ISSN Electrónico: 2500-9338
Volumen 23-N°1
Año 2023
Págs. 37 – 54
ECONOMIC SITUATION OF
RICE CROP IN THE CENTRAL AREA OF COLOMBIA
Francisco Javier Dorado Urbano
ORCID link https://orcid.org/0000-0002-8008-8334
Recepción
Date: December 7, 2022
Recepción
Date: March 20,
2023
Abstract:
This article analyzes the current economic
situation of rice crop in the central zone of the country based on updated
official secondary sources of information, on recent agricultural economic
analysis theories and through a Quasi-Experimental research method with
longitudinal time. The main causes of the lower production, planted areas and yields
per hectare are the low profit margins explained by high production costs, high
volatility in real prices, high import volumes, informal financing, uncertainty
in marketing among other structural circumstances such as land tenure.
Keywords:
rice production; production yields; production
costs; cost-benefit analysis
*
PhD student in World Economics, Xiamen
University, China . Master in Economics, Universidad Nacional
Autónoma de México. Specialist in
Globalization, Economic Growth and Stability, Instituto de Empresa, Spain. Public Administrator,
Escuela Superior de Administración Pública. Economist, Universidad de Nariño.
Email: fdoradou@gmail.com.
ECONOMIC SITUATION OF RICE CROP IN THE CENTRAL
AREA OF COLOMBIA
Resumen:
El presente artículo analiza la situación económica
actual del cultivo de arroz en la zona centro del país en base a fuentes
secundarias de información oficiales actualizadas, en teorías de análisis
económico agrícola recientes y mediante un método de investigación
Cuasi-Experimental con tiempo longitudinal. Como principales causas de la menor
producción, áreas sembradas y rendimientos por hectárea se identifican los
bajos márgenes de utilidad explicados por altos costos de producción, una alta
volatilidad en los precios reales, altos volúmenes de importación, informalidad
en la financiación, incertidumbre en la comercialización entre otras
circunstancias estructurales como la tenencia de la tierra.
Palabras clave: arroz; producción arrocera; rendimientos de producción; costos de
producción; análisis costes-beneficio
SITUAÇÃO ECONÔMICA DO
CULTIVO DE ARROZ NA ZONA CENTRAL DA COLÔMBIA
Resumo:
Este artigo analisa a
situação econômica atual do cultivo de arroz na zona centro do país com base em
fontes oficiais de informação secundária atualizadas, em teorias recentes de
análise econômica agrícola e através de um método de pesquisa
quase-experimental com tempo longitudinal. As principais causas da
menor produção, áreas plantadas e rendimentos por hectare são as baixas margens
de lucro explicadas pelos altos custos de produção, alta volatilidade nos
preços reais, altos volumes de importação, financiamento informal, incerteza na
comercialização entre outras circunstâncias estruturais, como posse da terra.
Palavras-chave: arroz; produção de arroz;
rendimentos de produção; custos de produção; análise de custo-benefício
1. INTRODUCTION:
In the Colombian rural area, 24% of the total population of the country
lives, the agricultural sector represents the second most important sector in
terms of employed population after commerce, where 16.81% of the total employed
are located (DANE 2021), although the country has a high potential for
agricultural production according to the FAO, it is the second world exporter
of flowers and the third world exporter of coffee and bananas. The most serious
indicators of poverty and extreme poverty occur in rural areas where 44.6% of
the population living in this area is in a situation of poverty and 18.8% in a
situation of extreme poverty (DANE 2022) that consumption of this food its
crucial, added to the fact that in Latin America and the Caribbean the problem
of hunger and malnutrition has worsened in recent years (FAO 2022).
This in the context of a situation of economic recovery after the
Covid-19 pandemic characterized by high levels of inflation, mainly in food,
war between Russia and Ukraine, a high exchange rate, disruption in global
supply chains that have With expensive inputs and imported food, as well as
prospects for low rates of economic growth in the coming years, it is essential
to improve the food security situation in the context of climate change, as
well as encourage the development of productive and export potential in the
country (FAO 2022). In addition, the rural sector is the most affected by the
problem of drug trafficking and violence, where Colombia showed a significant
increase in the cultivation of illicit crops where the country continued to be
the largest producer of coca leaf with 204,000 hectares in the year . 2021, an
increase of 43% compared to 2020 (United Nations Office on Drugs and Crime -
UNODC 2022), this in the context of a policy change in the treatment of the
forced eradication of illicit crops by the new government and the
prioritization in the application of commitments based on a Comprehensive Rural
Reform as a result of the peace agreement recently signed in the country.
