Brazilian smallholders pursue climate-smart agriculture

Climate-smart is business-smart

Climate-smart agriculture promotes innovative adaptations to climate change that generate positive economic, environmental and social outcomes. An association of smallholders in Brazil shows its potential, along with the need for smarter finance.

Agribusiness is the primary economic activity in the Greater Dourados region of central Brazil. Much of the land there was once covered by the Cerrado, wooded grasslands with a high environmental value. Today, according to the World Wildlife Fund, only twenty percent of the original Cerrado remains. Unsustainable agricultural practices and the associated impacts of climate change have contributed to the reduction of this ecologically and economically vital savannah.

Network of family farmers takes a different approach

Scattered among the large-scale agricultural enterprises of Greater Dourados, an estimated 70,000 families maintain traditional smallholdings, with varied financial success. Among them a network of 160 smallholder families has come together to form the Associação dos Produtores Orgânicos do Mato Grosso do Sul (APOMS), which applies agroecology principles to traditional farming operations. APOMS trains farmers in organic farming and forestry techniques that improve soil productivity and promote restoration of the Cerrado ecosystem.

Reforestation by APOMS members is contributing to the recovery of Cerrado ecosystems. Photos: Climate-Smart Agriculture case studies series

“Green belts are being re-established, including several initiatives to restore native vegetation through agroforestry,” explains Olácio Komori, APOMS’ Managing Director. One example is the Baru tree, a fast-growing endemic species that is valued for timber flooring but which also provides a highly nutritious, low-calorie nut.

Climate-smart agriculture is business-smart agriculture

APOMS operates a commercial center on behalf of its members. Here technical advisers identify new business opportunities, oversee logistics and negotiate purchasing and sales contracts. This collective approach provides advantages to members, giving them access to government contracts that offer a thirty percent price premium for organic produce.

The center also advocates on behalf of farmers. It successfully lobbied for a new law prohibiting aerial spraying of agricultural pesticides in the municipality, arguing that it was causing serious health and environmental impacts.

APOMS’ business model for cooperative, sustainable production attracted rural finance organizations to the area. Their activities generated a regional credit cooperative for smallholders, enabling even more families to participate in climate-smart farming initiatives. And it looks like their focus on sustainability could pay off even more in the future.

Agroecology training center, used by smallholders in the APOMS network

Smart financing models are needed

Recent research funded by Rabobank Foundation and produced by Alimi Impact Ventures suggests that climate-smart agriculture provides an underappreciated investment opportunity. The research report (Impact Investing in Climate-Smart Agriculture (CSA) in Brazil”) assessed fifty climate-smart agriculture initiatives in Brazil. Six of the case studies, including APOMS, are showcased in the Climate-Smart Agriculture Case Studies Series.

Angélica Rotondaro, co-author of the report, thinks that climate-smart agriculture shows considerable development potential. She is convinced that investors who accept a higher level of risk, a longer investment horizon and an unclear exit can benefit from the initiatives.

“Frontier markets like those in our case studies provide big opportunities for early movers,” she says. “There is a growing consumer market that cares about how food has been produced. This is more than a niche market.” She sees a lot of potential for scaling up activities in this market, but says that innovative finance models will be key.

“Frontier markets provide big opportunities for early movers”

- Angélica Rotondaro, Alimi Impact Ventures

“In addition to needing better access to affordable credit, smallholders in Brazil need access to technical expertise and expanded networks to reach larger consumer markets,” she says. “If financers develop models that meet all of those needs, it will create a win-win situation.”

She believes that by sharing their existing networks with ambitious smallholders, financers can reduce their risk exposure. Introducing smallholders to potential buyers, for example, would link credit to guaranteed purchases.

It’s clear that climate-smart agriculture needs investment-smart financing. The Cerrado will benefit from both.