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The Economics of Milk Production in Cajamarca, Peru, with Particular Emphasis on Small-Scale Producers

Published by:
Publication date
Number of Pages
Type of Publication:
Focus Region:
Latin America & the Caribbean
Focus Topic:
Agricultural Value Chains / Agri-Businesses
Type of Risk:
Managerial & operational
Garcia, O.; Gomez, C.A.
International Farm Comparison Network (IFCN)

The main purpose of this study was to gain insight into the household and farm economics of small-scale dairy farmers in Cajamarca, Peru and to obtain estimates of their costs per unit of output in milk production so as to gauge their potential for improvement and their vulnerability to international competition in the wake of regional trade negotiations.

The study applies a method of economic analysis developed by the International Farm Comparison Network (IFCN) which is based on the concept of ‘typical farms’. The following three farm types were found to represent over 75, 90, and 95 percent of the regions’ milk production, cow numbers and farm numbers respectively. The first type of farms (5 cows) represents the typical dairy farm in the Jalca-Ladera area (>2,800 metres above sea level); the second category (6 cows) was chosen to represent the majority of dairy farms in the high intra-mountainous valleys (2,600 to 2,800 masl), and finally, a third farm type (13 cows) represents the typical production system found in the Cajamarca valley (2,500 to 2,600 masl). Each farm was analyzed in detail and assets, production costs, profits and other economic information are presented graphically and are described in the text. In addition, the study contains a description and analysis of the margins in the dairy and feedstuffs chains operating in Cajamarca.

A number of conclusions emerge from the study. Increasing milk production in Cajamarca should be profitable for the farm types studied in the sierra, and appears to be a good strategy for the country as a whole since international milk powder prices are expected to increase. In general, the productivity of livestock in the sierra is low, offering ample scope for improvement. Improving nutrition through better forage production will be key to raising dairy productivity. The use of cultivated pastures, often promoted by dairy development programs, has only been successful in areas where irrigation is possible and where no direct competition with cash crops exists and more attention should therefore be paid to improving native rangelands. As significant parts of both the consumer prices for dairy products and the farmer prices for feedstuffs go towards covering processing, transportation, and retailing costs, dairy development in the region will demand more efficient chains that connect the high sierra farmers with the coastal markets for both farm inputs and outputs.

A five page executive summary is also available in addition to this paper.