Required Report - public distribution

**Date:** 2/1/2006

**GAIN Report Number:** EC6001

EC6001

**Ecuador**

**Grain and Feed**

**Annual**

**2006**

**Approved by:**

![](media/image1.wmf)Melinda D. Sallyards

U.S. Embassy

**Prepared by:**

Rene A. Alarcon

**Report Highlights:**

Ecuador\'s production of wheat continues to decrease, and imports are
expected to grow to 460,000 MT in MY 2006. Corn production is estimated
to continue at current levels, roughly 365,000 MT for MY 2006. Although
the U.S. continues to dominate Ecuador\'s corn market, Uruguay has
increased its corn exports given its 50% tariff preference under
Ecuador-Mercosur agreement. Rice production will be normal at 480,000 MT
once rainfalls in production areas have normalized. Also, milled rice
exports to Colombia resumed in 2005 and reached 21,000 MT.

Includes PSD Changes: Yes

Includes Trade Matrix: Yes

Annual Report

Quito \[EC1\]

\[EC\]

Table of Contents

[EXECUTIVE SUMMARY 3](#executive-summary)

[WHEAT 4](#wheat)

[Production 5](#production)

[Consumption 5](#consumption)

[Trade 6](#trade)

[Policy 7](#policy)

[CORN 8](#corn)

[Production 9](#production-1)

[Consumption 9](#consumption-1)

[Trade 10](#trade-1)

[Policy 11](#policy-1)

[RICE 12](#rice)

[Production 13](#production-2)

[Consumption 13](#consumption-2)

[Trade 14](#trade-2)

[Policy 14](#policy-2)

# EXECUTIVE SUMMARY

Wheat production in Ecuador continues to decline to a point where it is
almost negligible. Production in MY 2005 has been revised to 6,000 MT
and a projection of 3,000 MT for MY 2006. Wheat imports for MY 2006 are
forecasted at 460,000 MT, a slight growth over the past year given an
increased consumption by the feed industry and the reduction in local
production. Total imports in CY 2005 reached 456,000 MT, of which
imports from the U.S. accounted for 139,000 MT (30 percent). Canada
continues to be the main supplier of wheat to Ecuador with 287,000
MT/year (63 percent) in CY 2005.

Corn production is estimated to remain without major changes in MY
2006/2007 at 365,000 MT in 118,000 Ha. Overall annual corn consumption
is estimated to grow to 760,000 MT due to the rapid growth of the feed
meal compound industry and a greater production of poultry, eggs, pork
and shrimp. Post forecasts corn imports of 430,000 MT in MY 2006. In CY
2004, corn imports reached a record value of 457,000 MT, the majority
from the United States. Although Uruguay has made an inroad to the
Ecuadorian market in CY 2005, it is expected that the U.S. will continue
to have the largest share of Ecuador's corn market.

Rice production is forecasted at 480,000 MT for MY 2006 on 215,000 Ha, a
small decrease compared to MY 2005. The planting season started late
this year due to dry conditions that caused losses and discouraged
farmers. However, as rainfalls resumed in early January the planting
season is expected to be normal. Exports to Colombia resumed in 2005
with 21,000 MT. Exports for MY 2006 are estimated at 25,000 MT.

# WHEAT

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

  **Country**         **Ecuador**                                                          

  **Commodity**       **Wheat**                                      (1000                 
                                                                     HA)(1000              
                                                                     MT)                   

                      2004          Revised    2005       Estimate   2006       Forecast   UOM

                      USDA Official Post       USDA       Post       USDA       Post        
                      \[Old\]       Estimate   Official   Estimate   Official   Estimate   
                                    \[New\]    \[Old\]    \[New\]    \[Old\]    \[New\]    

  **Market Year                     07/2004               07/2005               07/2006    MM/YYYY
  Begin**                                                                                  

  Area Harvested      18            16         15         10         0          5          (1000 HA)

  Beginning Stocks    93            75         59         80         53         77         (1000 MT)

  Production          12            10         9          6          0          3          (1000 MT)

  TOTAL Mkt. Yr.      416           455        450        456        0          460        (1000 MT)
  Imports                                                                                  

  Jul-Jun Imports     416           455        450        456        0          460        (1000 MT)

  Jul-Jun Import U.S. 107           139        0          150        0          160        (1000 MT)

