 droughts in Matopiba caused productivity to be 40 percent lower than in Brazil as a whole.

Meteorological impact creates business risks for soy producers. Producers face operational risks due to lower productivity and are exposed to conflicts over water with other local water users. Furthermore, soy producers and farmland investors are increasingly confronted with declining agricultural suitability of farmland, negatively influencing soy yields and profits the value of farmland. This leads to the risk of stranded assets.

For the full report and additional reports on sustainability risks analysis and company profiles, please see the Chain Reaction Research website.

For more information, please contact Arnoud Keizer.