Required Report - public distribution

**Date:** 3/8/2006

**GAIN Report Number:** GT6002

GT6002

**Guatemala**

**Oilseeds and Products**

**Annual**

**2006**

**Approved by:**

![](media/image1.wmf)Stephen Huete, Agricultural Counselor

Office of Agricultural Affairs

**Prepared by:**

Karla Tay, Agricultural Specialist

**Report Highlights:**

Guatemala domestic consumption of oils and grease is 200,000 MT/year.
Palm oil and palm kernel oil account for 93% of the country's
production, and provide 76,300 MT of oil for the food processing
industry. In 2005 palm oil production was 90,000 MT. For 2006 palm oil
production is expected to increase to 150,000 MT. The local food
processing industry is shifting from the use of soybean oil to palm oil,
for frying purposes. Palm oil is more cost effective as it is more
stable for frying and it is 20% cheaper than soybean oil. Soybean oil
imports are forecast to drop from 70,600 MT to 34,300 in 2006.

Includes PSD Changes: Yes

Includes Trade Matrix: Yes

Unscheduled Report

Guatemala \[GT1\]

\[GT\]

Table of Contents

[Executive Summary 3](#executive-summary)

[Production 4](#production)

[Oilseeds 4](#oilseeds)

[Meals 6](#meals)

[Consumption 7](#consumption)

[Oils 7](#oils)

[Meals 8](#meals-1)

[Trade 8](#trade)

[Stocks 10](#stocks)

[Policy 10](#policy)

[Marketing 10](#marketing)

# Executive Summary

Guatemala's palm oil production is expected to increase from 90,000 MT
in 2005 to 150,000 MT in 2006. Domestic consumption is expanding, thanks
to the oil's stability for frying and competitive cost. Imports of
soybean oil, which directly compete in the food industry, may experience
a drop from 70,600 MT in 2005 to 34,300 MT in 2006, as palm oil is
aggressively conquering new niches.

Palm oil and palm kernel oil account for 93% of Guatemalan oil
production. The final 7% corresponds to soybean oil, which only covers
8% of the local demand. Argentina shared 30-40% of soybean and soybean
meal imports before 2004. The U.S. shares in 2004 and 2005 showed a
considerable increase. Guatemala imports 96% of its soybean oil and 76%
of its soybean meal from the United States. Guatemala's total oil and
grease consumption in 2005 was estimated in 200,000 MT. A general 5%
increase is expected for 2006.

The animal feed industry imported 241,400 MT of meals in 2005. Local
meal production roughly covers 15% of the local demand.

Guatemala exports 76,300 MT of palm oil, mainly to Mexico and El
Salvador. Total imports of soybean oil are domestically consumed. Crude
sunflower seed oil is mostly imported from the U.S. and the refined oil
is re-exported to the rest of the Central American countries. El
Salvador is the major importer for Guatemala's sunflower oil.

# Production

Guatemala is the third largest producer of palm oil in Central America,
providing 18% of the region's palm oil. Both palm oil and palm kernel
oil account for 93% of the Guatemalan oil production. Soybean oil
constitutes 7% of the country's oil production.

## Oilseeds

  --------------------- ------------- ---------- ----------------- ---------- -------------- ----------
  PSD Table                                                                                   

  Country               Guatemala                                             (1000 HA)      
                                                                              (1000          

  Commodity             Oil, Palm                                             TREES) (1000   
                                                                              MT)            

                        **Revised**   **2004**   **Preliminary**   **2005**   **Forecast**   **2006**

                        Old           New        Old               New        Old            New

  Market Year Begin                   10/2003                      10/2004                   10/2005

  Area Planted                        29.7                         37.5                      39.7

  Area Harvested                      15.1                         15.6                      26.8

  Bearing Trees                                                                               

  Non-Bearing Trees                                                                           

  Total Trees                                                                                 

  Beginning Stocks      0.0           7.8        0.0               7.0                       7.0

  Production            115.0         95.6       115.0             98.9                      154.5

  Imports               16.0          17.1       15.0              19.3                      5.5

  Imports from U.S.     0.0           0.0        0.0               0.0                       0.0

  TOTAL SUPPLY          131.0         120.5      130.0             125.2                     167.0

  Exports               68.0          75.8       70.0              76.3                      79.0

  Domestic Consumption  63.0          37.7       60.0              41.9                      79.5

  Ending Stocks         0.0           7.0        0.0               7.0                       8.5