  TOTAL SUPPLY        521           540        518        542        53         540        (1000 MT)

  TOTAL Mkt. Yr.      2             0          5          0          0          0          (1000 MT)
  Exports                                                                                  

  Jul-Jun Exports     2             0          5          0          0          0          (1000 MT)

  Feed Dom.           40            35         40         40         0          45         (1000 MT)
  Consumption                                                                              

  TOTAL Dom.          460           460        460        465        0          470        (1000 MT)
  Consumption                                                                              

  Ending Stocks       59            80         53         77         0          70         (1000 MT)

  TOTAL DISTRIBUTION  521           540        518        542        0          540        (1000 MT)
  ------------------- ------------- ---------- ---------- ---------- ---------- ---------- ---------

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

  **Country**                 Ecuador                       

  **Commodity**               Wheat                         

  Time Period                 Jan-Dec        Units:         MT

  Imports for:                2004                          **2005**

  **U.S.**                    145000         **U.S.**       139500

  Others                                     Others          

  Canada                      271000         Canada         287000

  Argentina                   292            Argentina      30380

                                                             

  Total for Others            0                             0

  Others not Listed           0                             0

  **Grand Total**             **416292**     ** **          **456880**
  --------------------------- -------------- -------------- --------------

## 

## Production

Ecuador's production of wheat is insignificant and continues to decrease
drastically. Production for MY 2005 has been revised to 6,000 MT, and
production for MY 2006 is estimated at no more than 3,000 MT. Most
farmers in the highland areas are replacing wheat with more profitable
crops such as white corn, potatoes, and legumes. In addition, farmers
are discouraged by repetitive droughts during the planting season, lack
of irrigation systems and bad geographical conditions for wheat
production.

Most wheat produced in Ecuador grows in the central and northern
highlands under adverse geographic and weather conditions. Rudimentary
production techniques and lack of improved seeds result in yields
averaging 0.6 MT per hectare. The final product is high in price, low in
quality and not suitable for milling. Most local wheat is consumed in
rural areas as an ingredient of soups or purees. A small percentage is
used by the feed meal compound industry and the remaining is stored as
seeds or given to animals as feed.

## Consumption

Ecuador's total domestic consumption of wheat is forecasted to reach
470,000 MT in MY 2006, roughly 39,000 MT per month.

Ecuador mostly uses hard wheat suitable for flour (for white bread and
pasta), thus the ratio of wheat imports is 85% hard to 15% other
(basically soft). Wheat consumption is fairly stable and the demand by
the milling industry depends highly on the sale price of flour.
Currently, the price of flour is low (\$17 per hundred-pound bag at
wholesale as opposed to \$22-24 last year), but that does not
necessarily translate into cheaper bread or higher consumer demand. It
rather means that millers would be processing the same or less wheat in
order to push the price up given the constant demand. According to
industry sources, this phenomenon occurs more noticeably during
electoral years, when the price of flour is used politically. Flours
(for bread, baking and other purposes) represent the majority of
Ecuador's human consumption of wheat (75%), followed by pasta (15%), and
nutritional products and crackers (10%).

Consumption of wheat for feed has shown interesting growth in the past
few years, and is expected to reach 45,000 MT in MY 2006. This constant
increase is explained by the shrimp industry's recovery from the white
spot disease, and an important growth in production and exports. Despite
higher import duties (1.97%-4.42%) imposed by the United States to
Ecuador as part of an anti-dumping case in late 2004, Ecuador exported
more shrimp to the U.S. and other markets in 2005. In fact, shrimp
exports grew by 16% in 2005 compared to 2004. This may be explained by
reduced supply of shrimp production areas of Asia that were affected by
the Tsunami at the end of 2004. In addition, an important growth in
Ecuador's production of tilapia marks a trend for increased consumption
of wheat for feed.

The milling industry estimates that their ideal revolving stocks would
be six weeks worth of consumption, or approximately 59,000 MT when using
MY 2006 forecast figures. However, they continue to have difficulties
contracting vessels for their imports, and with the changing tariffs
they have to pay under the Andean Price Band during a one-year period.
For these reasons, the industry is obliged to maintain higher stocks of
wheat. Final stocks in MY 2004 and 2005 were estimated at 80,000 and
77,000 MT respectively, and the forecast for MY 2006 is 70,000 MT.

