Required Report - public distribution

**Date:** 8/18/2004

**GAIN Report Number:** CI4022

CI4022

**Chile**

**Grain and Feed**

**Annual**

**2004**

**Approved by:**

![](media/image1.wmf)Christine M. Sloop, Agricultural Attaché

U.S. Embassy Santiago

**Prepared by:**

Luis Hennicke, Agricultural Specialist

**Report Highlights:**

> **A larger wheat harvest due to good weather and high prices will
> result in a fall in imports for MY2003. Corn imports are expected to
> expand slightly in spite of the increase in planted area and
> production, as demand is expected to stay strong.**

Includes PSD Changes: Yes

Includes Trade Matrix: Yes

Annual Report

Santiago \[CI1\]

\[CI\]

Table of Contents

[**Executive Summary 3**](#executive-summary)

[Wheat 3](#wheat)

[Production 3](#production)

[Consumption 3](#consumption)

[Trade 3](#trade)

[Price Band 3](#price-band)

[PS&D Table 4](#psd-table)

[Import Trade Matrix 5](#import-trade-matrix)

[Corn 5](#corn)

[Production 5](#production-1)

[Consumption and Trade 5](#consumption-and-trade)

[PS&D Table 6](#psd-table-1)

[Import Trade Matrix 7](#import-trade-matrix-1)

# Executive Summary

Good weather and high wheat prices resulted in an increase in both
planted area and production in MY2003. As a result, lower wheat imports
are expected, both relative to our forecast and compared to last year's
imports. Another expansion in planted area and production is expected in
MY2004.

Chile's corn production for MY 2003 will expand as planted area and
yields have increased. The forecast for MY2004 also is positive. Import
requirements for MY 2003 and 2004 are expected to remain high, as
consumption is expected to increase due to an expected expansion in the
poultry and hog industries.

# Wheat

# Production

Although total wheat planted area fell slightly in MY2003, excellent
weather during the growing season (mainly in the southern production
areas, where 70 percent of Chile's wheat is produced) resulted in an
increased production. With moderate rains during the spring and no
frost, there were few problems with fungus and other diseases yields
reached an all time record average of 4.6 Metric Tons per hectare. These
factors also contributed to the excellent quality of the harvest.

For MY 2004, the initial planting survey forecasts only a small increase
in the planted area, when compared to the previous year. This increase
is attributed to expectations that wheat prices will remain stable and
the projected planted area for oats, an alternative crop to wheat, will
fall significantly. Oat prices have fallen to a third of what they were
at the beginning of the year. Consequently the planted area for oats is
expected to be a much smaller and farmers are expected to plant wheat on
some of that land instead.

## 

# Consumption

Although our PS&D table shows a slight increase in total consumption of
wheat, consumption for human use during the last few years has been
rather stagnant, albeit at a high level vis a vis the rest of the world.
According to the local bakery association, Chileans consume an average
of close to 100 kilos of bread per capita per year, making them the
second largest consumers of bread in the Western hemisphere after
Germany. Approximately 25,000 persons are employed in the industry.

# Trade

The new import figures are expected to be much smaller than previously
estimated, due to the increased availability of domestic wheat, which
reached a record high in MY2003. For MY2004, a further reduction in
imports is forecast, as larger harvests and stagnant consumption are
expected. Trade sources have indicated that half this year's imports
were durum wheat from Canada; the remainder was bread wheat mainly from
the U.S. and Argentina. For the second semester they expect to import
Soft White Wheat from the U.S., to be mixed with lower quality domestic
wheat.

Trade contacts report that domestic import decisions are normally driven
by price followed by quality, but sometimes price and/or quality take a
second seat when a shipload needs to be filled. Under these conditions a
higher price may be paid and/or a lower quality accepted for the
remainder portion of the shipment. Consequently, although you would
expect importers to get wheat from a U.S. supplier when a higher quality
product is sought, the supplier in a third country, even with a lower
quality product might get the sale.

# Price Band

In November 2003, the Chilean Government set floor and ceiling prices
for wheat. The values for the floor and ceiling prices are USD\$128
f.o.b. and USD\$148 f.o.b. respectively. These prices will remain fixed
until 2007. Starting 2008, the floor will be adjusted downward by 2% a
year, until 2014, when the President will evaluate whether to continue
with the price band system or eliminate it. The reference price will be
a fixed amount in USD per ton and it will be published six times a year.
The reference price will be based on an average of the daily price for
the 30 days preceding the date of publication. For the first semester
the relevant market will be FOB an Argentinean port and for the second
semester it will be soft red winter wheat #2, FOB Gulf of Mexico. It
will be applied on the date of entry of the goods. For wheat flour
imports, the same values of the wheat price band are applied, but these
are increased by 56%.

