Required Report - public distribution

**Date:** 3/10/2005

**GAIN Report Number:** CO5005

CO5005

**Colombia**

**Grain and Feed**

**Annual**

**2005**

**Approved by:**

![](media/image1.wmf)David J. Mergen

U.S Embassy

**Prepared by:**

Leonardo Pinzon

**Report Highlights:**

Imports of yellow corn and wheat are expected to increase, while white
corn and rice imports will fall. Colombia established a tariff-rate
quota for yellow corn of 1,900,000 tons and for white corn of 45,000
tons. Colombia has not set a tariff-rate quota for rice, with all
imports paying a prohibitive 80 percent duty. Imports of corn and wheat
will reach 2.29 and 1.3 million metric tons in 2005/2006. Colombia
started implementing of the Andean -- Mercosur free trade agreement in
February 2005. Colombia, Ecuador and Peru are currently negotiating a
bilateral free trade agreement with the U.S.

Includes PSD Changes: Yes

Includes Trade Matrix: Yes

Annual Report

Bogota \[CO1\]

\[CO\]

Table of Contents

[Executive Summary 3](#executive-summary)

[Production 3](#production)

[Consumption 3](#consumption)

[Trade 4](#trade)

[Stocks 4](#stocks)

[Policy 4](#policy)

[Andean Community - Mercosur Agreement
5](#andean-community---mercosur-agreement)

[Tables 6](#tables)

[Colombia wheat PSD, 2003/04 -- 2005/06 (July-June)
6](#colombia-wheat-psd-200304-200506-july-june)

[Colombia: Wheat Imports 2003/04 (July-June)
7](#colombia-wheat-imports-200304-july-june)

[Colombia: Wheat Prices to Grower, 2002 -- 2003
8](#colombia-wheat-prices-to-grower-2002-2003)

[Colombia: Corn PSD, 2003/04 to 2005/06 (October-September)
9](#colombia-corn-psd-200304-to-200506-october-september)

[Colombia: Corn Imports, 2002/03 (October-September)
10](#colombia-corn-imports-200203-october-september)

[Colombia: Corn Prices to Grower, 2003-2004
11](#colombia-corn-prices-to-grower-2003-2004)

[Colombia: Milled Rice PSD, 2003 to 2005
12](#colombia-milled-rice-psd-2003-to-2005)

[Colombia: Rice Imports, 2004 (January-November)
13](#colombia-rice-imports-2004-january-november)

[Colombia: Rice Price to Millers, 2003-2004
14](#colombia-rice-price-to-millers-2003-2004)

# Executive Summary

The Colombian feed industry and wheat millers depend heavily on corn and
wheat imports. Corn imports supply around 70 percent of the total demand
while wheat imports supply 97 percent of the local needs. Imports are
expected to reach 2.29 million metric tons of corn and 1.3 million
metric tons of wheat in the 2005/2006 marketing year. While local corn
production is highly protected, low yields and high production costs
making it unlikely that local production will displace imports in the
near future. Stronger economic growth and increased market access under
the bilateral free trade agreement currently under negotiation are
expected to further increase demand for imported corn.

Rice imports in Colombia are currently marginal since rice production
enjoys high border protection (an 80 percent duty for imported rice).
Although other Andean countries are charged a zero duty, the Colombian
Government has used safeguard measures to maintain tight controls on
imports. Most imports --- legal and illegal --- are cross border trade.

Colombia started implementing in February 2005 the free trade agreement
between Mercosur and the Andean Community. Under the agreement, wheat
will be removed from the Andean price band system immediately and the
duty phased out by 2009. Corn and rice will remain in the Andean price
band system, with Mercosur paying a reduced duty relative to other
countries.

Colombia, Ecuador and Peru are currently negotiating a free trade
agreement with U.S. in a process that started in May 2004. The goal is
to end the negotiations in 2005 and implement the agreement in 2006

# Production

*Corn* production is expected to reach 1.309 million tons in 2004/2005
MY with a slight increase to 1.316 million tons in the following year.
Although corn production is strongly promoted by the government (the
local price is over double the world market price), the high costs of
local production and the possibility of more open trade under the free
trade agreement make significant increases in local production unlikely.
The area planted under traditional non-mechanized production continues
to fall, while the mechanized area is expected to increase further.

*Rice* production in traditional rice growing areas is increasing due to
strong border protection (80 percent import duty) and government
investment in irrigation systems. Local prices for paddy rice are close
to \$250 per ton. Production is expected to reach 2,300,000 tons in 2005
and 2,317,000 tons in 2006.

