Day 21 – Explaining quinoa markets in Poopo.

Day 21 – Explaining quinoa markets in Poopo.

I was invited to the mid-sized altiplano mining town of Poopo by the indigenous leaders in charge of local development.  They were not in the Royal Quinoa export growing region, but produced quinoa for their own local markets and consumption and wanted to learn more about what was happening in the quinoa industry.  We set up a workshop date with the Mayor and for two weeks, broadcast it over the radio and through local networks.  The mayor’s secretary had a copy of my presentation on her laptop and I had made copies to distribute as well.

The day of the workshop came and I waited in the mayor’s courtyard as the time passed.  The workshop was to be at 2pm but it was now almost 2:30 and no one was to be seen.  This brought back memories of times 15 years ago when I ran a rural newspaper in the valley regions of Cochabamba.  Meetings in these sleepy towns would always happen an hour after they were scheduled and change and events passed slowly.  I was reminded that the punctual, market motivated people of the quinoa lands were not the norm of all of Bolivia.

Eventually, staff began to appear and it was confirmed that there was in fact a quinoa presentation scheduled for today.  A quinoa farmer appeared, Primo Quispe Cheqa from Quilla.  A few phone calls were made and eventually, Fausto Flores from Tola Pampa also arrived.  We were set.  It was a sunny afternoon in the cool altiplano.  Both gentlemen decided they would prefer to hold the workshop in the mayor’s courtyard instead of a cold meeting room.  So we did.

The quinoa in Poopo is grown in addition to incomes earned in mining and animal production.  Families there often had a few llamas, cows or pigs that they raised for food and extra income, mostly selling locally in their own market.  The Poopo market prices were a bit higher (about 10-15%) than those in the city an hour away.  This is because there was less competition to drive down prices and the miners had money to buy products with.  Families also farmed maintaining several parcels, which were largely 1 acre lots that were located in different micro-climate zones with varying soil types.  Her people grew largely wheat, fava beans, potatoes and quinoa for themselves and alfalfa for their cows.  In some regions where there was irrigation, small crops of lettuce and onions were also planted.

Primo and Fausto were fascinated with the markets, prices and consumer demands in the US.  How the crops arrived there and the distribution channels.  They had no desire to enter these markets, nor had the production necessary to do so.  Their quinoa yields were substantially smaller than those of the Quinoa Real region with production being about 5-8 quintals produced per family per year.  In comparison in the quinoa region families produce an average of 150 quintales a year – valued at about $1,200.

Soon the skies darkened, wind began to blow and a hail storm appeared on the horizon.  We ended our workshop in a friendly manner and enjoyed the time we had to talk informally about quinoa markets and how they worked.

DAY 51 –Quinoa Farmers are 20% worse off than last year

DAY 51 –Quinoa Farmers are 20% worse off than last year

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Bolivia’s quinoa farmers are worse off economically with much lower market access – as reflected in the Circles of Susianabitliy survey. The orange expresses a time of extreme angst. Farmers’ feeling of having market access has decreased by 20% since 2015.

So today I presented the culmination of all studies, community visits, homestays, women’s discussion groups, and the quickly tabulated significant results of the Circles surveys at the Catholic University in La Paz, Bolivia.  About 60 people attended including quinoa farmers from Salinas and Uyuni, students, the press, and various organization and department directors.  Three farmers from Uyuni prepared organic handmade quinoa bread baked in their adobe, wood burning, community oven plus cookies and pito (and hand toasted, ground quinoa, powdered energy drink) …All featuring different varieties of quinoa with unique properties.

Varieties and properties were the theme of the presentation which recognized a significant decrease in farmers’ access to quinoa markets (20% less than 2015) and the ability to function in a quinoa-based economy (15% less than 2015).  Many farmers in Oruro had unsold quinoa in their homes while those in Potosi had none.  Quinoa was sold in small quantities on the common markets as cash was needed – for example people were selling sacks of quinoa to pay for school uniforms and books for the upcoming school year.

Running the numbers it is easy to see that quinoa farmers are quickly descending back into the abject poverty they rose from in 2007 with the world interest in quinoa – and new markets.  The current market price of 450 a quintal for fair trade, organic, Royal Quinoa is based on Peru’s cheaper conventional, industrialized quinoa which dominates the world markets.  This does not cover a farmer’s costs of production leaving them to operate at a loss.  Here’s why.