  TOTAL DISTRIBUTION    131.0         120.5      130.0             125.2                     167.0
  --------------------- ------------- ---------- ----------------- ---------- -------------- ----------

Palm oil production in Guatemala is distributed among 4 major producers:
Hame, Indesa, Superior, and Agrocaribe. From the 39,650 Ha planted, 900
Ha belong to independent producers that provide palm fruits to
Agrocaribe, who provides both processing and technical assistance.
Average palm oil yields per year are estimated in 7 MT/Ha (7,000 Kg/Ha).
Total oil yield of palm, including kernel oil, is estimated in 7.6
MT/Ha. Palm oil represents 23% of the fruit content while palm kernel
oil is roughly 2% of the fruit's oil. Palm kernel oil accounts for 10%
of the total extracted oil.

Palm oil farms and processing plants are located in the North (Petén),
Northwest (Izabal), and South Coast. Productivity in the South Coast is
higher than in the Northwest, but production costs are higher due to
irrigation requirements. The operation efficiency is comparable between
both the South Coast and the Northwest production areas. Petén will
probably replace the South Coast plantations in a couple of years, since
rainfall in the Petén is more evenly distributed through the year and
better approaches oil palm's needs.

Production of fruit and oil varies during the year according to the wet
and dry seasons. Production peaks from August to October, when each
month's production accounts for 16.5% of the total annual production.
From January to March, the drier months, roughly 1.5-2.0% of the
production is processed monthly.

Worldwide demand for palm oil showed a steep annual increase from 3.24%
to 5.85% of the total demand for oils in 2003/2004. Guatemala has also
increased its planted area from 29.7 to 37.5 thousand Ha. Harvested area
is dramatically increasing in 2006, allowing a production jump from
90,000 MT to 150,000 MT. Since palm flowering and palm fruit production
heavily rely upon rains, Guatemalan producers are very positive about
this year's production because La Niña is forecast with above average
rain and because production is moving to the rainier Atlantic side.

Most of the planting seed for palm production comes from Costa Rica, and
the most popular varieties grown in Guatemala are English Deli x Econa
and Deli x Aros (ASD Costa Rica), Dami Las Flores (Hacienda Las Flores),
Deli x Yangambi (ASD Costa Rica); Costa Rica selected lines Deli x
Ghana, Deli x Nigeria (ASD Costa Rica), French line Deli x Irho, and
Deli x La mé. The main lines with better adaptation in Guatemala are
Deli x Ghana, Deli x Irho, and Damila Flores. These varieties allow for
20-25% extraction efficiency and have a 65-70% olein content. New clones
(Fran and Tornado, from Costa Rican origin and selection) under test
production may increase yields from 7 MT/Ha to 10 MT/Ha as these clones
can be planted in higher densities (200 plants/Ha). New hybrids (Elaeis
guineensis x Elaeis oleifera), also under test production, have 85%
olein content, thus potentially increasing extraction efficiency up to
35-40%.

## 

  --------------------- ------------- ---------- ----------------- ---------- -------------- ----------
  PSD Table                                                                                   

  Country               Guatemala                                             (1000 HA)      

  Commodity             Oil, Soybean                                          (1000 MT)      

                        **Revised**   **2004**   **Preliminary**   **2005**   **Forecast**   **2006**

                        Old           New        Old               New        Old            New

  Market Year Begin                   10/2003                      10/2004                   10/2005

  Area Planted                        13.0                         13.5                      13.0

  Area Harvested                      11.0                         12.5                      10.0

  Beginning Stocks                    0.5                          0.5                       0.5

  Production                          6.2                          7.0                       7.7

  Imports                             67.9                         70.6                      34.3

  Imports from U.S.                   64.9                         67.8                      34.3

  TOTAL SUPPLY                        74.6                         78.1                      42.5

  Exports                             0.0                          0.0                       0.0

  Domestic Consumption                74.1                         77.6                      42.0

  Ending Stocks                       0.5                          0.5                       0.5

  TOTAL DISTRIBUTION                  74.6                         78.1                      42.5
  --------------------- ------------- ---------- ----------------- ---------- -------------- ----------

## 

Soy is a minor crop in Guatemala. Most soy production is found in the
South Coast. Soy is grown primarily for meal production; the oil is
considered a by-product. Guatemala produced about 7,000 MT of soy oil in
2005. Guatemala imports 92% of the soybean oil from the U.S. Since local
restaurants and food processors are showing greater interest in
domestically produced palm oil, it is possible that U.S. soy oil exports
will fall in 2006, possibly by up to half.