*Wheat* crop area in Colombia will continue without major changes in the
next two years. Small growers with traditional farming practices and low
investment are maintaining production at around 33,000 tons a year. An
unfavorable climate for growing milling quality wheat, relatively low
duties under the Andean price band system (the duty at the start of
March 2005 was 11 percent) and the absence of government incentives make
increases in production unlikely.

# Consumption

###### Corn consumption is expected to grow 1.8 percent in the marketing year 2004/05 and it is expected increase a further 3.9 percent during 2005/06. The growth in con consumption is due to increases in production of poultry, livestock (dairy and swine), and a relatively recent growth in fish and shrimp production. 

*Rice* consumption will show a weak increase of 0.7 percent during 2005.
High local prices, due in part to high import duties, discourage
increased consumption of rice. Please note, that per capita consumption
statistics are not accurate and there is currently a joint effort by the
industry and government to improve this measurement.

*Wheat* consumption is estimated to rise only 0.6 percent in the
upcoming marketing year 2005/06. Pasta consumption expanded during the
last three years but industry sources expect smaller growth in the
future.

# Trade

Corn imports are expected to grow to 2.29 million metric tons in
marketing year 2005/2006. This represents a 4.3 percent growth from 2.20
million tons calculated in 2004/2005. The U.S. increased its market
share to 88 percent (1.87 million tons) during 2003/2004, as lower
shipping costs offset the lower duty for imports from Argentina. The
duty advantage for Argentine corn will increase from 3 percentage points
to 3.9 percentage points in 2005, which is not expected to significantly
undermine the freight advantage of U.S. corn. Depending on when the
U.S./Andean bilateral free trade agreement currently under negotiation
is implemented, the U.S. market share should increase in the future.

Rice imports are estimated at 50,000 metric tons (milled basis) for CY
2005, a fall of 50 percent from a year earlier. The estimate is based on
expected legal imports of 30,000 tons from Ecuador and 20,000 tons of
illegal trade with Venezuela and Ecuador. The Colombian Ministry of
Agriculture has not yet established a tariff-rate quota for imports from
Ecuador and non-Andean countries (all imports currently pay a
prohibitive 80 percent duty), but trade contacts expect the government
to allow some imports from other Andean countries later in 2005.
Colombia imports paddy rice from the U.S. when the industry is in short
supply of high quality rice. Colombia purchased 3,000 metric tons of
paddy rice from U.S. during 2004.

Wheat imports continue to supply 98 percent of milling needs. Imports
for the marketing year 2005/2006 are expected to be 1,305,000 metric
tons. Imports from U.S. will likely be 780,000 metric tons (60 percent
share) due to more competitive prices and lower shipping costs. Canada
is the next largest supplier.

# Stocks

Based on information from local contacts, corn stocks are calculated to
represent one month of total consumption.

Colombian rice stocks are expected to be 193,000 tons (paddy bases) at
the end of 2005, which represents one month of total consumption.
Overall stock levels are expected to increase from the start of 2003 due
to larger supplies and increases in government rice storage payments.
The government of Colombia has established a storage payment to support
grower prices and to provide an incentive to hold paddy rice out of
market channels. Rice stocks are built up during the second half of the
year due to the local harvest in the largest growing region.

Local contacts estimate that wheat stocks will represent 35 days of
consumption at the end of marketing year 2005/06.

# Policy

In February 2004, Colombia started a new system to guarantee the
purchase of local production by the industry. The new system is a
tariff-rate quota, with the in-quota amount auctioned off based on the
importers commitment to purchase local production. The out-of-quota duty
is the high of either 5 percent or the Andean price band duty for yellow
corn and sorghum, 45 percent for white corn and 80 percent for rice.
Currently, the duty for yellow corn and grain sorghum under the price
band system is 20 percent (the price band duty can be found at:
http://www.comunidadandina.org/politicas/franja_circular.htm). The price
band duty is not currently applied to white corn, which has a 45 percent
duty (the duty was increased from 15 percent in September, 2004 and will
be in place up to March 31, 2005). Colombia also applies an 80 percent
for rice (the duty was increased from 20 percent in December 2003),
rather than the price band duty (currently 1 percent).

The current tariff-rate quota for yellow corn is 1.9 million tons, while
the tariff-rate quota for white corn was reduced to 40,000 tons from
145,000 tons in 2004 to increase the protection for the local white corn
production. For paddy rice or its milled equivalent, in order to protect
local production the Ministry of Agriculture has not yet set an import
tariff-rate quota for 2005. Wheat imports are excluded from the
tariff-rate quota mechanism and all imports pay the price band duty
(currently 11 percent).

