Speeches of the ICAC

Title: Cost of Agronomic Operations to Grow Cotton in Latin American Countries

Delivered by: Dr. M. Rafiq Chaudhry, Head, Technical Information Section

Delivered to: 5th Meeting of Latin American Association of Cotton Research and Development ("ALIDA")

Location: Managua, Nicaragua

Date: 13 November, 1995


The Technical Information Section of the International Cotton Advisory Committee (ICAC) recently completed an exercise to assess cost of production of raw cotton in the world. This is an exercise which is done every three years to keep the data updated. Thirty one countries participated in the latest survey conducted on the crop year 1994/95. However, in line with the theme of the conference, "Management of Varieties with Emphasis on Fiber Quality," I will be presenting a comparison of the cost of agronomic operations in the Latin American countries. My presentation will not be complete if data for some non-agronomic operations is not included in the paper. Thus, I have added some non-agronomic features in my paper which will ultimately conclude to the cost of producing a kilogram of seedcotton and lint.

Out of 31 countries who participated in the survey, nine belong to the Latin American region. These nine countries represented about 98% of the total cotton area grown in this region during 1994/95. Data from across region countries is not a part of this paper. Let me admit that it is not an easy task to assess cost of production of cotton. Differences in the production practices and local methods to assess cost of production make inter-country comparisons extremely difficult. Individual input comparisons are probably more valid.

Seed

Seed is not only a fundamental input but poor quality of seed cannot be compensated with any other input. I believe that in addition to what seed quality might really contribute to higher yield, better quality of seed enhances the confidence of growers to invest more and grow cotton more securely. The data from nine countries showed that seed and seed treatment costs range from only US$ 11 in Ecuador to over US$ 60 in Cauca Valley in Colombia. It is expensive to buy seed for planting in Colombia, Paraguay, Bolivia, Peru and Nicaragua. For some countries, the possible reason may be importing treated seed from abroad. If it is possible to multiply seed and maintain purity within a country cost savings could be achieved by importing varieties instead of seed.

Fertilizers

The data received from Argentina and Bolivia show that synthetic fertilizers are generally not used in these two countries. In Argentina, on the average only 2% area is treated with nitrogenous fertilizers; phosphorous and potassium are not applied. The data from other countries showed that the maximum amount spent on fertilizers occurs in Peru, followed by Colombia (irrigated conditions), Brazil and Ecuador. The reason for higher fertilizer costs in Peru, Colombia and Ecuador is that higher doses of nitrogen fertilizers are applied to grow cotton. Though nitrogen fertilizer is not applied in heavy doses, the cost of fertilizers is high in Brazil because of addition of phosphorous and potassium nutrients. Low cost in Paraguay is due to the fact that nitrogen fertilizers are not applied to cotton.

Weed Control

Weeds can be controlled either manually, mechanically or through the application of pre and post emergence herbicides. Herbicides are not used in many countries of the world. In this region, herbicides are used on 98% of the total cotton area in Colombia and 50% of the total cotton area in Brazil. They are applied on less than 2% of the total area in Paraguay. Data on the cost of herbicide use is not available from Brazil, but it is most expensive to use herbicide control methods in Colombia where over US$ 200 are spent on this operation. Herbicide use is expected to become more popular in many countries. Extensive use of herbicides in Colombia does not require other methods to control weeds; manual or mechanical methods are used in all other countries to get rid of weeds. In Brazil, more dollars are spent to control weeds by methods other than chemicals than in any other country.

Combination of chemical and other methods showed that with the exception of Colombia, there is no significant variation among countries in respect to weed control costs in the region. Slightly higher costs in Brazil, Paraguay and Bolivia are due to the combination of chemicals and physical methods.

Insecticides

Insecticides are the most important group of agrochemicals applied to grow cotton. In terms of quantity, insecticides follow fertilizers. On the basis of data received from the participating countries, it is observed that all cotton area is treated with insecticides at least once during the season. However, about 8% of the total area does not get insecticides in Brazil, most probably it is perennial cotton because only 20% of the total perennial cotton is sprayed. Insect pressure determines how many times a crop should be sprayed. The data showed that over US$ 300/ha are spent to control insects in Nicaragua and Mexico, higher than in any other country. Guatemala may be even higher than this but data from Guatemala were not available. To some extent, Colombia has been able to control insect control costs. It is still least expensive to control insects in Argentina and Paraguay but with the introduction of the boll weevil in these countries, insect control costs may rise in the next few years.

Irrigation

Most of the cotton grown in the region is not irrigated. However, irrigation facilities are available in some areas in Argentina, Colombia, Mexico and Peru. In the Lower and Middle Sinu area of Colombia, cotton is properly irrigated and it costs over 300 dollars to irrigate one hectare to obtain a good harvest.

