Required Report - public distribution

**Date:** 9/1/2005

**GAIN Report Number:** CI5016

CI5016

**Chile**

**Livestock and Products**

**Pork Annual**

**2005**

**Approved by:**

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

Office of Agricultural Affairs

**Prepared by:**

Luis Hennicke, Agricultural Specialist

**Report Highlights:**

As a result of a strong export demand the largest Chilean pork producers
are expanding production by increasing the number of sows. Production
then is expected to expand an estimated 10 percent in 2005 and another
14 percent in 2006. Imports also are expected to grow, as exports of
pork are likely to outgrow production expansions.

Includes PSD Changes: Yes

Includes Trade Matrix: Yes

Annual Report

Santiago \[CI1\]

\[CI\]

Table of Contents

[Executive Summary 3](#executive-summary)

[Production General 3](#production-general)

[PORK 3](#pork)

[Production 3](#production)

[TABLE - Pork Meat Production and Trade (Metric Tons)
4](#table---pork-meat-production-and-trade-metric-tons)

[Consumption 4](#consumption)

[Trade 5](#trade)

[Exports 5](#exports)

[TABLE -- Export Projection, volume and value
5](#table-export-projection-volume-and-value)

[Imports 5](#imports)

[TABLE -- Domestic Pork and Product Prices
6](#table-domestic-pork-and-product-prices)

[TABLE -- Tariff Rate 6](#table-tariff-rate)

[PSD Table 7](#psd-table)

[Export Trade Matrix 8](#export-trade-matrix)

# Executive Summary

Chile's pork industry has based its development on the geographic
isolation that has been fundamental to keep an animal disease free
environment. Economic stability, along with an open market strategy,
have encouraged investments that have had a positive effect on the
quantity and quality of production. There is a strong focus on
controlling the production process to meet buyer specifications. Pork
production has grown extraordinarily during the last decade, at a rate
of slightly less than 9 percent yearly. This production expansion is
mainly due to increases in efficiency and the transfer of the low grain
prices (the main input in swine production) to the consumer, stimulating
pork meat consumption.

# Production General

Chile's economic stability and expansion has spurred a continuous
increase in meat consumption over the last decade. An average annual GDP
growth rate of over 6 percent during the last 18 years and per capita
income that has increased three times has positioned Chile as one of the
fastest growing economies in the western hemisphere.

As a result meat consumption and production has expanded significantly.
The most impressive growth has occurred in poultry. Chile's poultry
industry has been aided by strong consumption and on meeting salmonella
certification requirements that have kept imports out. Poultry exports
also have grown significantly in the last 10 years. Per capita
consumption has grown from 22 Kg in 1995 to 32 Kg in 2004. In the early
1990's, the production that could not be sold in the export market was
sold at very competitive prices on the domestic market, thus cutting
into the beef and pork sales.

Beef consumption also has increased but production has not kept pace
with rising utilization. Consequently, Chile has become a significant
beef importer. The MERCOSUR member countries currently are the main
suppliers of beef in Chile.

Pork production and consumption also has been increasing steadily for
the last decade. Per capita consumption has increased from 12 Kg in 1995
to 18.5 Kg in 2004. Exports also have grown since 1995. The latest
statistics show that Chile possesses a total population of 2.3 million
pigs up from 1.5 million in 1995.

# PORK

## Production

Chile's pork production has expanded tremendously during the last two
decades, from 66 thousand metric tons in 1985 to 372 thousand metric
tons in 2004, an average yearly expansion of over 20%. Its production
expansion and efficiency is a result of a privileged sanitary
environment with favorable climatic conditions.

## 

+-------------+-------------+-------------+-------------+-------------+
| ## TABLE -  |             |             |             |             |
| Pork Meat P |             |             |             |             |
| roduction a |             |             |             |             |
| nd Trade (M |             |             |             |             |
| etric Tons) |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
|             | Production  | Exports     | Imports     | Per Capita  |
|             |             |             |             | Consumption |
|             | (CWE)       | (PWE)       | (PWE)       | (Kg/        |
|             |             |             |             | person)     |
+-------------+-------------+-------------+-------------+-------------+
| 1990        | 123,170     | 1,646       | 0           |             |
+-------------+-------------+-------------+-------------+-------------+
| 1995        | 172,410     | 2,755       | 979         | 12.1        |
+-------------+-------------+-------------+-------------+-------------+
| 2000        | 261,477     | 12,994      | 1,854       | 16.5        |
+-------------+-------------+-------------+-------------+-------------+
| 2001        | 303,006     | 24,391      | 296         | 18.1        |
+-------------+-------------+-------------+-------------+-------------+
| 2002        | 350,721     | 45,291      | 584         | 19.6        |
+-------------+-------------+-------------+-------------+-------------+
| 2003        | 365,343     | 61,473      | 187         | 19.3        |
+-------------+-------------+-------------+-------------+-------------+
| 2004        | 372,845     | 78,794      | 751         | 19.0        |
+-------------+-------------+-------------+-------------+-------------+
|             |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+
| Source:     |             |             |             |             |
| Central     |             |             |             |             |
| Bank,       |             |             |             |             |
| Ministry of |             |             |             |             |
| Agriculture |             |             |             |             |
| (ODEPA)     |             |             |             |             |
+-------------+-------------+-------------+-------------+-------------+

