Voluntary Report - public distribution

**Date:** 9/26/2003

**GAIN Report Number:** VE3011

VE3011

**Venezuela**

**Grain and Feed**

**Corn Crop Up, Grain Price Levels Still Not Set**

**2003**

**Approved by:**

![](media/image1.wmf)Leanne E. Hogie

U.S. Embassy VENEZUELA

**Prepared by:**

Clara Nuñez

**Report Highlights:**

As the corn, sorghum and rice crops start to be harvested; there is
still no agreement within Venezuela on prices to producers. The
Venezuelan Minister of Agriculture announced prices on August 28 that
producers felt too low, and the Minister was removed three days later,
supposedly in part for his arbitrary handling of the price announcement.
The farmers, industry and government officials have been negotiating the
new price levels, but no agreement has yet been reached. Meanwhile, a
large corn crop is expected, and the rice harvest is sufficient for at
least the next six months consumption.

Includes PSD Changes: Yes

Includes Trade Matrix: No

Unscheduled Report

Caracas \[VE1\]

\[VE\]

**Overview**

As the corn, sorghum and rice crops start to be harvested; there is
still no agreement within Venezuela on prices to producers. The
Venezuelan Minister of Agriculture announced prices on August 28 that
producers felt were too low, and the Minister was removed three days
later, supposedly in part for his arbitrary handling of the price
announcement. The farmers, industry and government officials have been
negotiating the new price levels, but no agreement has yet been reached.
Meanwhile, a large corn crop is expected, and the rice harvest is
sufficient for at least the next 6 months consumption.

**Price Setting is Complicated**

Venezuelan farmers feel that grain prices promised last spring no longer
cover production costs since most imported inputs must be purchased with
dollars at high black market rates. Meanwhile, consumers have already
seen large increases in the cost of the basic food basket and with
increasing levels of unemployment they are ill placed to handle further
price increases. Food processors are being squeezed as they are now
forced to sell products at controlled prices, but if faced with higher
priced inputs they will need to raise end-product prices yet again in
order to be able to operate.

To deal with these types of conflict in the food sector, the Ministry of
Agriculture and Lands (MAT) recently formalized the creation of National
Boards (Juntas Nacionales) in eight major food sectors. These Boards are
composed of representatives from the producer, processor, retail,
consumer and government sectors, and are charged with reviewing the
criteria for establishing fair prices for the entire production chain.
The Cereals Board had been meeting frequently to discuss prices for
corn, sorghum and rice, the three major crops that start to be harvested
in September. While producers had hoped for prices as high as Bs.
480/kilo for corn, a general agreement had been reached of a price
around Bs. 425-450. Similarly, new prices for rice and sorghum had been
tentatively agreed to, but they were significantly higher than the
Agriculture Minister's first proposal.

###### Various Cereal Price Proposals in Bs. Per Kilo

+----------+--------+----------+------------+------------+-----------+
|          | # S    | **MAT    | *          | **Juntas   | **        |
|          | pring  | Proposed | *Producers | Tentative  | Tentative |
|          | Price  | Price**  | Requested  | A          | Consumer  |
|          |        |          | Price**    | greement** | Product   |
|          |        |          |            |            | Price**   |
+----------+--------+----------+------------+------------+-----------+
| Corn     | 375    | 400      | 450        | 425        | 1220      |
+----------+--------+----------+------------+------------+-----------+
| Paddy    | 340    | 370      | 447        | 440        | 1400      |
| rice     |        |          |            |            |           |
+----------+--------+----------+------------+------------+-----------+
| Sorghum  | 274    | 320      | 430        | 360        | n.a.      |
+----------+--------+----------+------------+------------+-----------+

The most recent news is that the prices will now be set by the Ministers
Cabinet, and is expected to be announced during the week of September
29^th^.

Venezuela does not have an official system of farmer price supports or
subsidies, but rather depends upon agreements between the producing
sector and the limited number of processing plants that purchase the
corn and rice. This passes all the costs of providing producer supports
to the processing sector, which will inevitably pass those costs on to
the consumer. The GOV has not implemented a system of direct subsidies
to farmers, nor one of subsidizing the end product to the consumer.
However, post has learned that as of this writing various proposals are
being reviewed to provide subsidies to producers. No details are yet
available.

# Corn Crop Recovers

Producers are talking about a record crop of corn this year, mainly due
to improved yields in the state of Guarico. Excellent rains during the
summer growing season helped boost yields from their normal levels of
around 2 tons/hectare to almost 4 tons/hectare this year. Area planted
also increased, even in the face of the uncertainty at planting time
about the higher costs for imported inputs such as fertilizer and
machinery parts. But total area harvested and yields may be hurt
somewhat by September rains, especially in the state of Portuguesa. Post
at this time is increasing the corn crop estimate (mainly white corn) to
1.4 million tons.

We anticipate that most of the crop will be absorbed by the food
industry this year. The corn flour processing industry usually consumes
about 1.2 million tons, and stocks were extremely depleted this year due
both to the short crop last year and the fact that the feed industry was
pressed to absorb some of the white corn since it could not gain access
to yellow corn imports. Post anticipates there will be some restriction
on access to import licenses for yellow corn over the next several
months as the local crop is placed.

