Required Report - public distribution

**Date:** 4/29/2005

**GAIN Report Number:** CI5008

CI5008

**Chile**

**Grain and Feed**

**Annual**

**2005**

**Approved by:**

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

Office of Agricultural Affairs

**Prepared by:**

Luis Hennicke, Agricultural Specialist

**Report Highlights:**

> **A smaller wheat harvest due to adverse weather will result in a
> slight expansion in imports for MY2004. Corn imports are forecast to
> expand significantly as planted area and production are expected to
> fall and domestic demand will stay strong.**

Includes PSD Changes: Yes

Includes Trade Matrix: Yes

Annual Report

Santiago \[CI1\]

\[CI\]

Table of Contents

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

[WHEAT 3](#wheat)

[Production 3](#production)

[Consumption 3](#consumption)

[Prices 3](#prices)

[Trade 4](#trade)

[Price Band 4](#price-band)

[PSD Table 5](#psd-table)

[Import Trade Matrix 5](#import-trade-matrix)

[Prices Table 6](#prices-table)

[CORN 7](#corn)

[Production 7](#production-1)

[Consumption and Trade 7](#consumption-and-trade)

[PSD Table 8](#psd-table-1)

[Import Trade Matrix 9](#import-trade-matrix-1)

[Prices Table 9](#prices-table-1)

# Executive Summary

As a result of adverse weather conditions in most growing areas wheat
output fell slightly in MY2004 when compared to the previous year.
Consequently, wheat imports are expected to expand slightly. In MY2005,
as a result of a significant fall in wheat prices, initial planting
surveys show a dramatic fall in planting intentions and production.
Therefore imports are forecast to expand considerable.

Although Chile's corn production for MY 2004 is expected to expand, as
planted area has increased, imports will remain similar to last year as
domestic demand also is growing. However for MY2005, a significant fall
in planted area and production is forecast as prices have fallen
dramatically. As a result, import requirements for MY 2005 are expected
to jump considerably, as consumption is expected to increase due to
growth in the poultry and hog industries.

# WHEAT

# Production

Although total wheat planted did not change in MY2004, when compared to
the previous marketing year, total production fell due to adverse
weather conditions in most growing areas during last spring (Sept-Nov).
Lower than normal temperatures and excessive rain in late spring and
early summer affected average yields in most production regions. However
the adverse weather conditions did not affect the quality of the
production.

For MY 2005, the initial planting survey forecasts a significant fall in
the total planted area, when compared to the previous year. This fall is
attributed mainly to a reported 30 percent fall in domestic wheat prices
for this season's crop. Additionally, expectations of better prices for
alternative crops like oats, barley and rapeseed are expected to
contribute to the fall in total planted area and production for the
coming marketing year.

## 

# Consumption

Although our PS&D table shows a slight increase in total consumption of
wheat, consumption for human use during the last few years has been
rather stagnant. According to the local bakery association, Chileans
consume an average of close to 100 kilos of bread per capita per year,
making them the second largest consumers of bread in the Western
hemisphere after Germany. Approximately 25,000 persons are employed in
the industry. Domestic feed consumption of wheat has reportedly been
expanding the last few years. A fast growing salmon and trout feed
industry has become an alternative outlet for some wheat producers'
production who have no storage capacity and have to sell their wheat
right after harvest. As prices offered by millers fell significantly
this year an increasing number of producers looked for alternatives and
sold their production for cash to the feed industry.

# Prices

Wheat prices paid to farmers by the milling industry have reportedly
fallen 25 to 30 percent compared to last year. A significant revaluation
of the local currency against the dollar, together with low prices for
Argentinean wheat flour and increased imports of flour are the main
factors cited by the milling industry for the domestic decline in wheat
price. Wheat flour imports increased over 350 percent in 2004, climbing
from 1,260 MT in 2003 to 5,760 MT in 2004. As a result, wheat flour
millers and wheat producers requested and obtained a safeguard of 17% on
flour imports from Argentina. This safeguard will be in effect during
CY2005. Wheat producers supported this request in the hope that they
would receive better prices for this year's production (MY2004). However
this did not occur, and so planted area is expected to fall significant
next year can be expected (MY2005).

