Exploring opportunities for diversification of specialized tobacco farms in the Northwest of Argentina

Abstract

In the Northwest of Argentina tobacco (Nicotiana tabacum L.) is economically and socially important. Tobacco mono-cropping, excessive tillage and inadequate irrigation management cause soil degradation. This and also tobacco production dependence on government subsidies and concern about health damage from tobacco consumption calls for research on diversification. The aim of this thesis was to explore opportunities for diversification of specialized tobacco farms in the Northwest of Argentina. The application of random and fixed effect econometric models to a pseudopanel of data of soil analysis reports showed positive elasticity between SOM (soil organic matter) and Nitrogen (N), Phosphorus (P) and Potassium (K) availability. The evaluation of SOM improvement through the use of green manure in relation to N (the only significant elasticity) showed that costs and benefits of green manuring would be equal if SOM would increase from the current content of 1.55 % to 3.61 % which is barely achievable. By applying Principal Component Analysis and Cluster Analysis to Agricultural Census data, four clusters of tobacco farms were determined. The largest two clusters in terms of number of farms (90%) concerned highly specialized tobacco farms with 23-24 ha of tobacco. The Analytic Hierarchy Process (AHP) technique was used to get a ranking of farming activities for diversification. The final weights of farming activities showed that especially livestock activities and spring-summer crops are important alternatives for tobacco production. Following this ranking of activities a quadratic programming model including maximization of expected income minus risk was applied to a typical specialized tobacco farm. The model results for the current situation showed that all irrigated land was devoted to tobacco production while the rest was used for soybean production, irrespective of the level of risk aversion of farmers, resulting in continuous soil degradation. In the situation with the requirement of no further soil degradation, tobacco and soybean were replaced for an important part by beef bull production (including the production of alfalfa and maize for silage for feeding) and farm gross margin decreased by 35% compared to the current situation. In the situation of abolishment of governmental subsidies on tobacco, the production plan consisted of soybean, beef bulls and tobacco; soil degradation was reversed but the gross margin of the farm decreased by some 60%.