![](media/image2.wmf)

## Trade

Ecuador's wheat imports for MY 2006 are forecasted at 460,000 MT.
Imports in CY 2005 reached 457,000 MT, and the MY 2004 figure was
revised to 455,000 MT. The MY 2006 forecast is 7 percent over the
average of the past ten years, but less that 1% higher than the
estimation for MY 2005. The 1995-2005 average is 426,000 MT with a
minimum of 303,000 MT in 1995 and maximum of 500,500 MT in 1998.

Imports from the U.S. in the period 1995-2005 were 184,000 MT on
average. In CY 2005, imports from the U.S. reached 139,500 MT (30
percent of the market), and Canada continues to be the main supplier of
wheat to Ecuador with 287,000 MT and 63 percent market share. Ecuadorian
millers perceive high-protein Canadian wheat as more reliable in its
milling quality than the American wheat and lower in price. According to
the buyers, for the same price or lower price, Canada offers wheat with
higher protein and gluten, as well as lower dockage. Aggressive
marketing carried out by the Canadian Wheat Board, careful pre-shipment
inspection, and economic support of the Canadian Commercial Corporation
to Ecuadorian importers helps in maintaining Canada's market share.

![](media/image3.wmf)

The US Wheat Associates are currently providing technical assistance to
selected Ecuadorian millers on the use of U.S. wheat varieties to obtain
quality products at lower costs. These activities aim at increasing the
preference of U.S. wheat.

## 

As expected, Argentina made an important inroad of 30,380 MT in the
Ecuadorian wheat market during CY 2005. These exports took place during
the period April-September when the price band registered a variable
levy of zero and the final duty on wheat was 10%. As a result of the
Ecuador-Mercosur agreement, Argentine wheat paid a reduced ad-valorem of
9% during that period, a fact that may have motivated imports. Also,
Ecuadorian millers have in the past used low-protein Argentine wheat to
blend with high-protein American or Canadian wheat. The animal feed
industry also uses a large portion of the Argentine wheat.

## 

## Policy

Wheat is a marker product under the Andean Price Band System, with basic
duty of 10 percent plus an additional variable levy, depending on the
reference price. In July of 2001, the Government of Ecuador phased--out
wheat from the price band system as part of its WTO commitments.
However, Ecuador re-included wheat in the price band in August of 2003
arguing an obligation to do so by Andean Community commitments. For the
period April 2005 -March 2006, floor and ceiling prices were set at
\$160 and \$180 respectively. The variable levy has ranged between 0%
and --10%, thus average tariffs on wheat were 3.6% for most of CY 2005.

Ecuadorian wheat millers support immediate tariff reduction of wheat to
zero, and exclusion from the price band system under the current Free
Trade Agreement. This, according to the industry, would boost imports of
U.S. wheat by making it more competitive by price.

In addition, Ecuador has bilateral trade agreements with Peru and Chile,
and multilateral trade agreements with ALADI (Latin American Association
of Integration). In 2004, Ecuador reached a tariff liberalization
agreement with Mercosur (Argentina, Brazil, Paraguay and Uruguay).
Implementation of these agreements in Ecuador was scheduled to start by
January 1, 2005, but actual implementation started on April 1, 2005.
Wheat has special treatment under the agreements with Mercosur, thus
tariff preferences are granted over the total duty, which is comprised
of the ad-valorem (basic) duty plus the Andean Price Band variable levy.
Currently, trade partners pay tariffs on wheat as follows:

+------+----------+---------+--------+---------+------+-------+-----+
| **H  | ######## | **Parag | *      | *       | **Br | **    | **U |
| TS** |  Product | uay**/4 | *Urugu | *Argent | azil | Mexic | .S. |
|      |          |         | ay**/2 | ina**/3 | **/3 | o**/1 | and |
|      |          |         |        |         |      |       | Ca  |
|      |          |         |        |         |      |       | nad |
|      |          |         |        |         |      |       | a** |
+------+----------+---------+--------+---------+------+-------+-----+
| 1001 | Wheat,   | 7.5%    | 0.3%   | 9.0%    | 9.0% | 9.2%  | 10  |
| 1090 | durum    |         |        |         |      |       | .0% |
+------+----------+---------+--------+---------+------+-------+-----+
| 1001 | Wheat,   | 7.5%    | 0.3%   | 9.0%    | 9.0% | 9.2%  | 10  |
| 9020 | other    |         |        |         |      |       | .0% |
+------+----------+---------+--------+---------+------+-------+-----+