  --------------------- ------------- ---------- ----------------- ---------- -------------- ----------
  PSD Table                                                                                   

  Country               Guatemala                                             (1000 HA)      

  Commodity             Oil,                                                  (1000 MT)      
                        Sunflower                                                            
                        seed                                                                 

                        **Revised**   **2004**   **Preliminary**   **2005**   **Forecast**   **2006**

                        Old           New        Old               New        Old            New

  Market Year Begin                   10/2003                      10/2004                   10/2005

  Area Planted                                                                                

  Area Harvested                                                                              

  Beginning Stocks      0.0           0.0        0.0               3.4                       3.5

  Production            0.0           0.0        0.0               0.0                       0.0

  Imports               15.0          25.6       22.0              23.9                      23.0

  Imports from U.S.     14.0          25.4       21.0              25.9                      14.0

  TOTAL SUPPLY          15.0          25.6       22.0              27.3                      26.5

  Exports               8.0           9.2        8.0               9.0                       8.5

  Domestic Consumption  7.0           13.0       14.0              14.8                      14.7

  Ending Stocks         0.0           3.4        0.0               3.5                       4.1

  TOTAL DISTRIBUTION    15.0          25.6       22.0              27.3                      27.3
  --------------------- ------------- ---------- ----------------- ---------- -------------- ----------

## Meals

Meals are produced in Guatemala for animal feed, almost exclusively
devoted to the poultry industry. Local production of soybean and palm
kernel meal account for 15% of the local demand, forcing the animal feed
industry to import 241,400 MT of meals in 2005.

## 

  --------------------- ------------- ---------- ----------------- ---------- -------------- ----------
  PSD Table                                                                                   

  Country               Guatemala                                             (1000 HA)      

  Commodity             Soybean meal                                          (1000 MT)      

                        **Revised**   **2004**   **Preliminary**   **2005**   **Forecast**   **2006**

                        Old           New        Old               New        Old            New

  Market Year Begin                   10/2003                      10/2004                   10/2005

  Area Planted                        13.0                         13.0                      13.0

  Beginning Stocks      0.0           0.0        0.0               0.0                       0.0

  Production            0.0           27.6       0.0               31.1                      34.2

  Imports               227.0         215.3      240.0             230.0                     243.8

  Imports from U.S.                   175.9                        169.5                     175.0

  TOTAL SUPPLY          227.0         242.9      240.0             261.1                     278.0

  Exports               0.0           0.0        0.0               1.1                       0.6

  Domestic Consumption  227.0         242.9      240.0             260.0                     277.4

  Ending Stocks         0.0           0.0        0.0               0.0                       0.0

  TOTAL DISTRIBUTION    227.0         242.9      240.0             261.1                     278.0
  --------------------- ------------- ---------- ----------------- ---------- -------------- ----------

  --------------------- ------------- ---------- ----------------- ---------- -------------- ----------
  PSD Table                                                                                   

  Country               Guatemala                                             (1000 HA)      

  Commodity             Palm kernel                                           (1000 MT)      
                        Meal                                                                 

                        **Revised**   **2004**   **Preliminary**   **2005**   **Forecast**   **2006**

                        Old           New        Old               New        Old            New

  Market Year Begin                   10/2003                      10/2004                   10/2005

  Area Planted                        29.7                         37.5                      39.7

  Area Harvested                      15.1                         15.6                      26.8

  Beginning Stocks                    0.0                          0.0                       0.0

  Production                          10.3                         10.6                      18.2

  Imports                             0.0                          0.0                       0.0

  Imports from U.S.                   0.0                          0.0                       0.0

  TOTAL SUPPLY                        10.3                         10.6                      18.2

  Exports                             0.0                          0.0                       0.0

  Domestic Consumption                10.3                         10.6                      18.2

  Ending Stocks                       0.0                          0.0                       0.0

  TOTAL DISTRIBUTION                  10.3                         10.6                      18.2
  --------------------- ------------- ---------- ----------------- ---------- -------------- ----------

# 

# Consumption

Guatemala's total oil and grease consumption in 2005 was estimated in
200,000 MT. A 5 percent increase is expected for 2006.

