Write-up taken from the IRRI's Rice Almanac (2013):
Peru is located in west-central South America, with a land mass of approximately 1.28 million km2 and 5,220 km2 of water. Three geographic regions can be differentiated: coastal, mountain, and forest. The coastal region is a narrow 2,414-km flat, mainly arid and partly desert strip between the Pacific Ocean and the Andes Mountains. Good-quality farmlands are found only in the valleys of the seasonal rivers. The mountain region, in the Andes Mountains, is divided into western, central, and eastern mountains rising up to 6,780 m above sea level. Most of this area is composed of valleys and plateaus. Lake Titicaca, the world’s highest navigable lake, is in the eastern mountains. The forest region is east of the Andes and includes part of the Amazon forest, divided into high forest—a belt lying between 700 and 3,600 m on the east side of the Andes Mountains—and low forest, composed of uninterrupted forest.
Peru’s climate is tropical with abundant rainfall, high temperatures, and lush vegetation. However, it varies from west to east, being dry-desert in the coastal region and temperate in the highland valleys. The coastal regions have a mean temperature of 18 °C and total absence of rainfall during summer. Some parts of the coast grow vegetation thanks to the garúa, or winter fog. In the mountainous region, temperature decreases with altitude, from north to south and east to west. The forest region has a humid tropical climate with rainfall of 1,500–3,000 mm per year and 80% humidity.
Peru has a population of more than 29 million, of whom almost 50% are concentrated in the coastal region at densities of 186–5,774 persons per km², in contrast to the forest and mountain regions with 1–9 and 10–25 persons per km², respectively. The population growth rate declined from 1.5% in 2000 to 1.1% in 2010 and it is expected to continue decreasing. Only 28% of the population, almost 7 million people, lives in rural areas.
The Peruvian economy has experienced ups and downs depending on the world economy. In 2008, for example, it grew 10% but, in 2009, less than 1% as a result of the world recession, a fall in private investment, and a decrease in government spending. The economy bounced back in 2010, achieving 9% growth. The most important economic sector in Peru is services, comprising 56% of GDP. The economy also depends on exports of minerals and metals, while the contribution of the agricultural sector to GDP is 8.5% (2010). Peru continues attracting foreign investment; this investment, rapid economic expansion, the government’s conditional cash transfers, and other government programs together helped to reduce the national poverty rate from 44.5% in 2006 to 31.3% in 2010.
Recent developments in the rice sector
Rice crops are an important component of the agricultural sector, making up 9.4% of the gross value of national agricultural production and occupying 18.3% of the total cultivated area. Rice is a major source of rural employment; 1.5% of the economically active population works in the rice subsector. The consumer price index is highly dependent on rice prices.
Rice is a staple food in Peru and in some regions is even more important than potato in the diet; together, potato and rice have the most extensive cropping area in the country. Rice is also used for feeding livestock and making alcohol, acetic acid, acetone, oil, pharmaceutical products, fuel, and compost. Rice consumption in Peru is the third highest of South America after Guyana and Suriname, with 48.7 kg per capita per year in 2009. The caloric and protein intakes from rice grew 4% and 3%, respectively, during 1995-2009, while those of maize and wheat fell around 4%.
Peruvians prefer two types of rice. The elite favor packed long grain, white, grainy rice of high volume expansion. In contrast, the majority prefer rice in bulk, more tender, slightly sticky, and not very white. More than 30 rice varieties are consumed, their source being the rice breeding program of the National Rice Research Program of Peru, derived from rice varieties developed by IRRI-Philippines and CIAT-Colombia.
The rice crops are located mainly in the north valleys, forest rim, and forest region. Peruvian rice production tripled from 0.97 million t in 1990 to 2.83 million t in 2010. Production is concentrated in the north (52%, or 1.48 million t), followed by the high forest (40%, or 1.14 million t). The increase in national rice production is the result of water abundance, favorable weather conditions, economic policies, and increases in planted area and grain yield. The harvested area doubled from 0.18 million ha in 1990 to 0.39 million ha in 2010 while yield surged from 5.3 to 7.3 t/ha. The highest average yields in 2009 were in the south coast with 13 t/ha, followed by the north coast with 9.2 t/ha; the forest region had the lowest yield with 6.7 t/ha. These high yields are the result of improved technology, availability of quality seeds, research, and technology transfer. Peru has the highest rice yields in Latin America and is seventh in the world ranking. Its 750 registered mills have a capacity of 8 million t per year.
Nevertheless, Peru imports rice, although imports fell from 0.46 million t in 1992 to 0.21 million t in 2011, less than 5% of present requirements. Most (90%) is from Uruguay and Vietnam (8%). Peru also exports increasing quantities of rice, from only 48 t in 2005 to 47,908 t in 2009.
Irrigated rice production costs are closely related to yield, and vary with input costs, estimated at US$244–256 per ton. Such high costs require yields above 6.8 t/ha; otherwise, Peruvian rice would not be competitive in international markets.
