Islands of dairy in a sea of sugarcane: the future of family dairy farming in Brazil.

The future of family farming is a matter of debate, especially because of the far-reaching economic and political changes that are occurring. One vision is that family farms will disappear because they are less efficient than large-scale industrial farming enterprises. Others foresee that they will survive, due to their ability to resist external forces and adapt their internal processes. The recent increase in worldwide demand for biofuels is changing economic and social relationships in many rural areas by creating potentially competing claims on natural resources. The huge Brazilian sugarcane industry, one of the most efficient in the world, has expanded enormously, replacing pastures. This thesis studies the (differential) impact that the increasing area of sugarcane has had on family dairy farmers in Sao Paulo state and the various drivers at different levels that influence land use and, therefore, the future of these farmers. Historical changes in land use, production technologies, and product and land prices are described, together with how these are linked to changing policies in Brazil. The study analyses how dairy farmers, with different rationales and resource endowments, react to the increased competition from sugarcane for land and labour. It shows that farmers have different options and strategies when considering leasing their land for sugarcane production. It also looks at local responses and alternatives to this trend and has found that intensifying small-scale dairy production holds potential for increasing the income and quality of life of small-scale farming households. The research reveals that the increasing competition between milk production and sugarcane is not only the result of long-term governmental policies that support the expansion of the sugarcane business. It is also related to the internal dynamics of the dairy and beef chains. In the Brazilian case, different drivers (at different scales) have played an important role in the replacement of pastures by sugarcane. One factor is the ever-expanding milk frontier, which has been driven by technological innovations (e.g. UHT milk). Other factors include the price fluctuations in raw milk and beef that occurred after deregulation and the concentration that has occurred in the dairy industry and the retail sector. The study concludes that the expansion of sugarcane needs to be understood in the context of the dynamics of other agricultural sectors and the long-term national political economy rather than being seen solely as the result of recent increases in global demand for biofuel. At the farm level, the study identified a more complex set of interactions than merely a competition between sugarcane and dairy farming. The comparison of different farm types reveals that labour availability, household resilience and technology introduction are the key factors influencing farmers’ decisions. The proximity of cities that offer more attractive jobs and provide schooling opportunities for farmers’ children is largely responsible for the labour shortages in family dairy farming. The effects of sugarcane expansion are contradictory and uneven according to the different strategies and resource endowments of farmers. Leasing land to sugarcane may be attractive to farmers as it reduces labour load and risk while guaranteeing a monthly income. On the other hand, farmers who abandon dairy production and totally rent to sugarcane may be entering a ‘one way street’: once the infrastructure is dismantled, they cannot return to their former business. Nevertheless, when only part of the land is rented to sugarcane as a form of diversification, this can offer a guaranteed extra income, fitting the rationale of resilience, lowering risks and uncertainties, and providing resources for investing in intensification. Neither option is feasible for very small farms due to the size of their operation. This thesis went on to examine the option of dairy intensification as promoted by the Balde Cheio programme. The study of this programme provides insights into the interactions between technology, innovation and family farmers’ needs. It looks at a sample of farmers who joined the Balde Cheio programme and attained high land productivity, equivalent to that observed in developed countries that employ more intense, sophisticated and highly specialized production systems. The higher productivity was due to a combination of more lactating cows per unit area (31%), higher productivity per cow (24%) and better labour performance (37%) while using less land area (-7%). The gross margin per unit area almost doubled even though milk prices only increased by 7%. This was achieved through having a large number of lactating cows per unit area as a result of strategies that make use of the high potential for dry matter production of tropical grasses, (rather than through achieving extremely high productivity per cow - a typical strategy of non-grazing systems). These intensified milk production systems yielded an average of R$ 3,000/ha, which is highly competitive with R00/ha for sugarcane leasing and R00/ha for soybean production. The average values in terms of income per family member were also very competitive in comparison to average urban wages. This research continued by analysing how such changes in the productive processes took place at the level of the family dairy farm. The examination of the internal dynamics of the Balde Cheio programme reveals several lessons for family farmer oriented research, development and extension. For example, it shows that it is possible to attain high levels of productivity and outstanding economic results without expensive ‘cutting-edge’ technologies but with an intense circulation of different forms of knowledge and skills supported by institutional arrangements, intense networking among different types of actors and the flexible application of relatively simple techniques. Other processes applied included trialling/experimenting under real farming conditions and adjusting to the farmer’s rhythm of innovation. These processes have narrowed the gap between ‘the scientific frontier’ – the advanced research orientation of the governmental research institutes – and the realities experienced by small dairy farming systems. The results show that, despite the increasing opportunity costs for land and labour and competition for local resources (created by other commodity chains and the attraction of urban areas), it is still possible for family dairy farmers to be competitive if they are supported to sustainably intensify their production processes.