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Peru Agribusiness Report Q1 2009
Business Monitor International, Feb 2009, Pages: 42
Peru Agribusiness service provides proprietary medium term price forecasts for key commodities, including corn, wheat, rice, sugar, cocoa, coffee, soy and milk; in addition to newly-researched competitive intelligence on leading agribusiness producers, traders and suppliers; in-depth analysis of latest industry developments; and essential industry context on Peru's agribusiness service.
After years of turmoil with production hit by disease, poor security and disastrous land reforms, Peruvian agriculture has, over the last decade, began finding its feet. Sugar, coffee and cocoa production have all seen strong growth. In the new Peru Agribusiness Report for Q1 2009, we examine how this recovery has come about and what the future holds for agriculture in the country.
Much of Peru's agriculture suffered badly under land reform policies brought in after the coup of 1968 led by General Juan Velasco Alvarado. Sugar was particularly hard-hit after mills and plantations were nationalised and handed over to cooperatives, thereby neutralising the power of the Northern sugar barons. Within years production began to fall, dropping more than 50% between 1975 and 1990. In 1980, Peru became a net sugar importer despite the fact that the industry's northern coast base sees some of the highest sugar cane yields in the world and the climate allows for year-round cultivation.
Since industry privatisation started in the 1990s, production has crept back up and by 2008, at 935,000 tonnes, was approaching its 1975 peak. Over the last few years, money has flowed into the sector with investors drawn by the rising price of sugar and the promise of ethanol production in the near future. We forecast sugar production to reach 1.09mn tonnes by the end of our forecast period in 2012, with ethanol production likely to begin in late 2009. We warn, though, that the contraction in the availability of finance could put a halt to some of the projects planned for the sector.
Coffee and cocoa production have also been growing strongly in the last ten years. Peru has benefited from the rising interest in ethically and organically produced goods among Western consumers. What were previously considered weaknesses of agriculture in Peru, such as lack of access to fertilizer and pesticide, have in many cases become strengths as producers find that the only major change needed to meet certification standards is an increase in paperwork and record-keeping. Certified organic, fairtrade, or environmentally friendly products sell at a premium on the world market and have provided an opportunity for small-scale coffee and cocoa growers to improve their profit margins. In 2007, speciality coffee exports fetched revenues of US$120mn, more than a quarter of the total coffee export revenue for that year.
As long as consumers in rich countries are prepared to pay a premium for ethically produced goods despite the economic turmoil in the West, then organic and environmentally friendly production should prove to be a profitable sub-sector for the country.
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