## 

## Oils

Guatemala's vegetable oil production continues to increase as local
consumption of vegetable oil, shortening, and margarine increases.
Exports of finished oils and margarines to neighboring countries are
experiencing a similar increase. The food industry is the major consumer
of palm oil. Big companies in Guatemala, like Frito Lay and Bimbo, have
shifted 100% of their consumption of soybean oil to palm oil; palm oil
is more cost effective as it allows more frying per serving. Margarine
producers are also more interested in palm oil due to its low
trans-fatty acid and antioxidant characteristics.

There is considerable expansion potential for oil consumption in
Guatemala. Total per capita oil consumption in Guatemala is 18 kg,
compared to Mexican oil consumption of 35 kg. Guatemalan palm oil
producers consider there is still great potential for higher "good oil"
consumption, and that lard and tallow use might eventually shift to palm
oil.

Palm kernel oil or "palmist" is used in the cosmetic and soap industry
to provide creamy properties. Local and Mexican companies using
Guatemalan palmist are Colgate and Procter & Gamble. This oil might
potentially replace tallow if Guatemala can increase its production in
order to meet demand. In 2006, an estimate of 13,043 MT of palmist is to
be produced. Guatemala imported almost 50,000 MT of tallow in 2005.

## Meals

The preferred oil meals in the Guatemalan feed sector are soybean meal,
palm kernel meal, and fishmeal. The poultry industry is the main
importer of soybean meal. The cattle industry is beginning to increase
its use of meals.

# 

# Trade

Guatemala's palm oil imports are primarily refined oil. Roughly 2% of
crude palm oil, for future processing, is imported to cover export
commitments with Mexico and Central America. Mexico and El Salvador are
the major export markets for Guatemala's palm oil.

Soybean oil imports from the U.S. showed a two-fold increase in 2004,
positioning the U.S. as the main provider for Guatemala. Argentina used
to provide 30-40% of Guatemala's total soybean oil imports.

Refined sunflower seed oil was also imported from Argentina before 2004.
For the last two years, the U.S. provided 99% of the market. The oil
refining companies are using more soybean and palm oil than sunflower
seed oil, mainly due to price considerations. The average fob price for
soy oil was \$ 500 / MT in 2005, growing 4.5% annually. In contrast, the
average fob price for palm oil has been steady at \$ 400 / MT.

At least 80% of imported soybean meal comes from the U.S. Argentina
shared 15% of Guatemala's imports, but the trend is to bring most of the
soybean meal from the U.S. due to lower prices and cheaper
transportation costs.

  ------------------ -------------- ------------ ------------- ------------
  Import Trade                                                  
  Matrix                                                       

  Country            Guatemala                                  

  Commodity          Oil, Palm                                 (1,000 \$)

  Time Period        Jan-Dec                                   (1,000 MT)

  Imports for:       2004           Units        2005          Units

  U.S.               0.0            0.0          0.4           0.0

  Others                                                        

  Honduras           8,144.0        14.5         7,646.1       14.5

  Malaysia           1,010.2        2.3          242.6         0.6

  Indonesia          131.0          0.2          0.0           0.0

  El Salvador        71.6           0.1          27.1          0.0

  Total for Others   9,356.8        17.1         7,915.8       15.1

  Others not listed  37.0           0.0          14.1          0.1

  Grand Total        9,393.8        17.1         7,929.9       15.2
  ------------------ -------------- ------------ ------------- ------------

  ------------------ -------------- ------------ ------------- ------------
  Export Trade                                                  
  Matrix                                                       

  Country            Guatemala                                  

  Commodity          Oil, Palm                                 (1,000 \$)

  Time Period        Jan-Dec                                   (1,000 MT)

  Exports for:       2004           Units        2005          Units

  U.S.               0.0            0.0                        0.0

  Others                                                        

  Mexico             17,665.2       36.3         15,865.0      38.2

  El Salvador        15,752.2       26.7         12,818.0      23.4

  Nicaragua          2,583.4        3.8          1,596.0       2.4

  Honduras           25.3           0.0          96.0          0.2

  Total for Others   36,026.1       66.8         30,375.0      64.2

  Others not listed  0.1            0.1          26.0          0.1

  Grand Total        36,026.2       66.9         30,401.0      64.3
  ------------------ -------------- ------------ ------------- ------------

  ------------------ -------------- ------------ ------------- ------------
  Import Trade                                                  
  Matrix                                                       