# PS&D Table 

# 

+----------------------+-----+-----+-----+-----+-----+-----+-----+
| Chile                |     |     |     |     |     |     |     |
|                      |     |     |     |     |     |     |     |
| Wheat                |     |     |     |     |     |     |     |
+----------------------+-----+-----+-----+-----+-----+-----+-----+
|                      | **  | **  | **  | **E | **  | **F | *   |
|                      | 200 | Rev | 200 | sti | 200 | ore | *UO |
|                      | 2** | ise | 3** | mat | 4** | cas | M** |
|                      |     | d** |     | e** |     | t** |     |
+----------------------+-----+-----+-----+-----+-----+-----+-----+
|                      | **U | **P | **U | **P | **U | **P |     |
|                      | SDA | ost | SDA | ost | SDA | ost |     |
|                      | Of  | Es  | Of  | Es  | Of  | Es  |     |
|                      | fic | tim | fic | tim | fic | tim |     |
|                      | ial | ate | ial | ate | ial | ate |     |
|                      | \[O | \[N | \[O | \[N | \[O | \[N |     |
|                      | ld\ | ew\ | ld\ | ew\ | ld\ | ew\ |     |
|                      | ]** | ]** | ]** | ]** | ]** | ]** |     |
+----------------------+-----+-----+-----+-----+-----+-----+-----+
| ######               |     | 1   |     | 1   |     | 1   | M   |
| ## Market Year Begin |     | 2/2 |     | 2/2 |     | 2/2 | M/Y |
|                      |     | 002 |     | 003 |     | 004 | YYY |
+----------------------+-----+-----+-----+-----+-----+-----+-----+
| **Area Harvested**   | 416 | 416 | 425 | 420 | 450 | 424 | (1  |
|                      |     |     |     |     |     |     | 000 |
|                      |     |     |     |     |     |     | HA) |
+----------------------+-----+-----+-----+-----+-----+-----+-----+
| **Beginning Stocks** | 282 | 372 | 441 | 471 | 406 | 443 | (1  |
|                      |     |     |     |     |     |     | 000 |
|                      |     |     |     |     |     |     | MT) |
+----------------------+-----+-----+-----+-----+-----+-----+-----+
| **Production**       | 1   | 1   | 1   | 1   | 1   | 1   | (1  |
|                      | 797 | 797 | 780 | 922 | 850 | 900 | 000 |
|                      |     |     |     |     |     |     | MT) |
+----------------------+-----+-----+-----+-----+-----+-----+-----+
| **TOTAL Mkt. Yr.     | 574 | 502 | 400 | 250 | 400 | 250 | (1  |
| Imports**            |     |     |     |     |     |     | 000 |
|                      |     |     |     |     |     |     | MT) |
+----------------------+-----+-----+-----+-----+-----+-----+-----+
| **Jul-Jun Imports**  | 420 | 369 | 500 | 430 | 400 | 235 | (1  |
|                      |     |     |     |     |     |     | 000 |
|                      |     |     |     |     |     |     | MT) |
+----------------------+-----+-----+-----+-----+-----+-----+-----+
| **Jul-Jun Import     | 147 | 118 | 0   | 263 | 0   | 0   | (1  |
| U.S.**               |     |     |     |     |     |     | 000 |
|                      |     |     |     |     |     |     | MT) |
+----------------------+-----+-----+-----+-----+-----+-----+-----+
| **TOTAL SUPPLY**     | 2   | 2   | 2   | 2   | 2   | 2   | (1  |
|                      | 653 | 671 | 621 | 643 | 656 | 593 | 000 |
|                      |     |     |     |     |     |     | MT) |
+----------------------+-----+-----+-----+-----+-----+-----+-----+
| **TOTAL Mkt. Yr.     | 12  | 0   | 15  | 0   | 15  | 0   | (1  |
| Exports**            |     |     |     |     |     |     | 000 |
|                      |     |     |     |     |     |     | MT) |
+----------------------+-----+-----+-----+-----+-----+-----+-----+
| **Jul-Jun Exports**  | 12  | 0   | 15  | 0   | 15  | 0   | (1  |
|                      |     |     |     |     |     |     | 000 |
|                      |     |     |     |     |     |     | MT) |
+----------------------+-----+-----+-----+-----+-----+-----+-----+
| **Feed Dom.          | 150 | 150 | 150 | 150 | 150 | 150 | (1  |
| Consumption**        |     |     |     |     |     |     | 000 |
|                      |     |     |     |     |     |     | MT) |
+----------------------+-----+-----+-----+-----+-----+-----+-----+
| **TOTAL Dom.         | 2   | 2   | 2   | 2   | 2   | 2   | (1  |
| Consumption**        | 200 | 200 | 200 | 200 | 200 | 220 | 000 |
|                      |     |     |     |     |     |     | MT) |
+----------------------+-----+-----+-----+-----+-----+-----+-----+
| **Ending Stocks**    | 441 | 471 | 406 | 443 | 441 | 373 | (1  |
|                      |     |     |     |     |     |     | 000 |
|                      |     |     |     |     |     |     | MT) |
+----------------------+-----+-----+-----+-----+-----+-----+-----+
| **TOTAL              | 2   | 2   | 2   | 2   | 2   | 2   | (1  |
| DISTRIBUTION**       | 653 | 671 | 621 | 643 | 656 | 593 | 000 |
|                      |     |     |     |     |     |     | MT) |
+----------------------+-----+-----+-----+-----+-----+-----+-----+