**/1** Under ALADI.

**/2** Uruguay will have reached zero tariffs on wheat by January 1,
2009

**/3** Argentina and Brazil will have reached zero tariffs on wheat by
January 1, 2018

**/4** Paraguay will have reached zero tariffs on wheat by January 1,
2015.

# CORN

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

  **Country**         **Ecuador**                                                          

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

                      2004          Revised    2005       Estimate   2006       Forecast   UOM

                      USDA Official Post       USDA       Post       USDA       Post        
                      \[Old\]       Estimate   Official   Estimate   Official   Estimate   
                                    \[New\]    \[Old\]    \[New\]    \[Old\]    \[New\]    

  **Market Year                     10/2004               10/2005               10/2006    MM/YYYY
  Begin**                                                                                  

  Area Harvested      113           113        120        110        0          118        (1000 HA)

  Beginning Stocks    121           75         121        60         181        62         (1000 MT)

  Production          300           315        360        340        0          365        (1000 MT)

  TOTAL Mkt. Yr.      450           393        450        417        0          430        (1000 MT)
  Imports                                                                                  

  Oct-Sep Imports     450           393        450        417        0          430        (1000 MT)

  Oct-Sep Import U.S. 322           311        0          300        0          310        (1000 MT)

  TOTAL SUPPLY        871           783        931        817        181        857        (1000 MT)

  TOTAL Mkt. Yr.      50            33         50         35         0          45         (1000 MT)
  Exports                                                                                  

  Oct-Sep Exports     50            33         50         35         0          45         (1000 MT)

  Feed Dom.           600           650        650        680        0          710        (1000 MT)
  Consumption                                                                              

  TOTAL Dom.          700           690        700        720        0          760        (1000 MT)
  Consumption                                                                              

  Ending Stocks       121           60         181        62         0          52         (1000 MT)

  TOTAL DISTRIBUTION  871           783        931        817        0          857        (1000 MT)
  ------------------- ------------- ---------- ---------- ---------- ---------- ---------- ---------

  --------------- --------- ----------- ---------- -- --------------- --------- ---------- ----------
  **Import Trade                                      **Export Trade                       
  Matrix**                                            Matrix**                             

  **Country**     Ecuador                             **Country**     Ecuador              

  **Commodity**   Corn                                **Commodity**   Corn                 

  Time Period     Jan-Dec   Units:      MT            Time Period     Jan-Dec   Units:     MT

  Imports for:    2004                  **2005**      Exports for:    2004                 **2005**

  U.S.            426000    U.S.        269000        U.S.            0         U.S.       0

  Others                    Others                    Others                    Others      

  Argentina       31000     Argentina   121500        Colombia        38291     Colombia   27446

                            Uruguay     27300                                               

                                                                                            

  Total for       31000                 148800        Total for       38291                27446
  Others                                              Others                               

  Others not      0                     0             Others not                            
  Listed                                              Listed                               

  Grand Total     457000                417800        Grand Total     38291                27446
  --------------- --------- ----------- ---------- -- --------------- --------- ---------- ----------

## Production

Corn production in Ecuador is estimated at 365,000 MT on 118,000 Ha for
MY 2006/2007 (October/September). Initial production estimations for MY
2005/2006 have been revised to 340,000 MT. This is explained by an area
reduction of approximately 10,000 Ha, which were not planted given a
drought in production areas during the start of the winter planting
season (November and December of 2005).

Given that the first planting occurred in January of 2006, the winter
harvest season of MY 2005/2006 is expected to start two months late by
May or June. This means that Ecuador will likely need to import corn
during at least the first semester of CY 2006.

Production of corn in Ecuador is estimated to remain virtually stagnant
in MY 2006/2007 given several factors. The first is a noticeable change
in weather conditions, especially during the early stages of the winter
planting season. The winter planting and harvest are the largest and
represent 80 percent of the total annual production. It is, however,
very dependent on rainfalls during the months of and November and
December. Another factor is the lack of irrigation systems and very
limited access to credit for agricultural inputs such as seeds and
agrochemicals.