In Chile, the pork industry is highly concentrated and vertically
integrated. The Pork Producers Association only has 40 members out of
140 producers, but these members produce 92% of the total domestic
production. Almost 75 percent of Chile's pork production is concentrated
among 5 large pork packers, of which Agrosuper accounts for 65 percent
of total production, followed by Friosa at 15 percent and Valledor
accounting for 8 percent. The largest five producers, members of the
Association, are vertically integrated. Vertical integration has enabled
producers to maintain a strict level of product traceability throughout
the process and ensuring product safety, quality and reliability from
the production site to the final consumer. Large investments to
incorporate state-of-the-art technology that strengthen sanitary and
production efficiency levels, as well as an aggressive campaign to
expand export markets through the implementation of free trade
agreements, are the main factors that explain the Chilean pork
industry's success. Only an estimated 3 percent of total pork production
comes from the so-called non-industrial operations.

Close to 97 percent of the pork producers are located in two Regions,
Region VI (Rancagua) with almost 68 percent of total production and the
Metropolitan Region (Santiago) where 29 percent is produced. Agrosuper's
main operation is concentrated in Region VI with 75% of the total number
of pigs.

Industry expects pork production to increase by 10 percent in 2005,
because domestic and export demand are still expanding. Another 14
percent expansion is projected for 2006. Industry sources believe
increased feed costs (higher prices for corn and soybeans) have affected
production in Europe and Brazil. However, demand for pork and pork
products in Asia have been growing as a result of avian influenza.
Increases in production in Chile will be due to an increase in the
number of sows maintained by the largest operations. As a result of
increased economies of scale, production costs are expected to fall,
which will allow these producers to export part of this production
expansion. Additionally, since they are integrated vertically, these
companies can transfer their cost efficiencies into the price of the
final product, thus stimulating consumption of certain cuts by offering
especially competitive prices.

# Consumption

Domestic pork consumption has expanded over 220 percent from 1986 to
2004. Per capita consumption grew from 6.1 Kg in 1986 to 19 Kg in 2004.
Additionally its share of total meat consumption in Chile grew from 21
percent in 1986 to 26 percent in 2004. Leaner pork meat, an extensive
and aggressive generic marketing campaign, lower prices and increased
disposable income are many of the reasons for the significant increase
in domestic consumption during the last 20 years. The industry expects
domestic pork consumption to reach 22 kilos per capita in year 2010.

# Trade

## Exports

Chilean pork exports have grown significantly during the last decade,
from 2,755 MT in 1995 to over 102,000 MT in 2004, an average annual
increase of over 40 percent. The main destinations for Chilean pork are
Japan, South Korea, Mexico and EU member countries.

Industry officials indicate special trade agreements and the higher
sanitary conditions for the pork production are Chile's main comparative
advantage in gaining market access. Chile is free of the main diseases
that affect pig production and the strict regulatory controls and
sanitary restrictions carried out by the Agricultural and Livestock
Service (SAG) throughout the production chain, provide a national
sanitary framework that prevents the introduction of diseases, which has
allowed Chile to access many different markets.

Until recently the Pork Industry's main objective was to satisfy
domestic demand. Realizing the good quality of their product and
supported by Chile's open market and export promotion policies, the
industry has turned its attention to the export markets. Exports are
forecast to reach 500 million dollars by 2010 from a base of \$322 mil
in 2005.

