By Paulo Prada and Caroline Stauffer

RIO DE JANEIRO/SAO PAULO (Reuters) - A year after adopting changes to its long-standing forestry policy, Brazil is struggling to implement the new rules, adding to uncertainty that appears to be fueling an increase in clearing of the Amazon rainforest.

Regulators, landowners and farmers say they don't know how long it will take to enact the new "forestry code," a dense law that, among other rules, governs the amount of woodland that must be preserved on farms and other productive property.

On Wednesday, President Dilma Rousseff recognized the scale of the chore, especially a crucial first step to register Brazil's more than 5 million farms and ranches, a process essential to demarcate existing cropland from protected terrain.

"We have to consider this one of the great challenges for the country," she said during a speech in the capital, Brasilia. "We will prove that we have solid instruments to maintain a balance between the productivity of farming, ranching and forestry and the protection of the environment."

Rousseff spoke at an event where Brazil updated previous deforestation figures, showing an annual decrease through July 2012. The figures build on progress of previous years.

More recent data, however, suggests the trend has since reversed, as changes to environmental policy, the slow rollout of the new forest code and big ongoing development projects create a scenario that activists say fosters destruction. Preliminary government figures, and those of a private research institute, show an upswing in cleared forest since August 2012.

Deforestation figures, which gradually get updated as on-the-ground research complements satellite data, are tallied monthly and compiled in an annual tabulation that begins in August, when the Amazon dry season makes imagery the most reliable.

For farmers and ranchers in Brazil, Latin America's biggest country and one of the world's top agricultural product exporters, doubts about the new code are clouding long-term planning, especially with regard to fields that may need reforesting.

Unless the government enacts the code swiftly, the law could become vulnerable to the sort of debate and calls for modification that plagued the previous code.

"This is a regulatory transition that must not last any longer than necessary," warned Andre Lima, a public policy advisor at the Amazon Environmental Research Group, or IPAM.

When lawmakers last year adopted the new code, Brazil's government said it would dispel uncertainty in previous forestry law. Now, though, even government agencies say the opposite is happening - at least while Brazil figures out how to apply it.

"We're looking at four or five years before we would see any result," George Porto Ferreira, who manages deforestation data for Ibama, Brazil's federal environmental agency, told Reuters.

The first step to enact the new code, triggered by a one-year deadline established in the law, is just now starting.

It requires each of Brazil's 26 states to register every farm and ranch. In addition to mapping out their precise location and dimensions for the first time, the process will help identify exactly what is cropland and forest on those plots and establish which portions must be replanted as woodland.

A provision of the new code, an effort to make up for past deforestation, stipulates that a total area roughly the size of Italy must be reforested. A government study predicts the provision will not hurt harvests because most replanting can take place on degraded pastures, not productive fields.

Still, states are only now beginning to figure out how to register the farms, an arduous process that is expected to take at least two years. At least two more years will be needed after that for farmers to develop their reforestation plans. Farmers then have up to two decades for the planting itself.

Until states spell out how to proceed, landowners and producers are going about business as usual.

"We're looking forward to the code's implementation so we can know what changes, if any, need to be made," said Eduardo Godoi, an executive at Famato, the farming and ranching federation of Mato Grosso, Brazil's biggest soy-producing state.

CONTINUED DESTRUCTION

The limbo enables destruction, environmentalists say.

After years of declines, preliminary government data suggests that deforestation increased by 15 percent between August 2012 and April 2013, compared with the same nine-month period a year earlier. The government says a fuller picture will follow the dry season and clarify what damage is man-made and what is the result of wildfires and other natural deterioration.

But the data so far supports the theory that high crop and commodity prices provoke destruction, said Ferreira, the federal official. In Mato Grosso, the state with the most deforestation since August, there was a 12 percent jump in soy planting.

The government's figures are modest compared to those compiled by Imazon, a private research institute that also tracks satellite imagery. Its figures suggest deforestation increased by as much as 88 percent during the nine-month period.

If borne out, the trend would underscore fears that Rousseff has delegated too much enforcement to local authorities, who critics say are more likely to favor development over environmental concerns. Deforestation is already creeping into areas where she has declassified parkland and changed policy to allow for hydroelectric dams and other infrastructure projects.

Producers, meanwhile, are hoping the government delivers on a vague pledge in the new code for "payments for environmental services." That is, Brazil, in theory, will compensate farmers for keeping virgin forests on their lands.

Researchers say as much as 60 percent of land protected by the code is privately owned or in vulnerable public areas outside existing parks or nature reserves. Environmental groups and the government are considering various methods, such as carbon markets, that could place a value on that woodland.

No framework, however, appears likely anytime soon.

"That would be our dream," said Godoi, of the Mato Grosso federation. "But the truth is no one is getting paid for this."

(Editing by Todd Benson and Philip Barbara)