Production of corn in Ecuador remains inefficient with yields averaging
2.7 to 3.0 metric tons per hectare. However, several private initiatives
(especially by the poultry industry) currently provide improved seeds,
technical assistance and other inputs to some 10 percent of the planted
area, which can reach production yields up to 5 metric tons per hectare.

## Consumption

Ecuador's total corn domestic consumption is estimated at 760,000 MT for
Marketing Year 2006/2007, 93 percent of which is consumed by the feed
industry. The increased demand is explained by the feed industry's 6
percent annual growth rate, along with an important annual growth of the
poultry and egg industry (8 percent) and a higher per capita consumption
of poultry meat in Ecuador (18 to 20 Kg/year). The feed meal compound
industry has had an important growth in production in the past 12 years,
from 600,000 MT to 1.6 million MT in 2006.

Consumption figures have been revised for MY 2004/2005 and for MY
2005/2006 to reflect the reality of the feed meal compound industry,
which currently uses the majority of corn. Some 40,000 MT/Year are being
used in MY 2005 for human consumption in the form of snack foods and
also as seeds. Another 35,000 MT/Year are exported to Colombia for human
consumption.

The poultry industry, with total population of 125 million chickens per
year, and annual sales growth rate ranging 5-10%, consumes 80% of the
feed corn every year. This industry produces some 185,000 MT of poultry
meat, and approximately 70,000 MT of eggs per year. Another sector
showing interesting growth is pork, with a population of 1.7 million
pigs per year, and which now consumes some 100,000 MT/year. Other
industries demanding corn-based feed are shrimp (showing a considerable
growth in the past few years), trout and tilapia.

## Trade

Ecuador imported 417,800 MT of yellow corn in CY 2005. Approximately
269,000 MT were imported from the United States and the remaining from
Argentina and Uruguay. The Ecuadorian feed industry prefers U.S. corn to
Argentine corn because of its lower foreign material content, and a
faster delivery to Ecuadorian ports. Although the U.S. maintained a 64%
market share in 2005, Uruguay made an important inroad to the Ecuadorian
market by exporting some 27,000 MT of corn in that year. This broke the
homogeneity of Ecuador's corn purchases between the United States and
Argentina since 1999, and shows the first trade effects of the
Ecuador-Mercosur tariff liberalization agreement in detriment of U.S.
exporters. Further details will be provided under the Policy discussion.

On average, Ecuador has imported 40 percent of its corn demand since
1995, with a minimum of 16,800 MT registered in that year, and a maximum
of 457,000 MT in CY 2004. Although the animal feed industry considers
Ecuadorian corn as better quality than the American and Argentine
product, they purchase the imported corn because of its lower price and
availability given that Ecuador has not met the local demand of corn
since 1997. In fact, it is not likely that Ecuador will meet its demand
in the short term, thus major imports will continue with variations
depending on the availability of local production and prices. Corn
imports are forecasted at 430,000 MT for MY 2006-2007.

![](media/image4.wmf)

Due to a high demand and good prices paid to Ecuadorian corn in
Colombia, Ecuador has exported an average of 60,000 MT/year of corn to
that market in the past ten years. These exports usually take place
during the peak of the harvest season (May), and are destined for human
consumption in the form of "arepa" or tortilla due to the suitability of
Ecuadorian corn for such purposes. Exports to Colombia in CY 2004 and
2005 were 38,000 MT and 27,000 MT respectively. Future exports during
2006 are estimated at 45,000 MT.

![](media/image5.wmf)

## Policy

Corn imports are assessed 15% ad-valorem duty (over CIF), plus a
variable levy applied under the Andean Price Band System (APBS). Under
this system, the ad-valorem tariffs are adjusted (increased or reduced)
depending on the correlation between international reference prices at
the time of import, and set floor and ceiling prices. The Andean
Community set floor and ceiling prices of corn for the period April 2005
to March 2006 at \$126 and \$138 per MT. Upon accession to the WTO,
Ecuador bound its tariffs (including the additional APBS levy) for corn
at 45%. In addition, Ecuador maintains a worldwide TRQ of 19,600 MT of
corn at a set tariff of 25%. This TRQ is filled when international corn
prices drop and the APBS increases corn duties beyond 25% (15%
ad-valorem + a variable levy over 10%).