+---------------------+----------------------+------------------------+
| ##                  |                      |                        |
|                     |                      |                        |
| ## TABLE            |                      |                        |
| -- Export Projectio |                      |                        |
| n, volume and value |                      |                        |
+---------------------+----------------------+------------------------+
|                     | Pork Meat            |                        |
+---------------------+----------------------+------------------------+
| Year                | Volume (M.T.)        | Value (Thous. US\$)    |
+---------------------+----------------------+------------------------+
| 2005                | 128,800              | 322,000                |
+---------------------+----------------------+------------------------+
| 2006                | 173,880              | 434,700                |
+---------------------+----------------------+------------------------+
| 2007                | 191,268              | 447,741                |
+---------------------+----------------------+------------------------+
| 2008                | 208,482              | 465,651                |
+---------------------+----------------------+------------------------+
| 2009                | 229,330              | 484,277                |
+---------------------+----------------------+------------------------+
| 2010                | 250,000              | 505,000                |
+---------------------+----------------------+------------------------+
|                     |                      |                        |
+---------------------+----------------------+------------------------+
| Source: Pork        |                      |                        |
| Producers           |                      |                        |
| Association         |                      |                        |
+---------------------+----------------------+------------------------+

## Imports

Industry sources have report that pork imports currently are
insignificant, but will most probably grow in the coming years, as
domestic and export demand outstrips production. The opening of the US
market for Chilean pork is expected to contribute to increase Chilean
exports. This will most probably create a larger deficit for the Chilean
sausage industry, which is not vertically integrated, i.e. they do not
produce swine and/or own a slaughterhouse. The sausage industry needs a
constant supply of pork imports. As a result of increased c prices
during the last 4 years for domestic input, the processing industry is
increasingly turning towards imports to assure a constant supply.
Currently, only certain cuts are imported (boneless and bellies), as
these products are destined for the processing industry (sausage).
Canada has been the main supplier of pork for the sausage industry. But
new market access for US pork products is expected to replace some
Canadian imports. Like Canadian product, US product can now enter duty
free.

+-----------+--------------------+-----------------+------------------+
| ##        |                    |                 |                  |
|           |                    |                 |                  |
| ## TABLE  |                    |                 |                  |
|  -- Domes |                    |                 |                  |
| tic Pork  |                    |                 |                  |
| and Produ |                    |                 |                  |
| ct Prices |                    |                 |                  |
+-----------+--------------------+-----------------+------------------+
|           | Producer for live  | Pork meat in    | Pork Chop at     |
|           |                    | carcasses       | consumer level   |
|           | Animals            |                 | (US\$/Kg)        |
|           |                    | (US\$/Kg)       |                  |
|           | (US\$/ Kg)         |                 |                  |
+-----------+--------------------+-----------------+------------------+
| 1999      | 0.80               | 1.42            | 2.91             |
+-----------+--------------------+-----------------+------------------+
| 2000      | 0.76               | 1.35            | 3.01             |
+-----------+--------------------+-----------------+------------------+
| 2001      | 0.68               | 1.29            | 2.65             |
+-----------+--------------------+-----------------+------------------+
| 2002      | 0.68               | 1.34            | 2.49             |
+-----------+--------------------+-----------------+------------------+
| 2003      | 0.77               | 1.52            | 2.54             |
+-----------+--------------------+-----------------+------------------+
| 2004      | 0.92               | 1.69            | 3.18             |
+-----------+--------------------+-----------------+------------------+
|           |                    |                 |                  |
+-----------+--------------------+-----------------+------------------+
| Source:   |                    |                 |                  |
| National  |                    |                 |                  |
| Institute |                    |                 |                  |
| of        |                    |                 |                  |
| St        |                    |                 |                  |
| atistics, |                    |                 |                  |
| ODEPA     |                    |                 |                  |
+-----------+--------------------+-----------------+------------------+

An industry source indicated that imports would be much larger if price
were the only factor to consider in an import transaction. However since
the export market is so important, imported ingredients must comply with
highest sanitary conditions. Pork product imports can only come from
countries that have similar or better sanitary conditions than Chile.

+--------------+-------------------------+-------+--------------------+
| ##           |                         |       |                    |
|              |                         |       |                    |
| ## TABLE --  |                         |       |                    |
| Tariff Rate  |                         |       |                    |
+--------------+-------------------------+-------+--------------------+
| Tariff       | Product Description     | Rate  | Other Info         |
| Number       |                         | (%)   |                    |
+--------------+-------------------------+-------+--------------------+
| 02031200     | Fresh bone-in Pork      | 6     | Duty free from EU, |
|              |                         |       | Canada and US      |
| 02031900     | Other Fresh Pork Meat   |       |                    |
+--------------+-------------------------+-------+--------------------+
| 02032200     | Frozen bone-in Pork     | 6     | Duty free from EU, |
|              |                         |       | Canada and US      |
| 02032900     | Other Frozen Pork Meat  |       |                    |
+--------------+-------------------------+-------+--------------------+
| 02063000     | Pork: Variety meat      | 6     | Duty free from EU, |
|              |                         |       | Canada and US      |
+--------------+-------------------------+-------+--------------------+
| 02101000     | Pork Meat               | 6     | Duty free from EU, |
|              |                         |       | Canada and US      |
+--------------+-------------------------+-------+--------------------+
| 16024000     | Processed Pork Meat     | 6     | Duty free from EU, |
|              |                         |       | Canada and US      |
+--------------+-------------------------+-------+--------------------+

Imports from MERCOSUR (Brazil and others) have an 80 percent preference
during CY2005, i.e. an importer would pay a 1.2 percent duty. However,
by January 1, 2006, these products will enter duty free.