## 

# Trade

The new import figures are expected to be smaller than previously
estimated for MY2004 but larger than last year. For MY2005, a
significant expansion in imports is forecasted, as planted area and
production will fall significantly as a result of this year's low prices
paid to producers and their subsequent shift in plantings to alternative
crops.

Domestic import decisions are normally driven by price followed by
quality, but sometimes price and/or quality take a back seat when a
shipload needs to be filled. Under these conditions a higher price may
be paid and/or a lower quality accepted for the remaining portion of the
shipment. Consequently, although you would expect importers to get wheat
from a U.S. supplier when a higher quality product is sought, the
supplier in a third country, even with a lower quality product might get
the sale.

Wheat exports shown in the PS&D table correspond to wheat product
exports, mostly uncooked pasta, which is converted to grain equivalent.
Chiles largest markets for these products are countries like Peru and
Venezuela. The US is also an important export market for these products.

# Price Band

In November 2003, the Chilean Government set floor and ceiling prices
for wheat. The values for the floor and ceiling prices are USD\$128
f.o.b. and USD\$148 f.o.b. respectively. These prices will remain fixed
until 2007. Starting 2008, the floor will be adjusted downward by 2% a
year until 2014, when the President will evaluate whether to continue
with the price band system or eliminate it. The reference price will be
a fixed amount in USD per ton and it will be published six times a year.
The reference price will be based on an average of the daily price for
the 30 days preceding the date of publication. For the first semester
the relevant market will be FOB an Argentinean port and for the second
semester it will be soft red winter wheat #2, FOB Gulf of Mexico. It
will be applied on the date of entry of the goods. For wheat flour
imports, the values of the wheat price band increased by 56 percent are
applied.

