May 3, 2006

 

Chile to import more wheat and corn from Argentina, not US
 

 

Lower wheat production in Chile due to a fall in prices and adverse weather will result in an expansion in imports for marketing year 2005, according to a USDA attache report posted Monday (May 1) on the Foreign Agricultural Services website.

 

As a result of these two factors, planted area and output fell slightly in MY2005 compared to the previous year.

 

Chile's corn production for MY 2006 is expected to fall significantly as low prices discouraged plantings. Forecasts for MY2007 show another reduction in production; as a result, import requirements are expected to jump considerably, as consumption is expected to increase due to growth in the poultry and hog industries.

 

Wheat is politically Chile's most important annual crop.

 

Total wheat planted area fell 25 percent in MY2005. Adverse weather conditions during planting time and harvest, together with low prices obtained by producers for the previous year's harvest are the main reasons for the significant fall in planted area and production.

 

Additionally, excess rain and bad weather during the fall and winter delayed planting in the main wheat producing areas.

 

For MY2006, the initial planting survey forecasts an increase in the total planted area, when compared to MY2005 due to higher domestic wheat prices. Domestic prices have been climbing as a result of increasing international prices and a lower than expected crop the year before.

 

International prices reportedly increased in a response to a lower harvest in Argentina and the United States.

 

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.

 

For MY2006, a slightly smaller amount of imports is forecasted, as production will expand again in response to better prices paid during this season.

 

Although there is a strong demand for corn due to projected increases in poultry and hog production, the prices being paid to producers 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 depressed world corn prices. As a result of the low global corn prices, corn plantings and production in MY 2006 fell and it is forecasted to fall further in MY2007 as domestic corn prices are similar and follow international prices closely.

 

Corn plantings in Chile are expected to fall further in the coming years as costs of production keep rising and small farmers look for alternative crops.

 

Corn imports are expected to expand, due to expanded feed use in the hog and poultry industries and a smaller output expected in MY2006 while imports are expected to jump over 20 percent in MY2007.

 

Argentina is the largest supplier of bulk corn to Chile. This situation is not expected to change, as Argentina continues to have cost/quality advantages.

 

Allegedly there is a significant cost advantage for Argentinean corn, as consignments are simply driven across the border to the consumer, thus avoiding the costs of unloading and loading at ports as in the case of the US.