Land Rent

The vast majority of cotton grown in Argentina, Brazil, Mexico, Paraguay and Peru is self cultivated and data for cost of renting land to grow cotton are not available. The data are available from Bolivia, Colombia, Ecuador and Nicaragua. The data showed that the cost of renting one hectare to grow cotton costs about US$ 250 in Cauca Valley of Colombia. Under rainfed conditions, the way most of the cotton is grown in Colombia, the cost of using land to grow cotton is US$ 162. In Bolivia, Ecuador and Nicaragua, land rent per hectare is less than US$ 100.

Pre-Sowing Operations

So far, the cost of seven individual inputs which may be used before planting, at the time of planting cotton or during the process of growing cotton has been discussed. Pre-sowing costs include pre-soaking irrigation and cultivation of land in fallow to enhance fertility or to control weeds. On the basis of available information including land rent, pre-sowing operation costs are the highest in Colombia and Mexico. If land is not rented, due to the high cost of pre-soaking irrigation, it is most expensive to prepare fields for planting of cotton in Mexico.

Sowing Operations

Sowing operations include soaking irrigation, seed and seed treatment, land preparation, fertilizers applied at the time of planting and pre-emergence herbicides and drilling of seed. It is least expensive to plant cotton in Argentina, less than US$ 50/ha. Mainly, it is because of non-utilization of synthetic fertilizers and minimum use of herbicides. The same two factors boost the sowing cost in Colombia, Ecuador and Paraguay. In Peru, much more attention is paid to the preparation of land for planting which enhances the cost of sowing operations.

Growing Operations

After planting, until cotton is ready for harvesting, thinning, weeding, irrigation, insect control and defoliation (if machine picked), have to be carried out. These operations are again most expensive in Colombia and Peru. The main reason for differences among countries is a greater difference in costs of insecticides and fertilizers.

Harvesting

Cotton is mostly machine picked in Argentina and Mexico. Cost of harvesting one hectare of cotton ranges from US$ 159 in the case of Bolivia to US$ 385 in Mexico. In Peru, it costs US$ 360 to pick one hectare of Tanguis cotton. In all other countries, the cost of harvesting one hectare of cotton is close to US$ 200.

Cost of Producing Seedcotton

The cost of producing one hectare of cotton includes all operations from pre-sowing to harvesting except land rent which has been excluded in order to make comparisons more reliable. Cost per hectare of seedcotton is over US$ 1,000 in Colombia, Mexico and Peru. It ranges between US$ 500-700 in Bolivia, Brazil, Ecuador, Nicaragua and Paraguay. It is least expensive to grow one hectare of cotton in Argentina.

Cost of producing a kilogram of seedcotton is also the minimum in Argentina i.e. 20 cents/kg. In Colombia, it is not only that the total cost/ha is higher, cost per kg of seedcotton is also the highest. Cost per kg of seedcotton is 48 cents in Brazil, 44 cents in Paraguay, 36 cents in Ecuador, 34 cents in Mexico and 31 cents in Nicaragua. Though the total cost/ha for seedcotton production is higher in Mexico, higher seedcotton yield reduces per kg cost of seedcotton.

Cost of Ginning

Cost of ginning includes transportation to gin factory, ginning and classing/grading charges. Data on ginning were not available from Brazil and Peru. However, the data from other countries showed that ginning is least expensive in Nicaragua followed by Paraguay, US$ 60 and US$ 107 respectively. Ginning cost is over US$ 200 in the Santiago region of Argentina, Cauca Valley of Colombia and Mexico, apparently, because of higher seedcotton yield/ha.

Economic and Fixed Costs

Economic costs mean management/administrative, interest on capital, all repairs and general farm overhead costs. Fixed costs mean cost of power supply, irrigation system, tractors and farm implements. Some countries have not reported all components of these costs, particularly fixed costs, but it is assumed that they are covered under various other heads. These costs are highest in Ecuador, followed by Colombia, Mexico and Brazil.

Total Cost

Total cost for producing a specific quantity of lint, excluding land rent and value of seed, greatly varies among countries in the region. Total cost is the highest in Colombia followed by Mexico i.e. US$ 1700 and 1464/ha respectively. It is least expensive to produce cotton in Argentina and Nicaragua.

It is also true to say that, compared with other countries in the region, a kilogram of lint is produced at a lower cost in Nicaragua and Argentina. Total cost/ha may be lower in some countries but due to low yield, cost per kg of lint becomes higher. It is particularly true in case of Brazil, Ecuador and Paraguay. Thus, it is assumed that lower prices may have a significant impact on planting cotton in Colombia, Brazil, Ecuador and Paraguay.

Structure of Cost

Structure of cost has been computed from the seedcotton cost including all pre-sowing operations/costs and harvesting costs. Though it is possible to calculate a similar chart for every country, cost structure has been shown for three countries. In Bolivia, one fourth of total cost goes to insect control. Similar expenditure is incurred on harvesting. Weed control formed 16% of total cost.

In Mexico, insect control and harvesting costs are very much similar to Bolivia. Irrigation and weeding are 18% and 7% of total seedcotton cost.

Paraguay has a different cost structure compared with Bolivia and Mexico. Cost of weeding is 18% but insect control costs are only 8% of total costs. Harvesting and fertilizers constitute 33% and 15% of total cost respectively.


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