The rice crop in Colombia has a significant relevance in the productive
structure and the agricultural sector, since it represents 35% of the total
area planted with short-cycle crops according to the Ministry of Agriculture
and Rural Development, where in the central zone of the country, 32% of the
total planted area is located between the years 2000 and 2020, being the
department of Tolima the one that comprises 29% of the [1]National
Rice Production Units -UPA-, the highest in Colombia, in addition to the fact
that this region has the best agroclimatic conditions for the development of
this crop (Federacion Nacional de
Arroceros - Fedearroz, National Rice Fund. 2021) therefore, the need to analyze
the current situation of the planted area, production, yield, foreign trade,
prices, consumption and production costs in recent years due to the fact there
are no recent studies that provide updated information in Colombia on the
sector that serve as a basis for correct decision-making in national and territorial
public and private policy, giving solutions to the current problem.
The results presented in this article seek to research the current
panorama of the main causes of the decrease in production, planted areas and
yield per ton of rice crop in the central zone of Colombia through a recent
economic analysis, where to respond to this question is considered as
objectives in a first part to characterize the global and national panorama of
production, exports and imports by country of destination and origin, in a
second part to analyze the current evolution in the main municipalities of the
area, focused on yields, planted areas and total production, followed by a
third section whose objective examines the real prices in the last fifteen
years and per capita consumption, disaggregating urban and rural areas, ending
with the analysis of the production cost structure and cost-benefit indicator,
all based on updated data available from reliable secondary sources such as
Fedearroz, Ministry of Agriculture and Rural Development, National
Administrative Department of Statistics (DANE), International Trade Center
(ITC), Banco de la Republica, United Nations Division for Trade of Commodities
(UNCOMTRADE). As well as the background of previous studies of the sector prepared
by Fedearroz, the Ministry of Agriculture and Development and the National Rice Fund, Ediagro and the study of Parra, RI, Puyana, R. and
Yepes, F. of Fedesarrollo of the year 2021 mainly .
Agricultural economic
analysis can be done in different ways based on the context of the Green Revolution and the
monoculture approach where the main variables that affect crop production are
explored, studying the structure of the milling industry, highlighting the main
problems that influence demand and marketing; preparing an evaluation of the
rice foreign trade policy to finally project a level of production and demand
estimating the exportable surpluses of the product according to different
alternatives (Gabriel Montes Ll., Ricardo Candelo C. & Ana Milena Muñoz de
Gaviria 1980).
Likewise, in this
analysis, the concepts that seek to provide a recent image of production in the
area are important, analyzing a global and regional context of production;
where it is referenced by including variables such as area, production and
performance, as well as the immersion in the international trade of the product
and relative consumption based on an inventory balance methodology. Inquiring
about the territorial composition of the crop, predominant systems according to
the area, seasonality, change in quantities and productivity of the region or
country.
According to Ocampo, J.
(2014) an economic diagnosis focused on a competitiveness strategy can be
shown, with the purpose of describing in the form of selected evidence how the
agricultural sector is at a given moment, in addition to the situation of
access to credit. and to public goods. To this end, a summary of the behavior
of the sector in recent years can be made, prioritizing the analysis of a regional
focus of indicators and the most important causes in factors such as marketing,
foreign trade and financing, among others, emphasizing innovation variables and
productivity. Thus, the transformation in foreign trade can be examined, mainly
in trade policy, exchange rate, trade agreements and diversification in exports
of agricultural products. To the above is added the detail of the main
indicators of the sector according to product at the national and zone level
where the planted area is related, productivity exposed on a semi-annual and
annual basis. Incorporating results referring to the type of sowing and the
irrigation system, published through maps according to specific
characteristics.
Finally, for Rafael
Isidro Parra-Peña S., Santiago Flórez G. & Daniel Rodríguez published in
(2022) the analysis must be carried out according to the characterization of
the value chain by product in the country according to recent years, analyzing
the most relevant obstacles to the chain and formulating conclusions in order
to provide a solution, in addition to offer data on the value chain of the crop
from planting and harvesting to the purchase of the product. Surveys of farmers
can also be carried out in order to analyze the effects of services on
productivity, costs and the level of satisfaction. In addition, optionally, an
econometric model can be used that analyzes production yields and costs and a
partial equilibrium model that details the trade policy and the consequences of
a full opening in this market in later years.
