A Brazilian soy story : how international soy demand affects deforestation and agricultural land use
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- Master Thesis 
In this paper, I use municipal soy trade data covering the years 2010 to 2015 to investigate the export market for Brazilian soy and what the expansion of soy exports leads to in terms of land use. The soy data were acquired from the Trase database and offer an unprecedented opportunity to map the international demand for soy to the municipal production and land use in Brazil. To the best of my knowledge, no equally detailed agricultural trade flow data has been available for research studies before this, lending originality to this study. For the econometric analysis, I use a fixed effects instrumental variable approach, with trade-weighted world income as an instrument for soy demand, to estimate the effect of soy demand on agricultural land use and deforestation. Unsurprisingly, I find a strong positive link between the Brazilian soy export market and the land use of exporting soy farms. This expansion of land has necessarily replaced other forms of land use. This paper is primarily an investigation of what alternative land uses have been restricted as a consequence of soy exports increasing. The main finding is that there is a significant negative elasticity between the land use of non-soy crops and the international soy demand. This implies that a significant share of the land use expansion of soy happens at the expense of other agricultural land use. However, I find no conclusive evidence that deforestation has been hastened by the increasing international demand for soy. This non-finding can be caused by either lacking power in statistical tests, by the effect of soy expansion on deforestation only being indirect due to displacement of other crops which again replace forests, or by Brazilian policies restricting the expansion of soy farming into forested territories being successful in curbing the negative externalities of soy farming. I also discuss the dominant role of China in the importing market, with a short analysis of what a trade war between the US and China would entail for Brazil.