The inputs for quinoa production are large.  The average family of 5 is now cultivating just seven hectacres (21 acres) due to a combination of low market prices and poor climate conditions.  With the drought, erosion, pests, frost and hail – it is expected yields will be half of what they normally are – about 12 quintals per hectare (or 132 pounds per acre).  The total cost for producing these yields are as follows:

Inputs costs
Fertilizer  $1,049
Tractor  $857
Labor  $342
Pest control  $120
TOTAL  $2,368
net earnings

Boivian quinoa farers are now living on less than $2 a day.

 

The gross earnings a farmer gets form this production, assuming 100% is sold at the 450 price, is $5,326 (USD).  Minus the inputs mentioned in the table this leaves a net annual earnings of $3,013 or $281 a month which is less than $2 a day for a family of five – the average family size in the rural areas.  The per capita income in Bolivia is $7,191 which means that today’s quinoa farmers earn at less then half the average family household in Bolivia.

The quinoa regions are remote.  Besides raising llamas which people maintain for personal consumption, fertilizer for the quinoa and local market sales  – there are no other economies.  Other crops do not grow in the high, dry, mineralized soils.  There is no other industry.  Though there is electricity, cell service, drinking water, elementary schools and roads to most communities – the cities which have paying jobs are hours away on bus. Many children live in state run boarding schools for access to high school education in larger cities, fathers leave for Chile or the cities for more permanent work and mothers and more often grandmothers, are left alone with toddlers in the shrinking communities to tend to the llamas, fields, raise the little children, and maintain the family farming compound – alone.

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Prices have plummetted leaving both farmers and their quinoa sales associations vulnerable and in crisis.

There is no market access for these communities.  In addition, the large associations which most farmers are members of, are in difficult times too.  Grower associations and cooperatives covered their costs by receiving a percentage of total sales in membership commissions.  With low prices and lower yields they are not making enough to cover their operating costs.  Many have expressive processing equipment they received through loans of over $100,000 which now need to be repaid.  They are operating at a loss, incurring debts and unable to pay their administrative costs.  In addition, there is shrinking market access for these associations – as more quinoa production is developed less expensively, externally in countries such as Peru but also in Canada, Australia, France, China, the Netherlands and the US, the demand for premium, hand grown organic Bolivian quinoa is shrinking.  So are the markets.  In 2016, US consumption of all quinoa dropped by almost 10% – the US is the world’s largest consumer of all quinoa.  So besides low prices, there is low demand too – many associations are waiting for orders, their warehouses full and members desperately waiting for payments for quinoa sold, often six months ago.  With no sales, there is no cash flow.

DAY 41 – Farmers earn less than 30 cents a pound for organic quinoa.

DAY 41 – Farmers earn less than 30 cents a pound for organic quinoa.

So what is the real cost of quinoa?  Looking at the entire value chain of quinoa there are complexities and challenges in all directions from the world markets competing for consumer dollars to the producers themselves, scraping to make a living from an undervalued grain that is not covering its production costs.    Here we will look at the quinoa value chain starting from the middle – the cost per ton for quinoa at the world market pricing of FOB from the Chilean seaport of Arica where sales are made to work markets.

quinoa price chart

Quinoa price differences at the FOB point of sale form the Chilean port of Arica.

Prices are from the end of January 2017 and vary depending on the quality and origin.  Small grain industrialized conventional quinoa from Peru and elsewhere is selling at $1,900 per ton while conventional Bolivian quinoa is offered at $2,100 a ton.  Organic quinoa that is largely only found in Bolivia and is most likely is the Quinoa Real variety is $2,350 a ton and the Fair Trade certified, organic Quinoa Real from Bolivia has a value of $2,600 a ton – a 27% higher price than the cheapest quinoa from Peru.  In February Bolivia expects to have the European Community legally accept their Seal of Denomination of Origin for their Quinoa Real variety which has the distinct qualities of a large, creamy seed, the highest protein and mineral  contents of any quinoa, is organically produced on small farms, and only grows within in a 30-mile radius around the salt flats.  This can help to secure a new level of pricing for Bolivia’s quinoa, or at least make it more competitive in the world market at current prices.

Fair Trade organizations, based in both in Europe as Germany’s World Fair Trade Organization (WFTO) and in the US as Fair Trade USA(FTUSA), are set up to protect farmers’ rights, grow community and ensure producers receive a living wage.  Just recently Fair Trade has recognized Bolivian quinoa as a potential Fair Trade product and has been offering membership and price guarantees to Bolivia producers.  Currently there are about 20 quinoa growing associations signed on as certified Fair Trade producers.  This membership comes with costs and rules – organizations pay hundreds of dollars for audits and must uphold commitments to transparency, inclusiveness and democratic decision making. In addition to receiving a minimum price guarantee, regardless of market movements, producer groups also receive an annual premium based on a % of total sales that year.