The Government of Ecuador does not provide any formal subsidy or
economic assistance program to promote yellow corn production. However,
the Ministry of Agriculture usually encourages corn production by
implementing absorption programs, and import bans during the corn
harvest season. These absorption programs guarantee the total purchase
of the local production at high prices. In September of 2004, the
Ministry of Agriculture implemented an absorption program by which the
feed industry was obliged to purchase some 300,000 MT of local corn at
\$185 per MT. A "Consultative Committee" that has the participation of
the feed industry, the official sector and a majority of producers makes
these decisions. The consultative committee meeting to fix prices for
the MY 2005/2006 harvest has not met yet, but it is expected that the
last price of \$185 per MT will be maintained or even increased.

Under the CAN-Mercosur trade talks, Ecuador has negotiated bilateral
tariff reductions with Argentina, Brazil, Paraguay and Uruguay. These
tariff reductions apply only to the ad-valorem duties as the Andean
Price Band System is maintained for corn. The Ecuador--Mercosur
agreement entered into effect in Ecuador on April 1, 2005 and has
liberalization schedules of 14 years for most cereals, including corn as
follows:

  ----------------- ------------------------------ -----------------------
  **Country of      **First Liberalization**       **Full Liberalization**
  Origin**                                         

  Argentina         3 year grace period 2005-2008, In 2018, 100%
                    10% reduction starting in      liberalization
                    January 2008.                  

  Brazil            In 2005: 10% reduction until   In 2018: Yearly
                    2008.                          reduction for 8 years
                                                   and 100% in 2018.

  Paraguay          In 2005, 40% reduction until   In 2018, 100%
                    2012.                          liberalization

  Uruguay           In 2005, 50% reduction until   In 2018: Yearly
                    2013.                          reduction for 8 years
                                                   and 100% in 2018.
  ----------------- ------------------------------ -----------------------

# RICE

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

  **Country**        **Ecuador**                                                                

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

                     2004          Revised    2005       Estimate   2006       Forecast         UOM

                     USDA Official Post       USDA       Post       USDA       Post              
                     \[Old\]       Estimate   Official   Estimate   Official   Estimate         
                                   \[New\]    \[Old\]    \[New\]    \[Old\]    \[New\]          

  **Market Year                    01/2004               01/2005               01/2006          MM/YYYY
  Begin**                                                                                       

  Area Harvested     215           205        230        230        0          215              (1000 HA)

  Beginning Stocks   262           98         192        72         195        76               (1000 MT)

  Milled Production  430           430        513        490        0          480              (1000 MT)

  Rough Production   694           694        827        790        0          774              (1000 MT)

  MILLING RATE       6200          6200       6200       6200       0          6200             (1000 MT)
  (.9999)                                                                                       

  TOTAL Imports      5             0          5          0          0          0                (1000 MT)

  Jan-Dec Imports    5             0          5          0          0          0                (1000 MT)

  Jan-Dec Import     0             0          0          0          0          0                (1000 MT)
  U.S.                                                                                          

  TOTAL SUPPLY       697           528        710        562        195        556              (1000 MT)

  TOTAL Exports      85            1          85         21         0          25               (1000 MT)

  Jan-Dec Exports    85            1          30         21         0          25               (1000 MT)

  TOTAL Dom.         420           455        430        465        0          470              (1000 MT)
  Consumption                                                                                   

  Ending Stocks      192           72         195        76         0          61               (1000 MT)

  TOTAL DISTRIBUTION 697           528        710        562        0          556              (1000 MT)
  ------------------ ------------- ---------- ---------- ---------- ---------- ---------- ----- ---------

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

  **Country**                Ecuador                           

  **Commodity**              Rice, Milled                      

  Time Period                Jan-Dec            Units:         MT

  Exports for:               2004                              **2005**

  U.S.                       0                  U.S.           0

  Others                                        Others          

  Colombia                   1476               Colombia       20636

                                                                

                                                                

  Total for Others           1476                              20636

  Others not Listed          0                                 0

  Grand Total                1476                              20636
  -------------------------- ------------------ -------------- -----------

## Production

Ecuador's milled rice production for MY 2006 (January-December) is
estimated at 480,000 MT on 215,000 Ha with the first harvest starting
late in May or June of 2006. The small decline in the planted area
responds to the lack of rainfalls registered in production areas without
irrigation (65% of the area), where some farmers lost their crops or
refrained from planting until rainfalls began.