In order to force processors to purchase at the recommended price, the
government has taken draconian measures in the past to prohibit imports
and force the purchase of certain quantities of domestic production
before import permits or licenses are granted. (See VE1028, VE2002,
VE2028.)

# Rice Harvest Means End to Imports For Now

As the major rice harvest in Venezuela starts, rice imports will no
longer be needed for at least six months. Rice production in 2003 is
expected to be slightly higher than our earlier estimate due to good
rains during the summer. However, area planted in 2003 was still down
due to lack of irrigation water in Guarico. The irrigation district at
Calabozo now has sufficient water to begin operating with the fall
planting, and therefore we are forecasting 2004 yields higher, but are
still being cautious on area. Post believes that producers started this
harvest cycle with some shortages of fertilizers and pesticides, which
may generate some problems. Finally, if rice consumption levels are to
be maintained, post forecasts that Venezuela will need to import an
additional 140,000 tons of rice next year, since stocks are extremely
low.

# Cereal Guides

The Government recently issued a new rule for the transport of cereals
in the country, with the objective of controlling, verifying and
registering all plant origin products. The different state units of the
Ministry of Agriculture will issue the new permit or "Cereals
Mobilization Guides." This means that all product must have the official
guides in order to cross state boundaries. Government and military
officials will be in charge of checking on product movement. This is
similar to the system that is in place for animal movement. The
Government stated that the new measures have been put in place in order
to prevent smuggling, robbery and unlawful actions taken against
producers.

  --------------- --------------- --------- ------------- --------- ---------- --------- ---------
  **PSD Table**                                                                          

  **Country**     **Venezuela**                                                          

  **Commodity**   **Corn**                                          (1000                
                                                                    HA)(1000             
                                                                    MT)                  

                  Revised         2002      Preliminary   2003      Forecast   2004      UOM

                  Old             New       Old           New       Old        New       

  **Market Year                   10/2001                 10/2002              10/2003   MM/YYYY
  Begin**                                                                                

  Area Harvested  450             450       400           400       430        460       (1000 HA)

  Beginning       225             225       87            87        37         97        (1000 MT)
  Stocks                                                                                 

  Production      1150            1150      1050          1100      1150       1400      (1000 MT)

  TOTAL Mkt. Yr.  512             512       450           660       550        500       (1000 MT)
  Imports                                                                                

  Oct-Sep Imports 512             512       450           660       550        500       (1000 MT)

  Oct-Sep Import  506             506       440           650       540        490       (1000 MT)
  U.S.                                                                                   

  TOTAL SUPPLY    1887            1887      1587          1847      1700       1997      (1000 MT)

  TOTAL Mkt. Yr.  0               0         0             0         0          0         (1000 MT)
  Exports                                                                                

  Oct-Sep Exports 0               0         0             0         0          0         (1000 MT)

  Feed Dom.       500             500       400           500       500        550       (1000 MT)
  Consumption                                                                            

  TOTAL Dom.      1800            1800      1550          1750      1680       1850      (1000 MT)
  Consumption                                                                            

  Ending Stocks   87              87        37            97        57         147       (1000 MT)

  TOTAL           1887            1887      1587          1847      1737       1997      (1000 MT)
  DISTRIBUTION                                                                           

                                                                                         
  --------------- --------------- --------- ------------- --------- ---------- --------- ---------

  --------------- --------------- --------- ------------- --------- ---------- --------- ---------
  **PSD Table**                                                                          

  **Country**     **Venezuela**                                                          

  **Commodity**   **Rice,                                           (1000                
                  Milled**                                          HA)(1000             
                                                                    MT)                  

                  Revised         2002      Preliminary   2003      Forecast   2004      UOM

                  Old             New       Old           New       Old        New       

  **Market Year                   01/2002                 01/2003              01/2004   MM/YYYY
  Begin**                                                                                

  Area Harvested  100             100       85            80        90         85        (1000 HA)

  Beginning       125             125       60            41        30         15        (1000 MT)
  Stocks                                                                                 

  Milled          320             320       260           270       280        305       (1000 MT)
  Production                                                                             

  Rough           472             472       383           400       413        450       (1000 MT)
  Production                                                                             

  MILLING RATE    6786            6786      6786          6786      6786       6786      (1000 MT)
  (.9999)                                                                                

  TOTAL Imports   0               0         120           74        170        140       (1000 MT)

  Jan-Dec Imports 0               0         120           74        170        140       (1000 MT)

  Jan-Dec Import  0               0         120           73        170        140       (1000 MT)
  U.S.                                                                                   

  TOTAL SUPPLY    445             445       440           385       480        460       (1000 MT)

  TOTAL Exports   8               27        60            10        50         40        (1000 MT)

  Jan-Dec Exports 0               0         0             10        0          40        (1000 MT)

  TOTAL Dom.      377             377       350           350       355        355       (1000 MT)
  Consumption                                                                            

  Ending Stocks   60              41        30            25        75         65        (1000 MT)

  TOTAL           445             445       440           385       480        460       (1000 MT)
  DISTRIBUTION                                                                           

                                                                                         
  --------------- --------------- --------- ------------- --------- ---------- --------- ---------