The government has not shown interest in developing the rice sector while producers do not want or cannot invest money to develop the sector and turn the small self-sufficient farms into bigger producing ones.
Irrigated rice accounts for two-thirds of the rice area and most of the supply, mainly in the forest rim in the regions of Cajamarca and Amazonas, in the higher forest of San Martín, and in the coastal regions of Tumbes, Piura, Lambayeque, La Libertad and Arequipa. Upland rice is grown in the high and low forest, and lowland rice in the low forest in Ucayali and Loreto. Upland and lowland rice are mainly produced for local consumption and supply is unstable, with average yields of 1.5 t/ha and 2.4–2.9 t/ha, respectively.
San Martín is the most favorable rice-growing region because it has water year-round, even though the yield is low compared with that of other Peruvian irrigated rice production regions.
Irrigated rice is sowed by hand using seedlings or using pregerminated seeds; in the lowland system, transplanting is used, whereas, for uplands, rice is sowed by broadcasting seedlings or laying them in rows on dry soil. In the north and south coast, labor for transplanting is expensive and broadcasting seedlings and mechanized transplanting are preferred.
Production constraints in Peru are related not only to rice production but also to the broader agricultural sector, as shown below.
Soil destruction and change in land use. Poor land-use practices and conversion of forest into agricultural areas have caused deforestation, desertification, salinization of soils, depletion of water resources, and degradation of ecosystems. As a consequence, crop yields are low and soon fields become useless, causing poverty.
Production is based on individual small-scale farmers. Peruvian agriculture is based on small farmers with plots of less than 10 ha. In 2011, there were 125,000 rice producers and 26% of rice farms were smaller than 5 ha, 43% had areas of 5–20 ha, and only 31% were bigger than 20 ha. There are very few big producers and they are not organized; the new Peruvian Association of Rice Producers (APEAR) has little negotiating power with the government on matters such as regulating rice production and prices, establishing new rice areas, strengthening international competitiveness of the sector, and protecting small producers against monopsony, oligopsony, and aggressive financial intervention. The result has been economic losses, constant decapitalization, and lack of access to credit, technical assistance, and improved technology.
Uncontrolled prices and markets. Production, harvest, and markets are not organized; many unnecessary intermediaries are involved; wholesale markets do not exist; and poor infrastructure hampers the transport of rice from production centers to consumption areas and hinders the production growth in Peru’s noncoastal areas.
No access to regulated long-term credit. Rice production is funded by the rice industry, mainly by loans from the milling industry at high interest rates—7–10% per month. Banks offer only short-term credit and they are concentrated in Lima.
Market price. Recent revaluation of the national currency (nuevo sol peruano) together with the removal of tariffs in January 2011 caused imported rice to become cheaper than domestic rice. In addition, during 2000-10, input costs increased faster (79%) than rice prices (29%). Limited technical assistance, research, and training. Specialized technical assistance is not readily available and is limited by the fragmentation of the sector and the government’s lack of interest. The Ministry of Agriculture does not have a plan for research, technology transfer, and technical assistance to farmers.
Lack of infrastructure. The lack of storage infrastructure is one of the main constraints to rice production regionally.
Water. Rice producers do not have adequate irrigation systems and the establishment of other crops has damaged the soil and caused salinization due to constant flooding.
Rice varieties. The rice varieties now sown have high yield potential and good grain quality but some of them are highly susceptible to pests and diseases, which lowers yield. Additionally, too many varieties are sown, causing difficulties in trade. It is necessary to refocus research on market analysis and not only on production.
Rice producer associations. The Peruvian Association of Rice Millers (APEAR) strengthens the rice sector to become more competitive. It protects rice producer rights and offers training on professional development and technical assistance. APEAR is also working to strengthen the rice producers’ union by offering technical assistance; research; trade and policy analysis services; making agreements with companies providing inputs, machinery, and seeds; and designing programs to make the rice sector competitive.
Added value for Peruvian rice. The lack of added value remains a major constraint to rice commercialization. Rice color classifiers to select rice grains are one way to improve grain quality and production indexes; two units have been installed in the country to date.
Profitability, sustainability, and competitiveness. The National Institute for Agricultural Innovation (INIA) is developing rice varieties with higher yield, better grain quality, resistance to pests and diseases, and adapted to the Peruvian rice-producing regions; it is also elaborating integrated crop management practices that use less chemicals and reduce production costs.
APEAR is working with the National Institute for the Defense of Competition and Protection of Intellectual Property (INDECOPI) and municipal governments on the formalization of the rice sector. APEAR showed the need for a market for cereals and grains in Lima and asked seed companies for the implementation of sanitary measures and good practices in the production and sale of seeds.
Sources: FAO’s FAOSTAT database online and AQUASTAT database online, as of September 2012.