Agriculture

Investing in quinoa

Exploring the market dynamics of an Andean staple

Quinoa consumption has risen sharply in recent years, creating a rapid increase in production and prices – and some unsustainable agricultural practices. But responsAbility client Irupana is supporting quinoa growers, and the industry’s long-term prospects.

Quinoa is a grain crop grown primarily for its edible seeds and has been a major source of nutrition for people in Bolivia, Ecuador, Peru, and Chile for several millennia.

However, in recent years, its nutritional value has led to a sharp increase in consumption in the US and Europe, and, therefore, a rapid increase in prices and production volumes.

Quinoa Case 01

Threats to industry’s long-term viability

The rise in the price of quinoa has been beneficial for growers in Bolivia. But it has also created a more competitive business environment, resulting in the spread of unsustainable agricultural practices, threatening the industry’s long-term viability.

Quinoa Case 02

Chenopodium quinoa is a member of the flowering plant family Amaranthaceae

Alternative food source

The exceptional nutritional properties of quinoa, and its resilience and adaptability to adverse climatic and soil conditions, have led the United Nation’s Food & Agriculture Organization (FAO) to promote it as an alternative food source for countries suffering from acute food insecurity.

Quinoa the superfood

Quinoa is the common name for ‘Chenopodium quinoa’, a member of the flowering plant family Amaranthaceae.  Cultivated by indigenous Andean populations for thousands of years, the ‘mother grain’ is gluten-free and has far larger quantities of protein, calcium, magnesium, potassium, iron and zinc, and vitamins A and E, than wheat, maize, barley, rice, and oats. It is also the only plant food known to contain all essential amino acids.

Altered consumption patterns

Quinoa’s transition from Amerindian staple to superfood has impacted local consumption patterns.

Rising prices have made it difficult for low-income households to afford quinoa. As prices for bread and rice have not increased at the same pace, households are now consuming these products as a more affordable alternative.

Given how much more nutritious quinoa is than wheat, maize, barley and rice, this development has prompted fears that malnutrition will increase as a result.

Case Study Quinoa EN

Read the full case study Quinoa: exploring the market dynamics of an Andean staple to see how global demand for quinoa rose sharply between 2007 and 2013, and how per capita consumption of quinoa in Bolivia has increased almost six fold.

Read the full case study Quinoa: exploring the market dynamics of an Andean staple to see how global demand for quinoa rose sharply between 2007 and 2013, and how per capita consumption of quinoa in Bolivia has increased almost six fold.

Read the full case study Quinoa: exploring the market dynamics of an Andean staple to see how global demand for quinoa rose sharply between 2007 and 2013, and how per capita consumption of quinoa in Bolivia has increased almost six fold.

Soaring demand: rising prices

While quinoa consumption has grown rapidly in the US, Canada and Europe, production is still concentrated in the Bolivian and Peruvian Highlands. In 2013, these two countries supplied over 95% of the world’s quinoa.

Although plans are underway to expand production in other locations, there is unlikely to be any substantial increase in the immediate future.

Charting the Quinoa boom – global exports and prices

Quinoa Case Graphic

This structural imbalance, with limited supply and soaring demand, is causing prices to rise sharply. 

Source
FAD 2014/INE, *Data up to August 2014
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Quinoa Case 03

Quinoa cultivation has expanded rapidly and become more mechanized: increased cultivation has a potentially detrimental impact on long-term soil fertility.

Unsustainable agricultural practices

The quinoa boom has also led to a more competitive and uncertain business climate as the number of farmers and private firms battling for market share has increased.

This has accelerated the spread of unsustainable agricultural practices that could threaten the long-term productivity of the ecosystem.

Irupana: committed to sound agricultural practices

However, some companies remain committed to sound agricultural practices. One such company is Irupana Andean Organic Food S.A. (Irupana), an investee of a responsAbility-managed fund since 2013.

Irupana is one of Bolivia’s premier natural and organic food companies. It supplies both local and international markets with a wide variety of Andean foods such as quinoa, amaranth, cañahua and tarhui.

Irupana works with over 200 affiliated smallholder producers and aims to:

  • Boost local consumption of grain crops grown in the Andes
  • Increase production of organic and added-value products that give producers access to higher-paying markets
  • Promote the long-term sustainability of the industry through a commitment to organic and sustainable practices

Challenging discrimination

One of Irupana’s missions is to challenge discriminatory views surrounding the consumption of local produce. It seeks to rebrand quinoa locally and make Bolivians proud of their national heritage.

Irupana has 17 local retail outlets that sell value-added products such as cereal bars, milk, and flour. These stores provide Irupana with a large platform to combat the negative stereotypes associated with quinoa and ensure a stable market for its products.

Quinoa Case 04

While quinoa tends to be associated with relatively affluent, health-conscious consumers in the West, its consumption in Bolivia often attracts negative prejudice.

200 affiliated producers

Irupana sources its high-quality quinoa from a core group of over 200 affiliated producers, most of whom are smallholders cultivating on less than five acres of land.

The surge in demand for quinoa has had a direct and powerful impact on producer incomes.

Profitability of quinoa cultivation (per hectare), at 2014 price range*

Quinoa Case Graphic 02

At 2014 prices, a smallholder farmer with 2 hectares of land can earn 1.5 times the minimum annual wage

Transforming lives

The quinoa boom has transformed the lives of producers, who now have more income left over after the harvest.

Smallholder farmers who cultivate quinoa benefit directly from their cooperation with Irupana. They receive technical assistance, a loyalty premium for each quintal of quinoa they supply and improved confidence in sustainable practices.

Overcoming challenges

However, the surge in prices has brought certain challenges. Banks have expanded lending to larger agricultural companies while leaving smallholders underserved. In an increasingly uncertain climate, their relationship with Irupana is more important than ever.

Pre-harvest financing

Working with responsAbility, Irupana can provide pre-harvest financing to producers. As such, it benefits from a more reliable supply of high-quality produce.

Irupana is committed to treating producers fairly; this includes paying them promptly for their produce.

Before working with responsAbility, the limited availability of local financing made it difficult for Irupana to pay producers up front.

responsAbility accepted export contacts as collateral for the loan to Irupana, giving it important access to financing.

Driving demand

Quinoa Case 05Quinoa’s reputation as one of the world’s most nutritious foods will continue driving demand for this product, leading to an expansion of the boundaries of the agricultural area in which it is produced.

By managing investments in companies like Irupana, responsAbility is supporting the development of sustainable livelihoods for quinoa growers while improving the long-term outlook for the industry.

Case Study Quinoa EN

Read how responsAbility is supporting the quinoa industry in the full case study Quinoa: exploring the market dynamics of an Andean staple.

Read how responsAbility is supporting the quinoa industry in the full case study Quinoa: exploring the market dynamics of an Andean staple.

Read how responsAbility is supporting the quinoa industry in the full case study Quinoa: exploring the market dynamics of an Andean staple.

The source for all information mentioned herein is responsAbility Investments AG unless not mentioned otherwise.

reponsAbility Investments AG is not an investor and does neither provide direct nor indirect financing. The mentioned investments in the specific markets, countries, companies, institutions, instruments, or sectors are exclusively transacted by the investment vehicles managed or advised by responsAbility Investments AG.