3.
The present study used a Quasi-Experimental research method with
longitudinal time ( Menard, S. 1991), characterized by the
separation of the parts of a whole in order to understand them individually,
achieving a process of analysis and rational union. of scattered elements; with
the purpose of understanding the behavior of variables such as production,
yields, foreign trade, consumption, prices, production costs among others, in a
previously preconceived structure of the problem; For this, in the first part
and based on statistical data, it starts from a global and national context of
the production and foreign trade of the product according to the country of
origin and destination based on the most recent data published by the National
Rice Fund, Fedearroz, International Trade Center and UNCOMTRADE, subsequently
an economic characterization of the most relevant municipalities according to
their production is carried out, through secondary information obtained from
the Municipal Agricultural Evaluations carried out by the Ministry of
Agriculture and Rural Development between the years 2007 to 2021, together with
what is exposed in the Municipal Development Plans. Additionally, the most
recent information processed through spreadsheets and displayed in tables and
graphs on production in tons, yield and planted areas of the main crops by
municipalities is shown, in order to analyze their evolution over time and to
know the importance of rice cultivation in the area.
Subsequently, the historical real prices of the last fifteen years are
analyzed, for which information was collected from Fedearroz and the Banco de
la República, focusing on the green Paddy variety, with said information a
historical record of prices was made that allowed through own calculations
obtain harmonized data at present value. Likewise, the evolution of per capita
consumption is shown according to urban and rural areas in the last fifteen
years based on data from the Economic Research Division of Fedearroz and the
National Survey of Quality of Life- ECV of DANE. Regarding the characterization
of the marketing and financing process, it was prepared based on information
from studies, bulletins and current reports with data from producers, unions,
key players, mills, dismantlers, commercial houses and other institutions
related to the crop and sector.
Finally ,the Evaluations of Production
Costs and Cost Benefit ratio analysis, it was carried out based on
representative information from various sources such as the Monthly Bulletin of
Input Components, internal and external price indicators, specific information
from producers, key marketers of DANE area and specialized data from Fedearroz,
among others of the area, which were reviewed, organized, calculated, supplemented,
updated and analyzed in detail.
4. RESULTS:
World rice production in 2020 was concentrated
mainly in Asian and Southeast Asian countries, with countries such as China,
India, Bangladesh and Vietnam contributing 74% of world production (544 million
tons), where China and India concentrate 52% of the production volume and 42%
of the harvested area worldwide.
Among 83 different countries worldwide, which
reported information for the year 2020 and organized into five groups according
to their level of production, China and India, with productions of more than
150 million tons/year are in a second group. There are Indonesia and Bangladesh
that report 14% of the world harvest with productions close to 50 million tons
per year.
In a third group are those countries that
obtained a production between ten to 50 million tons in the year 2020 and that
represent 21% of the total world production (19.4 million tons) among them are
Vietnam, Thailand, Myanmar, Philippines, Japan, United States, Pakistan and
Brazil. While in a fourth group there are countries that achieved a production
between two and ten million tons of production, Colombia is in this group
together with countries like Peru that obtained 2.9 and 3.2 million tons of
production respectively, this group represents 9% of total world production.
Finally, in a fifth group there are 54 countries with productions of less than
two million tons, which represent 3% of the total world production. (National
Rice Fund 2021)
In general aggregate terms by region, it can be stated that the Asian continent and the
Asia-Pacific subregion concentrate 90% of the world production of this cereal
in 2020, while the African continent represents 5% and the American countries
the 4.8% of world production. This is mainly explained by aspects of
geographical extension, population mass and internal consumption of the
product. (Goswani, R. Chatterjee, S. & Prasad, B. 2014).
Regarding productivity measured in yield per
hectare, Australia stands out (with 10.4 tons per hectare) as the country with
the highest world yields. While China (7.04 tons per hectare) and India (4.13
tons per hectare), despite having the highest productions worldwide, are
located in more relegated positions in terms of performance (China in position
8 and India in the position 40 out of 83 countries).
