Required Report - public distribution

**Date:** 11/28/2006

**GAIN Report Number:** CI6033

CI6033

**Chile**

**Avocado**

**Annual**

**2006**

**Approved by:**

![](media/image1.wmf)Joseph Lopez, Agricultural Attaché

Office of Agricultural Affairs

**Prepared by:**

Luis Hennicke, Agricultural Specialist

**Report Highlights:**

**Output and exports of avocados are expected to increase this year, as
a result of more planted area coming into production.**

Includes PSD Changes: Yes

Includes Trade Matrix: Yes

Annual Report

Santiago \[CI1\]

\[CI\]

Table of Contents

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

[Production 3](#production)

[Consumption 3](#consumption)

[Table -- Chile: Avocado Planted Area, Production and Exports
4](#table-chile-avocado-planted-area-production-and-exports)

[Trade 4](#trade)

[Policy 4](#policy)

[Market Development 5](#market-development)

[PSD Table 5](#psd-table)

[Export Trade Matrix 6](#export-trade-matrix)

# Executive Summary

Chilean avocado production will continue to increase in the coming
years, as there are still a large number of orchards entering their most
productive stage. Although the total area planted to avocados has
increased significantly during the last few years, industry sources
indicate that the rate of increase in planted area is expected to level
off. Excellent gains made in export markets in the past are the main
reason for the significant increase in dedicated land use to avocados.
But as prices are falling together with an expected increase in
competition from Mexico in key export markets like the US, a slowdown in
the planting expansion will occur.

# Production

For MY2005 (Jan-Dec 2006) a larger than both, last year and previously
estimated avocado production is expected as a large number of newly
planted orchards are coming into production. Although it is early to
predict MY2006 (Jan-Dec 2007), further expansion in production is
expected as the planted area, which has grown significantly over the
last few years as a result of excellent returns, comes into production.
Weather also has been favorable during flowering in most producing
areas. Future increases in planted area will be mainly in Hass varieties
for the export market. Avocado production is sensitive to climactic
conditions, particularly to low temperatures during flowering and
temperature changes. Weather largely accounted for production variations
in the past.

Most Chilean avocados are produced in arid regions with little rain,
except during the winter months, consequently most orchards are
frequently free of pests and spraying is not necessary. Production area
has expanded during the last few years. Increases in planted land have
been almost exclusively devoted to the Hass variety, which represents
over 75 percent of total production.

As prices of avocados have been falling during the last few years, total
area planted to avocados is not expected to keep expanding as in the
past. Additionally, the strong demand observed in the past in Chile's
most important market, the United States, is expected to fall
significantly once Mexican avocados gain access to all 50 States.
Mexican avocados enter the US duty free.

A little over 98 percent of all Chilean commercial avocado trees are
planted in the central area of the country ‑ from Region IV through
Region VI. The predominant areas are Region V (Quillota, Aconcagua
Valley and La Ligua, Petorca) with 61 percent of the total and the
Metropolitan Region with 21 percent of the total. The largest expansion
in planting during the last few years has been in Region V, followed by
the Metropolitan Region and Region IV. Although almost all of the
expansion has been dedicated to the Hass variety, there are over 20
other varieties planted.

# Consumption

Despite the recent increases in consumption, per capita domestic use is
still considered to be fairly low for a producing country -- around 3.5
Kg. per person. To increase domestic consumption, the Chilean avocado
producers association has a domestic promotional campaign that focuses
on a nutrition and health message. The promotional campaign will go from
October 1, 2006 through January 31, 2007 with an estimated cost of US\$
800, 000. It consists of ads on the street, newspapers, magazines, radio
and TV campaign and in-store promotion in 40 supermarkets.

+----------------+-----------------+-----------------+-----------------+
| ## Tabl        |                 |                 |                 |
| e -- Chile: Av |                 |                 |                 |
| ocado Planted  |                 |                 |                 |
| Area, Producti |                 |                 |                 |
| on and Exports |                 |                 |                 |
+----------------+-----------------+-----------------+-----------------+
| Years          | Planted Area    | Production (MT) | Exports (MT)    |
|                | (Ha)            |                 |                 |
+----------------+-----------------+-----------------+-----------------+
|                |                 |                 |                 |
+----------------+-----------------+-----------------+-----------------+
| 1973           | 4,490           | 14,500          | \-              |
+----------------+-----------------+-----------------+-----------------+
| 1980           | 6,180           | 25,000          | 12              |
+----------------+-----------------+-----------------+-----------------+
| 1985           | 7,605           | 28,900          | 1,200           |
+----------------+-----------------+-----------------+-----------------+
| 1990           | 8,315           | 38,800          | 11,557          |
+----------------+-----------------+-----------------+-----------------+
| 1995           | 11,560          | 48,000          | 12,000          |
+----------------+-----------------+-----------------+-----------------+
| 1999           | 19,800          | 80,550          | 34,788          |
+----------------+-----------------+-----------------+-----------------+
| 2000           | 21,202          | 95,000          | 52,049          |
+----------------+-----------------+-----------------+-----------------+
| 2001           | 21,800          | 98,000          | 52,492          |
+----------------+-----------------+-----------------+-----------------+
| 2002           | 22,900          | 129,000         | 78,071          |
+----------------+-----------------+-----------------+-----------------+
| 2003           | 23,300          | 148,000         | 97,646          |
+----------------+-----------------+-----------------+-----------------+
| 2004           | 24,500          | 170,000         | 113,508         |
+----------------+-----------------+-----------------+-----------------+
| 2005           | 24,900          | 177,000         | 136,412         |
+----------------+-----------------+-----------------+-----------------+
| 2006           | 26,731          | 195,000         | 136,500 1/      |
+----------------+-----------------+-----------------+-----------------+
| 2007           | 27,500          | 205,000         | 145,000 2/      |
+----------------+-----------------+-----------------+-----------------+
|                |                 |                 |                 |
+----------------+-----------------+-----------------+-----------------+
| Note: 1/       | Estimate        |                 |                 |
+----------------+-----------------+-----------------+-----------------+
| 2/             | Forecasts       |                 |                 |
+----------------+-----------------+-----------------+-----------------+
| Source:        |                 |                 |                 |
| Ministry of    |                 |                 |                 |
| Agriculture,   |                 |                 |                 |
| Central Bank   |                 |                 |                 |
+----------------+-----------------+-----------------+-----------------+

