High profits from soybean-corn agriculture are associated with increased land prices and deforestation rates in Mato Grosso’s Amazon forests

Abstract Land clearing in the Brazilian Amazon is strongly influenced by the economics of farming at the forest frontier. Here we examine how rising profits from second-season corn, grown after soybeans, may increase pressure on forests in the state of Mato Grosso. We assemble detailed annual data on crop prices, yields, production costs, land values, and forest loss, and construct measures of both per-hectare and regional-level profits from soybean and safrinha corn farming. Using statistical models designed to separate the effects of expected returns from the effects of profit-driven expansion, we show that increases in farm profits raise land prices and are followed by higher levels of forest clearing. These effects persist for several years after a shift in profits. Our results suggest that expanding corn production in frontier regions, by making farming more profitable, fuels land speculation and encourages the clearing of new land.