Going with the grain: Quinoa exports are rising at a rapid pace

There’s a new kid on the block in Peru’s increasingly diversified mix of lucrative export produce; rich in protein content, low in gluten and with options for application in everything from the food, pharmaceuticals and cosmetic industries, quinoa, locally known as the golden grain, is establishing a place at the top end of the international market.

In 2013 the US Department of Agriculture reported that Peru’s global quinoa exports, at a value of just over $34.37m, had risen by more than 750% since 2007. By volume, quinoa exports reached almost 12,000 tonnes in 2012. According to the Ministry of Agriculture (Ministerio de Agricultura y Riego, MINAGRI), in the first half of 2013 exports reached 5912.3 tonnes, at a value of just under $20m, a 33.2% and 55.9% yo-y increase, respectively. In 2012, Peru was the world’s second-biggest exporter after Bolivia, which tripled its exports in that year to 23,000 tonnes, accounting for nearly half of the global supply. Among the 37 countries the grain is sold to, the US constitutes the largest market, accounting for $21.4m in 2012, followed by Germany ($2.3m) and Australia ($1.89m).

The country’s association with the grain has raised Peru’s reputation in developed markets as a producer of organic, high-quality foods. “Quinoa has been a lead trade facilitator for Peru and it has opened doors that have allowed the country to branch out and further increase trade,” said Mike Underhill, chief investment officer at Capital Innovations, a real assets management firm specialising in the agricultural sector.

Global Food Security

The rapid increase in exports of the pseudocereal is set to accelerate further, as quinoa has taken centre stage in the global policy on food security. In addition to holding essential amino acids, trace elements and vitamins, the grain also has the advantage of being able to adapt to varying geographic environments and climates. According to the Food and Agriculture Organisation (FAO) it is resistant to drought, poor soils and high salinity, and can be cultivated up to an altitude of 4000 metres, withstanding temperatures between - 8° C and 38° C. Interest in the grain has also made it a vital source of income for many Andean smallholder farmers, who rank among Peru’s poorest classes.

In recognition of its potential contribution to eradicating hunger, malnutrition and poverty, the UN General Assembly has branded 2013 the “International Year of Quinoa”, while Peru’s first lady Nadine Heredia Alarcón de Humala has been named the FAO’s special ambassador for the grain, succeeding Bolivian President Evo Morales. At the General Assembly’s gathering in February 2013, she stated, “As the world faces the challenge of feeding its population in a context of climatic change and depletion of water resources, quinoa’s adaptability provides reason for hope.” Ban Ki-moon, the UN’s secretary-general added that, “The crop holds the promise of improved incomes, a key plank of the Zero Hunger Challenge,” in reference to a recently launched initiative to encourage governments to strive for food security.

This is good news for Peru’s quinoa growers and exporters. “The UN’s decision to make 2013 the international year of quinoa could push foreign food firms to use it in their products,” Francisco Diez-Canseco of Grupo Orgánico Nacional, a Peruvian exporter, said in May 2012. Nevertheless, the anticipated global popularity of the grain has also put the country to the challenge of filling the surge in demand from overseas markets while securing sufficient and affordable supplies for local consumers.

Between 2008 and 2012 the share of national quinoa production destined for exports grew from 14% to 24%, fuelled by price rises of nearly 400% in some markets, including the US. Domestic prices have increased as well, albeit in lesser proportions. In Lima 1 kg of quinoa sells for around PEN10 ($3.77), a price four times more expensive than rice.

Restrictions

In a recent interview with a local newspaper, Juan Rheineck, vice-minister for agriculture, said that, “In some poorer areas residents have little access to products such as quinoa as it is becoming more and more expensive. That is what we have to avoid. We have to produce better and more.” High prices and limited availability of land in the highlands have also raised concerns of additional land disputes within Peru’s agricultural sector, particularly after violent incidents over the matter occurred in 2012 in neighbouring Bolivia, where land suitable for quinoa production is scarcer. Despite a rise in quinoa-cultivated land from 28,000 ha to 44,777 ha between 2000 and 2012, this area still ranks at the bottom end of the spectrum in the sector, overshadowed by other grains such as rice (388,659 ha), and soft and hard corn (246,800 ha and 305,000 ha, respectively). Although additional area was added, a decline in yields from 1.06 tonnes per ha in 2008 to 0.97 tonnes in 2012 emphasises the need for higher productivity.

Agricultural policymakers have embarked on initiatives to increase production standards and output, encourage collaboration among growers and specialise in the most marketable species. Various types of quinoa are produced in Peru, but the international market has a specific demand for quinoa real ( royal quinoa), which is considered to have the highest levels of protein, vitamins and minerals.

Government support is aimed at standardising production of this type. Through AGROIDEAS, a public programme aimed at providing equipment and administrative support, the government is making tools and machinery available to quinoa farmers in Puno, where 80% of national production is concentrated. Efforts are also under way to expand the production area towards the coast, where possibilities of larger-scale industrial farming are higher, all the while preserving organic cultivation. According to MINAGRI, in 2013 total quinoa-cultivated land is expected to reach 50,000 ha. In addition to the rise in cultivated surface and yields, the measures are targeting social inclusion, an overriding objective of the current administration. In particular, the issue of encouraging female empowerment, by providing technical training and facilitating access to local markets, is one that the administration is aggressively tackling.

Competition

Meanwhile, competition from new quinoa-producing nations is on the rise. Farmers in the main importing countries, such as the US, Canada and the UK, have started to plant small quantities alongside their cash crops, encouraged by high quinoa prices in local supermarkets. Emerging Asian economies, as well as Kenya and Mali, have started production as well, demonstrating competitive yields, according to the FAO. Its studies indicate that quinoa production could also be developed in the Himalayas, the plains of northern India, the Sahel, Yemen and other arid regions of the world.

While beneficial to global food security, quinoa’s adaptability to varying climatic conditions could erode Peru’s position in the market if the country’s production capacity does not increase. The minister of agriculture and irrigation, Milton von Hesse, recently commented in an interview on national TV that the key for Peru is to ensure differentiation, capitalising on its ancient history with the grain and making the most of its established reputation as an organic grower operating under socially responsible conditions.

“Thanks to the cultural, historical and socioeconomic context, Peru, just like Bolivia and Ecuador, is in a privileged position to develop our share in the international quinoa market,” the minister said. Adolfo Valle, general manager of global produce provider UNIVEG, agrees that Peru’s competitiveness is in the production of high-end organic fruits and vegetables, targeting the top segments in developed markets. “I think we will see substantial private investment flowing into these areas in the years to come,” Valle told OBG. Capital Innovations, a real assets management firm that specialises in infrastructure, timber and agriculture, claims its agribusiness investment strategy yielded returns of 103% in the past three years.

Organic

The organic market is a key growth sector for Peru’s exports. It has already gained international recognition in organic coffee, bananas and cocoa. Attesting to this burgeoning global reputation, Peru was invited as the guest of honour in Berlin’s International Fair Fruit Logistica 2013, held in February 2013, where more than 200 Peruvian producers had the chance to network with consumers and distributors from around the world.

Quinoa is not only expected to lead Peru’s export revenues for all organic produce, but it will likely do so in other regional nations. In neighbouring Bolivia, Paola Mejía, the general manager of Bolivia’s Chamber of Quinoa Real and Organic Products Exporters, in an interview with The Guardian newspaper, went as far as to say, “If the country aggressively promotes the crop, revenues could exceed those of gas and minerals within the next 10 years.”

Peru, with its doors to the global economy wide open, is a strong contender for the top exporting position, provided it continues to increase its production volume through high yields and surface area.