+-------------------+-----+-------+-----+-------+-----+-------+-------+
| ## PSD Table      |     |       |     |       |     |       |       |
+-------------------+-----+-------+-----+-------+-----+-------+-------+
| Country           | Ch  |       |     |       |     |       |       |
|                   | ile |       |     |       |     |       |       |
+-------------------+-----+-------+-----+-------+-----+-------+-------+
| Commodity         | Wh  |       |     |       | (1  |       |       |
|                   | eat |       |     |       | 000 |       |       |
|                   |     |       |     |       | HA  |       |       |
|                   |     |       |     |       | )(1 |       |       |
|                   |     |       |     |       | 000 |       |       |
|                   |     |       |     |       | MT) |       |       |
+-------------------+-----+-------+-----+-------+-----+-------+-------+
|                   | 2   | Re    | 2   | Est   | 2   | For   | UOM   |
|                   | 003 | vised | 004 | imate | 005 | ecast |       |
+-------------------+-----+-------+-----+-------+-----+-------+-------+
|                   | U   | Post  | U   | Post  | U   | Post  |       |
|                   | SDA | Est   | SDA | Est   | SDA | Est   |       |
|                   | Of  | imate | Of  | imate | Of  | imate |       |
|                   | fic | \[    | fic | \[    | fic | \[    |       |
|                   | ial | New\] | ial | New\] | ial | New\] |       |
|                   | \   |       | \   |       | \   |       |       |
|                   | [Ol |       | [Ol |       | [Ol |       |       |
|                   | d\] |       | d\] |       | d\] |       |       |
+-------------------+-----+-------+-----+-------+-----+-------+-------+
| Market Year Begin |     | 12    |     | 12    |     | 12    | MM    |
|                   |     | /2003 |     | /2004 |     | /2005 | /YYYY |
+-------------------+-----+-------+-----+-------+-----+-------+-------+
| Area Harvested    | 420 | 420   | 424 | 420   | 0   | 360   | (1000 |
|                   |     |       |     |       |     |       | HA)   |
+-------------------+-----+-------+-----+-------+-----+-------+-------+
| Beginning Stocks  | 441 | 471   | 449 | 411   | 434 | 311   | (1000 |
|                   |     |       |     |       |     |       | MT)   |
+-------------------+-----+-------+-----+-------+-----+-------+-------+
| Production        | 1   | 1922  | 1   | 1860  | 0   | 1584  | (1000 |
|                   | 922 |       | 900 |       |     |       | MT)   |
+-------------------+-----+-------+-----+-------+-----+-------+-------+
| TOTAL Mkt. Yr.    | 301 | 239   | 300 | 270   | 0   | 635   | (1000 |
| Imports           |     |       |     |       |     |       | MT)   |
+-------------------+-----+-------+-----+-------+-----+-------+-------+
| Jul-Jun Imports   | 442 | 430   | 300 | 235   | 0   | 450   | (1000 |
|                   |     |       |     |       |     |       | MT)   |
+-------------------+-----+-------+-----+-------+-----+-------+-------+
| Jul-Jun Import    | 253 | 263   | 0   | 0     | 0   | 0     | (1000 |
| U.S.              |     |       |     |       |     |       | MT)   |
+-------------------+-----+-------+-----+-------+-----+-------+-------+
| TOTAL SUPPLY      | 2   | 2632  | 2   | 2541  | 434 | 2530  | (1000 |
|                   | 664 |       | 649 |       |     |       | MT)   |
+-------------------+-----+-------+-----+-------+-----+-------+-------+
| TOTAL Mkt. Yr.    | 15  | 21    | 15  | 20    | 0   | 20    | (1000 |
| Exports           |     |       |     |       |     |       | MT)   |
+-------------------+-----+-------+-----+-------+-----+-------+-------+
| Jul-Jun Exports   | 19  | 0     | 15  | 0     | 0   | 0     | (1000 |
|                   |     |       |     |       |     |       | MT)   |
+-------------------+-----+-------+-----+-------+-----+-------+-------+
| Feed Dom.         | 150 | 150   | 150 | 190   | 0   | 200   | (1000 |
| Consumption       |     |       |     |       |     |       | MT)   |
+-------------------+-----+-------+-----+-------+-----+-------+-------+
| TOTAL Dom.        | 2   | 2200  | 2   | 2210  | 0   | 2210  | (1000 |
| Consumption       | 200 |       | 200 |       |     |       | MT)   |
+-------------------+-----+-------+-----+-------+-----+-------+-------+
| Ending Stocks     | 449 | 411   | 434 | 311   | 0   | 300   | (1000 |
|                   |     |       |     |       |     |       | MT)   |
+-------------------+-----+-------+-----+-------+-----+-------+-------+
| TOTAL             | 2   | 2632  | 2   | 2541  | 0   | 2530  | (1000 |
| DISTRIBUTION      | 664 |       | 649 |       |     |       | MT)   |
+-------------------+-----+-------+-----+-------+-----+-------+-------+

+---------------------+--------------+------------------+--------------+
| ##                  |              |                  |              |
| Import Trade Matrix |              |                  |              |
+---------------------+--------------+------------------+--------------+
| Country             | Chile        |                  |              |
+---------------------+--------------+------------------+--------------+
| Commodity           | Wheat        |                  |              |
+---------------------+--------------+------------------+--------------+
| Time Period         | Jan-Dec      | Units:           | M.T.         |
+---------------------+--------------+------------------+--------------+
| Imports for:        | 2003         |                  | 2004         |
+---------------------+--------------+------------------+--------------+
| U.S.                | 252584       | U.S.             | 39682        |
+---------------------+--------------+------------------+--------------+
| Others              |              | Others           |              |
+---------------------+--------------+------------------+--------------+
| Canada              | 139778       | Canada           | 120170       |
+---------------------+--------------+------------------+--------------+
| Argentina           | 92308        | Argentina        | 61867        |
+---------------------+--------------+------------------+--------------+
| France              | 8            | Paraguay         | 5856         |
+---------------------+--------------+------------------+--------------+
|                     |              | France           | 3            |
+---------------------+--------------+------------------+--------------+
|                     |              | Mexico           | 2            |
+---------------------+--------------+------------------+--------------+
| Total for Others    | 232094       |                  | 187898       |
+---------------------+--------------+------------------+--------------+
| Others not Listed   | 0            |                  |              |
+---------------------+--------------+------------------+--------------+
| Grand Total         | 484678       |                  | 227580       |
+---------------------+--------------+------------------+--------------+