# 

# Import Trade Matrix

Note: Year 2004 figures are for January through June only.

  ------------------------- -------------- ----------------- --------------
  **Commodity**             **Wheat**                        

  **Time Period**           **Jan-Dec**    **Units:**        **M.T.**

  **Imports for:**          **2003**                         **2004**

  U.S.                      252584         U.S.              39682

  Others                                   Others            

  Canada                    139778         Canada            53998

  Argentina                 92308          Argentina         15081

  France                    8              Paraguay          5856

                                           Mexico            2

                                                              

                                                              

                                                              

                                                              

                                                              

                                                              

  **Total for Others**      232094                           74937

  **Others not Listed**     0                                  0

  **Grand Total**           484678                           114619
  ------------------------- -------------- ----------------- --------------

# 

# 

# Corn

# Production

Good prices, together with favorable weather, had a positive effect on
Chile's final total area planted and production in MY2003. Moderate
rainfall in the spring with no frost and almost no rain in the fall,
contributed to an excellent quality crop with no moisture problem. These
factors also contributed to an expansion in the production and another
increase is expected in MY2004, as the demand will stay strong due to
projected increases in poultry and hog production. Additionally, some
alternative crops, such as oats have been deteriorating vis a vis corn.
Prices for corn are expected to remain high, as world stocks are
reportedly not expanding as fast as global demand.

# Consumption and Trade

Although domestic corn production is expected to increase, due to an
expansion in the planted area together with an increase in yields,
imports are projected to remain stable, as the feed use in the hog and
poultry industries continues to expand.

Currently, Argentina is the largest supplier of bulk corn to Chile. This
situation is not expected to change, as Argentina continues to have
cost/quality advantage. Argentine corn also is subject to a lower import
duty rate than U.S. corn, as a result of the Mercosur (80 percent
preferential tariff difference). Currently, Argentina pays a duty of 1.2
percent, while U.S. corn is still subject to a 6 percent duty. The
U.S. - Chile Free Trade Agreement will remove this difference, but it
will not happen until January 1, 2006. As a result imports are expected
to come from Argentina and other MERCOSUR members until the reduction in
tariff takes place.

