The cotton production of Peru

The cotton production of Peru

According to information of USDA the cotton production of Peru is expected to fall 12 % to 38500 metric tons, in 2011 the production amounted to 46941 metric tons recovering significantly from its all time low of 25590 metric tons in 2010. The peak production took place in 2006 with 89000 metric tons

The major reason for the decreasing cotton production is deriving from the fact that no genetic improvement of the crop has taken place in the last 40 years and was therefore combined with low efficiency, leading to low yields. A typical cotton producing farm has a size of only five hectares and makes the difficulty for investment in seeds and in mechanisation. The Peruvian government has made credit lines and technical assistance available to farmers organising themselves in associations but it did not help traditional cotton producers. Cotton subsidies in other cotton producing countries, thread and textile dumping from India and China and better profit opportunities in other crops reduced additionally Peruvian cotton production.

The Exporters Association of Peru has been promoting the quality of Peruvian cotton abroad and was also introducing some quality standards. But credit to the cotton producers is the foremost factor for farmers. The Peruvian Agricultural Bank, a state owned bank that lent subsidised credits without collateral went bankrupt there was not one private credit institution lending money to the agricultural sector. In more recent times private banks are lending money, but these credits are not affordable by the farmers, especially in the Tanguis region. The ginning industry plays a dual role in processing raw cotton and granting financing for seeds and sometimes by giving also technical assistance to the cotton producers.

The additional disadvantages Peruvian cotton producers have to face are a long growing season and pests. The inefficiency is caused by an extremely small size of the average planting area as 90 % of the farms entail less than five hectares and the already mentioned insufficient credit access because such farmers do not own land titles or viable collateral to guarantee a credit line and commercial banks will not take the risk to lend to them. Informal tenders make credit arrangements to the cotton farmers but with interest rates as high as 8 to 10 % monthly (!). More on Peru can also be found in TextileFuture’s e-paper issue of March 2012 and there are other items to be had in the News section on our website

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