Required Report - public distribution

**Date:** 11/30/2005

**GAIN Report Number:** CI5030

CI5030

**Chile**

**Avocado**

**Annual**

**2005**

**Approved by:**

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

Office of Agricultural Affairs

**Prepared by:**

Luis Hennicke, Agricultural Specialist

**Report Highlights:**

**Output and exports of avocados are expected to increase this year, as
a result of more planted area coming into production together with good
weather and strong export demand.**

Includes PSD Changes: Yes

Includes Trade Matrix: Yes

Unscheduled Report

Santiago \[CI1\]

\[CI\]

Table of Contents

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

[Production 3](#production)

[Consumption 3](#consumption)

[Table -- Chile: Avocado Planted Area, Production and Exports
4](#table-chile-avocado-planted-area-production-and-exports)

[Trade 4](#trade)

[Policy 5](#policy)

[Market Development 5](#market-development)

[PSD Table 5](#psd-table)

[Export Trade Matrix 6](#export-trade-matrix)

# Executive Summary

Chilean avocado production will continue to increase in the coming years
as there is still a large number of orchards entering their most
productive stage. Although the total area planted to avocados has
increased significantly during the last few years, industry sources
indicate that the rate of increase in planted area is expected to level
off in the near future. The increase in dedicated land use to avocados
is principally the result of excellent gains made in export markets in
the past. But as prices are falling together with an expected increase
in competition from Mexico in key export markets like the US, a slowdown
in the planting expansion will occur.

# Production

For MY2004 (Jan-Dec 2005) a smaller than previously estimated avocado
production but slightly larger than last year's output is expected as a
large number of avocados orchards were affected by alternate bearing
volumes, that is, after the high production last year a much lower
production resulted this year. Although it is early to predict MY2005
(Jan-Dec 2006), further expansion in production is expected as the
planted area, which has grown significantly over the last few years as a
result of excellent returns, comes into production. Weather also has
been favorable during flowering in most producing areas. Future
increases in planted area will be mainly in Hass varieties for the
export market. Avocado production is sensitive to climactic conditions,
particularly to low temperatures during flowering and temperature
changes. Weather largely accounted for production variations in the
past.

Most Chilean avocados are produced in arid regions with little rain,
except during the winter months, consequently most orchards are
frequently free of pests and spraying is not necessary. Production area
has expanded over 1,200 hectares per year during the last 4 years.
Increases in planted land have been almost exclusively devoted to the
Hass variety, which represents 75 percent of total production.

According to the Chilean avocado commission, total area planted to
avocados is not expected to keep expanding as in the past, as prices for
avocados have been falling significantly after many years of high
prices. Export prices have fallen from US\$1.22 per Kg to US\$0.85 per
Kg during the first 10 months of 2005. Additionally, the strong demand
observed in the past in Chile's most important market, the United
States, is expected to fall significantly once Mexican avocados gain
access to all 50 States. Mexican avocados enter the US duty free.

A little over 98 percent of all Chilean commercial avocado trees are
planted in the central area of the country ‑ from Region IV through
Region VI. The predominant areas are Region V (Quillota, Aconcagua
Valley and La Ligua, Petorca) with 61 percent of the total and the
Metropolitan Region with 21 percent of the total. The largest expansion
in planting during the last few years has been in Region V, followed by
the Metropolitan Region and Region IV. Although almost all of the
expansion has been dedicated to the Hass variety, there are over 20
other varieties planted.

## 

# Consumption

Despite the recent increases in consumption, per capita domestic use is
still considered to be fairly low for a producing country -- around 3.5
Kg. per person. To increase domestic consumption, the Chilean avocado
producers association has launched a promotional campaign that focuses
on a nutrition and health message. The promotional campaign will go from
October 1, 2005 through January 31, 2006 with an estimated cost of US\$
410, 000. It consists of ads on the street, newspapers, magazines, radio
and TV campaign and in-store promotion in 40 supermarkets. An estimated
65 to 75 percent of production is normally exported, leaving the
domestic market currently with approximately 52,000 MT.