In the case of Colombia, its national average
production reported in 2020 was 4.78 tons per hectare, ranking 21st worldwide,
establishing the country at higher levels in this indicator, which according to
the registered values is in the fourth top of productivity internationally. (Rural Agricultural
Planning Unit - UPRA. 2020)
In terms of international trade worldwide, it is evident that for the
year 2020 rice imports were 75.3
million tons compared to global exports that reached 48.6 million tons, that
imports are greater than exports is mainly explained by the release of
inventories from the large exporting countries such as India,
Thailand, Pakistan, the United States and China.
It is interesting to analyze the case of India and
China since the first country is defined as a net exporter of the product with
around 14.6 million tons, while China exports around 2.3 million tons and
imports 2.9 million tons, as evidenced in Figure 1; reflecting this as a
dynamic market of high production and trade, but also as a market defined by
the size of the population, greater purchasing power and high per capita
consumption of this good. (Fan, S. & Pardey,
P.G. 1997)
World
Exports and Imports of Rice in million tons per country in 2020.
Source : Own calculations based on ITC and UNCOMTRADE.
(2022).
For the specific case of
Colombia, it is evident that the country is a net importer of rice since its
imports are considerably higher than its exports, where for the year 2020 these
were 279.048 and 1.990 tons respectively. Its main trading partners as origin
of imports were the United States with 186.990 tons and Ecuador with a total of
44.064 tons imported in 2020. These two countries account for 82% of Colombian
imports of this product, as evidenced in the Table 1. This situation has
occurred despite the strong devaluation of the Colombian peso against the US
dollar in recent years, which has been 34.3% in 2020 compared to 2017. In
addition, factors such as the Free Trade Agreement and smuggling could partly
influence these high import figures for the product. (Parra, RI, Puyana, R.
and Yepes, F. 2021).
While Colombian rice
exports are minimal, with 1.274 tons exported in 2020, mainly to countries like
Venezuela (934 tons) and Cuba (300 tons). It should also be noted that in the
American continent some countries of Central America and the Caribbean import
between four and seven times their national production, being potential export
opportunities and market benchmarks for Colombia; For this, the unit production
costs per hectare must be reduced, as well as their yield and productivity
improved through the implementation of more and better technology in the crop areas . (Fedearroz & National Rice Fund. 2021. )
Table n° 1 Rice imports by Colombia according to
country of origin. (2017 to 2020) No. Countries 2017 2018 2019 2020 1 World 127,082 164,869 208.491 279.048 2 Ecuador 268 30.597 28.977 44.064 3 United
States 126.389 132.912 145.488 186,990 4 Peru 0 0 33.496 47.631 5 Thailand 195 207 276 117 6 Italy 141 130 138 146 7 India 64 4 79 59 Source : Own
calculations based on ITC and UNCOMTRADE. (2022).
Context
Central Zone.
Analyzing the cultivation
of rice in the Central Zone that includes the departments of Tolima, Valle del
Cauca, Caquetá, Huila, Cauca and Nariño measured in Rice Production Unit (UPA),
as presented in Table 2, 74.5% of these belong to areas smaller than ten
hectares, that is, small and medium producers; and that 59% of them are leased
units in terms of land tenure. (Fedearroz. 2017).
Table 2 Producers and Rice Production Units by region. Year 2016. Region Producers UPA* Colombia 16.378 25.256 Central area 5.232 10.111 Tolima 3.350 7.235 Selected
municipalities 1.710 3.797 *Rice
Production Unit Source: IV National Rice Census 2016 – DANE – FEDEARROZ.
(2017).
Focusing the
analysis on the municipalities of El Espinal, Saldaña, Flandes and Guamo as the
areas with the highest historical production and performance at the national
level, and according to information provided by the Development Plans of these
municipalities, it is highlighted that the main economic activity of the
territory It is found in the primary sector, represented by agricultural
activities, followed by the tertiary sector in the tourism, social, community
and personal services, transport services, restaurants and hotels sectors. In
the primary sector, the main crops are transitory like rice, corn and cotton,
as shown in Figure 2, although the growth of fruit crops such as mango in
recent years stands out.
Figure N° 2 Production of main crops by Municipality
in tons in 2021. Source : Own
elaboration based on Municipal Agricultural Evaluations - Ministry of
Agriculture and Rural Development. (2022).
Transient crops have a
greater participation in economic activity in the municipality of El Espinal,
since together they represent close to 80% of the production in tons for the
year 2021. In their order, the cultivation of corn stands out with a
participation of 54% and the cultivation of rice with a participation of 45%
over the total production in tons for the year 2021.
