Brazil is the world’s largest beef producer and second largest beef exporter. As such, cattle ranching activities have caused up to 90% of Brazil’s recent deforestation, and around 75% of country-wide greenhouse gas emissions contributing to climate change. Furthermore, almost all Brazilian cattle are grazed on degraded pastures, resulting in very inefficient land use for cattle farming.
Sustainable cattle ranching practices pose both environmental and economic benefits: Cultivating on restored pastures in degraded areas can eliminate pressure from deforestation, increase productivity, and produce higher quality, higher yield beef. However, most ranchers in the Amazon can’t implement sustainable ranching techniques as they lack upfront capital and are still in the process of obtaining land titles that would otherwise serve as loan collateral.
Climate Smart Cattle Ranching will increase the supply of deforestation-free beef from the Amazon by providing financial and technical assistance to ranchers that comply with the Brazilian Forest Code.
Through the Climate Smart Cattle Ranching initiative, Naturevest and the Nature Conservancy provide an innovative business model for cattle ranchers to adopt more sustainable and efficient practices. The initiative will establish a “New Company” to provide loans and technical assistance to ranchers on the condition that they adopt Embrapa’s Good Agricultural Practices and comply with Brazil´s Forest Code.
Rather than land titles, traceable livestock will serve as guarantees to secure loans, using the newest monitoring technology to trace animal ownership.
The New Company will also work collectively with beef producers to ensure consistent and standardized supply of meat. It will then provide them with a unified voice to negotiate better terms and prices for their high quality, traceable, deforestation-free beef.
Restored pastures using sustainable techniques could see a 95% reduction in emissions intensity.
The proponents aim to formally launch the New Company by March 2018 and kick off operations by the second half of 2018. The Nature Conservancy has already implemented a similar sustainable cattle project by working with local producers in the state of Pará, which has some of the highest deforestation rates in Brazil. The New Company plans to co-invest in 30 rural properties in the next two years, and scale up to 100 properties by 2022, covering potentially 300 thousand hectares and mobilizing USD 205 million in the state of Pará alone. Once the model is proven, the New Company would implement the same strategy in other critical regions of the Amazon suffering from cattle-related deforestation using a franchise system approach.
To establish the New Company and launch the program, the initiative will need to raise an estimated USD 65 million from: grants by private foundations, concessional capital from multilateral development banks, and equity from private investors. As the concept is proven and investor risk reduced, the New Company will pledge receivables generated from these purchase contracts to a Receivables Fund (FIDC), providing a risk return profile that will attract more commercial investors.
This replication strategy can rapidly contribute to a substantial increase in deforestation-free beef supply, helping Brazil to meet its goals to restore up to 12 million hectares of forests and 15 million hectares of degraded pastures by 2030.