Production of organic inputs optimizing agricultural efficiency
Production of organic inputs optimizing agricultural efficiency
Business Model Description
Develop and produce organic fertilizers as a natural alternative to enhance crop performance, with an emphasis on reducing production costs and environmental pollution.
Expected Impact
Providing naturally sustainable alternatives for agricultural profitability.
How is this information gathered?
Investment opportunities with potential to contribute to sustainable development are based on country-level SDG Investor Maps.
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Country & Regions
- Macroregion Norte
- Macroregion Sur
- Macroregion Selva
Sector Classification
Food and Beverage
Development need
- In 2022, the weight of the agricultural sector in the GDP is 6.1% (3)
- In December 2022, the year-on-year variation of the Agricultural Production Index was -0.96%, due to a decrease in agricultural activity of -2.43% (1).
- By the end of the year, the agricultural sector grew by 4.3% compared to the same period in 2021, driven by increased production in the Agricultural subsector (+5.5%) (2).
Policy priority
- Institutional Strategic Plan 2019-2024 (Modified) - MIDAGRI (Implement initiatives to improve agricultural services) (5).
- Agricultural Policy Guidelines: A guiding framework for decision-making by public and private sector actors (6).
- Food and Nutritional Security Law No. 31315: Development of public policies on food security (4).
Gender inequalities and marginalization issues
- Income disparities between men and women can affect consumption patterns in the food and beverage sector, such as:
- The average income of women is 69.6% of men's income - INEI (Sep-2022) (10).
- In 2021, men's labor income increased by 10.7%, while it decreased by 1.1% for women (11).
Investment opportunities introduction
- In 2021, it achieved a GDP growth recovery of 13.6% (12).
- The National Agricultural Policy (PNA) guides public investment towards providing services that strengthen the sector (14).
- Strategic National Development Plan 2050: references agricultural production within the framework of a broader vision of sustainable country development (7).
Key bottlenecks introduction
- Inflation was 6.43% in 2021 and 8.56% in 2022. This reduces the purchasing power of the population (15)(16).
- Agriculture in Peru has low productive efficiency, with 85% of farmers having plots smaller than 10 hectares (17).
- 17% of companies in the extractive sector reported difficulties in finding qualified personnel (18).
Food and Agriculture
Development need
- Agriculture has grown at an annual rate of 3.3%, allowing products to become competitive in international markets (19).
- Poverty among small agricultural producers is partly attributed to the inappropriate utilization of the natural resource base (17).
- In 2021, agricultural production was the second-largest employment-generating activity in Peru (20).
Policy priority
- The National Concerted Plan for the Promotion and Development of Organic or Ecological Production - PLANAE 2021-2030 aims to improve the competitiveness and sustainability of organic production (27).
- Law No. 29196 - Law on the Promotion of Organic or Ecological Production promotes sustainable and competitive development of organic production in Peru (25).
Gender inequalities and marginalization issues
- According to INEI in 2012, 46.9% of women receive lower incomes than men, with only 12.7% having reduced incomes. Additionally, although women make up 30.8% of those involved in agricultural and livestock activities, only 28.8% of the plots dedicated to this activity are managed by women (22)(23).
Investment opportunities introduction
- The FAE Agro, created to provide credit for working capital to agricultural producers, contributed USD 532 million in loans, benefiting more than half a million small producers. This is in addition to the funds from AgroPerú, the Arranca Perú program, and the MIDAGRI budget, totaling approximately USD 525 million in financing (13)."
Key bottlenecks introduction
- Peruvian agriculture has a high dependence on the importation of inorganic fertilizers, and it would require significant volumes of organic fertilizers to meet the demand of farmlands. However, these organic fertilizers must have competitive prices compared to conventional fertilizers to be widely adopted.
Agricultural Products
Pipeline Opportunity
Production of organic inputs optimizing agricultural efficiency
Develop and produce organic fertilizers as a natural alternative to enhance crop performance, with an emphasis on reducing production costs and environmental pollution.
Business Case
Market Size and Environment
USD 100 million - USD 1 billion
< 5%
In 2021, fertilizer imports in Peru amounted to USD 723 million (21).