I will offer a value chain analysis of the current Fair Trace price of quinoa and see where it arrives both for the consumer and the producer to determine the fairness of that price.  Next I will offer an alternative that can help farmers get what they consider to be a fair price, and what once was the Fair Trade minimum for quinoa in 2015.

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Price break out for a pound of Fair Trade, organic Bolivian quinoa sold to a US consumer in a local grocery store.

At $2,600 a ton FOB from Arica, Chile – Bolivia’s closest sea port, Bolivia’s Fair Trade, organic quinoa prices out at $1.18 a pound.  Private Fair Trade companies are buying this quinoa from producers at 450Bs a quintal ($64 for 220 pounds) or $.29 a pound. This represents 25% of the FOB price.  The rest goes towards covering the costs of commercial processing and cleaning ($.14 or 12%) and the administration, documentation and transportation from the farm to the plant to the port ($.75 or 64% of production).  This same $1.18 a pound of quinoa is shipped by container to the US (in this case) where it is sold to wholesale buyers.  The buyer (importer) sells the container of quinoa to large companies such as Pepsi and Kelloggs who then repackage the quinoa in small quantities under different brand names and sell it to stores who then place it on their shelves for consumer purchasing.  Each step in the supply chain has its own price points.  For example in the retail food industry the common store markup for packaged food products is 30%.

Taking a $7.17 per pound price for a box of organic quinoa in my local food coop – which has a 30% markup on their packaged foods – we can work out way backwards to the FOB to see where costs are incurred in the quinoa value chain.  The store gets $1.65 per pound on the product it sells (23%), the re-packager gets $2.60 (36%) which also covers the cost of packaging, branding and administration, the importer gets $1.86 (or 26%) which covers their administration, distribution and sales costs.

Day 40 –  40 years of quinoa development

Day 40 –  40 years of quinoa development

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Traditional housing in the remote quinoa lands.

How did the small, remote, impoverished quinoa communities of yore grow into a multimillion dollar international market?  The answer is years of development projects, investment, experiments, failure and success – starting in the 1970s

The 1970s was the time of the agriculture revolution in the development world with mechanized, chemical farming of massive acreages producing high yields of carefully developed crop varieties.  Quinoa was not overlooked in this period as hundreds of thousands of development dollars poured into the quinoa region to help develop this ancient grain for commercial use.  It was certainly a time of trial and error for the region – a place with delicate, volcanic soils, little rainfall and minimal organic material for building soil strength (nutrients).

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The vast, isolated quinoa landscape and llama.

Farmers tell tales of foreign agronomics arriving with different fertilizers, pesticides and industrialized farming methods – each time being “outsmarted” in the long run by the native wisdom and organic farming techniques of the ancestors.  Miguel Huyallas tells of the Dutch development worker who in the 1980s came with urea and other processed fertilizers for the quinoa farmers.  Miguel challenged him to a quinoa growing “contest” and offered a piece of his land to the Dutch agronomist. The first year, the Dutch’s quinoa grew better than Miguel’s – larger, taller, with higher yields.  However by the second year, the Dutch’s soils were already exhausted and his quinoa produced much less than Miguel’s organic quinoa fed with organic llama manure.  The agronomist explained Miguel, never returned after that.

There are patches of desert land where nothing grows, explains a Bolivian agronomist in Salinas.  The soils, he says, are burnt by the rigorous use of chemical fertilizers by USAID projects which did not take into account the slower decomposition of matter in arid environments and the lesser amounts of carbon in the volcanic soils.

Gladys of Chuvica talks of the pesticides which were used in abundance in 1970s development projects in her community.  She explains how the people did not have proper training in applying and caring for them, often saturating their skin and breathing in the fumes.  She attributes her mother’s early death at 50 to poisoning from the pesticides and believes there is a high rate of undocumented cancers in her region because of this.  The other day a woman farmer in Quillacas told me how once when she was hand fumigating her crop, the backpack style tank that is filled with pesticides leaked all over her clothes and through to her skin before she realized there was a leak in the tank. The farmers do not want to fumigate.  They understand the dangers of the chemicals and no one I have visited in the highlands is using chemical fertilizers in their production.

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The quinoa fields of Otuyo, Salinas.

