Brazilian soy producer SLC Agrícola said that it will stop deforesting in the Cerrado in 2020 and move to increasing productivity on already cleared land. However, its newly announced target to halt deforestation will not take effect right away. SLC Agrícola will continue to execute plans to clear land at its farms before shifting to zero deforestation. Moreover, the company’s sustainability director, according to Folha de S.Paulo, opposes a moratorium for deforestation for soy production in the Cerrado, although the Amazon Soy Moratorium has been mostly effective.
SLC Agrícola’s motivation behind announcing a commitment to halting deforestation this year likely stems from pressure on its buyers to sever links to producers and farmers that clear land for soy production. For instance, SLC Agrícola’s top buyer, Cargill, has been cut off by consumer goods company Nestlé in Brazil for not being able to trace soy from its suppliers and changes in policy regarding deforestation in Brazil, while Grieg Seafood will not use proceeds from its newly launched green bond to buy from a Cargill subsidiary. Moreover, the combination of investors calling for action among agricultural interests to curb deforestation and governments in Europe adopting stricter supply chain regulations could expose soy traders to greater reputational, market access, and financial risks. Besides Cargill, the other main buyers are Bunge and Amaggi LD (a joint venture between Louis Dreyfus, Amaggi Group, and Zen-Noh). All three have zero-deforestation commitments but they cover only illegal land clearing. Cargill told CRR: “We are not and will not source soy from farmers who clear land in the protected areas and we have controls in place to prevent non-compliant product from entering our – and our customers’ – supply chains… According to this process, there are no restrictions to working with SLC.” Cargill added: “Cargill – along with our industry, farmers, local governments and customers – all have accountability for transforming the food supply chain, and we are engaging with stakeholders every day to make progress.” Bunge and Louis Dreyfus had not responded for comment by the time of publication.
SLC Agrícola has seen increased publicity for its land clearing this year. Global Witness highlighted Odey Asset Management’s 10 percent stake in the company despite ongoing deforestation. Brazilian Capital Reset noted the company’s deforestation risk exposure. In June, Chain Reaction Research (CRR) estimated that SLC Agrícola had deforested 10,000 hectares (ha) during the first five months of the year, with the clearing occurring at its Fazenda Parceiro and Fazenda Palmeira farms.
NGOs communicated to CRR that SLC Agrícola’s announcement is a positive step toward curbing deforestation, but it will not necessarily alleviate pressure. “While it’s encouraging SLC Agrícola is acting on concerns about forest destruction, in the same breath the company says it will clear up to 5,000 more hectares of Cerrado forest,” Global Witness told CRR. “It will also continue to profit from land that has already been deforested. SLC’s problematic record on deforestation is illustrated by the GBP 2.4 million (USD 3.1 million) worth of fines from Brazil’s environment agency it has received in recent years.” Global Witness added that some local communities are concerned about SLC Agrícola’s land practices and are calling for land to be returned. “If SLC is truly committed to ending deforestation, the company must not only stop future forest destruction but also repair its previous harms to the environment and forest communities.” Another NGO told CRR that despite SLC Agrícola moving forward with clearing this year, “it is positive that a relevant land company/soy producer is committing to zero deforestation/conversion from 2020 on.”
SLC Agrícola expands as soy exports rise sharply
SLC Agrícola recently established Fazenda Palmeira in order to continue with clearing outside of its partnership to supply retailer Lidl with ProTerra-certified soy. Soy produced at Fazenda Palmeira, which is not part of the SLC Agrícola-Lidl partnership, is not included in ProTerra and RTRS certification programs. Both ProTerra and RTRS certifications exclude the conversion of native vegetation for soy cultivation, but allow producers to certify operations in stages. This means that producers can certify some of their supply while continuing to deforest in other areas. The Fazenda Palmeira farm is 24,680 ha large, with about 85 percent of the area planted. The Fazenda Parceiro farm has a total planted area of 14,351 ha, but the total area is 42,020 ha (with almost 11,000 ha leased).
Even before its recent announcement, SLC Agrícola, which has transitioned to an “asset-light” business model in recent years, acknowledged that it would continue to clear native vegetation once it received the necessary environmental licenses. Although the company has yet to see any repercussions from buyers for its deforesting as its actions have been in line with Brazil’s Forest Code, the Norwegian Government Pension Fund divested from the company in 2017.
SLC Agrícola’s expansion comes at a time the Brazilian soy industry is seeing large growth and revenue amid high exports and a depreciation in the Real. Brazilian soy exports totaled 60.3 million metric tons during the first half of the year, up 38 percent compared to the same time in 2019, with China as the main destination. In its second-quarter earnings, SLC Agrícola said its soy volumes rose by 8.4 percent during the first half of the year, contributing to net revenue increasing by 16 percent.