Soybean exports, market power, and deforestation

Abstract: This paper investigates the impact of market power exerted by large soy exporters on soy production and its relationship with deforestation in Brazil between 2004 and 2017. We hypothesize that large exporters leverage their power to markdown soybean prices from producers. Empirical analysis reveals that municipalities with large exporters experience lower agricultural revenues per unit of soybean produced, supporting this markdown hypothesis. Theoretical modeling shows that larger exporters pay lower prices, leading to reduced soy production and consequently lower deforestation rates. These findings are empirically confirmed. These findings highlight the critical role of market structure in shaping environmental outcomes in agricultural supply chains.