  Country            Guatemala                                  

  Commodity          Oil, Soybean                              (1,000 \$)

  Time Period        Jan-Dec                                   (1,000 MT)

  Imports for:       2004           Units        2005          Units

  U.S.               39,503.8       64.9         43,108.2      81.4

  Others                                                        

  Argentina          1,615.8        2.2          0.0           0.0

  Costa Rica         344.0          0.4          75.7          0.0

  Mexico             335.9          0.4          10.6          0.0

  El Salvador        71.3           0.0          402.6         0.6

  Total for Others   2,367.0        3.0          488.9         0.6

  Others not listed  0.7            0.0          1.5           0.0

  Grand Total        41,871.5       67.9         43,598.6      82.0
  ------------------ -------------- ------------ ------------- ------------

  ------------------ -------------- ------------ ------------- ------------
  Import Trade                                                  
  Matrix                                                       

  Country            Guatemala                                  

  Commodity          Oil, Sunflower                            (1,000 \$)
                     seed                                      

  Time Period        Jan-Dec                                   (1,000 MT)

  Imports for:       2004           Units        2005          Units

  U.S.               16,354.2       25.7         9,165.9       14.0

  Others                                                        

  Costa Rica         140.7          0.1          94.1          0.1

  El Salvador        91.1           0.1          93.1          0.1

  Panama             18.1           0.0          32.5          0.0

  Total for Others   109.2          0.2          219.7         0.2

  Others not listed  141.8          0.0          17.7          0.0

  Grand Total        16,605.2       25.9         9,403.3       14.2
  ------------------ -------------- ------------ ------------- ------------

  ------------------ -------------- ------------ ------------- ------------
  Export Trade                                                  
  Matrix                                                       

  Country            Guatemala                                  

  Commodity          Oil, Sunflower                            (1,000 \$)
                     seed                                      

  Time Period        Jan-Dec                                   (1,000 MT)

  Exports for:       2004           Units        2005          Units

  U.S.               0.0            0.0          0.0           0.0

  Others                                                        

  El Salvador        6,636.7        6.5          6,738.8       6.6

  Nicaragua          941.6          1.0          659.1         0.7

  Panama             381.0          0.7          108.9         0.2

  Honduras           482.2          0.6          401.8         0.5

  Costa Rica         524.9          0.5          524.9         0.5

  Total for Others   8,966.4        9.3          8,433.5       8.5

  Others not listed  54.5           0.0          0.0           0.1

  Grand Total        9,020.9        9.3          8,433.5       8.6
  ------------------ -------------- ------------ ------------- ------------

# Stocks

Stocks for all oils and meals are less than 8,000 MT. From the total
supply, 98-100% is consumed and/or exported. The whole world market
roughly holds stocks for 38 days.

# 

# Policy

Under CAFTA, Guatemalan tariffs on crude vegetable oils will go to zero
immediately from the current 15%. The exception is crude palm oil, which
will retain a 5% tariff phased out over 10 years. Stearin will have a
25% tariff, to be eliminated in 15 years. Refined oils will continue to
be subject to a 15% tariff, to be phased out over 15 years.

# Marketing

Guatemalan producers are promoting palm oil as a healthy product
contributing to the improvement of the environment. Reportedly, the oil
palm plantations in Guatemala generate close to 1 million tons of oxygen
and sequester 2 million tons of carbon annually. In addition, palm oil
does not contain cholesterol nor trans fatty acids, but is rich in HDL
and has 60 times the antioxidant power of Vitamin B (tocopherol), as
tocotrienol molecules.

Refined palm oil is not available for retail sale due to its stearin
content, which forms a solid film around the liquid oil at room
temperature, and its red natural color. Malaysia (major palm oil
producer), Indonesia, Ecuador and Brazil market red palm oil as a
finished product. Colombia will make its first trials with red oil in
2006/7. Guatemala expects similar trials for 2007/8, as the new hybrids
(*Elaeis guineensis* x *Elaeis oleifera*) are ready to be harvested.

Palm oil producers are interested in promoting biodiesel production and
use in Guatemala. A 4.0 million ton production, equivalent to 4% of
Guatemala's diesel consumption, could have a great impact in the
environment and allow Guatemala to comply with the Kyoto Protocol. The
principal barrier to biodiesel use is that present laws do not allow the
addition of biofuels to diesel. The proposal would have to be supported
by the government. Meanwhile, German models of biodiesel plants are
already being analyzed.