Improving Land Use by Slope Farmers in the Andes: An Economic Assessment of Small-Scale Sprinkler Irrigation for Milk Production

Milk production is an important source of secure and regular income, especially in mountain areas. However, slope farmers in the Andes commonly face difficulties in shifting to milk production, given the limited access to land and water for fodder production. The implementation of sprinkler irrigation to expand the cultivation of permanent fodder crops, reduce soil erosion, and enhance soil productivity would represent a promising step forward. This study stresses the feasibility for small-scale farmers of shifting to sprinkler irrigation. It draws on farm household data and analysis of 10 family-based sprinkler irrigation projects in northern Peru. A farm mization model and a farm investment model were applied to assess expected changes in production and profitability and the development of farmers' savings and liquidity over a 10-year period, Independent of the water efficiency gain, results show that smallholders face a strong cash flow (liquidity) problem when shifting to sprinkler irrigation. To make this investment feasible for farmers, longer repayment periods (of several years) should be implemented and interest rates kept low. Close collaboration between nongovernmental organizations (NGOs) and regional milk buyers would best guarantee credit because farmers' repayments could simply be deducted from regular milk bills. Given their own interest in increasing local milk supply, these milk buyers are also good NGO partners in implementation of effective extension to improve fodder and herd management, in order to maximize the payoff of the sprinkler investment.