+-------------------+---------------+---------------------+-----------+
| ## Prices Table   |               |                     |           |
+-------------------+---------------+---------------------+-----------+
| Country           | Chile         |                     |           |
+-------------------+---------------+---------------------+-----------+
| Commodity         | Wheat         |                     |           |
+-------------------+---------------+---------------------+-----------+
| Prices in         | pesos         | per uom             | Kg        |
+-------------------+---------------+---------------------+-----------+
|                   |               |                     |           |
+-------------------+---------------+---------------------+-----------+
| Year              | 2004          | 2005                | \% Change |
+-------------------+---------------+---------------------+-----------+
| Jan               | 121           | 95                  | -21%      |
+-------------------+---------------+---------------------+-----------+
| Feb               | 113           | 94                  | -17%      |
+-------------------+---------------+---------------------+-----------+
| Mar               | 113           | 94                  | -17%      |
+-------------------+---------------+---------------------+-----------+
| Apr               | 113           |                     | -100%     |
+-------------------+---------------+---------------------+-----------+
| May               | 114           |                     | -100%     |
+-------------------+---------------+---------------------+-----------+
| Jun               | 117           |                     | -100%     |
+-------------------+---------------+---------------------+-----------+
| Jul               | 117           |                     | -100%     |
+-------------------+---------------+---------------------+-----------+
| Aug               | 118           |                     | -100%     |
+-------------------+---------------+---------------------+-----------+
| Sep               | 108           |                     | -100%     |
+-------------------+---------------+---------------------+-----------+
| Oct               | 109           |                     | -100%     |
+-------------------+---------------+---------------------+-----------+
| Nov               | 99            |                     | -100%     |
+-------------------+---------------+---------------------+-----------+
| Dec               | 93            |                     | -100%     |
+-------------------+---------------+---------------------+-----------+
|                   |               |                     |           |
+-------------------+---------------+---------------------+-----------+
| Exchange Rate     | 586           | Local Currency/US   |           |
|                   |               | \$                  |           |
+-------------------+---------------+---------------------+-----------+
| Date of Quote     | 3/31/2005     | MM/DD/YYYY          |           |
+-------------------+---------------+---------------------+-----------+
|                   |               |                     |           |
+-------------------+---------------+---------------------+-----------+
| Note: Constant    |               |                     |           |
| March 2005 prices |               |                     |           |
+-------------------+---------------+---------------------+-----------+

# CORN

# Production

Growing demand and good prices in MY 2004 had a positive effect on
Chile's final total area planted for corn in MY 2005. The larger planted
area together with a moderate rainfall in the spring with no frost
resulted in a large and good quality crop with little or no moisture
problems. Although demand will stay strong due to projected increases in
poultry and hog production, the prices being paid to producers for this
year's corn production have fallen dramatically as international prices
for corn have dropped significantly. High prices stimulated world
production of corn last year bringing stocks back to normal levels and
contributing to the deterioration of world corn prices in 2004. As a
result of the low global corn prices, corn plantings and production in
MY 2006 are expected to fall significantly.

# Consumption and Trade

Although total domestic corn production is expected to be larger in MY
2005 than the previous year, corn imports are expected to remain steady
or expand slightly, due to expanded feed use in the hog and poultry
industries. Since corn production is forecast to fall significantly in
MY 2006 and demand will continue to expand, imports are expected to jump
over 30 percent.

Argentina is the largest supplier of bulk corn to Chile. This situation
is not expected to change, as Argentina continues to have cost/quality
advantage. Argentine corn also is subject to a lower import duty rate
than U.S. corn, as a result of the Mercosur Agreement (90 percent
preferential tariff difference). Currently, Argentina pays a duty of 0.6
percent, while U.S. corn is still subject to a 6 percent duty. The
U.S. - Chile Free Trade Agreement will remove this difference, but not
until January 1, 2006. As a result, imports are expected to come from
Argentina and other MERCOSUR members at least until the tariff
elimination takes place (January 2006).

