Zarc Research Network and the productive sector discuss challenges for climate risk management

How to improve climate risk management in agriculture was the theme of the annual meeting of the Agricultural Climate Risk Zoning Research Network (Zarc), held on May 10th and 11th at Embrapa headquarters, in Brasília (DF). The event brought together experts from Embrapa, technicians from the Ministry of Agriculture and Livestock (Mapa), the Central Bank and representatives from the productive sector, such as cooperatives and insurance companies, with the aim of discussing methodologies, new models and technical parameters to be applied in the next period. .

The meeting also marks the beginning of actions within the new cooperation agreement established with the Central Bank to update, methodological improvement and expand Zarc to 27 new crops and production systems that have not yet been studied, until 2026.

Based on agroclimatic studies, zoning indicates the planting times with the lowest chances of losses due to adverse weather events for more than 40 agricultural crops throughout the national territory, guiding, with its risk assessments, programs such as the Activity Guarantee Program Agriculture (Proagro), Proagro Mais and the Rural Insurance Premium Subsidy Program (PSR). Responsible for carrying out the studies, the Research Network has the participation of specialists from 34 Embrapa Units, under the coordination of Embrapa Digital Agriculture (Campinas/SP).

Zarc is a public policy instrument that highlights the importance of research, which serves thousands of rural producers thanks to management tools based on the anticipation of climatic events that can negatively impact agri-food systems and economically compromise raw materials and food markets. The statement was made by the president of Embrapa, Silvia Massruhá, during the opening of the event.

“It is an important cooperation platform, more than a project or a program, because it involves other research institutions, segments of the productive sector, producer associations, federations, insurance companies, government and academia”, she highlighted, highlighting that it is a success story and a model capable of further subsidizing other public policies. “In partnership with the Ministry of Agriculture and Livestock and the Central Bank, we are on the path to maturity, as the second phase of the agreement begins, with the inclusion of new indicators that will contribute to agricultural risk management” , he stated.

For the director of Regulation at the Central Bank, Otávio Ribeiro Damaso, also present at the opening table of the event, public recognition of the relevance of Embrapa, which contributes to the development of Brazilian agriculture, is necessary. “In this context, the importance of Zarc as a risk mitigation instrument for producers is fundamental, hence the renewal of the partnership between the institutions to guarantee the expansion and strengthening of benefits for the sector”, he commented.

Regarding Proagro, Damaso said it is a public good and highlighted that, despite the growth in recent years, it is necessary to evolve in the issue of risks, to ensure that the producer has security. “We are discussing ways to subsidize the agricultural sector, sources of credit, targeting savings, encouraging the capital market”, he commented, highlighting that the objective is to create better conditions to attract more insurance companies for rural producers.

The special advisor to the Ministry of Agriculture and Livestock, José Ângelo Mazzillo, also defended the need for sustainability mechanisms for agriculture, which help producers manage their activities and improve the resilience of the sector, making it more robust and capable. to overcome climate fluctuations. “We have Proagro and PSR, which are practical paths, but they need support,” he said, highlighting that both depend on subsidies offered by Zarc, which contributes to the incorporation of sustainable practices and reinforces the basis, which is governance.

“We have a very clear path and we understand that the main instruments for managing climate risks are Zarc and Proagro, available to rural producers, and that they need support from the State”, he commented. “Agriculture that occupies around 70 million hectares in both harvests and has a covered area of ​​11 million hectares needs to improve”, he guarantees. “The entire theoretical framework is based on Zarc, a tool that Embrapa is enriching and now bringing governance practices and sustainable management practices”, he adds.

For him, it is essential to make the PSR budget predictable and sufficient. “Zarc’s expenses must be within research and funding, in the budget,” he added. Mazzillo said he believes that the PSR, based on Zarc, is the main instrument for mitigating climate risks and should have a mandatory budget. “We now have it in the Multi-Year Plan (PPA), starting in 2024, with clear coverage targets”, he guarantees.

Challenges for climate risk management

The first technical session of the event sought to discuss the main challenges for managing climate risks in agriculture from the perspectives of agricultural policy, credit regulation and Proagro, insurance companies, rural producers and agronomic research.

Embrapa Digital Agriculture researcher Eduardo Monteiro, who coordinates the Zarc Research Network, introduced the topic, pointing to the need to generate more precise risk estimates or assessments, especially when observing the future worsening trend in the context of climate change. . “The increase in the frequency of occurrence of extreme events is increasingly evident, that is, a consequent increase in risk,” he says.

