Required Report - public distribution

**Date:** 2/19/2004

**GAIN Report Number:** PE4002

PE4002

**Peru**

**Oilseeds and Products**

**Annual**

**2004**

**Approved by:**

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

U.S. Embassy

**Prepared by:**

Gaspar E. Nolte

**Report Highlights:**

Fishmeal production in CY 2004 is forecast at 1.5 Million Metric Tons, a
27 percent increase compared to the previous year. This significant
increase is the result of a higher total catch. Soybean meal imports are
expected to 525,000 MT in CY 2004. Soybean oil imports are forecast at
225,000 MT in CY 2004.

Includes PSD Changes: Yes

Includes Trade Matrix: Yes

Annual Report

Lima \[PE1\]

\[PE\]

**Executive Summary**

Total fish catch for CY 2004 is forecast at 7.8 Million Metric Tons, a
significant increase from the 5.9 MMT in 2003. Fishmeal production for
CY 2004 is forecast at 1.5 MMT a 27 percent increase compared to the
previous year, still not at 2002 level. This significant increase is the
result of a higher total catch. Warmer waters and the predominance of
young fish caused a significant catch reduction in 2003.

The fishing industry is still struggling with the financial crisis
originated by El Niño which drove most of the fish away from the
Peruvian coast in 1997/1998; the world wide economic crisis that stopped
most of the exports to Asia and caused prices to plummet. Though it has
managed to reduce its debt somewhat, they still owe \$1.2 billion.

Fish oil production is forecast at 210,000 MT in CY 2004, a slight 2.4
percent recovery from the previous year. Since there are many factors
affecting fish oil production, including weather and feed availability
for the fish, fish oil production may vary significantly from year to
year. Fish oil exports for CY 2004 are forecast at 160,000.

Soybean meal imports are forecast at 525,000 MT for CY 2004, about two
percent less than the previous year. With 287,532 MT, Paraguay continues
to be the leading soybean meal exporter to Peru in 2003 followed by
Argentina with 206,269 MT. The U.S. exported 6,348 MT.

Soybean oil imports are forecast at 225,000 MT in CY 2004. Peru
implemented a safeguard for the Andean Community on Nations (CAN) member
countries for soybean oil targeting Bolivian soy oil. Peru also
implemented an antidumping measure against Argentine soy oil.

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

  **Country**      **Peru**                                                                  

  **Commodity**    **Meal,                                        (1000                      
                   Fish**                                         MT)(PERCENT)               

                   2002       Revised     2003        Estimate    2004           Forecast    UOM

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

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

  Catch For        8000       7800        8500        5917        0              7800        (1000 MT)
  Reduction                                                                                  

  Extr. Rate,      0.22125    0.2217948   0.2211764   0.1992563   #DIV/0!        0.1923076   (PERCENT)
  999.9999                                                                                   

  Beginning Stocks 228        70          158         228         138            5           (1000 MT)

  Production       1770       1730        1880        1179        0              1500        (1000 MT)

  MY Imports       0          0           0           0           0              0           (1000 MT)

  MY Imp. from     0          0           0           0           0              0           (1000 MT)
  U.S.                                                                                       

  MY Imp. from the 0          0           0           0           0              0           (1000 MT)
  EC                                                                                         

  TOTAL SUPPLY     1998       1800        2038        1407        138            1505        (1000 MT)

  MY Exports       1750       1482        1800        1372        0              1400        (1000 MT)

  MY Exp. to the   500        371         500         527         0              520         (1000 MT)
  EC                                                                                         

  Industrial Dom.  0          0           0           0           0              0           (1000 MT)
  Consum                                                                                     

  Food Use Dom.    0          0           0           0           0              0           (1000 MT)
  Consump.                                                                                   

  Feed Waste Dom.  90         90          100         30          0              60          (1000 MT)
  Consum                                                                                     

  TOTAL Dom.       90         90          100         30          0              60          (1000 MT)
  Consumption                                                                                

  Ending Stocks    158        228         138         5           0              45          (1000 MT)

  TOTAL            1998       1800        2038        1407        0              1505        (1000 MT)
  DISTRIBUTION                                                                               

  Calendar Year    0          0           0           0           0              0           (1000 MT)
  Imports                                                                                    

  Calendar Yr Imp. 0          0           0           0           0              0           (1000 MT)
  U.S.                                                                                       