+--------------+------+-------+------+-------+------+-------+--------+
| ## PSD Table |      |       |      |       |      |       |        |
+--------------+------+-------+------+-------+------+-------+--------+
| Country      | C    |       |      |       |      |       |        |
|              | hile |       |      |       |      |       |        |
+--------------+------+-------+------+-------+------+-------+--------+
| Commodity    | Corn |       |      |       | (    |       |        |
|              |      |       |      |       | 1000 |       |        |
|              |      |       |      |       | HA)( |       |        |
|              |      |       |      |       | 1000 |       |        |
|              |      |       |      |       | MT)  |       |        |
+--------------+------+-------+------+-------+------+-------+--------+
|              | 2003 | Re    | 2004 | Est   | 2005 | For   | UOM    |
|              |      | vised |      | imate |      | ecast |        |
+--------------+------+-------+------+-------+------+-------+--------+
|              | USDA | Post  | USDA | Post  | USDA | Post  |        |
|              | Offi | Est   | Offi | Est   | Offi | Est   |        |
|              | cial | imate | cial | imate | cial | imate |        |
|              | \[O  | \[    | \[O  | \[    | \[O  | \[    |        |
|              | ld\] | New\] | ld\] | New\] | ld\] | New\] |        |
+--------------+------+-------+------+-------+------+-------+--------+
| Market Year  |      | 03    |      | 03    |      | 03    | M      |
| Begin        |      | /2004 |      | /2005 |      | /2006 | M/YYYY |
+--------------+------+-------+------+-------+------+-------+--------+
| Area         | 119  | 119   | 128  | 128   | 0    | 100   | (1000  |
| Harvested    |      |       |      |       |      |       | HA)    |
+--------------+------+-------+------+-------+------+-------+--------+
| Beginning    | 337  | 213   | 348  | 257   | 383  | 357   | (1000  |
| Stocks       |      |       |      |       |      |       | MT)    |
+--------------+------+-------+------+-------+------+-------+--------+
| Production   | 1321 | 1321  | 1410 | 1410  | 0    | 1000  | (1000  |
|              |      |       |      |       |      |       | MT)    |
+--------------+------+-------+------+-------+------+-------+--------+
| TOTAL Mkt.   | 1000 | 986   | 1000 | 1000  | 0    | 1295  | (1000  |
| Yr. Imports  |      |       |      |       |      |       | MT)    |
+--------------+------+-------+------+-------+------+-------+--------+
| Oct-Sep      | 1043 | 870   | 1000 | 950   | 0    | 0     | (1000  |
| Imports      |      |       |      |       |      |       | MT)    |
+--------------+------+-------+------+-------+------+-------+--------+
| Oct-Sep      | 0    | 0     | 0    | 0     | 0    | 0     | (1000  |
| Import U.S.  |      |       |      |       |      |       | MT)    |
+--------------+------+-------+------+-------+------+-------+--------+
| TOTAL SUPPLY | 2658 | 2520  | 2758 | 2667  | 383  | 2652  | (1000  |
|              |      |       |      |       |      |       | MT)    |
+--------------+------+-------+------+-------+------+-------+--------+
| TOTAL Mkt.   | 60   | 63    | 75   | 60    | 0    | 50    | (1000  |
| Yr. Exports  |      |       |      |       |      |       | MT)    |
+--------------+------+-------+------+-------+------+-------+--------+
| Oct-Sep      | 62   | 0     | 75   | 0     | 0    | 0     | (1000  |
| Exports      |      |       |      |       |      |       | MT)    |
+--------------+------+-------+------+-------+------+-------+--------+
| Feed Dom.    | 2100 | 2050  | 2150 | 2100  | 0    | 2120  | (1000  |
| Consumption  |      |       |      |       |      |       | MT)    |
+--------------+------+-------+------+-------+------+-------+--------+
| TOTAL Dom.   | 2250 | 2200  | 2300 | 2250  | 0    | 2260  | (1000  |
| Consumption  |      |       |      |       |      |       | MT)    |
+--------------+------+-------+------+-------+------+-------+--------+
| Ending       | 348  | 257   | 383  | 357   | 0    | 342   | (1000  |
| Stocks       |      |       |      |       |      |       | MT)    |
+--------------+------+-------+------+-------+------+-------+--------+
| TOTAL        | 2658 | 2520  | 2758 | 2667  | 0    | 2652  | (1000  |
| DISTRIBUTION |      |       |      |       |      |       | MT)    |
+--------------+------+-------+------+-------+------+-------+--------+