+----------------+-----------------+-----------------+-----------------+
| ## Tabl        |                 |                 |                 |
| e -- Chile: Av |                 |                 |                 |
| ocado Planted  |                 |                 |                 |
| Area, Producti |                 |                 |                 |
| on and Exports |                 |                 |                 |
+----------------+-----------------+-----------------+-----------------+
| Years          | Planted Area    | Production (MT) | Exports (MT)    |
|                | (Ha)            |                 |                 |
+----------------+-----------------+-----------------+-----------------+
|                |                 |                 |                 |
+----------------+-----------------+-----------------+-----------------+
| 1973           | 4,490           | 14,500          | \-              |
+----------------+-----------------+-----------------+-----------------+
| 1980           | 6,180           | 25,000          | 12              |
+----------------+-----------------+-----------------+-----------------+
| 1985           | 7,605           | 28,900          | 1,200           |
+----------------+-----------------+-----------------+-----------------+
| 1990           | 8,315           | 38,800          | 11,557          |
+----------------+-----------------+-----------------+-----------------+
| 1995           | 11,560          | 48,000          | 12,000          |
+----------------+-----------------+-----------------+-----------------+
| 1999           | 19,800          | 80,550          | 34,788          |
+----------------+-----------------+-----------------+-----------------+
| 2000           | 21,202          | 95,000          | 52,049          |
+----------------+-----------------+-----------------+-----------------+
| 2001           | 21,800          | 98,000          | 52,492          |
+----------------+-----------------+-----------------+-----------------+
| 2002           | 22,900          | 129,000         | 78,071          |
+----------------+-----------------+-----------------+-----------------+
| 2003           | 23,300          | 148,000         | 97,646          |
+----------------+-----------------+-----------------+-----------------+
| 2004           | 24,500          | 170,000         | 113,508         |
+----------------+-----------------+-----------------+-----------------+
| 2005           | 24,900          | 177,000         | 120,000 1/      |
+----------------+-----------------+-----------------+-----------------+
| 2006           | 25,200          | 190,000         | 132,000 2/      |
+----------------+-----------------+-----------------+-----------------+
|                |                 |                 |                 |
+----------------+-----------------+-----------------+-----------------+
| Note: 1/       | Estimate        |                 |                 |
+----------------+-----------------+-----------------+-----------------+
| 2/             | Forecasts       |                 |                 |
+----------------+-----------------+-----------------+-----------------+
| Source:        |                 |                 |                 |
| Ministry of    |                 |                 |                 |
| Agriculture,   |                 |                 |                 |
| Central Bank   |                 |                 |                 |
+----------------+-----------------+-----------------+-----------------+

## 

# Trade

The US market received 89 percent of Chile's total avocado exports in
2004. However exports to the EU, mainly Spain, Netherlands and the
United Kingdom increased significantly. Although export volumes to the
EU countries combined do not exceed 10 percent, they almost tripled in
2004 when compared to the previous year. A bigger industry effort to
diversify their markets, together with a strong Euro, contributed in
increasing exports to the other destinations, in 2005.

As a result of the US-Chile FTA, Chile obtained a duty free quota of
49,000 M.T. beginning with CY2004, this quota will increase 5 percent
yearly over the next 12 years until the quota is eliminated and Chilean
avocados enter the US duty free.

Chilean avocado exports are highly dependent on the U.S. market. The
California Avocado Commission's promotional campaign will continue this
year, which is financed trough the Check Off program. The budgeted
amount for 2004-05 was approximately 4.7 million dollars.

Additionally, the Chilean Avocado Commission started a campaign last May
in Europe, performing market studies in the United Kingdom and Spain and
a public relations campaign in the UK that included bringing a group of
United Kingdom editors of magazines and newspapers to Chile. The total
estimated cost for this activity was US\$500,000.