In the case of this
municipality, the advantage of having the irrigation district of the Coello
river stands out since it has allowed the expansion of the agricultural
frontier in the municipality since 1953, has facilitated the association of
small producers and agro-industrial development through value-added processes
to final agricultural goods; In addition, to facilitate workshops and
warehouses where elements for the sector are manufactured. (Government of
Tolima. 2014)
It should be noted that
these municipalities are located on main national roads that connect important
population centers such as Bogotá, Neiva, Ibagué, Girardot and Melgar mainly,
in addition to having a secondary and tertiary road network that interconnects
the agricultural productive sectors with the main markets, distribution and
consumption of the different products, although the government points out the
importance of restoring and expanding the network due to its normal
deterioration. (Municipal Council of El Espinal. 2017)
Likewise, the
municipality of Saldaña has rice cultivation as its main agricultural activity,
where it presents great challenges such as climate
change that causes increases in dry periods that, although it has the
irrigation district administered by USOSALDAÑA, there is a need to expand your
coverage with new technologies such as laser technology pools. The livestock
sector is also significant in the territory where alternatives such as
silvo-pastoral and agroforestry production systems are proposed, as well as
crop rotation. (Castro-Llanos, F., Hyman, G., Rubiano, J., Ramírez-Villegas, J.
& Achicanoy, H. 2019)
In this municipality
there is little diversification of the productive offer and therefore a high
dependence on the productive system of rice monoculture specifically; For this,
the municipal government proposes to improve the quality of life of the
producers through the use of the Guarantee Fund of the Agrarian Bank,
agro-industrial fairs and business roundtables. (Municipal Council of Saldaña.
2020)
Table 3 Planted
area (ha), production (ton) and yield (ton/ha) for rice cultivation by
municipality. Years 2007, 2011, 2016 and 2021 Year Criterion Espinal Flandes Guamo Saldaña 2007 Sown area 12.285 1.622 13.620 10.472 Production 75.678 16.115 95.763 67.860 Performance 8.3 8.0 7.6 7.5 2011 Sown area 12.300 2.652 11.881 9.400 Production 80.615 18.564 92.575 41.675 Performance 6.2 7.0 7.0 6.6 2016 Sown area 12.043 1.696 12.638 9.984 Production 91.362 12.320 98.114 67.359 Performance 7.5 7.2 7.7 6.7 2021 Sown area 8.135 771 10.300 9.200 Production 62.934 6.352 79.670 56.840 Performance 7.81 8.13 7.7 6.2 Source : Own elaboration based on Municipal
Agricultural Evaluations. Ministry of Agriculture and Rural Development. IV
National Rice Census 2016 - DANE – FEDEARROZ. (2022).
It is observed that
according to the production in tons, the municipality of El Guamo is the most
productive in the zone in the rice crop, being 60.33%, followed by the
cultivation of corn with a total of 37.9% and by the cultivation of cotton with
a total of 1.76% in the year 2021.
During the last fifteen years, the planted area data show a significant
reduction for all municipalities, highlighting the municipality of El Espinal,
which in 2007 had 12.285 planted hectares while in 2021 these were 8.135.
Regarding production indicators, in 2021 it is highlighted that the municipality
of El Guamo (with 79.670 tons) is the most
productive, followed by the municipalities of Espinal, Saldaña and Flandes, as
evidenced in Table 3.
Historical real prices and per capita
consumption.
The analysis of real
prices highlights a trend of high volatility during the last fifteen years with
significant variations close to 56% in periods of approximately three years,
for example in the month of October 2007 it starts at a low price for that date
of $904.956 per ton. to later rise to $1.557.618 in July 2008 and drop again to
$1.107.876 per ton in June 2009. After this. continuous growth can be observed
until reaching $1.403.170 per ton in August 2012, mainly due to the
phytosanitary crisis that caused crop vanishing[2] and a considerable
reduction in production for that date (Castro. F..
Hyman. G.. Rubiano. J..
Ramírez-Villegas. J. & Achicanoy. H. 2019), then the price dropped to
$1.070.075 per ton in August 2013.
Figure N° 3 Real prices at present value per ton of
green paddy rice. 2007-2022. Source : Own
calculations based on Fedearroz. (2022)
The yield is obtained by
dividing the production by the harvested area, a figure that is sometimes
different from the planted area data due to registered harvests from previous
periods. In the case of rice cultivation in the central zone, the yields in
2007 vary between 7.5 and 8.3 tons per hectare while in 2021 these vary between
6.2 and 8.1, evidencing a slight reduction in general terms.
