Trase Yearbook 2020
The state of forest risk supply chains
A review of commodity deforestation and expansion, the traders and markets that dominate exports and their exposure to associated deforestation risk, and the effectiveness of zero-deforestation commitments for half of global trade in forest-risk commodities.
Soy expansion and deforestation in Paraguay: an uncertain picture
Paraguay’s soy plantations are concentrated in the east of the country, in the already heavily deforested Atlantic Forest. There are signs that a new deforestation frontier may be opening up in the sparsely populated Dry Chaco west of the Paraguay River, which is home to the majority of Paraguay’s remaining forest and indigenous communities.
Soy is a mainstay of Paraguay’s economy. In 2018, soy exports generated US$3.8 billion – 51% of the country’s total export revenue.
There was 198,170 ha of deforestation across Paraguay in 2016
Paraguay’s soy production is concentrated in the east of the country, in the already heavily deforested Atlantic Forest biome. Rates of deforestation in the Atlantic Forest have declined dramatically since the introduction of a zero-deforestation law (Ley de Deforestacion Cero) in 2004 .
There was 6,826 ha of soy deforestation in 2016
This drop in deforestation in the Atlantic Forest continued in 2014–2016, when soy deforestation fell more than 50%, from 11,046 to 5,083 hectares (around 39% of all deforestation in the Atlantic Forest in the period). It is likely that most, if not all of the deforestation that did happen in the biome was illegal.
Between 2010 and 2018 the Paraguayan Chaco lost more than 2 million ha of native vegetation. The Dry Chaco in particular has seen some of the highest rates of deforestation in the world in the past decade, largely due to the expansion of cattle pasture. Nearly all of Paraguay’s 9.5 Mt of soy exports in 2018 came from the Atlantic Forest.
Deforestation in the Chaco has also been declining in recent years, with only 54,000 ha of Chaco forest lost in 2018, down from 400,000 ha in 2010. Whether this trend will continue, however, is uncertain for a number of reasons.
Potential for a new soy deforestation frontier in the Dry Chaco?
of deforestation risk per 1,000 tonnes of soy exports sourced from Paraguay in 2017
The area of soy cultivation in the Dry Chaco is currently tiny, estimated at just 5,315 ha in 2018, accounting for just 0.2% of the country´s total soy crop, according to government data. Trase data show that direct soy deforestation in the Dry Chaco fell by 73% between 2016 and 2018, from 1,722 to 465 ha per year.
(2 out of 18) of soy-producing departments accounted for nearly half of soy deforestation in 2017
There are signs, however, that soy production in the Dry Chaco is set to increase, which will likely accelerate deforestation – whether directly (for cropland) or indirectly by displacing cattle pasture expansion. These signs include several new roads in the Dry Chaco and the Bio-Oceanic Corridor, linking the Paraguayan Chaco to international ports in Brazil, Chile and Argentina, as well as government approval of drought-resistant soy varieties more suitable to conditions in the Dry Chaco. Land prices also remain attractively low for pioneering producers and the Dry Chaco (and a large part of the Humid Chaco that lies in the west of the country) is not covered by the 2004 zero-deforestation law.
As the Dry Chaco is the furthest biome from the sea, most of its soy output goes to the domestic market. However, while Trase data does not link any exports to production in the Dry Chaco, expert sources suggest that some of the larger properties in the Chaco are in fact producing soy for export, taking their beans to Concepción or Villeta port (near Asunción) for crushing or for direct export.
Deforestation risk linked to exports highly concentrated in the Atlantic Forest
The top 5 exporter groups accounted for 71% of export volume and 70% of linked deforestation risk in 2017
Despite the slowdown in soy deforestation, the soy deforestation risk associated with exports from Paraguay was 10,337 ha in 2017, which means the overall relative deforestation risk was much higher than for soy exports from neighbouring Argentina and Brazil (1 ha/kt in 2017, compared with 0.05 and 0.7 ha/kt, respectively, for Argentina and Brazil). Some 59% of the soy deforestation risk associated with exports from Paraguay was concentrated in two departments in the Atlantic Forest.
Paraguay’s zero deforestation law applies to all deforestation for agriculture in the east of the country (thus excluding most of the Chaco). In 2017 alone, Trase estimates there was almost 8,000 ha of illegal soy deforestation risk in exports from eastern Paraguay. A third of this was exported to the European Union, 10% to Turkey, 9% to Russia and 7% to Argentina. Some 58% was likely to have been exported by companies that had a zero-deforestation commitment (ZDC) .
Argentina becomes the biggest market for soy exports
Argentina crushing capacity drives up imported soy deforestation risk in 2018See insight
Between 2016 and 2018, soy exports from Paraguay to Argentina increased more than tenfold, reaching 3.5 Mt, or 37% of all exports, and displacing the EU as the top soy export destination. Much of the soy imported by Argentina in recent years has almost certainly been crushed and re-exported to international markets. This followed a major drought that affected Argentina’s soy production and Argentina lifting restrictions on soy imports.
of soy exported from Paraguay was covered by a trader’s zero-deforestation commitment in 2018
Paraguayan exports to the EU dropped in the same period, from 2.8 Mt in 2016 to 1.6 Mt in 2018. But the EU remains the second largest export market for Paraguayan soy, making up 17% of exports in 2018. Russia is another important export market for Paraguayan soy, importing over 1 Mt of Paraguayan soy in 2018.
Unlike Brazil and Argentina, Paraguay exports no soy to mainland China. Nevertheless, the Chinese state-owned trader COFCO was the third largest exporter of Paraguayan soy in 2018, exporting mostly to Argentina.
New entrants challenge ABCD traders in Paraguayan soy export tradeSee insight
Like Argentina and Brazil's, the Paraguayan soy export market is highly concentrated. Two thirds of Paraguay’s soy exports in this period were handled by five trading groups: Cargill, ADM, Russian trader Sodrugestvo, COFCO and Louis Dreyfus.
Increasing coverage of zero-deforestation commitments
of soy deforestation risk was linked to exports covered by a zero-deforestation commitment in 2017
The share of soy exports from Paraguay covered by a company ZDC increased from 46% in 2016 to 64% in 2018, following the adoption of commitments by three major trading companies: Amaggi and COFCO in 2017 and Louis Dreyfus in 2018. However Sodrugestvo, which almost exclusively serves the Russian market, lacks a commitment.
Despite these commitments, there was no discernible difference in the deforestation risk exposure of companies with and without ZDCs.
A challenging data environment
The government’s ability to monitor deforestation in the Chaco should soon improve with the launch of a centralised Forest Atlas platform in partnership with the World Resources Institute. Nevertheless, gaps and inconsistencies in the data make Paraguay a particularly challenging context for calculating deforestation associated with soy exports. This is true for estimates of soy production area, deforestation and sourcing.
More information on data sources and methods .