+--------------------+-----+-----+-----+-----+-----+-----+-----------+
| # PSD Table        |     |     |     |     |     |     |           |
+--------------------+-----+-----+-----+-----+-----+-----+-----------+
| Country            | Ch  |     |     |     |     |     |           |
|                    | ile |     |     |     |     |     |           |
+--------------------+-----+-----+-----+-----+-----+-----+-----------+
| Commodity          | Me  |     |     |     | (1  |     |           |
|                    | at, |     |     |     | 000 |     |           |
|                    | Sw  |     |     |     | MT  |     |           |
|                    | ine |     |     |     | CWE |     |           |
|                    |     |     |     |     | )(1 |     |           |
|                    |     |     |     |     | 000 |     |           |
|                    |     |     |     |     | HE  |     |           |
|                    |     |     |     |     | AD) |     |           |
+--------------------+-----+-----+-----+-----+-----+-----+-----------+
|                    | 2   | R   | 2   | Es  | 2   | Fo  | UOM       |
|                    | 004 | evi | 005 | tim | 006 | rec |           |
|                    |     | sed |     | ate |     | ast |           |
+--------------------+-----+-----+-----+-----+-----+-----+-----------+
|                    | U   | P   | U   | P   | U   | P   |           |
|                    | SDA | ost | SDA | ost | SDA | ost |           |
|                    | Of  | Es  | Of  | Est | Of  | Est |           |
|                    | fic | tim | fic | ima | fic | ima |           |
|                    | ial | ate | ial | te\ | ial | te\ |           |
|                    | \   | \   | \   | [Ne | \   | [Ne |           |
|                    | [Ol | [Ne | [Ol | w\] | [Ol | w\] |           |
|                    | d\] | w\] | d\] |     | d\] |     |           |
+--------------------+-----+-----+-----+-----+-----+-----+-----------+
| Market Year Begin  |     | 0   |     | 0   |     | 0   | MM/YYYY   |
|                    |     | 1/2 |     | 1/2 |     | 1/2 |           |
|                    |     | 004 |     | 005 |     | 006 |           |
+--------------------+-----+-----+-----+-----+-----+-----+-----------+
| Slaughter          | 0   | 3   | 0   | 4   | 0   | 4   | (1000     |
| (Reference)        |     | 975 |     | 380 |     | 995 | HEAD)     |
+--------------------+-----+-----+-----+-----+-----+-----+-----------+
| Beginning Stocks   | 0   | 0   | 0   | 0   | 0   | 0   | (1000 MT  |
|                    |     |     |     |     |     |     | CWE)      |
+--------------------+-----+-----+-----+-----+-----+-----+-----------+
| Production         | 0   | 373 | 0   | 411 | 0   | 469 | (1000 MT  |
|                    |     |     |     |     |     |     | CWE)      |
+--------------------+-----+-----+-----+-----+-----+-----+-----------+
| Intra EC Imports   | 0   | 0   | 0   | 0   | 0   | 0   | (1000 MT  |
|                    |     |     |     |     |     |     | CWE)      |
+--------------------+-----+-----+-----+-----+-----+-----+-----------+
| Total Imports      | 0   | 1   | 0   | 1   | 0   | 2   | (1000 MT  |
|                    |     |     |     |     |     |     | CWE)      |
+--------------------+-----+-----+-----+-----+-----+-----+-----------+
| TOTAL Imports      | 0   | 1   | 0   | 1   | 0   | 2   | (1000 MT  |
|                    |     |     |     |     |     |     | CWE)      |
+--------------------+-----+-----+-----+-----+-----+-----+-----------+
| TOTAL SUPPLY       | 0   | 374 | 0   | 412 | 0   | 471 | (1000 MT  |
|                    |     |     |     |     |     |     | CWE)      |
+--------------------+-----+-----+-----+-----+-----+-----+-----------+
| Intra EC Exports   | 0   | 0   | 0   | 0   | 0   | 0   | (1000 MT  |
|                    |     |     |     |     |     |     | CWE)      |
+--------------------+-----+-----+-----+-----+-----+-----+-----------+
| Total Exports      | 0   | 102 | 0   | 129 | 0   | 174 | (1000 MT  |
|                    |     |     |     |     |     |     | CWE)      |
+--------------------+-----+-----+-----+-----+-----+-----+-----------+
| TOTAL Exports      | 0   | 102 | 0   | 129 | 0   | 174 | (1000 MT  |
|                    |     |     |     |     |     |     | CWE)      |
+--------------------+-----+-----+-----+-----+-----+-----+-----------+
| Human Dom.         | 0   | 272 | 0   | 283 | 0   | 297 | (1000 MT  |
| Consumption        |     |     |     |     |     |     | CWE)      |
+--------------------+-----+-----+-----+-----+-----+-----+-----------+
| Other Use, Losses  | 0   | 0   | 0   | 0   | 0   | 0   | (1000 MT  |
|                    |     |     |     |     |     |     | CWE)      |
+--------------------+-----+-----+-----+-----+-----+-----+-----------+
| TOTAL Dom.         | 0   | 272 | 0   | 283 | 0   | 297 | (1000 MT  |
| Consumption        |     |     |     |     |     |     | CWE)      |
+--------------------+-----+-----+-----+-----+-----+-----+-----------+
| Ending Stocks      | 0   | 0   | 0   | 0   | 0   | 0   | (1000 MT  |
|                    |     |     |     |     |     |     | CWE)      |
+--------------------+-----+-----+-----+-----+-----+-----+-----------+
| TOTAL DISTRIBUTION | 0   | 374 | 0   | 412 | 0   | 471 | (1000 MT  |
|                    |     |     |     |     |     |     | CWE)      |
+--------------------+-----+-----+-----+-----+-----+-----+-----------+
| Calendar Yr. Imp.  | 0   | 0   | 0   | 0   | 0   | 0   | (1000 MT  |
| from U.S.          |     |     |     |     |     |     | CWE)      |
+--------------------+-----+-----+-----+-----+-----+-----+-----------+
| Calendar Yr. Exp.  | 0   | 0   | 0   | 0   | 0   | 0   | (1000 MT  |
| to U.S.            |     |     |     |     |     |     | CWE)      |
+--------------------+-----+-----+-----+-----+-----+-----+-----------+