Finally, it is highlighted
that for the year 2021 the municipality of Flandes has the highest yields with
8.1 tons per hectare, while the municipality of Saldaña presents the lowest
yields with 6.2 tons per hectare. It is evident in the last ten years that
although the yield has increased in all municipalities, production has
decreased during this period.
Subsequently, and for
recent years the price per ton becomes even more volatile since it continues in
a process of growth in real prices until reaching its maximum for the month of
February 2016 of $1.535.412, explained among other aspects by a climate change
phenomenon translated mainly into droughts, which caused a reduction in
production and an increase in price (Fedearroz 2021); where subsequently the
reference price falls to $896.073 in September 2017, registering a reduction
rate of 71.34% for a year and a half, as shown in Figure 3.
It is highlighted that
despite having evolved with a positive trend, real prices were in December 2017
and September 2021 at historical lows similar to those paid in August 2007.
showing high volatility that generates few incentives to the producer at the
time of investing since he considers this activity as unsafe in the long term,
casting doubt on future investment decisions in the sector.
Finally, in the acute
period of the Covid-19 pandemic between April 2019 and September 2021, the real
price per ton decreased by 84.57%. registering the minimum historical real
price in the last fifteen years, which was $988.406.05. a price that it was
below the production costs for the date, to later grow again in the economic
recovery period between October 2021 and August 2022 by 72.14% remaining at
$1.747.257 l.
Another additional factor
that causes price volatility and excess production in the economic system of
rice cultivation is the low added value of the final products in general as a
conversion alternative to the finished goods that exist today. (General
Comptroller of the Republic. 2020)
The per capita
consumption of white rice has increased in the last fifteen years as shown in
Figure 4, going from 39 in 2007 to 43.16 kilograms per person in 2021, being
higher in rural than urban areas in all periods. It is highlighted that during
2007 to 2016 the total average consumption remained relatively the same close
to 40 kilograms, where from 2017 to 2020 it grew significantly at a rate of 18%
total, reducing again between 2020 and 2021 at a rate of 6.8 %. a situation
that becomes more evident in the rural sector from 2019 to 2021. mainly due to
the economic crisis caused by the Covid-19 pandemic. (DANE and Fedearroz 2021)
Marketing and Financing.
The current situation
that Colombia is experiencing occurs in a context where a production of 3.3
million tons of white rice was obtained by 2021 in around 544.635 planted
hectares (5.365 hectares less compared to 2016) at the national level and it is
expected that to end the year 2022 and 2023. equal or higher figures are
achieved in this regard; However. this has not been entirely positive for
producers due to the fact that there is overproduction added to high costs,
where it is expected that the maximum prices of 2015 will not be reached again;
In addition. according to the Ministry of Agriculture and Rural Development,
there are about 652 thousand tons stored as of December 2020 which makes the
context more complex. (Parra-Peña. R.. Flórez. S.
& Rodríguez. D. 2022).
The marketing process for
rice cultivation in the area is relatively more organized and formal compared
to the other two transitory crops that are produced (corn and cotton) and which
has more options for the farmer when negotiating its production. In these
municipalities there are four large mills in charge of the commercialization.
processing and storage of the production such as; Diana Agrícola SAS., Molinos
Roa SA., Molinos Florhuila S.A., and Molinos Caribe SAS., however, Molino Diana
Agrícola SAS is the largest in terms of processing and storage capacity in the
area and traditionally plays a relevant role in terms of marketing, financing
and pricing to producers in the studied area. (Ediagro. 2005).
The lower production,
yield and profits of the crop in the area is reflected in a low demand for the
additional services provided by the mills such as financing, technical
assistance and sale of inputs, where the portfolio of delinquent debtors has
grown significantly and the beneficiaries of new credits have been clearly
reduced. This financing service focuses on the loan of a credit of
approximately $1.200.000 per hectare at the moment in which the crop is in
development, where everything possible is done so that this resource is used in
the lease payment; This is done by the financing entity, verifying through
technical assistance in the field compliance with the requested requirements,
in addition to other requirements such as having a contract in the case of
tenants. (DANE and Fedearroz 2021)
Faced with this
situation, the strategy of the mills in the area is to invest in mainly
imported machinery and technology for drying, threshing and packaging as a
national policy of modernization in each and every one of the plants in order
to be more productive. Competitive, efficient and with this achieve higher
profits in the market, as well as contribute to future opportunities with a
view to exporting the product. (Parra-Peña. R..
