1. Emissions pricing
Greenhouse gas emissions pricing could materially drive up production costs for emission-intensive cattle producers and create opportunities to diversify revenue streams.

2. Land constraints
Climate action, land conservation measures and competition for land from the bioeconomy could reduce the availability of affordable pasture land.

3. Yield improvements
As business models reliant on high land use and deforestation become less feasible, cattle farmers can prioritize sustainable productivity investments and process improvements to boost yield on existing land and on degraded pastures.

4. Accelerating investment
Investment in capital goods, land, advanced technology adoption and improved management practices could increase production efficiency.

5. Beef price fluctuations
Climate transitions could create producer price increases for deforestation-free and low-emission cattle products globally, presenting opportunities for producers that increase productivity and provide transparency to buyers and financiers.

6. Dietary shifts
Evolving global dietary trends could threaten demand for beef and other cattle products under climate transitions, as the growth in sustainable-minded consumers increases demand for protein alternatives and low-emission beef.

7. Growing exports
Export markets are likely to become increasingly important due to Brazil’s competitive advantage in beef production, although regulations promoting source of origin disclosure will restrict market access for deforestation-linked beef.

‘Climate change and the actions taken to mitigate its impacts, known as climate transitions, represent some of the largest systemic changes our economies have ever seen. ‘Climate transitions’ refer to shifts in domestic policy, consumer preference, international regulations, competition driven by technology and other market demands for sustainability that will transform the future of the global economy, especially across the Brazilian cattle sector. Climate transition risks – legal and policy, technology, market and reputation – are all potential pitfalls that can impact performance and are increasingly critical to address, and they all present corresponding opportunities for market leaders.

For Brazil, new anti-deforestation policies, international trade and sustainability standards and corporate or investor net-zero goals all contribute to transitioning the cattle sector towards a new paradigm stakeholders must proactively manage. Learn more about specific climate transitions impacting Brazil’s cattle sector in our report.

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We use several different scenarios to showcase the potential impacts that climate transitions may have upon the Brazilian cattle sector and reflect how different levels of climate action can create material financial risks and opportunities. To help Brazilian cattle producers and investors understand the scale of impacts from climate transitions, this report highlights a plausible reference scenario aligned with keeping global warming below 2°C.

This models the impact of forecasted climate policies and actions on the real economy up to 2050, tracing detailed effects on producer prices, crop yields, and rates of deforestation. This scenario, the Forecast Policy Scenario, is aligned with the Inevitable Policy Response initiative developed by the UN-supported Principles for Responsible Investment. These principles have been signed by investors with over USD 121 trillion in assets under management.

This report analyzes how different types of climate transitions will impact critical financial outcomes for the cattle sector’s producers, investors, buyers and other stakeholders. See the potential outcomes for the Brazilian cattle sector across the following:

• Future prices for cattle producers
• Changes in available pastureland
• Changes in Brazilian cattle exports
• Improvements in yield per hectare
• Increases in returns with investments in soil restoration
• Profitability for different types of cattle producers
• Profiles of cattle producers most and least-likely to experience financial losses
• And more

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EMERGING RISKS

The profitability of cattle production varies significantly across Brazil. On average, more efficient and technologically advanced systems in the south of Brazil outpace smaller, less-efficient producers in the north. This profitability dynamic, and other factors, are applied through Orbitas economic tools to see how climate transition impacts will create risks that the sector will have to contend with.

SUSTAINABLE OPPORTUNITIES

Brazilian cattle farmers can proactively adopt technology and management solutions that increase financial resilience to climate transitions and diversify revenue streams. Low-cost techniques include pasture management practices, increased fertilizer efficiency and use and sustainable farming methods, such as integrated crop-livestock-forest systems and silvopasture.  Investments in these new opportunities serve as both proactive mitigation of climate transition related risks to prevent financial losses, and as ways to capitalize on growing demand for low-emission, deforestation-free and cost-competitive beef. Regenerative soil restoration practices, for example, could increase the per hectare yield of severely degraded pastures by up to 310 percent, raising profitability by over USD 375 (~BRL 1875) per hectare for the lowest productivity producers today.

NEW MARKET OPPORTUNITIES

There are growing markets for other land use practices that can transform degraded pasture land into profitable assets to diversify revenue opportunities across rural Brazil. Additional revenue streams include agroforestry and non-timber forest products and carbon markets as GHG prices grow. Download the report for more details on these new markets and how Brazil’s cattle sector can proactively manage risks and opportunities.

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