A g r i c u lt u r e G l o b a l P r a c t i c e N o t e 14 Paraíba, Brazil Agricultural Sector Risk Assessment Diego Arias and Jorge Caballero The present study is part of an effort by the World Bank and the State of Paraíba to assess agricultural sector risks as a contribution to the strategic economic develop- ment and poverty reduction agenda of the State Government. It is composed of two phases: 1) Agricultural Sector Risk Identification and Prioritization and 2) Risk Management Strategy and Action Plan. The study was conducted in close collabora- tion with the Cooperar Agency (which is currently preparing a World Bank–financed project) and the Secretary of Agriculture of Paraíba. When compared to the total national agriculture since it is well suited to the semiarid conditions gross domestic product (GDP), Paraíba’s prevailing in rural Paraíba. Thus, based on the agricultural sector accounts for only 0.7 productive structure (reflecting the relative percent of total production. In relation to the importance of both crops and production Northeast, Paraíba accounts for 11 percent of patterns) the priority value chains and sub- total agriculture GDP. Nonetheless, agriculture sectors chosen for the risk management analysis, remains an important source of employment were: sugar cane, commercial fruit production, for the majority of the rural population, and family agriculture, and livestock production. the rural population remains vulnerable to agricultural shocks, in that a shock will have The risk assessment confirmed that there are greater proportional impacts on the welfare of a no high-impact risks with a high probability poor household that on a wealthier one. of occurence in Paraíba (a one-in-three-year occurence is considered highly probable, and The risks in Paraíba’s agricultural sector are highly a one-in-five-year occurence is considered concentrated in a few crops that account for probable). However, there are several probable more than 80 percent of the total agricultural and highly probable risks that cause moderate gross output value of the state and 84 percent and high impacts when realized. It was observed of total estimated annual losses due to realized that the important issues identified around these production risks. These crops include: sugar main risks require comprehensive measures cane, pineapple, banana, coconut, cassava, to complement the existing federal policies maize, and beans. Livestock production is also and programs that in some way contribute to a key livelihood activity for the rural population managing agricultural risks (Garantia Safra, price AGRICULTURE GLOBAL PRACTICE NOTE — OCTOBER 2015 Photo credit: World Bank guarantees, livestock sanitary services, food family agriculture in the total number of farmers safety, etc.) and to improve their implementation (there are 148,047 family farmers in Paraíba in Paraíba. out of a total of 167,272 farmers), then those risks are the main risks in Paraíba. Accordingly, the solutions scenario presents strong actions Major Risks directed towards improving risk mitigation For the sugar cane value chain, the most among family farmers, such as adoption of important risks are: drought, irregular innovative technology, improved agricultural precipitation, possibility of contamination with practices and effective marketing mechanisms. the ferrugem laranja disease, and uncertainty The solutions scenario also contains about gasoline prices. The sugar cane industry suggestions for better agroclimatic information is the most important agribusiness sector and management, together with recommendations main economic activity of Paraíba. As a result, regarding other agricultural sub-sectors in any adverse impact on this supply chain also Paraíba. has important financial consequences to the State. For the fruticulture value chain, the Adverse Impacts four main risks are: irregular rainfall, pests and diseases, pesticide use without needed technical The impacts of the aforementioned risks have knowledge, and inter-annual price variations. For greater consequences for human welfare among the livestock sector (mainly cattle, sheep, and the individuals, communities, and regions of goat), the three main risks are: drought, exotic Paraíba that are the most vulnerable. The poorest diseases that affect the world beef trade, and areas of the state, as measured by earned zoonotic diseases. income per capita, are not necessarily the areas that will be hardest hit by drought. State Severe drought, irregular rainfall, and pests transfers for old age pensions and Bolsa Família and diseases are the main risks affecting family serve to diversify the poor’s portfolio and buffer farmers in Paraíba. When the risks are prioritized the direct effects of drought. taking into account the relative importance of 2 | AGRICULTURE GLOBAL PRACTICE NOTE — OCTOBER 2015 Approximately R$ 28 million (equivalent to US$ 16 1. Strengthen State rural extension and technical million), or 2.3 percent of the agricultural GDP, was assistance system, including both production estimated as the value of the average production and marketing aspects loss annually in the agricultural sector as a result of unmanaged production risks. Drought was 2. Review and reinforce State animal and plant the main cause of these shocks, sometimes in health sanitary system combination with other events. The calculation 3. Improve coordination within fruit supply involves all crops, but the losses are concentrated chains in the those whose