Nicaragua plans to double black bean production to fulfill Venezuela’s need. Some skeptics have raised concern about long-term effects.

By wpengine

0 Flares 0 Flares ×

In a year of transition following the death of controversial leader Hugo Chavez, Venezuela has been dealing with an issue that few would expect from one of the region’s wealthiest nations: food shortages.

To alleviate the problem, the oil-rich, import-dependent nation has looked to its neighbors, who happen to be political allies in the leftist anti-imperialist movement lead by Chavez. Using cheap oil as leverage, Venezuela has increased—or plans to increase—imports of many staple foods from countries like Nicaragua, Honduras and the Dominican Republic.

Black beans, a cheap source of protein already deeply ingrained in the local diet, are of particular interest to Venezuela, and the big supplier is Nicaragua. Traditionally a red bean producer whose principal markets are the United States and El Salvador, the Central American country has announced plans to double its black bean output this year to feed Venezuela’s rising demand.

To encourage producers to shift from red to black, the Nicaraguan government has offered seeds, supplies and a fixed price of 800 cordobas (US$ 32) per hundredweight of black beans during the harvest period. The government estimates that these measures will ensure a total planted area of 17,300 acres for 2013, up from the roughly 9,000 acres planted in 2012.

The National Farmers and Ranchers Union (UNAG) is on board with the government’s strategic plan and is even pushing for Nicaraguan bean producers to cut their total production of red beans in half by 2017 to make way for black beans.

“We are working with the Ministry of Agriculture and Forestry to manage this cycle well, above all to have enough beans to export to our Venezuelan brothers, along with other policies that the government has put into effect with our consensus,” said Álvaro Fiallos, president of UNAG.

 

RED BEAN 2012

BLACK BEAN 2012

TOTAL

Planted Area (acres) 707,484 9,065 716,549
Production 4.6 Million 80,180 4.7 Million
Average Yield (cwt per acre) 6.5 8.9
 

RED BEAN 2013

BLACK BEAN 2013

TOTAL

Planted Area (acres) 735,250 17,300 752,550
Production 5.1 Million 166,000 5.2 Million
Average Yield (cwt per acre) 7.0 9.6
 

The Risk For Producers

Several Nicaraguan economists and industry representatives have expressed concern over what they view as a hasty and short-sighted move that could harm producers in the long run. They warn against the instability of the Venezuelan market, arguing that Nicaragua should focus on traditional red bean markets and maintaining domestic supplies.

“While it is true that there is an opportunity in this market right now, we do not believe it will stay that way in the long term, which is why producers shouldn’t bank on these black bean programs,” said Felix Miranda, president of the National Bean Commission of the Association of Producers and Exporters of Nicaragua (APEN), which rejected the proposal to reduce red bean output in favor of black beans.

“There’s not much reliability in the black bean market. Moreover, red beans have better prices in the international market. In past years Venezuela was offering good prices for black beans, but then those prices dropped to the same level as those on the international market. And the price right now is not as attractive as many have said. The (pricing) trend for red beans is better,” Miranda said.

APEN also argued that the program will place traditional markets for Nicaraguan red beans—including the United States—in jeopardy and could negatively affect the country’s food security. In 2012 the Food and Agriculture Organization of the United Nations (FAO) recognized Nicaragua as being the only country in the region to achieve a reduction in malnutrition. It should be noted that 94% of all food production in the country belongs to small and medium-scale farmers, 80% of whom grow primarily beans, corn and rice.

Luis Arévalo, general manager of the Agricultural Exchange of Nicaragua SA (Bagsa), said the government should leave the decision of whether or not to plant more black beans up to the producers themselves.

“If there’s a market for red beans, they’re going plant them with a price in mind; the same goes for black beans. The producers are smart and they’ll know what variety to plant according to what’s best for them.”

Arévalo also pointed out that most producers plant red beans for their own consumption and that they export the leftovers to other countries in Central America.

“We mustn’t forget that in Central America we are mestizos and we like red beans,” he said.

Albalisa Monopoly and Other Issues

The biggest irony in the government’s plan to invert its bean industry to feed Venezuela is the fact that it won’t actually be selling the beans directly. Alba Alimentos de Nicaragua SA (Albalinisa), a private entity with a sizable monopoly over exports of beef, cattle, milk and black beans to Venezuela, will serve as intermediary between the Nicaraguan producers and Venezuelan buyers. Albalinisa has seen its profits increase tenfold since it began in 2008, surpassing US$ 500 million in 2011.

René Navas, president of the Carazo Agricultura Cooperative of Seed Producers (Caprosec), is weary of the black bean program for this very reason. He believes the incentives are just a way for the Nicaraguan government—whose Chief Executive Daniel Ortega happens to have friendly ties with Albalinisa—to coax producers before leaving them out to dry.

“Our only market for black beans is Venezuela, and it’s true that the country needs a great quantity of beans, but we cannot sell to them directly, only through Albalinisa. A hundredweight of beans sells for US$ 100 over there, and they only pay us US$ 32.”

Navas also mentioned the issue of Venezuela’s high quality standards, which will inevitably add on production costs for the Nicaraguan producers who could soon depend on this market.

“Producers that have gotten involved with these government programs to produce black beans have ended up disappointed because (Venezuela) has very high standards for quality. They won’t buy beans with even the slightest amount of debris in the grain and this has a very high cost that’s not compensated for. If the producer doesn’t comply with these quality requirements, they are punished with low prices or can’t sell the product at all,” Navas explained.

Despite these concerns, Nicaragua is already knee deep in black bean exports to Venezuela, which increased 531% between January and May of this year. In terms of profits, bean exports have raised some US$ 4.69 million this year versus US$ 681,000 over the same period in 2012. If Nicaragua continues to follow through with the plan, economists like René Vallecillo warn that it must proceed with caution.

“Giving priority to Venezuelan exports could lead to a steep rise in prices and internal supply issues. There has to be a plan. If not we could end up with more problems ourselves for having prioritized those of another country,” Vallecillo said.