# Trade

The US market received 85 percent of Chile's total avocado exports in
2005. However exports to the EU, mainly Spain, Netherlands and the
United Kingdom increased significantly. Although export volumes to the
EU countries combined do not exceed 9 percent, they increased over 20
percent in 2005 when compared to the previous year. A big industry
effort is made to diversify their markets. Additionally a strong Euro,
contributed in increasing exports to the other destinations, in 2006.
The share of total exports to the EU countries is expected to reach 30
percent in CY2006.

As a result of the US-Chile FTA, Chile obtained a duty free quota of
49,000 M.T. beginning with CY2004. This quota increases 5 percent yearly
over the next 12 years, after which avocados will enter the US duty
free.

Chilean avocado exports are highly dependent on the U.S. market. The
California Avocado Commission's promotional campaign will continue this
year, which is financed trough the Check Off program. The budgeted
amount for 2005-06 was approximately 5.4 million dollars.

# Policy

The Chilean Government has no subsidy or special tax incentives for
avocado production or exports. Imports are charged a 6 percent uniform
duty rate. There is a proposed law, called \"Law for the Recovery and
Promotion of the Native Forest\", which has been sitting in Congress
since 1992 that could affect future expansion of avocado plantings if
approved. The proposed law also calls for preservation of the hillsides
that will restrict replacements of native trees and bushes to fruit
plantings. Most of the new plantings during the last three years have
been in hillsides, as these present an advantage over flatland in
relation to frosts. The bill has gone through lengthy discussions and
still has not been approved, mainly due to differing views among the
various government agencies involved.

# Market Development

Although avocados from California and Mexico can enter the Chilean
market, this country's rather large, year‑around avocado production and
low domestic prices tend to discourage commercial imports for all but a
few months during the marketing year.