  Calendar Year    0          1482        0           1372        0              1400        (1000 MT)
  Exports                                                                                    

  Calndr Yr Exp.   0          4           0           6           0              6           (1000 MT)
  to U.S.                                                                                    
  ---------------- ---------- ----------- ----------- ----------- -------------- ----------- -----------

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

  **Country**                        Peru

  **Commodity**                      Meal, Fish

  Time Period                        CY2003

  Exports for:                       

  U.S.                               6012

  Others                             

  China                              520616

  Germany                            188724

  Japan                              166212

  Taiwan                             68498

  Canada                             44528

  UK                                 39269

  Spain                              38183

                                     

                                     

                                     

  Total for Others                   1066030

  Others not Listed                  299958

  Grand Total                        1372000
  ---------------------------------- ------------------------------------

Units: Metric Tons

**Fishmeal**

**Production**

Total fish catch for Calendar Year 2004 is forecast at 7.8 Million
Metric Tons, a significant increase from the 5.9 MMT in 2003. Fishmeal
production for CY 2004 is forecast at 1.5 MMT a 27 percent increase
compared to the previous year. This significant increase is the result
of a higher total catch. Warmer waters and predominance of young fish
caused a significant catch reduction in 2003.

After years of enjoying fairly stable economic growth and rather large
profits, the Peruvian fishing industry has suddenly found itself in
troubled waters after the 1997/1998 El Niño and the Asian crisis. The
negative effects of el Niño weather phenomenon which pushed the fish
away from the Peruvian coasts in 1998, along with the strong devaluation
of Asian currencies in 1999, main markets for Peruvian fishmeal,
overwhelmed even the most pessimistic estimates turning a sound industry
into a high risk investment, especially for banks. Moreover, after a
year with prices at around \$680 per MT for prime fishmeal and \$600 per
MT for Fair Average Quality (FAQ) fishmeal, prices plummeted to around
\$450 and \$380 respectively. Currently, the total industry debt is
estimated at \$1.2 billion. The three largest companies account for
about 25 percent of the debt.

![](media/image2.wmf)

Of the 110 fishmeal plants along the Peruvian coast, only 90 are
currently working. The Peruvian fishing fleet is comprised of 984 boats,
684 steel boats with storage capacity over 500 cubic meters and 300
wooden boats with storage capacity of 110 cubic meters. Total processing
capacity is 7,500 MT per hour, about four times more than they are allow
to catch. Most of the fishing plants have invested significant amounts
on better and more efficient equipment. Processing plants are now forced
to comply with some environmental regulations. Therefore most of them
are now investing in "tail-water" discharge recovery systems, and even
airborne particle recovery systems, both of which translate into higher
extraction rates (and profits). Larger producers are also investing in
canning or freezing lines, to convert more of the catch to higher valued
products for human consumption, a trend expected to continue.

Public awareness and international concern for environment problems
caused by the fishmeal industry are likely to increase in coming years,
which could translate into increased regulations.

Consumption

Local fishmeal consumption only accounts for three to five percent of
total production and does not have a great impact on the export market.
Consumption for CY 2004 is forecast at about 60,000 MT. Local
consumption is expected to increase somewhat in the next three years due
to an increase demand from the aquaculture industry, but it will still
not have a significant impact on fishmeal exports or price.

Trade

Fishmeal exports for CY 2004 are forecast at 1.4 MMT. With 520,616 MT,
China continues to be the major importer followed by Germany, Japan and
Taiwan. Fishmeal prices were considered adequate in CY 2003, ranging
from \$490 per MT for FAQ (fair average quality meal) to \$650 per MT
for prime meal.

Total fisheries exports were \$1.03 billion in CY 2003, three percent
less than CY 2002. Fishmeal exports in CY 2003 were \$741 million,
almost 10 percent less than the previous year. What Peruvians call
direct consumption products, as opposed to indirect consumption vis a
vis fishmeal, are expected to increase significantly in the upcoming
years. Canned fish exports were \$45 million in CY 2003, a 78 percent
increase compared to CY 2002. The principal markets for this product
were Spain (14 percent), Brazil (12 percent), and Colombia (10 percent).
Frozen and fresh fish exports were \$152 million in CY 2003, a 17
percent increase compared to the previous year, with the most important
market being the U.S. (25 percent), Spain (22 percent) and Italy (11
percent).