## Andean Community - Mercosur Agreement

Andean Community countries (Colombia, Ecuador and Venezuela) and
Mercosur members signed an Economic Supplemental Agreement in October
2004. This agreement includes a free trade program that Colombia put in
place in early February 2005. The trade liberalization program agreed
for grains has the following basic features:

**Corn**: Fifteen year phase out period to bring the basic corn duty of
15 percent down to zero (the variable component of the price band will
continue to be applied). For year 2005, Colombia granted to Argentina
and Brazil a 26 percent preference and 14 percent preference to Paraguay
and Uruguay on the 15% basic duty, the variable duty of the Andean
Community will remain applicable. Under this agreement, corn imports
from Argentina will pay 3.9 percentage points less in duties than
imports from the U.S. and other countries.

**Rice:** Colombia will phase out the fixed/base duty of 15 percent for
paddy rice and 20 percent for milled rice over 15 years, while
maintaining the variable component of the price band duty. For year
2005, Colombia granted to Mercosur countries a 14 percent preference on
the basic duty (paddy 15%; Milled 20%).

**Wheat:** Wheat and products containing wheat will be taken out of the
price band system immediately and are not subject to the special
agricultural safeguard. Colombia will phase out over a 6-year period (by
2009) the duty of 15 percent. For 2005, Colombia granted a preference
(reduction) of the 15% base duty of 36 percent to Argentina and Brazil,
48 percent to Paraguay and 40 percent to Uruguay.

## 

# Tables

## Colombia wheat PSD, 2003/04 -- 2005/06 (July-June)

(1,000 Hectares and 1,000 Tons.)

  --------------------- ----------- ------------- ----------- -------------- ----------- -------------- ---------
  **Colombia**                                                                                          

  **Wheat**                                                                                             

                        **2003**    **Revised**   **2004**    **Estimate**   **2005**    **Forecast**   **UOM**

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

  **Market Year Begin**             07/2003                   07/2004                    07/2005        MM/YYYY

  **Area Harvested**    15          15            15          15             0           15             (1000 HA)

  **Beginning Stocks**  119         119           122         120            125         113            (1000 MT)

  **Production**        32          32            33          33             0           33             (1000 MT)

  **TOTAL Mkt. Yr.      1246        1296          1250        1295           0           1305           (1000 MT)
  Imports**                                                                                             

  **Jul-Jun Imports**   1246        1296          1250        1295           0           1305           (1000 MT)

  **Jul-Jun Import      734         782           0           780            0           780            (1000 MT)
  U.S.**                                                                                                

  **TOTAL SUPPLY**      1397        1447          1405        1448           125         1451           (1000 MT)

  **TOTAL Mkt. Yr.      29          22            30          25             0           28             (1000 MT)
  Exports**                                                                                             

  **Jul-Jun Exports**   29          22            30          25             0           28             (1000 MT)

  **Feed Dom.           20          20            20          15             0           15             (1000 MT)
  Consumption**                                                                                         

  **TOTAL Dom.          1246        1305          1250        1310           0           1318           (1000 MT)
  Consumption**                                                                                         

  **Ending Stocks**     122         120           125         113            0           105            (1000 MT)

  **TOTAL               1397        1447          1405        1448           0           1451           (1000 MT)
  DISTRIBUTION**                                                                                        
  --------------------- ----------- ------------- ----------- -------------- ----------- -------------- ---------

## Colombia: Wheat Imports 2003/04 (July-June)

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

  **Country**           Colombia                            

  **Commodity**         Wheat                               

  Time Period           July-June      Units:               (0,000) MT

  Imports for:          2003                                **2004**

  U.S.                  781            U.S.                  

  Others                               Others               

  Canada                433                                  

  Australia             80                                   

  Ecuador               1                                    

                                                             

                                                             

                                                             

                                                             

                                                             

                                                             

                                                             

  Total for Others      514                                 0

  Others not Listed     1                                    

  Grand Total           1296                                0
  --------------------- -------------- -------------------- --------------

Source: WTA - Colombian Custom Agency (DIAN)

## Colombia: Wheat Prices to Grower, 2002 -- 2003

(1,000 pesos per Ton)

  ------------------- -------------------- ------------------- ------------
  **Prices Table**                                             

  **Country**         Colombia                                 

  **Commodity**       Wheat                                    

  Prices in           (0,000) col pesos    per uom             Metric ton

                                                               

  Year                2003                 2004                \% Change

  Jan                 560                  560                 0%

  Feb                 560                  560                 0%

  Mar                 560                  560                 0%

  Apr                 560                  560                 0%

  May                 560                  560                 0%

  Jun                 560                  560                 0%

  Jul                 560                  560                 0%

  Aug                 560                  560                 0%

  Sep                 560                  560                 0%

  Oct                 560                  560                 0%

  Nov                 560                  560                 0%

  Dec                 560                  560                 0%

                                                               

  Exchange Rate       2329.67              Local Currency/US   
                                           \$                  

  Date of Quote       3/2/2005             MM/DD/YYYY          
  ------------------- -------------------- ------------------- ------------

Note: Base price agreed for purchasing negotiations among Growers and
Millers.