In late December, the Government of Ecuador declared the agricultural
sector in emergency due to a drought that was affecting some areas
specialized in cattle breeding and other smaller areas where rice is
normally produced. However, as rains normalized during January in
non-irrigation rice areas, some 50,000 Ha are currently being
re-planted. Another factor that may be discouraging farmers from
producing rice is the low price registered in 2005 along with the high
production cost of approximately \$620 per hectare.

Production figures for MY 2004 and MY 2005 have been revised to reflect
the latest available information. Production for MY 2005 was 490,000 MT,
and actual exports were less than estimated thus Ecuador did not need to
import rice during MY 2005.

![](media/image6.wmf)

## Consumption

Rice is a staple food of Ecuadorians for two meals a day and the
majority of Ecuador's production is consumed locally. Monthly
consumption is estimated at 39,000 MT per month, roughly 470,000 MT in
MY 2006. Current per capita consumption is calculated at 40 Kg. per
month, and this is explained by higher prices of alternative staples,
such as bread or pasta. Rice is also replacing other traditional staples
in the highlands, such as quinoa and even potatoes.

Rice sales are traditionally marketed through wholesalers in one hundred
pound sacks (45 Kg) or in small stores by pounds. Prices vary depending
on the marketing channel. For example, the wholesale price of the 45
Kilogram sacks is \$26, while sales by the pound can make the price grow
to \$32 per sack. Some 80 percent of rice sales are made in sacks or by
the pound. In addition, as a result of supermarket expansion in the main
cities of Ecuador, purchasing habits have shifted towards buying
presentations of 2 or 5 kg, with a brand name. It is estimated that 15
percent of total rice sales are now made trough supermarkets under these
presentations. The majority of rice produced and consumed in Ecuador is
short according to U.S. standards.

## Trade

Ecuador has imported minimal quantities of paddy rice in the last ten
years since 1995, except in 1998 where weather-related losses made
imports grow to 140,000 MT, mostly paddy. If Ecuador's production
capacity were to continue as now, it is unlikely that Ecuador will be in
need to import rice in the future.

White, milled rice exports to Colombia were reestablished in 2005 after
very low exports in 2004. Exports reached 21,000 MT in 2005, and are
forecasted at 25,000 MT in MY 2006.

##  

## Policy

Rice imports are very sensitive issue in Ecuador. The Government of
Ecuador is pushing a self-sufficiency program for rice by continuing to
implement the Andean Price Band System (APBS) and by controlling
imports. APBS floor and ceiling prices for the period April 2005-March
2006 have been set at \$241 and \$265 per MT. The final tariff during
the most part of 2005 was 0%.

In addition, the Ministry of Agriculture's Consultative Committee on
rice, consisting of producers, millers and government officials decide
on the timing and quantity of rice imports. The Ad-valorem duty for
paddy rice is set at 15 percent, and 20 percent for all other types of
rice. Andean Community Nations (CAN) are assessed zero tariffs and are
not assessed the Andean Price Band. Other Latin American countries have
been granted ad-valorem tariff preferences under ALADI, but they still
are assessed the Andean Price Band:

  ---------- ----------------- --------- --------- ---------- ----------- -------------- ------------- --------------- ------------ ------------
  **HTS**    **Description**   **U.S. &  **CAN**   **Peru**   **Chile**   **ALADI \***                                              
                               World**                                                                                              

                                                                          **Paraguay**   **Uruguay**   **Argentina**   **Brazil**   **Mexico**

  10061090   Rice, Paddy       15%       Zero      Zero       15%         15%            7.5%          15%             15%          15%

  10062000   Rice, Brown       20%       Zero      Zero       20%         20%            10%           20%             20%          20%

  10063000   Rice, Milled      20%       Zero      Zero       20%         12%            10%           20%             20%          20%

  10064000   Rice, Broken      20%       Zero      Zero       20%         20%            10%           20%             20%          20%
  ---------- ----------------- --------- --------- ---------- ----------- -------------- ------------- --------------- ------------ ------------

\* ALADI stands for Latin American Integration Association.