![](media/image3.wmf)

Policy

The GOP continues to enforce two fishing seasons during each year. These
seasonal fishing bans are implemented during the anchovy spawning
seasons and may vary somewhat from year to year. Usually the bans are
enforced from January to mid March and from August to mid October. The
Ministry of Fisheries in the past set a national fishing quota, which
was usually around 8 MMT. Since last year, the system has changed to an
ongoing measurement of the fish size. The government does not allow
fishing if the size of the fish is less than 12 centimeters. In CY 2003
there was only 150 days allowed for commercial fishing.

The Government is very concerned about the sustainable limits of fish
catches, and sets limits for the processing capacity of plants and the
fishing capacity of fleets. Every processing plant and fishing vessel
must apply for an operating permit, and receive a quota, from the
Ministry of Fisheries, before it can begin operations each season.
Moreover, the government is no longer issuing permits to build new
plants nor boats. The only venue to acquire a fishing boat is to buy one
that already has a fishing permit. Some boat owners are being forced to
sell their boats due to the deep financial crisis.

Though the GOP has given the industry a tax break through value-added
tax drawback on exports, it is still enforcing the 2 percent tax on
assets, even if they only work 6 months a year.

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

  **Country**      **Peru**                                                                 

  **Commodity**    **Oil,                                        (1000                      
                   Fish**                                        MT)(PERCENT)               

                   2002       Revised     2003       Estimate    2004           Forecast    UOM

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

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

  Catch For        8000       7800        8500       5917        0              7800        (1000 MT)
  Reduction                                                                                 

  Extr. Rate,      0          0.0239743   0          0.0346459   #DIV/0!        0.0269230   (PERCENT)
  999.9999                                                                                  

  Beginning Stocks 0          2           0          2           0              1           (1000 MT)

  Production       0          187         0          205         0              210         (1000 MT)

  MY Imports       0          0           0          0           0              0           (1000 MT)

  MY Imp. from     0          0           0          0           0              0           (1000 MT)
  U.S.                                                                                      

  MY Imp. from the 0          0           0          0           0              0           (1000 MT)
  EC                                                                                        

  TOTAL SUPPLY     0          189         0          207         0              211         (1000 MT)

  MY Exports       0          104         0          168         0              160         (1000 MT)

  MY Exp. to the   0          104         0          72          0              80          (1000 MT)
  EC                                                                                        

  Industrial Dom.  0          14          0          5           0              5           (1000 MT)
  Consum                                                                                    

  Food Use Dom.    0          59          0          25          0              39          (1000 MT)
  Consump.                                                                                  

  Feed Waste Dom.  0          10          0          8           0              5           (1000 MT)
  Consum                                                                                    

  TOTAL Dom.       0          83          0          38          0              49          (1000 MT)
  Consumption                                                                               

  Ending Stocks    0          2           0          1           0              2           (1000 MT)

  TOTAL            0          189         0          207         0              211         (1000 MT)
  DISTRIBUTION                                                                              

  Calendar Year    0          0           0          0           0              0           (1000 MT)
  Imports                                                                                   

  Calendar Yr Imp. 0          0           0          0           0              0           (1000 MT)
  U.S.                                                                                      

  Calendar Year    0          104         0          168         0              160         (1000 MT)
  Exports                                                                                   

  Calndr Yr Exp.   0          0           0          0           0              0           (1000 MT)
  to U.S.                                                                                   
  ---------------- ---------- ----------- ---------- ----------- -------------- ----------- -----------

**Fish Oil**

**Outlook**

Fish oil production for CY 2004 is forecast at 210,000 MT, 5,000 MT more
than the previous year. Oil extraction is directly related to water
temperatures. Under normal weather conditions the oil extraction rate
should be around 8 to 10 percent, but in 2003, water temperatures were
higher than normal causing oil content to drop to around three percent.
Since next year is expected to be normal, weather wise, oil content in
the fish and thus oil production is expected to recover.

Exports for CY 2004 are forecast at 160,000 MT. Oil production and
exports are difficult to forecast due to the high variability in fish
oil content and the lack of official statistics. Chile, Belgium and
Norway were the most important importers of Peru's fish oil with 37
percent, 17 percent and 12 percent of the total exports respectively.

