100125 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 13 Bahia, 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 Bahia to assess agricultural sector risks as a contribution to the strategic economic development 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 collaboration with the Regional Development and Action Company of Bahia (CAR) and the Secretariat of Agriculture of Bahia (SEAGRI). In the immediate term the study provides practical elements for the implementation of the Bahia Sustainable Rural Development Project ­ — named Bahia Produtiva, which is currently implemented by CAR and is financed by a World Bank loan (8415-BR). Major Risks and are targeted under the Risk Management Strategy: agro-industrial commercial agriculture Bahia is the largest economy in Brazil’s Northeast in the Western region of the State (Cerrado), region and the eighth largest economy in the commercial fruit subsector, commercial country. The agricultural and livestock sectors horticulture subsector, family agriculture, and represent 7.4 percent of the State’s economy livestock production chains. and present an opportunity for both decreasing poverty and increasing economic growth and There are a number of relatively frequent development. Risks in Bahia’s agricultural sector (one-in-three, one-in-five, and one-in-10 year are highly concentrated in soybean, maize, occurrence probability) risks that have moderate cotton, cacao, fruits, vegetables and beans, as expected impact. These risks are climate well as livestock production. The aggregated (drought), pest and diseases, and price volatility. gross output value of these crops, which are The realization of those risks has no high or important both for household food security and critical impact because of the many government for the sustainability of commercial farming, interventions that are in place to produce accounts for 84 percent of total gross output innovations, cope with drought and support value of state agriculture and 82 percent of the crop prices, although their management can total estimated annual losses. The following be greatly improved. But there are a few risks productive systems aggregate the above crops with occasional-occurrence likelihood (one in AGRICULTURE GLOBAL PRACTICE NOTE — OCTOBER 2015 catastrophic impact that some shocks have at the time that they occur. For instance, during the 2002 and 2003 droughts, the worst in the 1990–2010 time period for Bahia’s agricultural sector, losses amounted to R$398 million and R$390 million respectively, more than double the annual average. More recently, in 2006 and 2009, the estimated production losses amounted to R$238 million and R$263 million, respectively. Photo credit: World Bank Further, the losses with respect to average agricultural production values tend to concentrate in specific crops and specific actors along the supply chain. The risk exposure is to 10 years) that could cause high/catastrophic a great extent a function of the supply chain damage, as already occurred in the past (fruit governance and the stakeholders’ capability and and cacao diseases, severe drought, and exotic opportunities for risk management. In the period livestock diseases), and therefore require strong 1999–2003 the losses were highly concentrated mitigation and coping preparation efforts. in cacao: 48, 62, 46, 44, and 20 percent of the total losses, respectively. During the very bad For the agro-industrial supply chains in the West years of 2002, 2003, 2006, and 2009, losses of Bahia the most important risks are extreme were particularly significant in soybean: 29, 36, dry climatic conditions and resistant pests 35 and 29 percent of total losses, respectively. and weeds due to intensive use of chemical Whereas other years drought conditions affected products. The commercial fruit subsector’s fruit and vegetable production more seriously, greatest risks are exotic diseases and the severe like in the period 1996–2000, where losses of droughts. The horticulture supply chain in turn papaya fruit alone accounted for 18–22 percent faces high price volatility and is exposed to of total production losses in Bahia. As regards some aggressive pests and diseases. For family the subsistence crops of family agriculture, agriculture the main risks are severe drought, particularly beans, the years of 1995–1996, irregular precipitation, and price volatility of 2001–2004 and 2010 were particularly bad. some crops like cassava. The livestock value In 2004 losses in beans were estimated to be chain is always subject to outbreak of exotic R$66 million or 38 percent of total agricultural diseases in addition to other diseases, and is production losses in the state. On occasion, the highly exposed to severe droughts. realized risks derive from longer-term processes of production downturns (cacao) or recurrent Adverse Impacts production drops (cassava) or periods of production depression. As a result of unmanaged production risks, the estimated value of the annual production loss Although livestock production is greatly of Bahia’s agricultural sector over the last 20 exposed to sanitary risks, Bahia has not suffered years was approximately R$186 million (US$105 catastrophic animal health events in recent million at 2010 exchange rate), on average, or 1.9 years. The outbreak of an exotic disease (e.g., foot percent of the State’s agricultural GDP. and mouth disease [FMD] or bovine spongiform encephalopathy) would trigger the elimination Average figures tend to conceal the actual of animals, quarantine and disinfection, the loss 2 | AGRICULTURE GLOBAL PRACTICE NOTE — OCTOBER 2015 of external markets, etc. This occurred during the Risk Management Solutions 2005 FMD outbreak in Mato Grosso do Sul and Paraná. The outbreak had great impact on exports Based on the above analysis and other and prices of beef, poultry, and pork, which considerations, the first phase of the assessment only recovered after Russia (the main importing identified the following risk management country) lifted