gross output value accounts for over 80 percent of the total agricultural 4. Develop an integrated agroclimatic gross output value: sugar cane, beans, banana, information system. pineapple, maize, papaya fruit, and cassava. After analyzing a number of programs and Sugar cane and fruits, especially pineapple, are projects that are already addressing some of the the greatest determinants of the agricultural identified risks along the above solution areas, the losses, due to their large share in Paraíba’s total team examined the existing gaps and potential agricultural production value. Paraíba is one of complementary actions. As a result, the following the largest pineapple-producing states in Brazil, are the strategic lines identified during the currently ranked as the second-largest producer in second phase of the agricultural risk management the country. assessment (ARM): Average figures tend to conceal the actual Agroclimatic risk information system (ACIS): catastrophic impact that some shocks have at the time they occur. For instance, during the 2010 • Develop an Integrated Agroclimatic Database System drought, losses amounted to R$65 million (against in the state of Paraíba, including federal institutions the R$28 million annual average), or 5.4 percent and the Executive Agency of Water Management of of the state’s agricultural GDP. There were much Paraíba higher losses in previous years: R$108 million in • Strengthen of the Drought Management Committee, 1998, R$104 million in 1993, and R$82 million in making actions more proactive and less reactive 1996. Not surprisingly, the first two years coincide • Train the extension workers associated with inspection with two very severe statewide droughts (1998 procedures in the Garantia Safra project, in order to and 1992–93). reduce moral hazard and technical issues. Losses in terms of the normal production value Sanitary and phytosanitary system: in 2010 were extreme for important smallholder crops like beans and maize, accounting for Sugarcane R$ 16 million and R$ 7 million losses, respectively. • Expand the area of sugarcane under biological control In the same year, the losses of sugar cane and banana reached R$ 18 million and R$ 13 million, • Assess the impact of the possible introduction of the respectively. In total these four crops accounted ferrugem laranja in Paraíba for 83 percent of total losses in 2010. • Set up a surveillance network for ferrugem laranja in Paraíba. Risk Management Solutions Fruticulture • Assess the likelihood and impact of the possible The first phase of the assessment identified the introduction of the diseases sigatoka negra and moko following four risk management intervention areas (bananas), cancro da videira and Huanglongbing to address priority risks: (citrus). AGRICULTURE GLOBAL PRACTICE NOTE — OCTOBER 2015 | 3 Family agriculture in the semi-arid zone Agricultural innovation system (AIS): • Substitute the varieties of palma forrageira susceptible • Improve the coordination of the Agricultural to the cochonilha do carmim for resistant ones. Innovation System for family agricultural risk Livestock production management • Reinforce the program for controlling and eradication »» Strengthen the research sub-system of brucellosis and tuberculosis • Improve the efficiency of the Agricultural Innovation • Coordinate the animal health and food safety System for family agricultural risk management programs »» Strengthen the Technical Assistance and Rural • Establish the actual status of classical swine fever and Extension (ATER) network Newcastle disease virus in Paraíba »» Enlarge successful programs and projects. • Create the State Agency for Agricultural Health. The proposed action plan reflects the strategic Supply chain coordination: lines and includes basic details on who, when, • Identify successful farm-to-market experiences in and how much is required for implementation. Paraíba and assess the viability of replication under a The estimated cost of the ARM Action Plan totals massive technical assistance program US$18,881,000 over five years, with a strong concentration of activities in the first two years. • Develop market-oriented business development methodologies for training and providing technical Out of this total, US$6,081,000 corresponds assistance to associated small-scale farmers to studies, training, and pre-investment and • Assess different options to support market US$12,800,000 corresponds to program invest- development for family agricultural products, ments. The Paraíba state ATER staff cost is not including revision of the legal framework to channel part of the ARM Action Plan, but it is included as public resources. a complementary public policy, as suggested by State policy makers. Table 1 summarizes the cost break down by intervention category. Table 1: Estimated Cost of the Proposed Risk Management Action Plan ($US) Studies, Field program Payments to training, and Intervention category implementation ATER staff pre-investment Total cost Agro-climatic risk 0 0 3,211,000 3,211,000 information system Sanitary and phytosanitary system 5,000,000 0 1,120,000 6,120,000 Supply chain coordination 0 0 205,000 205,000 Agricultural innovation system 7,800,000 0 1,545,000 9,345,000 Total Action Plan $12,800,000 $0 $6,081,000 $18,881,000 Fatima Amazonas, Jaime Estupinian, Carlos Peixoto, Decio Gazzoni, Pablo Valdivia, Barbara Farinelli and Vitor Ozaki contributed to this report. Internet: www.worldbank.org/agriculture, Twitter: wb_agriculture