Consumption in CY 2004 is forecast at 49,000 MT, 28 percent higher than
CY 2003. This increase is the result of an increase of fish oil
production and increasing demand for cheaper cooking oil by the lower
income sector of the population. Fish oil blended with vegetable oil is
the cheapest, thus the most popular cooking oil for Peruvian domestic
consumption.

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

  **Country**      **Peru**                                                               

  **Commodity**    **Meal,                                      (1000                     
                   Soybean**                                    MT)(PERCENT)              

                   2002        Revised    2003       Estimate   2004           Forecast   UOM

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

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

  Crush            2           0          2          0          0              0          (1000 MT)

  Extr. Rate,      0.5         #DIV/0!    0.5        #DIV/0!    #DIV/0!        #DIV/0!    (PERCENT)
  999.9999                                                                                

  Beginning Stocks 9           11         9          20         10             20         (1000 MT)

  Production       1           1          1          1          0              0          (1000 MT)

  MY Imports       575         543        600        534        0              525        (1000 MT)

  MY Imp. from     50          92         50         6          0              10         (1000 MT)
  U.S.                                                                                    

  MY Imp. from the 0           0          0          0          0              0          (1000 MT)
  EC                                                                                      

  TOTAL SUPPLY     585         555        610        555        10             545        (1000 MT)

  MY Exports       0           0          0          0          0              0          (1000 MT)

  MY Exp. to the   0           0          0          0          0              0          (1000 MT)
  EC                                                                                      

  Industrial Dom.  0           0          0          0          0              0          (1000 MT)
  Consum                                                                                  

  Food Use Dom.    0           0          0          0          0              0          (1000 MT)
  Consump.                                                                                

  Feed Waste Dom.  576         535        600        535        0              530        (1000 MT)
  Consum                                                                                  

  TOTAL Dom.       576         535        600        535        0              530        (1000 MT)
  Consumption                                                                             

  Ending Stocks    9           20         10         20         0              15         (1000 MT)

  TOTAL            585         555        610        555        0              545        (1000 MT)
  DISTRIBUTION                                                                            

  Calendar Year    0           543        0          534        0              525        (1000 MT)
  Imports                                                                                 

  Calendar Yr Imp. 0           92         0          6          0              10         (1000 MT)
  U.S.                                                                                    

  Calendar Year    0           0          0          0          0              0          (1000 MT)
  Exports                                                                                 

  Calndr Yr Exp.   0           0          0          0          0              0          (1000 MT)
  to U.S.                                                                                 
  ---------------- ----------- ---------- ---------- ---------- -------------- ---------- -----------

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

  **Country**                          Peru

  **Commodity**                        Meal, Soybean

  Time Period                          CY2003

  Imports for:                         

  U.S.                                 6348

  Others                               

  Paraguay                             287532

  Argentina                            206269

  Bolivia                              34077

  Total for Others                     527878

  Others not Listed                    

  Grand Total                          534226
  ------------------------------------ ----------------------------------

Units: Metric Tons

**Soybean meal**

**Outlook**

Soybean meal imports are forecast at 525,000 MT for CY 2004, about two
percent less than the previous year. Nevertheless, imports in the last
three years have been higher than the average, which have historically
been around 240,000 MT per year. Soybean imports are directly affected
by fishmeal production and prices.

With a per capita consumption of about 24 kilograms per annum, chicken
meat is a staple product in the Peruvian diet and the second cheapest
source protein after fish. Peru's poultry population is about 320
million birds per year and the main user of soybean meal, which
constitutes about 12 percent of the broiler's feed.

With 287,532 MT, Paraguay was the leading soybean meal exporter to Peru
in 2003 followed by Argentina with 206,269 MT. The U.S. exported 6,348
MT. Despite the duty free agreement, Bolivia only exported 34,077 MT of
soybean meal to Peru. Meal prices were around \$342 from Paraguay, \$321
from Argentina, both meals with 48 percent protein. Bolivian meal was
around \$328 but only 46 percent protein.

In 2001, Peru reduced import tariffs for soybean meal from 12 to 4
percent, thereby reducing the effects of tariff preferences agreements.
Peru grants 100 percent reduction for Bolivian meal, 70 percent
reduction for Paraguayan meal and 35 percent for Argentine meal. Besides
the tariff, every product imported into Peru or locally produced is
assessed 18 percent value-added tax.