import bans 28 months later. intervention areas to address priority risks: 1. Strengthen State rural extension and technical Risk Prioritization assistance system including both production and marketing aspects; Looking at risks from the combined perspective of their impact potential (moderate to critical) 2. Review and reinforce State animal and plant and management possibility (none to very high), health sanitary system; and severe drought and moniliase disease in cacao 3. Develop an integrated agroclimatic appear as the risks with the most critical potential information system. impact and minimum risk management. Therefore, they require medium- to long-term investment After analyzing a number of programs and and strong preparation to cope. Other diseases projects that are already addressing some of the such as sigatoka negra (banana) and cochonilha identified risks along the above solution areas, rosada (grapes and mangoes) also have minimum the team examined existing gaps and potential risk management capacity but have a lower complementary actions. As a result, the following damage potential. Weeds resistant to herbicides are the strategic lines identified during the (for crops like cotton, maize, soybean) present a second phase of the agricultural risk management potential high impact in the West of Bahia, and assessment (ARM): require an integrated pest management approach. Agroclimatic Information System Considering output value as a measure of • Develop an Integrated Weather System Database for aggregated impact of risks in Bahia as a whole, the State of Bahia; the greatest challenges are drought, and aggressive pests, diseases, and weeds resistant to • Strengthen the State Drought Committee in order to herbicides in Western Bahia (taking into account make actions more proactive and less reactive; the proportionally large economic size of that • Train extension workers that participate in the claim region). If focusing on family agriculture, which adjustment in the Garantia Safra in order to reduce has a small contribution to State agricultural moral hazard and technical issues. output value but is significant in social terms, Sanitary and Phytosanitary System irregular rainfall and drought appear as the only major risk. In effect, most family farmers live in • Implement a wide-area integrated pest management the Sertão (semi-arid) region where a destructive plan for the Cerrado of Western Bahia. recurrent drought scenario dominates. Family • Take action to delay or avoid the introduction of exotic farmers do not consider phytosanitary risks pests. important in comparison to the great weather- • Enhance and expand Rede de Multiplicação e related risks. Market risks are also minor because Transferência de Manivas-semente de Mandioca com of family farmers’ relatively low participation in qualidade Genética e Fitossanitária, a network of commercialization of agriculture products and multiplication and transfer of propagating materials because of federal procurement and price support of cassava with genetic and phytosanitary quality programs. program. AGRICULTURE GLOBAL PRACTICE NOTE — OCTOBER 2015 | 3 • Evaluate and improve animal health programs. cost of the entire ARM action plan has been estimated at a total of US$129,522,000 over five Supply Chain Coordination years, with a strong concentration of activities • Identify, support, and expand actual farm to market within the first two years. Out of this total, experiences and business opportunities for family US$5,622,000 would correspond to studies, farmers in Bahia. training and pre-investment, US$38,900,000 to • Build capacity in business development among program investments, and US$85,000,000 to associated small-scale farmers. cover staff costs associated with the Agriculture Development Company of Bahia (EBDA) reform. Agricultural Innovation System Table 1 shows the summary break down. • Improve the coordination of the Agriculture Innovation System for agriculture risk management of Finally, the following are some short-term actions family farmers. that can be undertaken by CAR/Bahia Produtiva: • Improve efficiency of the Agricultural Innovation • Expand the citrus seedling production program, System for family agriculture risk management: financing individual cages environments. »» Strengthen the research sub-system. • Strengthening family farmer farm-to-market relations »» Strengthen the Technical Assistance and Rural through greater farmer organization to facilitate Extension (Assistência Técnica e Extensão Rural) sub- technical assistance, marketing services, and increased system for family farmers. participation in institutional markets like the National Program for Acquisition of Food from Family Farmers • Improve efficiency of the Agricultural Innovation and the National School Feeding Program, having System for family agricultural risk management. Bahia Produtiva as a focal point to develop supply • Scale-up successful programs and projects for family chain coordination and supply/demand planning. farmers. • Conduct a survey on potential technical assistance The proposed action plan reflects the strategic providers in the State, as well as explore other non- lines and includes some basic details on who, public technical assistance modalities. when, and how much is required for the • Conduct a survey to gather information regarding rural implementation of the actions proposed. The households organized in Community Associations. Table 1: Estimated cost of the proposed Agriculture Risk Management Action Plan ($US) Intervention Field program Payments to EBDA Studies, training, and Total cost category implementation staff pre-investment Weather information system 0 0 3,581,000 3,581,000 Sanitary and phytosanitary system 0 0 746,000 746,000 Supply chain coordination 0 0 230,000 230,000 Agricultural innovation system 38,900,000 85,000,000 1,065,000 124,965,000 Total Action Plan $38,900,000 $85,000,000 $5,622,000 $29,522,000 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