+--------------------+----------------+-----------------+-------------+
| ## I               |                |                 |             |
| mport Trade Matrix |                |                 |             |
+--------------------+----------------+-----------------+-------------+
| Country            | Chile          |                 |             |
+--------------------+----------------+-----------------+-------------+
| Commodity          | Corn           |                 |             |
+--------------------+----------------+-----------------+-------------+
| Time Period        | Jan-Dec        | Units:          | M.T.        |
+--------------------+----------------+-----------------+-------------+
| Imports for:       | 2003           |                 | 2004        |
+--------------------+----------------+-----------------+-------------+
| U.S.               | 1517           | U.S.            | 0           |
+--------------------+----------------+-----------------+-------------+
| Others             |                | Others          |             |
+--------------------+----------------+-----------------+-------------+
| Argentina          | 968292         | Argentina       | 953150      |
+--------------------+----------------+-----------------+-------------+
| Brazil             | 30513          | Brazil          | 25944       |
+--------------------+----------------+-----------------+-------------+
| Paraguay           | 7987           | Peru            | 16          |
+--------------------+----------------+-----------------+-------------+
| Peru               | 8              | Canada          | 3           |
+--------------------+----------------+-----------------+-------------+
| Germany            | 1              | Mexico          | 1           |
+--------------------+----------------+-----------------+-------------+
| Total for Others   | 1006801        |                 | 979114      |
+--------------------+----------------+-----------------+-------------+
| Others not Listed  | 0              |                 | 0           |
+--------------------+----------------+-----------------+-------------+
| Grand Total        | 1008318        |                 | 979114      |
+--------------------+----------------+-----------------+-------------+

+----------------+---------------+----------------------+-------------+
| #              |               |                      |             |
| # Prices Table |               |                      |             |
+----------------+---------------+----------------------+-------------+
| Country        | Chile         |                      |             |
+----------------+---------------+----------------------+-------------+
| Commodity      | Corn          |                      |             |
+----------------+---------------+----------------------+-------------+
| Prices in      | pesos         | per uom              | Kg          |
+----------------+---------------+----------------------+-------------+
|                |               |                      |             |
+----------------+---------------+----------------------+-------------+
| Year           | 2004          | 2005                 | \% Change   |
+----------------+---------------+----------------------+-------------+
| Jan            | 95            | 83                   | -13%        |
+----------------+---------------+----------------------+-------------+
| Feb            | 97            | 81                   | -16%        |
+----------------+---------------+----------------------+-------------+
| Mar            | 95            | 76                   | -20%        |
+----------------+---------------+----------------------+-------------+
| Apr            | 93            |                      | -100%       |
+----------------+---------------+----------------------+-------------+
| May            | 95            |                      | -100%       |
+----------------+---------------+----------------------+-------------+
| Jun            | 97            |                      | -100%       |
+----------------+---------------+----------------------+-------------+
| Jul            | 97            |                      | -100%       |
+----------------+---------------+----------------------+-------------+
| Aug            | 94            |                      | -100%       |
+----------------+---------------+----------------------+-------------+
| Sep            | 93            |                      | -100%       |
+----------------+---------------+----------------------+-------------+
| Oct            | 91            |                      | -100%       |
+----------------+---------------+----------------------+-------------+
| Nov            | 89            |                      | -100%       |
+----------------+---------------+----------------------+-------------+
| Dec            | 88            |                      | -100%       |
+----------------+---------------+----------------------+-------------+
|                |               |                      |             |
+----------------+---------------+----------------------+-------------+
| Exchange Rate  | 586           | Local Currency/US \$ |             |
+----------------+---------------+----------------------+-------------+
| Date of Quote  | 3/31/2005     | MM/DD/YYYY           |             |
+----------------+---------------+----------------------+-------------+
|                |               |                      |             |
+----------------+---------------+----------------------+-------------+
| Note: In       |               |                      |             |
| constant March |               |                      |             |
| 2005 prices.   |               |                      |             |
+----------------+---------------+----------------------+-------------+