Between 2019 and 2020, the domestic supply at purchaser prices decreased by 4.6%. However, the intermediate demand for inorganic fertilizers in the agricultural sector increased by 3.6% in terms of volume. In 2020, the agricultural sector accounted for 76.0% of the total supply of fertilizers, other fertilizers, and nitrogenous mixtures.
Indicative Return
> 25%
Feasibility studies in the production of solid and/or liquid organic fertilizers obtain a return on investment between 40% and 50%. (26)
Investment Timeframe
Short Term (0–5 years)
The estimated payback period for a proposal in organic input production is between 3 to 4 years, primarily due to the initial capital investment required for large-scale production.(26)
Ticket Size
USD 500,000 - USD 1 million
Market Risks & Scale Obstacles
Business - Supply Chain Constraints
Market - Volatile
Market - Highly Regulated
Impact Case
Sustainable Development Need
33.8% of farmers consider the contamination from agricultural pesticides to be very high, 35% consider it high, 26.3% consider it moderate, and 5% consider it low (32).
Land pollution from the use of fertilizers leads to a decrease in farmers' production, which, in turn, impacts their economy (32).
Gender & Marginalisation
It is estimated that there are over 107,367 producers nationwide engaged in this sector, of which 94% are small farmers who are associated and adhere to national organic standards as well as the demanding international markets (33).
Out of the total agricultural plots dedicated to farming, only 28.8% of them are managed by women, while 71.2% are managed by men, indicating an opportunity gap that arises from the predominant role of women in household occupations (9).
Expected Development Outcome
It promotes good agricultural practices and the efficient use of resources to produce healthy products for consumers using nature-friendly methods, positively benefiting agroecosystems.
Gender & Marginalisation
The proposal of the model aims to provide alternatives that allow farmers to avoid situations of stagnation and have variables that enable them to maintain their production consistently.
Primary SDGs addressed
2.3.2 Average income of small-scale food producers, by sex and indigenous status
80% of Peruvian consumers are becoming increasingly informed about the foods they consume, 46% prefer to buy organic products once a week. Likewise, 73% believe that food with local ingredients helps the environment. (12)
By 2030, doubling agricultural productivity and the income of small-scale food producers, especially women, indigenous peoples, family farmers, and livestock keepers.
Objective 2 of the Health Policy for 2023 in Peru is to improve infant and maternal feeding practices by incorporating iron-rich, diverse, nutritious, locally-sourced, and appropriately portioned foods within a context of healthy eating.
Secondary SDGs addressed
Directly impacted stakeholders
People
Corporates
Public sector
Indirectly impacted stakeholders
Corporates
Public sector
Outcome Risks
The prices of imported inorganic fertilizers are expected to decrease starting from the year 2023.
When women do not have equal access to these innovative inputs, it limits their ability to adopt more sustainable and efficient agricultural practices.
Impact Risks
Small-scale farmers have not been retained during the period of increased prices of imported fertilizers, and they may not engage in the market for organic products.
Small producers are unaware of the advancements and results in the use of organic fertilizers.
The 30.8% (691,921) of women participating in the agricultural sector may not have access to these products due to their cost..
Impact Classification
What
Improves crop yields, reducing production costs and environmental pollution.
Risk
Income from new, lower-priced inorganic fertilizers
Impact Thesis
Providing naturally sustainable alternatives for agricultural profitability.
Enabling Environment
Policy Environment
Institutional Strategic Plan 2019-2024 (Modified) - MIDAGRI: Develop and implement initiatives to improve agricultural services (5).
Agricultural Policy Guidelines: Guiding framework for decisions by public and private sector actors (6).
National Development Strategic Plan 2050: makes reference to agricultural production and fertilizers within the framework of a broader vision for the sustainable development of the country (4).
Concerted National Plan for the Promotion and Promotion of Organic or Ecological Production - PLANAE 2021-2030: With the aim of improving the competitiveness and sustainability of ecological production.
Financial Environment
Financial incentives: FAE-Agro will have an initial fund of US$531 million and aims to benefit approximately 300,000 small-scale family farmers with plots of less than 5 hectares.