# Policy

The Chilean Government has no subsidy or special tax incentives for
avocado production or exports. Imports are charged a 6 percent uniform
duty rate. There is a proposed law, called \"Law for the Recovery and
Promotion of the Native Forest\", which has been sitting in Congress
since 1992 that could affect future expansion of avocado plantings if
approved. The proposed law also calls for preservation of the hillsides
that will restrict replacements of native trees and bushes to fruit
plantings. Most of the new plantings during the last three years have
been in hillsides, as these present an advantage over flatland in
relation to frosts. The bill has gone through lengthy discussions and
still has not been approved, mainly due to differing views among the
various government agencies involved.

# Market Development

Although avocados from California State and Mexico can enter the Chilean
market, this country's rather large, year‑around avocado production and
low domestic prices tend to discourage commercial imports for all but a
few months during the marketing year.

+------------------+------+-----+-----+-----+-----+-----+----------+
| ## PSD Table     |      |     |     |     |     |     |          |
+------------------+------+-----+-----+-----+-----+-----+----------+
| Country          | C    |     |     |     |     |     |          |
|                  | hile |     |     |     |     |     |          |
+------------------+------+-----+-----+-----+-----+-----+----------+
| Commodity        | A    |     |     |     | (HE |     |          |
|                  | voca |     |     |     | CTA |     |          |
|                  | dos, |     |     |     | RES |     |          |
|                  | F    |     |     |     | )(1 |     |          |
|                  | resh |     |     |     | 000 |     |          |
|                  |      |     |     |     | T   |     |          |
|                  |      |     |     |     | REE |     |          |
|                  |      |     |     |     | S)( |     |          |
|                  |      |     |     |     | MT) |     |          |
+------------------+------+-----+-----+-----+-----+-----+----------+
|                  | 2003 | R   | 2   | Es  | 2   | Fo  | UOM      |
|                  |      | evi | 004 | tim | 005 | rec |          |
|                  |      | sed |     | ate |     | ast |          |
+------------------+------+-----+-----+-----+-----+-----+----------+
|                  | USDA | P   | U   | P   | U   | P   |          |
|                  | Offi | ost | SDA | ost | SDA | ost |          |
|                  | cial | Est | Of  | Est | Of  | Est |          |
|                  | \[O  | ima | fic | ima | fic | ima |          |
|                  | ld\] | te\ | ial | te\ | ial | te\ |          |
|                  |      | [Ne | \   | [Ne | \   | [Ne |          |
|                  |      | w\] | [Ol | w\] | [Ol | w\] |          |
|                  |      |     | d\] |     | d\] |     |          |
+------------------+------+-----+-----+-----+-----+-----+----------+
| Market Year      |      | 0   |     | 0   |     | 0   | MM/YYYY  |
| Begin            |      | 1/2 |     | 1/2 |     | 1/2 |          |
|                  |      | 004 |     | 005 |     | 006 |          |
+------------------+------+-----+-----+-----+-----+-----+----------+
| Area Planted     | 2    | 24  | 24  | 24  | 0   | 25  | (H       |
|                  | 4500 | 500 | 900 | 900 |     | 200 | ECTARES) |
+------------------+------+-----+-----+-----+-----+-----+----------+
| Area Harvested   | 2    | 20  | 20  | 20  | 0   | 21  | (H       |
|                  | 0700 | 700 | 900 | 900 |     | 050 | ECTARES) |
+------------------+------+-----+-----+-----+-----+-----+----------+
| Bearing Trees    | 8591 | 6   | 8   | 6   | 0   | 6   | (1000    |
|                  |      | 750 | 673 | 820 |     | 862 | TREES)   |
+------------------+------+-----+-----+-----+-----+-----+----------+
| Non-Bearing      | 1577 | 1   | 1   | 1   | 0   | 1   | (1000    |
| Trees            |      | 240 | 660 | 304 |     | 354 | TREES)   |
+------------------+------+-----+-----+-----+-----+-----+----------+
| TOTAL No. Of     | 1    | 7   | 10  | 8   | 0   | 8   | (1000    |
| Trees            | 0168 | 990 | 333 | 124 |     | 216 | TREES)   |
+------------------+------+-----+-----+-----+-----+-----+----------+
| Production       | 17   | 170 | 200 | 177 | 0   | 190 | (MT)     |
|                  | 0000 | 000 | 000 | 000 |     | 000 |          |
+------------------+------+-----+-----+-----+-----+-----+----------+
| Imports          | 0    | 0   | 0   | 0   | 0   | 0   | (MT)     |
+------------------+------+-----+-----+-----+-----+-----+----------+
| TOTAL SUPPLY     | 17   | 170 | 200 | 177 | 0   | 190 | (MT)     |
|                  | 0000 | 000 | 000 | 000 |     | 000 |          |
+------------------+------+-----+-----+-----+-----+-----+----------+
| Exports          | 11   | 113 | 136 | 120 | 0   | 132 | (MT)     |
|                  | 8500 | 508 | 200 | 000 |     | 000 |          |
+------------------+------+-----+-----+-----+-----+-----+----------+
| Fresh Dom.       | 5    | 56  | 63  | 57  | 0   | 58  | (MT)     |
| Consumption      | 1500 | 492 | 800 | 000 |     | 000 |          |
+------------------+------+-----+-----+-----+-----+-----+----------+
| Processing       | 0    | 0   | 0   | 0   | 0   | 0   | (MT)     |
| Consumption      |      |     |     |     |     |     |          |
+------------------+------+-----+-----+-----+-----+-----+----------+
| TOTAL            | 17   | 170 | 200 | 177 | 0   | 190 | (MT)     |
| DISTRIBUTION     | 0000 | 000 | 000 | 000 |     | 000 |          |
+------------------+------+-----+-----+-----+-----+-----+----------+