<table>
<colgroup>
<col style="width: 23%" />
<col style="width: 8%" />
<col style="width: 8%" />
<col style="width: 8%" />
<col style="width: 7%" />
<col style="width: 9%" />
<col style="width: 8%" />
<col style="width: 7%" />
<col style="width: 7%" />
<col style="width: 7%" />
</colgroup>
<tbody>
<tr class="odd">
<td colspan="10"><h1 id="psd-table">PSD Table</h1></td>
</tr>
<tr class="even">
<td>Country</td>
<td colspan="9">Chile</td>
</tr>
<tr class="odd">
<td>Commodity</td>
<td colspan="6">Avocados, Fresh</td>
<td colspan="3">(HECTARES)(1000 TREES)(MT)</td>
</tr>
<tr class="even">
<td></td>
<td>2004</td>
<td>Revised</td>
<td></td>
<td>2005</td>
<td>Estimate</td>
<td></td>
<td>2006</td>
<td>Forecast</td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td>USDA<br />
Official</td>
<td>Post<br />
Estimate</td>
<td>Post<br />
Estimate<br />
New</td>
<td>USDA<br />
Official</td>
<td>Post<br />
Estimate</td>
<td>Post<br />
Estimate<br />
New</td>
<td>USDA<br />
Official</td>
<td>Post<br />
Estimate</td>
<td>Post<br />
Estimate<br />
New</td>
</tr>
<tr class="even">
<td>Market Year Begin</td>
<td></td>
<td>01/2005</td>
<td>01/2005</td>
<td></td>
<td>01/2006</td>
<td>01/2006</td>
<td></td>
<td>01/2007</td>
<td>01/2007</td>
</tr>
<tr class="odd">
<td>Area Planted</td>
<td>24900</td>
<td>24900</td>
<td>24900</td>
<td>25200</td>
<td>25200</td>
<td>26731</td>
<td>0</td>
<td>0</td>
<td>27500</td>
</tr>
<tr class="even">
<td>Area Harvested</td>
<td>20900</td>
<td>20900</td>
<td>20900</td>
<td>21050</td>
<td>21050</td>
<td>21050</td>
<td>0</td>
<td>0</td>
<td>22000</td>
</tr>
<tr class="odd">
<td>Bearing Trees</td>
<td>6820</td>
<td>6820</td>
<td>6820</td>
<td>6862</td>
<td>6862</td>
<td>6862</td>
<td>0</td>
<td>0</td>
<td>7172</td>
</tr>
<tr class="even">
<td>Non-Bearing Trees</td>
<td>1304</td>
<td>1304</td>
<td>1304</td>
<td>1354</td>
<td>1354</td>
<td>1354</td>
<td>0</td>
<td>0</td>
<td>1548</td>
</tr>
<tr class="odd">
<td>Total No. Of Trees</td>
<td>8124</td>
<td>8124</td>
<td>8124</td>
<td>8216</td>
<td>8216</td>
<td>8216</td>
<td>0</td>
<td>0</td>
<td>8720</td>
</tr>
<tr class="even">
<td>Production</td>
<td>177000</td>
<td>177000</td>
<td>177000</td>
<td>190000</td>
<td>190000</td>
<td>195000</td>
<td>0</td>
<td>0</td>
<td>205000</td>
</tr>
<tr class="odd">
<td>Imports</td>
<td>365</td>
<td>0</td>
<td>365</td>
<td>320</td>
<td>0</td>
<td>741</td>
<td>0</td>
<td>0</td>
<td>500</td>
</tr>
<tr class="even">
<td>Total Supply</td>
<td>177365</td>
<td>177000</td>
<td>177365</td>
<td>190320</td>
<td>190000</td>
<td>195741</td>
<td>0</td>
<td>0</td>
<td>205500</td>
</tr>
<tr class="odd">
<td>Exports, Fresh</td>
<td>136412</td>
<td>120000</td>
<td>136412</td>
<td>132000</td>
<td>132000</td>
<td>136500</td>
<td>0</td>
<td>0</td>
<td>145000</td>
</tr>
<tr class="even">
<td>Fresh Dom. Consumption</td>
<td>40953</td>
<td>57000</td>
<td>40953</td>
<td>58320</td>
<td>58000</td>
<td>59241</td>
<td>0</td>
<td>0</td>
<td>60500</td>
</tr>
<tr class="odd">
<td>For Processing</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
</tr>
<tr class="even">
<td>Total Distribution</td>
<td>177365</td>
<td>177000</td>
<td>177365</td>
<td>190320</td>
<td>190000</td>
<td>195741</td>
<td>0</td>
<td>0</td>
<td>205500</td>
</tr>
</tbody>
</table>

+---------------------+-------------+---------------------+------------+
| #                   |             |                     |            |
| Export Trade Matrix |             |                     |            |
+---------------------+-------------+---------------------+------------+
| Country             | Chile       |                     |            |
+---------------------+-------------+---------------------+------------+
| Commodity           | Avocados,   |                     |            |
|                     | Fresh       |                     |            |
+---------------------+-------------+---------------------+------------+
| Time Period         | Jan-Dec     | Units:              | M.T.       |
+---------------------+-------------+---------------------+------------+
| Exports for:        | 2005        |                     | 2006       |
+---------------------+-------------+---------------------+------------+
| U.S.                | 116326      | U.S.                | 34785      |
+---------------------+-------------+---------------------+------------+
| Others              |             | Others              |            |
+---------------------+-------------+---------------------+------------+
| U.K.                | 5936        | Spain               | 7926       |
+---------------------+-------------+---------------------+------------+
| Spain               | 4818        | Netherlands         | 6862       |
+---------------------+-------------+---------------------+------------+
| Netherlands         | 4804        | U.K.                | 4434       |
+---------------------+-------------+---------------------+------------+
| France              | 2079        | France              | 2109       |
+---------------------+-------------+---------------------+------------+
| Argentina           | 1496        | Japan               | 941        |
+---------------------+-------------+---------------------+------------+
| Japan               | 421         | Sweden              | 857        |
+---------------------+-------------+---------------------+------------+
| Sweden              | 378         | Argentina           | 548        |
+---------------------+-------------+---------------------+------------+
| Denmark             | 151         | Denmark             | 375        |
+---------------------+-------------+---------------------+------------+
| Ecuador             | 2           | Canada              | 238        |
+---------------------+-------------+---------------------+------------+
| Falkland            | 1           | Belgium             | 145        |
+---------------------+-------------+---------------------+------------+
| Total for Others    | 20086       |                     | 24435      |
+---------------------+-------------+---------------------+------------+
| Others not Listed   | 0           |                     | 94         |
+---------------------+-------------+---------------------+------------+
| Grand Total         | 136412      |                     | 59314      |
+---------------------+-------------+---------------------+------------+
|                     |             |                     |            |
+---------------------+-------------+---------------------+------------+
| **Note**: Year 2006 |             |                     |            |
| data are for        |             |                     |            |
| January Through     |             |                     |            |
| October only        |             |                     |            |
+---------------------+-------------+---------------------+------------+