Fiscal incentives: Law No. 31110, Law on Agricultural Labor Regime and Incentives for the Agricultural, Irrigation, Agro-export, and Agro-industrial Sector. Article 37 of the Income Tax Law establishes that taxpayers can deduct the necessary expenses to generate income.
Regulatory Environment
Law No. 31110. Law on the agrarian labor regime and incentives for the agricultural, irrigation, agro-export, and agro-industrial sector.
National agrarian policy: Aims to effectively address the various problems faced by agricultural producers. (22)
Law No. 29196 - Law for the Promotion of Organic or Ecological Production, which promotes the sustainable and competitive development of organic or ecological production in Peru.
Marketplace Participants
Private Sector
FOSAC, SINBIO, Fertigol
Government
- MIDAGRI - MINAM - PRODUCE
Multilaterals
- PromPerú - CAAE
Non-Profit
ACCA
Target Locations
Macroregion Norte
Macroregion Sur
Macroregion Selva
References
- (1) INEI (2023). Informe técnico de producción nacional diciembre 2022.
- (2) MIDAGRI (2022). Informe del Valor Bruto de la Producción Agropecuaria.
- (3) BCRP (2023). Notas de estudios diciembre 2022
- (4) Congreso de la República (2021), Ley N° 31315 - Ley de seguridad alimentaria y nutriciona
- (5) MIDAGRI (2022), Plan Estratégico Institucional 2019-2024 (Modificado)
- (6) MIDAGRI (2015), Lineamiento de política agraria
- (7) PCM (2022), Plan Estratégido de Desarrollo Nacional al 2050
- (8) Congreso de la República (2022), Ley N° 31556, que promueve medidas de reactivación económica de micro y pequeñas empresas de los rubros de restaurantes, hoteles y alojamiento turísticos.
- (9) INEI (2022). Perú Brechas de Género 2022
- (10) INEI (2022). Estadísticas con Enfoque de Género
- (11) GOB.PE (2022). Brecha de ocupación laboral - Nota de Prensa
- (12) EY (2022). Guía de Negocios e Inversión en Agricultura y Agribusiness en el Perú 2022/2023
- (13) GOB.PE (2020). Gobierno crea el FAE-AGRO para inyectar S/ 2,000 millones en créditos a pequeños productores - Nota de prensa
- (14) MIDAGRI (2021), D. S. N° 017-2021-MIDAGRI, Política Nacional Agraria 2021-2030
- (15) BCRP (2022). Reporte de Inflación . Diciembre 2022
- (16) INEI (2023). Variación de los Indicadores de precios de la Economía. Diciembre 2022
- (17) MIDAGRI (2022). Problemas tipo de la agricultura peruana
- (18) MTPE (2022). Encuesta de Demanda Ocupacional (EDO)
- (19) Fundación Friedrich Ebert (2021). La Agricultura Peruana Situación Post COVID-19
- (20) MEF (2020). Listado de empresas Reactiva Perú
- (21) MIDAGRI (2022). Panorama nacional e internacional del mercado de fertilizante
- (22) INEI (2017). Resultados definitivos del Censo 2017
- (23) INEI (2012). Inequidad de género en la actividad agropecuaria
- (24) SENASA (2022). MIDAGRI aprueba la creación del Sello nacional de producción orgánica para mejorar la competitividad del sector en el país
- (25) Congreso de la República (2008), Ley de promoción de la produccio orgánica o ecológica. Ley N° 29196
- (26) USIL (2020). Factibilidad para la elaboración de fertilizantes orgánicos.
- (27) MIDAGRI (2021), Plan Nacional Concertado para la Promoción y Fomento de la Producción Orgánica o Ecológica - PLANAE 2021-2030:
- (28) FOSAC
- (29) SINBIO
- (30) FERTIGOL
- (31) AGRARIA.PE (2022). Entrevista a PROMPERÚ
- (32) Revista Espacios (2019):Contaminación por plaguicidas agrícolas en los campos de cultivos en Cañete (Perú)
- (33) SENASA (2021): Con más de 460 mil hectáreas certificadas, Perú crece en producción orgánica