+-----------------------+-------------+-----------------+-------------+
| # Export Trade Matrix |             |                 |             |
+-----------------------+-------------+-----------------+-------------+
| Country               | Chile       |                 |             |
+-----------------------+-------------+-----------------+-------------+
| Commodity             | Meat, Swine |                 |             |
+-----------------------+-------------+-----------------+-------------+
| Time Period           | Jan-Dec     | Units:          | M.T.        |
+-----------------------+-------------+-----------------+-------------+
| Exports for:          | 2004        |                 | 2005        |
+-----------------------+-------------+-----------------+-------------+
| U.S.                  | 0           | U.S.            | 0           |
+-----------------------+-------------+-----------------+-------------+
| Others                |             | Others          |             |
+-----------------------+-------------+-----------------+-------------+
| Japan                 | 56074       | Japan           | 33657       |
+-----------------------+-------------+-----------------+-------------+
| South Korea           | 24596       | South Korea     | 17100       |
+-----------------------+-------------+-----------------+-------------+
| Mexico                | 9745        | Mexico          | 4005        |
+-----------------------+-------------+-----------------+-------------+
| Argentina             | 2023        | Argentina       | 1888        |
+-----------------------+-------------+-----------------+-------------+
| Italy                 | 1776        | Cuba            | 1143        |
+-----------------------+-------------+-----------------+-------------+
| Germany               | 1616        | U.K.            | 950         |
+-----------------------+-------------+-----------------+-------------+
| Cuba                  | 1342        | Italy           | 687         |
+-----------------------+-------------+-----------------+-------------+
| U.K.                  | 1122        | Germany         | 625         |
+-----------------------+-------------+-----------------+-------------+
| Netherlands           | 1050        | Ecuador         | 468         |
+-----------------------+-------------+-----------------+-------------+
| Colombia              | 1041        | Colombia        | 359         |
+-----------------------+-------------+-----------------+-------------+
| Total for Others      | 100385      |                 | 60882       |
+-----------------------+-------------+-----------------+-------------+
| Others not Listed     | 2047        |                 | 715         |
+-----------------------+-------------+-----------------+-------------+
| Grand Total           | 102432      |                 | 61597       |
+-----------------------+-------------+-----------------+-------------+