Crop Prices and Deforestation in the Tropics

Abstract: Global food demand is rising, driven by a growing world population and dietary changes in developing countries. This situation encourages farmers to increase crop production which, in turn, increases worldwide demand for agricultural land and the pressure on tropical forests. Given the probability that growth in world food demand will continue, this pressure is not likely to abate in coming decades. While the impactof food demand on deforestation has been in the headlines, rigorous evidence of the relationship between international crop prices and deforestation using large-N data remains scarce. We attempt to quantify this link during the twenty-first century using high-resolution annual forest loss data for tropical regions, combined with information on crop-specific agricultural suitability and annual global commodity prices. We find that price variation has a sizable impact on deforestation: crop price increases are estimated to be responsible for a third of the total deforested area in the tropics (approx. 2 million km 2 ) during the period 2001-2018. We also find that the degree of openness to international trade and level of economic development are first-order local characteristics affecting the magnitude of the impact of crop prices on deforestation.