October 2, 2003

 

Venezuela Corn Crop Up, Grain Price Levels Still Not Set

 

Report Highlights:
As the corn, sorghum and rice crops start to be harvested; there is still no agreement within Venezuela on prices to producers.  The Venezuelan Minister of Agriculture announced prices on August 28 that producers felt too low, and the Minister was removed three days later, supposedly in part for his arbitrary handling of the price announcement. The farmers, industry and government officials have been negotiating the new price levels, but no agreement has yet been reached.  Meanwhile, a large corn crop is expected, and the rice harvest is sufficient for at least the next six months consumption.

 

Overview

As the corn, sorghum and rice crops start to be harvested; there is still no agreement within Venezuela on prices to producers.  The Venezuelan Minister of Agriculture announced prices on August 28 that producers felt were too low, and the Minister was removed three days later, supposedly in part for his arbitrary handling of the price announcement.    The farmers, industry and government officials have been negotiating the new price levels, but no agreement has yet been reached.  Meanwhile, a large corn crop is expected, and the rice harvest is sufficient for at least the next 6 months consumption.

 

Price Setting is Complicated
Venezuelan farmers feel that grain prices promised last spring no longer cover production costs since most imported inputs must be purchased with dollars at high black market rates.   Meanwhile, consumers have already seen large increases in the cost of the basic food basket and with increasing levels of unemployment they are ill placed to handle further price increases.   Food processors are being squeezed as they are now forced to sell products at controlled prices, but if faced with higher priced inputs they will need to raise end-product prices yet again in order to be able to operate.

 

To deal with these types of conflict in the food sector, the Ministry of Agriculture and Lands (MAT) recently formalized the creation of National Boards (Juntas Nacionales) in eight major food sectors.  These Boards are composed of representatives from the producer, processor, retail, consumer and government sectors, and are charged with reviewing the criteria for establishing fair prices for the entire production chain. The Cereals Board had been meeting frequently to discuss prices for corn, sorghum and rice, the three major crops that start to be harvested in September.  While producers had hoped for prices as high as Bs. 480/kilo for corn, a general agreement had been reached of a price around Bs. 425-450. Similarly, new prices for rice and sorghum had been tentatively agreed to, but they were significantly higher than the Agriculture Minister's first proposal.

 

     Various Cereal Price Proposals in Bs. Per Kilo

 

Spring Price

MAT Proposed Price

Producers Requested Price

Juntas Tentative Agreement

Tentative Consumer Product Price

Corn

375

400

450

425

1220

Paddy rice

340

370

447

440

1400

Sorghum

274

320

430

360

n.a.

 

 

The most recent news is that the prices will now be set by the Ministers Cabinet, and is expected to be announced during the week of September 29th.

 

Venezuela does not have an official system of farmer price supports or subsidies, but rather depends upon agreements between the producing sector and the limited number of processing plants that purchase the corn and rice.  This passes all the costs of providing producer supports to the processing sector, which will inevitably pass those costs on to the consumer.  The GOV has not implemented a system of direct subsidies to farmers, nor one of subsidizing the end product to the consumer.  However, post has learned that as of this writing various proposals are being reviewed to provide subsidies to producers.  No details are yet available.

 

Corn Crop Recovers
Producers are talking about a record crop of corn this year, mainly due to improved yields in the state of Guarico. Excellent rains during the summer growing season helped boost yields from their normal levels of around 2 tons/hectare to almost 4 tons/hectare this year. Area planted also increased, even in the face of the uncertainty at planting time about the higher costs for imported inputs such as fertilizer and machinery parts.  But total area harvested and yields may be hurt somewhat by September rains, especially in the state of Portuguesa. Post at this time is increasing the corn crop estimate (mainly white corn) to 1.4 million tons.

 

We anticipate that most of the crop will be absorbed by the food industry this year. The corn flour processing industry usually consumes about 1.2 million tons, and stocks were extremely depleted this year due both to the short crop last year and the fact that the feed industry was pressed to absorb some of the white corn since it could not gain access to yellow corn imports.  Post anticipates there will be some restriction on access to import licenses for yellow corn over the next several months as the local crop is placed.

 

In order to force processors to purchase at the recommended price, the government has taken draconian measures in the past to prohibit imports and force the purchase of certain quantities of domestic production before import permits or licenses are granted.

 

PSD Table

 

 

 

 

 

 

 

Country

Venezuela

 

 

 

 

 

 

Commodity

Corn

 

 

 

(1000 HA)(1000 MT)

 

 

 

Revised

2002

Preliminary

2003

Forecast

2004

UOM

 

Old

New

Old

New

Old

New

 

Market Year Begin

 

10/2001

 

10/2002

 

10/2003

MM/YYYY

Area Harvested

450

450

400

400

430

460

(1000 HA)

Beginning Stocks

225

225

87

87

37

97

(1000 MT)

Production

1150

1150

1050

1100

1150

1400

(1000 MT)

TOTAL Mkt. Yr. Imports

512

512

450

660

550

500

(1000 MT)

Oct-Sep Imports

512

512

450

660

550

500

(1000 MT)

Oct-Sep Import U.S.

506

506

440

650

540

490

(1000 MT)

TOTAL SUPPLY

1887

1887

1587

1847

1700

1997

(1000 MT)

TOTAL Mkt. Yr. Exports

0

0

0

0

0

0

(1000 MT)

Oct-Sep Exports

0

0

0

0

0

0

(1000 MT)

Feed Dom. Consumption

500

500

400

500

500

550

(1000 MT)

TOTAL Dom. Consumption

1800

1800

1550

1750

1680

1850

(1000 MT)

Ending Stocks

87

87

37

97

57

147

(1000 MT)

TOTAL DISTRIBUTION

1887

1887

1587

1847

1737

1997

(1000 MT)

 

 

 

 

 

 

 

 

 

Source: USDA