Within this scenario, he highlights that it will be important to produce and use more data and information for a more accurate identification of the risk profile of each production area. According to him, this should help to assign risk levels and the cost of insurance more appropriately, including to reward those producers who invest in more resilient production systems. “The current risk assessment looks at the municipality, the culture, the soil and the cycle. We need to go to the next level and include additional information that considers, for example, the level of management and perhaps, in the future, even the genotype of the crop.”

To achieve this, according to the researcher, it will be necessary to reduce information acquisition costs, which can be achieved through the development of technological solutions that accelerate the obtaining, integration and availability of this data for all entities in the production chain involved in the processes. credit and rural insurance. “Integrating data into a single database can reduce asymmetry and improve the flow of important information to support risk management,” he emphasized.

Cláudio Filgueiras, head of the Department of Regulation, Supervision and Control of Rural Credit and Proagro Operations at the Central Bank, addressed the mechanisms created to improve the monitoring, verification and inspection of operations, such as the attribution of geodetic coordinates of areas of production before and after accidents. He also mentioned that since January this year, 100% of Proagro's information is available on the internet. “If anyone wants to look at the geodetic coordinates, at the entrance or at the end of the operation trial, it is on the Central Bank website. Today the program not only has the control of the Central Bank, it also has the control of society”, he highlighted.

Filgueiras spoke about the challenge of improving the classification of producers at lower levels of risk, based on Zarc, also on Proagro, and looking more carefully at production areas and expected loss in micro-regions to be more rational in the use of the resource public.

For the general coordinator of Agricultural Risk at the Ministry of Agriculture and Livestock, Hugo Borges, it is necessary to strengthen the migration of risk management towards a virtuous cycle. “Rural insurance and Proagro have precisely this role of breaking the vicious cycle that often leads producers to even leave the activity, by impacting access to credit, reducing the application of technology in the following harvest and compromising their assets”, he explains. In a virtuous cycle, the producer's cash flow is maintained, allowing new acquisition of credit, increased use of technology and increased productivity. According to him, sharing data and information between the actors involved will be essential for everyone to move in this direction. Within this look at the entire chain, Borges highlighted the publication, in 2019, of the decree that created the National Agricultural Zoning Program for Climate Risk, which sought to expand and improve risk management on a scientific basis.

Representing the Organization of Brazilian Cooperatives (OCB), Marcelo Sumiya, technical manager at Coamo, added the vision of the productive sector. He highlighted the need to address risk management from the production system as a whole, where there are moments of loss and recovery of resources, and also to increase the supply of conditions that make it easier for the farmer to take credit and adapt to agricultural insurance.

Sumiya also pointed to the importance of increasing investment in infrastructure and professionals to generate more assertive information, especially in relation to the climate, which helps answer basic questions for producers, such as predictions of the occurrence of phenomena such as El Niño and La Nina. “Technical assistance to producers works thinking about the future, planning that production system for the entire year”, he adds.

Joaquim Cesar Neto, president of the Rural Insurance Commission of the National Federation of General Insurance (FenSeg), addressed some of the challenges for the growth of the market in Brazil, including the need to reduce accident rates, which represents the relationship between compensation for the amount collected. With higher losses observed in recent years, mainly in the 2022 harvest, according to him, accident rates were reached above 65%, which impacts the maintenance of the service provided by the insurance company. Among the ways to reduce these rates and achieve greater balance, according to him, is the increase in the assured area, the diversification of crops covered and the induction in the adoption of technologies, allowing the producer to seek to fit into ranges with lower risks of losses and greater productivity. “We must seek to induce the use of technology. If insurance does not seek to induce technology, it is not doing its job.”

Also as part of the Zarc Embrapa Network meeting schedule, technical discussions were held to deepen studies on climate trend assessment, change and worsening of risk, strategies to encourage adaptation and resilience in production, such as the methodology developed based on the level of management (ZarcNM), and advances in the use of agrometeorological and spectral models for harvest monitoring, presented by Embrapa experts. Cocamar's executive manager Renato Watanabe also participated in the debate, who brought concrete examples of positive management results that have been obtained in rural properties covered by the Paraná cooperative through the adoption of good production practices, such as integrated systems.