Flórez. S. & Rodríguez. D. 2022).
The mills paid $170.000
for the 125 kilograms load in 2021 with the producer paying for the
transportation that is included in the canceled price, where there is a price
band that allowed the mill to pay a target price at producer. Hence, there was
a certain level of uncertainty due to the scale of collection, production and
distribution where a reconversion is observed in the producing areas since a
large part of the planted zone in the central area has moved to the eastern
plains region where the rent of the land is cheaper, although some costs such
as transportation to collection and transformation centers are higher; In
addition. the limited access to water resources has been one of the key factors
preventing the agricultural frontier in this area from being able to expand,
which will transform the economic. Political, social and environmental panorama
of the area. (Fedearroz 2021)
Regarding financing and
credit, it is highlighted that the costs of the credit study established by
Banco Agrario based on which it defines the amount of the loan are the same for
small and medium-sized producers where the requirements, amounts and mainly
interest rates. On average, the credit that Finagro lends through Banco Agrario
is around $4.500.000 in total for eight months in the case of rice planting. It
should be noted that there are other financing lines to which the Bank carries
out, such as land adaptation, purchase of machinery (which has a term of five
years), this mainly depends on the price of the machinery while the land
adaptation credit it is linked to the needs of the client in what he intends to
invest, where in the case of machinery this does not exceed 80% of the price
for medium-sized producers and 100% of the price for small producers.
Regarding the interest
rates that Banco Agrario establishes in the line of transitory crops, as well
as for the other lines of credit for small producers in September 2022, it is
the Reference Banking Indicator (IBR) +6.7% Annual Cash (EA), (15.7% EA) and
for the medium producer it is IBR +7.85% EA (16.85% EA), where many times there
are no quotas of this type since they depend on the amount assigned by the
national government.
It is also highlighted
that there are several commercial houses that. in addition to selling inputs
are key players in financing, which charge rates close to and higher than
usury. this type of practice is popular since in these places they do not
request too many requirements and disburse immediately with the products
purchased. (Rebolledo. Mc. Ramírez-Villegas. J. Graterol. E. Hernández-Varela.
C. Rodríguez-Espinoza. J. Petro-Páez. E. Pinzón. S. Heinemann. A.
Rodríguez-Baide. J. Van Den Berg . M. 2018).
At present it can be
noted that the active portfolio of Banco Agrario in the area is approximately
25.600 loans placed for agricultural banking, specifically for working capital
in rice crops, these are mostly eight-month term loans that are assigned to
about 200 clients.
Finally, it is
highlighted that the land ownership certificate is a difficult requirement for
most farmers to meet when obtaining a loan, since a large proportion of the
producers are tenants (44% according to the IV National Rice Census 2016 )
(Fedearroz 2017) and not having this document prevents them from benefiting
from the loan. It is also difficult to comply with the leasing contract
requirement because having such a high price, the vast majority of producers do
not agree to terms of more than six months where the agreed times generally do
not match the new credit requested because Banco Agrario takes into account the
start date of the contract.
Evaluation of production costs and cost-benefit
ratio.
The situation of rice
crop in the central zone of the department of Tolima is relatively complex, due
to the fact that it faces high production costs, mainly due to high land rental
costs as evidenced in Table 4, a significant increase in prices of inputs which
mostly come from imported components and have been affected by the high
revaluation of the dollar against the peso in recent years, increases in the
billing of volumetric and fixed rates of the irrigation service by the
districts that operate in the zone and high costs in the seeds; This has
reduced profitability as a farming business in the region which has caused a
considerable impact on new investments in this activity. leading many producers
to move them to other regions such as the Eastern Plains, where rental costs
are much lower although with higher transportation and marketing costs. (Parra.
RI. Puyana. R. and Yepes. F. 2021)
Table N° 4. Evaluation of production costs for small and
medium producers of rice crop. Central area of Colombia year 2021. Heading Full Value % DIRECT COSTS Land preparation $523.106 6.50% Sowing $903.229 11.23% Weed control $558.076 6.94% Control of pests and
diseases $410.930 5.11% Fertilization $1.871.582 23.27% Irrigation $716.633 8.91% Taken from the Lot $356.741 4.44% Subtotal Direct Costs $5.340.308 66.40% Subtotal Indirect
Costs $2.702.657 33.60% TOTAL PRODUCTION
COSTS $8.042.965 100% Source : Own elaboration
based on Fedearroz. (2022).