Source: Grains Growers Association.

## Colombia: Corn PSD, 2003/04 to 2005/06 (October-September)

(1,000 Hectares and 1,000 Tons)

  --------------------- ----------- ------------- ----------- -------------- ----------- -------------- ---------
  **Colombia**                                                                                          

  **Corn**                                                                                              

                        **2003**    **Revised**   **2004**    **Estimate**   **2005**    **Forecast**   **UOM**

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

  **Market Year Begin**             10/2003                   10/2004                    10/2005        MM/YYYY

  **Area Harvested**    565         565           580         568            0           570            (1000 HA)

  **Beginning Stocks**  249         249           244         241            269         270            (1000 MT)

  **Production**        1195        1305          1225        1309           0           1315           (1000 MT)

  **TOTAL Mkt. Yr.      2100        2107          2200        2200           0           2295           (1000 MT)
  Imports**                                                                                             

  **Oct-Sep Imports**   2100        2107          2200        2200           0           2295           (1000 MT)

  **Oct-Sep Import      1788        1871          0           1900           0           1950           (1000 MT)
  U.S.**                                                                                                

  **TOTAL SUPPLY**      3544        3661          3669        3750           269         3880           (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.           2050        2250          2150        2350           0           2500           (1000 MT)
  Consumption**                                                                                         

  **TOTAL Dom.          3300        3420          3400        3480           0           3615           (1000 MT)
  Consumption**                                                                                         

  **Ending Stocks**     244         241           269         270            0           265            (1000 MT)

  **TOTAL               3544        3661          3669        3750           0           3880           (1000 MT)
  DISTRIBUTION**                                                                                        
  --------------------- ----------- ------------- ----------- -------------- ----------- -------------- ---------

## Colombia: Corn Imports, 2002/03 (October-September)

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

  **Country**            Colombia                          

  **Commodity**          Corn                              

  **Time Period**        **Oct-Sep**   **Units:**          **(0,000) MT**

  **Imports for:**       **2003**                          **2004**

  **U.S.**               1870          U.S.                 

  **Others**                           Others              

  **Argentina**          189                                

  **Ecuador**            42                                 

  ** **                                                     

  ** **                                                     

  ** **                                                     

  ** **                                                     

  ** **                                                     

  ** **                                                     

  ** **                                                     

  ** **                                                     

  **Total for Others**   231                               0

  **Others not Listed**  6                                  

  **Grand Total**        2107                              0

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

Source: WTA - Colombian Custom Agency (DIAN)

## Colombia: Corn Prices to Grower, 2003-2004

(1,000 pesos per Ton)

  ------------------- ------------------ --------------------- ------------
  **Prices Table**                                             

  **Country**         Colombia                                 

  **Commodity**       Corn                                     

  Prices in           (0,000) Col pesos  per uom               Metric ton

                                                               

  Year                2003               2004                  \% Change

  Jan                 541                493                   -9%

  Feb                 536                507                   -5%

  Mar                 535                508                   -5%

  Apr                 510                518                   2%

  May                 560                508                   -9%

  Jun                 571                504                   -12%

  Jul                 522                552                   6%

  Aug                 515                508                   -1%

  Sep                 502                515                   3%

  Oct                 478                505                   6%

  Nov                 490                532                   9%

  Dec                 431                536                   24%

                                                               

  Exchange Rate       2329.67            Local Currency/US \$  

  Date of Quote       3/2/2005           MM/DD/YYYY            

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

Source: National Agriculture Commodity Exchange (Bolsa Nacional
Agropecuaria)

## Colombia: Milled Rice PSD, 2003 to 2005

(1,000 Hectares and 1,000 Tons)

  --------------------- ----------- ------------- ----------- -------------- ----------- -------------- ---------
  **Colombia**                                                                                          