+---------------------+-------------+---------------------+------------+
| ##                  |             |                     |            |
| Export Trade Matrix |             |                     |            |
+---------------------+-------------+---------------------+------------+
| Country             | Chile       |                     |            |
+---------------------+-------------+---------------------+------------+
| Commodity           | Avocados,   |                     |            |
|                     | Fresh       |                     |            |
+---------------------+-------------+---------------------+------------+
| Time Period         | Jan-Dec     | Units:              | M.T.       |
+---------------------+-------------+---------------------+------------+
| Exports for:        | 2004        |                     | 2005       |
+---------------------+-------------+---------------------+------------+
| U.S.                | 100990      | U.S.                | 86202      |
+---------------------+-------------+---------------------+------------+
| Others              |             | Others              |            |
+---------------------+-------------+---------------------+------------+
| U.K.                | 3570        | Spain               | 3335       |
+---------------------+-------------+---------------------+------------+
| Netherlands         | 2924        | Netherlands         | 2683       |
+---------------------+-------------+---------------------+------------+
| France              | 2403        | U.K.                | 3307       |
+---------------------+-------------+---------------------+------------+
| Spain               | 2121        | France              | 1500       |
+---------------------+-------------+---------------------+------------+
| Argentina           | 993         | Argentina           | 958        |
+---------------------+-------------+---------------------+------------+
| Japan               | 469         | Japan               | 250        |
+---------------------+-------------+---------------------+------------+
| Denmark             | 59          | Sweden              | 188        |
+---------------------+-------------+---------------------+------------+
| Canada              | 35          | Denmark             | 65         |
+---------------------+-------------+---------------------+------------+
| Sweden              | 21          |                     |            |
+---------------------+-------------+---------------------+------------+
| Brazil              | 4           |                     |            |
+---------------------+-------------+---------------------+------------+
| Total for Others    | 12599       |                     | 12286      |
+---------------------+-------------+---------------------+------------+
| Others not Listed   | 3           |                     | 0          |
+---------------------+-------------+---------------------+------------+
| Grand Total         | 113592      |                     | 98488      |
+---------------------+-------------+---------------------+------------+
|                     |             |                     |            |
+---------------------+-------------+---------------------+------------+
| Note: Year 2005     |             |                     |            |
| data are for        |             |                     |            |
| January through     |             |                     |            |
| October only        |             |                     |            |
+---------------------+-------------+---------------------+------------+