It is also observed that although the irrigation item corresponds to
8.91% this is remarkable considering that the volumetric and fixed rates during
the last years have increased their value in the different irrigation districts
of the country.
Finally, indirect costs show an important relative weight within the
general structure since they represent 34% of total costs; mainly explained by
land leasing (25.59%) which has increased significantly in recent years due in
part to speculation caused by recent overproduction. (DANE 2020)
Elaborating the Benefit-Cost ratio analysis according to the data
obtained, it can be affirmed that for a period of approximately four months of
duration of the crop with average yields of 7.46 tons per hectare and with the
data previously exposed. $9'150.034 are generated as income. per hectare which
discounting the respective production costs results in a profit of $1.107.070.4
and a Cost-Benefit ratio of 1.13, that is for each peso invested in the
project, 0.13 pesos are obtained as a profit, it’s a relatively low value
compared to previous years since in 2011 and 2016 it was 0.26 and 0.24
respectively; This relationship is even slightly above the opportunity cost
measured by the 90 day Fixed-rate certificate of deposit (CD) of that date
(3.08%). which tells us that the investment is profitable to carry out as a project
productive compared to a fixed-term deposit option surpassing by 9.92% the
profitability offered by an option with very low risk. ( Gitman. L. and Madura. J.
2000).
5. CONCLUSIONS:
Colombia obtained 2.9 and 3.3 million tons of production in 2020 and
2021, ranking in the group that represents 9% of the total world production;
while its national average production reported in 2020 was 4.78 tons per
hectare standing at levels of the top fourth in this regard.
Colombia is a net importer of rice because in 2020
these were 279.048 and exports were 1.990 tons. The origin of imports is the
United States with 186.990 and Ecuador with a total of 44.064 tons mainly. The
country shows a high export potential to Central American and Caribbean
countries especially where the conditions of competitiveness of the sector must
be improved to allow diversification in products and markets as well as an
increase in added value.
The four municipalities studied in the Central Zone base their economy
on the primary and tertiary sector, that is the agricultural, commerce and
services sectors; as the main product of the primary sector is in its order
rice, corn and cotton. It is worth noting that in the cultivation of rice in
general, both the planted areas, production and yields per hectare have been
reduced in the last fifteen years in most of these areas.
Significant volatility in real
historical prices has been observed in the last fifteen years throughout the
period which generates uncertainty in decisions about long-term investment in
the crop.
Private free market and informal forms of marketing and financing of
crops in the area predominate, leaving producers at the expense of the
requirements, prices and provisions of individual marketers. It is observed
that there is little financing from Public and Commercial Banks, which has been
replaced by alternatives with private agents at high costs.
The production costs and the cost-benefit ratio are $8.042.965 and 1.13 per hectare respectively, that is to say that for each
peso invested in the project 0.13 pesos are obtained as a profit, highlighting the items of land rental, seeds,
fertilizers and irrigation; such as those that represent the highest percentage
of the total, while the profit per hectare for small and medium producers is
approximately $1.107.070.4 during the four months of the productive cycle.
The main causes that hinder the expansion and development of the crop in
the central zone of the Colombian inter-Andean valleys are: low profit margins
explained by high production costs, high import volumes, low export levels and
capacity, high volatility in real prices in the market, high costs and
informality in financing, uncertainty in marketing among other structural circumstances
such as land tenure mainly which has caused displacement of planted areas to
other areas of the country such as the Eastern Plains.
This research establishes a point of reference for future studies to
monitor the situation in the coming years to the aspects mentioned here with an
economic analysis methodology applicable to any crop or agricultural or
agro-industrial productive project in the country in addition to serving as a
reference in public and private policy decision-making in the sector.
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[1]A
rice producing unit is understood to be any land used in the production of
rice, with independent administration, regardless of size, tenure condition,
production system or production destination.”IV National Rice Census- DANE –
FEDEARROZ. 2017.
[2]Phytosanitary
disease characterized by a deficient load of grains in the ears of rice, also
affecting their quality. (Fedearroz 2017).