The Government of Peru as not yet impeded imports of any agricultural
products due to "Biotechnology" concerns, nor expressed any inclination
to do so. Nevertheless the Congressional Agriculture Committee attempted
to pass a ban for GMOs in 2002 and 2003. The GOP has established a
committee to regulate production and trade of genetically engineered
products. So far there has not been any effect on commercial trade but
the government has started to receive some questions from consumers'
associations. Currently there is a congressional proposal to label GMO
products, but it does not seem to have much support. Nevertheless, Post
has met with several Congressmen and provided abundant information about
GMOs, including trade and labeling issues.

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

  **Country**      **Peru**                                                               

  **Commodity**    **Oil,                                       (1000                     
                   Soybean**                                    MT)(PERCENT)              

                   2002        Revised    2003       Estimate   2004           Forecast   UOM

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

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

  Crush            2           0          2          0          0              0          (1000 MT)

  Extr. Rate,      0           #DIV/0!    0          #DIV/0!    #DIV/0!        #DIV/0!    (PERCENT)
  999.9999                                                                                

  Beginning Stocks 20          10         20         15         20             8          (1000 MT)

  Production       0           0          0          0          0              0          (1000 MT)

  MY Imports       250         237        260        221        0              225        (1000 MT)

  MY Imp. from     50          35         60         26         0              20         (1000 MT)
  U.S.                                                                                    

  MY Imp. from the 0           0          0          0          0              0          (1000 MT)
  EC                                                                                      

  TOTAL SUPPLY     270         247        280        236        20             233        (1000 MT)

  MY Exports       0           0          0          0          0              0          (1000 MT)

  MY Exp. to the   0           0          0          0          0              0          (1000 MT)
  EC                                                                                      

  Industrial Dom.  0           0          0          0          0              0          (1000 MT)
  Consum                                                                                  

  Food Use Dom.    250         232        260        228        0              225        (1000 MT)
  Consump.                                                                                

  Feed Waste Dom.  0           0          0          0          0              0          (1000 MT)
  Consum                                                                                  

  TOTAL Dom.       250         232        260        228        0              225        (1000 MT)
  Consumption                                                                             

  Ending Stocks    20          15         20         8          0              8          (1000 MT)

  TOTAL            270         247        280        236        0              233        (1000 MT)
  DISTRIBUTION                                                                            

  Calendar Year    0           237        0          221        0              225        (1000 MT)
  Imports                                                                                 

  Calendar Yr Imp. 0           35         0          26         0              25         (1000 MT)
  U.S.                                                                                    

  Calendar Year    0           0          0          0          0              0          (1000 MT)
  Exports                                                                                 

  Calndr Yr Exp.   0           0          0          0          0              0          (1000 MT)
  to U.S.                                                                                 
  ---------------- ----------- ---------- ---------- ---------- -------------- ---------- -----------

**Soybean oil**

**Outlook**

Soybean oil imports are forecast at 225,000 MT in CY 2004. Imports in CY
2003 were 221,000 MT. Soy oil consumption in CY 2003 was 228,000 MT,
slightly lower than the 232,000 reached in CY 2002. Peru does not
produce any soybeans, so there is no crushing for oil. The only crushing
capacity is to produce full fat soy meal for feed.

Crude soybean oil imports are assess four percent import duty and
processed soy oil imports are assessed 12 percent. Peru has several
bilateral trade agreements for crude soybean oil. Imports from Bolivia
are duty free, while imports from Paraguay are granted 90 percent tariff
reduction. Soybean oil from Argentina has 80 percent tariff reduction.
Oil coming from any of these countries is not exempt from the 19 percent
value-added tax.

In November 2003, Peru implemented a safeguard against the Andean
Community on Nations (CAN) member countries for soybean oil. This
measure is targeted at increasing the price of Bolivian soy oil, in
order to protect the Peruvian oil refining industry. The safeguard
eliminates the 100 percent tariff preference granted to Bolivia.
Currently the safeguard is being evaluated by CAN committee, which will
decide weather this measure is based on sound facts or not by March. If
not, Peru will have to lift the safeguard. Peru also has implemented an
antidumping measure against Argentine soy oil, this measure adds from 17
to 20 percent on an f.o.b. basis, depending on the exporting company, on
top of the regular import duties.