  **Rice, Milled**                                                                                      

                        **2003**    **Revised**   **2004**    **Estimate**   **2005**    **Forecast**   **UOM**

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

  **Market Year Begin**             01/2003                   01/2004                    01/2005        MM/YYYY

  **Area Harvested**    480         480           490         495            0           500            (1000 HA)

  **Beginning Stocks**  146         146           133         158            128         203            (1000 MT)

  **Milled Production** 1367        1367          1385        1380           0           1390           (1000 MT)

  **Rough Production**  2278        2278          2308        2300           0           2317           (1000 MT)

  **MILLING RATE        6000        6000          6000        6000           0           6000           (1000 MT)
  (.9999)**                                                                                             

  **TOTAL Imports**     75          60            85          105            0           50             (1000 MT)

  **Jan-Dec Imports**   85          60            100         105            0           50             (1000 MT)

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

  **TOTAL SUPPLY**      1588        1573          1603        1643           128         1643           (1000 MT)

  **TOTAL Exports**     0           0             0           0              0           0              (1000 MT)

  **Jan-Dec Exports**   0           0             0           0              0           0              (1000 MT)

  **TOTAL Dom.          1455        1415          1475        1440           0           1450           (1000 MT)
  Consumption**                                                                                         

  **Ending Stocks**     133         158           128         203            0           193            (1000 MT)

  **TOTAL               1588        1573          1603        1643           0           1643           (1000 MT)
  DISTRIBUTION**                                                                                        
  --------------------- ----------- ------------- ----------- -------------- ----------- -------------- ---------

##  Colombia: Rice Imports, 2004 (January-November)

+-----------------------------+-------------+-----------+-------------+
| ####### Colombia            |             |           |             |
+-----------------------------+-------------+-----------+-------------+
| ###                         |             |           |             |
| #### Rice, Milled - Imports |             |           |             |
+-----------------------------+-------------+-----------+-------------+
| Time Period                 | Jan-Nov     | Units:    | (0,000 MT)  |
+-----------------------------+-------------+-----------+-------------+
| Imports for:                | 2004        |           | **2005**    |
+-----------------------------+-------------+-----------+-------------+
| U.S.                        | 3           | U.S.      |             |
+-----------------------------+-------------+-----------+-------------+
| Others                      |             | Others    |             |
+-----------------------------+-------------+-----------+-------------+
| Thailand                    | 45          |           |             |
+-----------------------------+-------------+-----------+-------------+
| Venezuela                   | 32          |           |             |
+-----------------------------+-------------+-----------+-------------+
| Guyana                      | 4           |           |             |
+-----------------------------+-------------+-----------+-------------+
| Ecuador                     | 1           |           |             |
+-----------------------------+-------------+-----------+-------------+
|                             |             |           |             |
+-----------------------------+-------------+-----------+-------------+
|                             |             |           |             |
+-----------------------------+-------------+-----------+-------------+
|                             |             |           |             |
+-----------------------------+-------------+-----------+-------------+
|                             |             |           |             |
+-----------------------------+-------------+-----------+-------------+
|                             |             |           |             |
+-----------------------------+-------------+-----------+-------------+
|                             |             |           |             |
+-----------------------------+-------------+-----------+-------------+
| Total for Others            | 82          |           | 0           |
+-----------------------------+-------------+-----------+-------------+
| Others not Listed           |             |           |             |
+-----------------------------+-------------+-----------+-------------+
| Grand Total                 | 85          |           | 0           |
+-----------------------------+-------------+-----------+-------------+

Source: WTA - Colombian Custom Agency (DIAN)

## Colombia: Rice Price to Millers, 2003-2004

(1,000 pesos per Ton)

  ------------------- ------------------ ------------------ --------------
  **Colombia**                                              

  **Rice, Milled                                            
  Prices**                                                  

  ** **                                                     ** **

  Prices in           (0,000) Col pesos  per uom            Metric ton

                                                             

  Year                2003               2004               \% Change

  Jan                 1042               1187               14%

  Feb                 1093               1227               12%

  Mar                 1122               1202               7%

  Apr                 1130               1203               6%

  May                 1126               1205               7%

  Jun                 1131               1189               5%

  Jul                 1146               1176               3%

  Aug                 1107               1112               0%

  Sep                 1071               1042               -3%

  Oct                 1092               1038               -5%

  Nov                 1146               1034               -10%

  Dec                 1165               1060               -9%

                                                             

  Exchange Rate       2329.67            Local Currency/US   
                                         \$                 

  Date of Quote       3/2/2005           MM/DD/YYYY          
  ------------------- ------------------ ------------------ --------------

Source: Rice Producers Federation (FEDEARROZ)