Agriculture

Agriculture

Highlights

• Gov. Fortuño appointed Javier Rivera Aquino as Secretary of Agriculture of the Island.
• Secretary Aquino announced that the plan for the sector was geared towards organizing a viable marketplace and getting to distribute locally grown products in an efficient matter.
• Gov. Fortuño announced that the gas pipeline of the south would be converted into a water main in order to boost agricultural production in the southern region. The governor's objective is to turn the region into the "breadbasket" of the Island.
• Agricultural production in 2008 saw reductions in most of the important products of the sector. Reflecting higher prices, Gross Agricultural Income increased by 1.2%.

Overview

Although agriculture still retains its importance in the local economy, it has declined considerably over the decades. As of fiscal year 2008, the share of the agricultural sector in the island's GDP in 2008 was 0.4%, and farm employment represents only 1.2% of total employment. The latest figures from the Puerto Rico Labor Department have employment at 19,000 in April.

Agricultural Income and its Main Products

Gross Agricultural Income (GAI) reached $792.0 million during fiscal year 2008, an increase of $9.6 million or 1.2%. The increase in GAI was more than the $785 forecasted last year, most liekely reflecting increases in prices of agricultural commodities. The main source of income came from milk, meat from poultry and other animals, eggs and live animals. In total, these products accounted for 47.9% of total GAI.

Dairy products, mainly fresh milk, are the main production sectors in terms of GAI, accouning for 23.2% of GAI. Gross income from milk farming reached $183.9 million in fiscal year 2008 or down by 1.9% 2007. Meanwhile, production of starchy vegetables rose by 25.9% in 2008 to $100 million, displacing poultry as the second main source of agricultural income.

Agricultural Production

In terms of physical output, agriculture had a bad year in 2008. Poultry farming decreased its output by 15.2% to 103,612 pounds in 2008. Other products, such as milk, coffee and pineapples also saw significant reductions in their production when compared to 2007. Milk production, the most important product in the Island's agricultural sector, has remained at about the same level of production since 1990. Total physical output dropped to 306,660 thousands of quarts, 10.4% less than in the previous year. However, it is not known if the reduction in milk production, or all of the other agricultural commodities, was solely due to climate issues, like the flooding of August, 2008, damages from the glancing blow of Hurricane Omar in October 2008, or to an overall downgrading of economic conditions in the Island.

Policy Incentives

The fiscal situation of the government has affected agricultural subsidies that, in turn, have seen a sharp reduction. In fiscal year 2005, total subsidies amounted to $95.1 million. By fiscal 2008, overall subsidies declined to $54.4 million, even lower than the $58.9 million disbursed in the previous year. Other policy initiatives which support the agricultural sector include a tax exemption on 90% of net income, property tax exemptions and tax credits for corporations that purchase local products.

The new administration plans to set forward several policy initives for the sector which include a $500 million dollar investment fund, zoning restriction for agricultural lands, develop training programs and developing distribution channels for local farmers.

The chief executive in charge of putting forward these initiatives is Javier Rivera Aquino, who was nominated by governor Fortuño to be the Island's Secretary of Agriculture. Mr. Rivera was unanimously confirmed by the Senate in a recent vote. Among the first initiaves of the new administration was changing the much maligned southern gas pipeline into a water main in order to fuel the southern region's agricultural production. The plan of the Fortuño administration is to turn the region into the "breadbasket" of the Island1.

Outlook

Agriculture's future will depend on a number of factors, which mitigate existing competitive disadvantages. These disadvantages include high labor costs and unavailability of labor, high cost of land and very high-energy costs. For example, in early 2009 the need for new workers for coffee farming was mitigated by bringing immigrant workers for the farming season. These and other mitigating factors will have a deciding say in the overall state of the industry in the next few years.