Never-the-less, development progressed and through decades of trial and error, an export quality, semi-industrialized quinoa industry was developed.  The first quinoa producers’ association ANAPQUI was founded in the 1980s.  France helped finance the association’s presence in international trade shows in the 1990s – helping to build awareness and markets for the tiny seed.  Belgium helped fund the first tractors being used in quinoa production through CECOAT, a Bolivian NGO, revolutionizing how the tiny hand-grown mountain grain was produced.  Tractors cannot function on the traditional mountainside fields of the quinoa, so a valley method of production was created on the flat plains of the salt flats, opening up hundreds of thousands of acres of new land for quinoa production. According to long time quinoa agronomist, Genaro Aroni, by 2014 Bolivia’s quinoa industry reached $200 million a year in sales with over 60 businesses worldwide grappling for access to the Bolivian “grain of gold,” and what the United Nations termed the high protein super food for the future of mankind.

The development came at a cost though.  Aroni estimated that by 2016 there were over 2,000 tractors tearing up the delicate soils of the altiplanos plains.  With the recent drop in quinoa prices however, farmers are no longer planting the 30 to 60 acre lots they once managed opting for 21 acre plantings instead and are seeking to sell their tractors.  Worse though are the thousands of acres of desert lands now left fallow.  The slow growing tola plants and pampa grasses have been removed leaving the land to dry and soils to be carried away by the wind.  Worse, there is no longer forage for the llamas and wild vicunas which once dominated Bolivia’s vast plains.  Projects to “reforest” the plains with tola plant seedlings are underway but it’s a long, slow process.

In addition, with the new lowland farming of quinoa, new insects arrived which were never present before – including a moth whose larvae eat the immature quinoa seed heads.  This has proven to be a huge challenge for farmers who value organic production and ancestral knowledge.  Never had these insects been present before, so there was no ancestral knowledge to pull from.  Over the years both conventional and organic pesticides have been used to fight the “worms” as they are called locally, but with mixed results.  The conventional pesticides such as cyprometherine work but ruin the organic certification of the seed while organic pesticides are still in an experimental stage and not very efficient.

Perhaps the most knowledgeable in the recent history of quinoa development is agronomist Aroni.  A quinoa grower himself from the Uyuni region, he’s spent 30 years on the quinoa development largely working with Proimpa, a Bolivian NGO whose mission is to, “Promote the conservation and sustainable use of natural resources, sovereignty and food security, and the competitiveness of agricultural products for the benefit of producers, the agricultural sector and society as a whole; Through research and technological innovation.”  Many of Proimpa’s programs and come from collaboration with the Collaborative Crops Research Program (CCRP) funded by the McKnight Foundation.

A recent example of a McKnight funded collaboration is the development of pheromone traps with Dutch academics.  The traps which each contain 10 different pheromones, attract male moths to prevent them from fertilizing the eggs of the female moths.   The moth larvae, a caterpillar, eats the valuable quinoa seed heads before they are formed causing thousands of dollars of damage and lost production.  This year is the first time the traps were put into use and farmers reported satisfaction with how the traps worked – noticing a substantial reduction in the number of caterpillars they were finding on their quinoa plants.

Aranoi speaks of the needs of the farmers in the areas of more funding for organic pest control systems and more investment into improving the delicate soils.  He is currently working with integrative systems where quinoa is intercropped with native grasses that hold down the soil and add much needed organic matter and nutrients to the soil.  One such plant is the k’ela, a wild leguminous tarhui that is a nitrogen fixer and can also be foraged by animals.

As far as the future of quinoa, Aroni sees more diversification in production being key for the people in the quinoa region.  Traditionally quinoa was grown in balance with llama production with both industries complimenting each other – the llamas provided manure and transportation for the quinoa and food for the families and the quinoa stalks and 2nd quality seeds provided supplemental food for the llama.  Now llamas and quinoa are often managed separately and the sizes of the herds have not kept up with the quinoa growth. In addition, there is not as developed of a market for llama meat, especially in the international arena.  Bolivia’s low fat, high protein, free range, organic llama meat is naturally low in cholesterol and is an excellent protein source.  Aroni sees the development of the llama industry as a way for quinoa farmers to move forward in their economic development and well-being.  He also sees the development of effective organic pest control systems and a clear, transparent, realistic pricing system for the quinoa as key to the sustainability of this industry in Bolivia.  A sustainable price for quinoa producers?   800Bs a quintal – the same price that farmers themselves have been asking for from all across the salt flats.