# PS&D Table 

+----------------+-----+-------+-----+-------+-----+-------+---------+
| Chile          |     |       |     |       |     |       |         |
|                |     |       |     |       |     |       |         |
| Corn           |     |       |     |       |     |       |         |
+----------------+-----+-------+-----+-------+-----+-------+---------+
|                | **  | *     | **  | **    | **  | **    | **UOM** |
|                | 200 | *Revi | 200 | Estim | 200 | Forec |         |
|                | 2** | sed** | 3** | ate** | 4** | ast** |         |
+----------------+-----+-------+-----+-------+-----+-------+---------+
|                | **U | *     | **U | *     | **U | *     |         |
|                | SDA | *Post | SDA | *Post | SDA | *Post |         |
|                | Of  | Est   | Of  | Est   | Of  | Est   |         |
|                | fic | imate | fic | imate | fic | imate |         |
|                | ial | \[Ne  | ial | \[Ne  | ial | \[Ne  |         |
|                | \[O | w\]** | \[O | w\]** | \[O | w\]** |         |
|                | ld\ |       | ld\ |       | ld\ |       |         |
|                | ]** |       | ]** |       | ]** |       |         |
+----------------+-----+-------+-----+-------+-----+-------+---------+
| **Market Year  |     | 03    |     | 03    |     | 03    | MM/YYYY |
| Begin**        |     | /2003 |     | /2004 |     | /2005 |         |
+----------------+-----+-------+-----+-------+-----+-------+---------+
| **Area         | 110 | 110   | 119 | 119   | 0   | 128   | (1000   |
| Harvested**    |     |       |     |       |     |       | HA)     |
+----------------+-----+-------+-----+-------+-----+-------+---------+
| **Beginning    | 275 | 205   | 256 | 213   | 206 | 276   | (1000   |
| Stocks**       |     |       |     |       |     |       | MT)     |
+----------------+-----+-------+-----+-------+-----+-------+---------+
| **Production** | 1   | 1190  | 1   | 1321  | 0   | 1410  | (1000   |
|                | 190 |       | 200 |       |     |       | MT)     |
+----------------+-----+-------+-----+-------+-----+-------+---------+
| **TOTAL Mkt.   | 1   | 1017  | 1   | 1050  | 0   | 1000  | (1000   |
| Yr. Imports**  | 000 |       | 000 |       |     |       | MT)     |
+----------------+-----+-------+-----+-------+-----+-------+---------+
| **Oct-Sep      | 933 | 854   | 1   | 870   | 0   | 850   | (1000   |
| Imports**      |     |       | 000 |       |     |       | MT)     |
+----------------+-----+-------+-----+-------+-----+-------+---------+
| **Oct-Sep      | 20  | 0     | 0   | 0     | 0   | 0     | (1000   |
| Import U.S.**  |     |       |     |       |     |       | MT)     |
+----------------+-----+-------+-----+-------+-----+-------+---------+
| **TOTAL        | 2   | 2412  | 2   | 2584  | 206 | 2686  | (1000   |
| SUPPLY**       | 465 |       | 456 |       |     |       | MT)     |
+----------------+-----+-------+-----+-------+-----+-------+---------+
| **TOTAL Mkt.   | 59  | 49    | 50  | 58    | 0   | 50    | (1000   |
| Yr. Exports**  |     |       |     |       |     |       | MT)     |
+----------------+-----+-------+-----+-------+-----+-------+---------+
| **Oct-Sep      | 57  | 0     | 50  | 0     | 0   | 0     | (1000   |
| Exports**      |     |       |     |       |     |       | MT)     |
+----------------+-----+-------+-----+-------+-----+-------+---------+
| **Feed Dom.    | 2   | 2000  | 2   | 2100  | 0   | 2200  | (1000   |
| Consumption**  | 000 |       | 050 |       |     |       | MT)     |
+----------------+-----+-------+-----+-------+-----+-------+---------+
| **TOTAL Dom.   | 2   | 2150  | 2   | 2250  | 0   | 2350  | (1000   |
| Consumption**  | 150 |       | 200 |       |     |       | MT)     |
+----------------+-----+-------+-----+-------+-----+-------+---------+
| **Ending       | 256 | 213   | 206 | 276   | 0   | 286   | (1000   |
| Stocks**       |     |       |     |       |     |       | MT)     |
+----------------+-----+-------+-----+-------+-----+-------+---------+
| **TOTAL        | 2   | 2412  | 2   | 2584  | 0   | 2686  | (1000   |
| DISTRIBUTION** | 465 |       | 456 |       |     |       | MT)     |
+----------------+-----+-------+-----+-------+-----+-------+---------+

# Import Trade Matrix

Note: Year 2004 figures are for January through June only.

+-----------------+----------------+----------------+----------------+
| **Commodity**   |                | #              |                |
|                 |                | ##### **Corn** |                |
+-----------------+----------------+----------------+----------------+
| **Time Period** | **Jan-Dec**    | **Units:**     | **M.T.**       |
+-----------------+----------------+----------------+----------------+
| Imports for:    | 2003           |                | 2004           |
+-----------------+----------------+----------------+----------------+
| U.S.            | 1517           | U.S.           | 0              |
+-----------------+----------------+----------------+----------------+
| Others          |                | Others         |                |
+-----------------+----------------+----------------+----------------+
| Argentina       | 968292         | Argentina      | 381987         |
+-----------------+----------------+----------------+----------------+
| Brazil          | 30513          | Brazil         | 15977          |
+-----------------+----------------+----------------+----------------+
| Paraguay        | 7987           | Peru           | 9              |
+-----------------+----------------+----------------+----------------+
| Peru            | 8              | Canada         | 2              |
+-----------------+----------------+----------------+----------------+
| Germany         | 1              | Mexico         | 1              |
+-----------------+----------------+----------------+----------------+
|                 |                |                |                |
+-----------------+----------------+----------------+----------------+
|                 |                |                |                |
+-----------------+----------------+----------------+----------------+
|                 |                |                |                |
+-----------------+----------------+----------------+----------------+
|                 |                |                |                |
+-----------------+----------------+----------------+----------------+
|                 |                |                |                |
+-----------------+----------------+----------------+----------------+
| **Total for     | 1006801        |                | 397976         |
| Others**        |                |                |                |
+-----------------+----------------+----------------+----------------+
| **Others not    | 0              |                | 0              |
| Listed**        |                |                |                |
+-----------------+----------------+----------------+----------------+
| **Grand Total** | 1008318        |                | 397976         |
+-----------------+----------------+----------------+----------------+