Status quo and prospects of smallholders in the Brazilian sugarcane and ethanol sector : lessons for development and poverty reduction

Along with a growing global ethanol market, investment in the production of sugarcane is growing, targeting new production areas also in Africa. This study addresses the question of how production systems and related value-chains can be created and governed so that they include smallholders in a sustainable manner. Brazil has historical experience with sugarcane and (large-scale) ethanol. The sector is highly concentrated. More recently, however, small ethanol distilleries have come up. The related production systems integrate small-scale sugarcane growing and alcohol processing in different ways. Therefore, this study asks: what caused concentration in Brazil, and how may it be circumvented elsewhere? And can positive pro-smallholder experiences be transferred from Brazil to other contexts? Part 1 describes the Brazilian sugarcane and ethanol sector with regards to smallholders. Part 2 describes four different small-scale ethanol systems. These cases are analysed and considered as scenario options for policy advice in contexts outside Brazil. The general conclusions of this study are as follows: Against statistical evidence, the target category of small, non-capital-intensive, poor landholders that produce cane for the sugar/ethanol industry is negligible in Brazil. The extreme concentration of the sector as observed in Brazil is not unavoidable. It is at least partly due to (past and current) economic practices and conditions that can in fact be subject to alternative policies. While accumulation in cooperatives has often been recommended, there are some doubts regarding feasibility in Brazil and more generally. Still, intelligent set-ups (as in case 2.3) make cooperatives an interesting option to pursue. Small-scale ethanol is indeed promising for remote energy supply and related value chains e.g. in rural Africa, especially for uses and markets other than transportation. Given the easy integration of cane and ethanol production via small-scale distilleries, cane-producing smallholders may profit from this in particular. There are several specificities to the Brazilian model cases, which will affect up-scaling and the transfer to other regional contexts. Regulation and several other policy measures are necessary to limit market concentration, and especially to empower small-scale sugarcane and ethanol production.