Country Focus: Colombia

by Melissa Alexander
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Colombia’s agricultural sector comprises two types: food-crop farming and export-orientated farming on large estates. Crop production accounts for two-thirds of the country’s agricultural output with livestock accounting for one-third.

After suffering through just 1% growth in 1998 and negative growth in 1999 — during a nationwide economic recession — the agriculture sector bounced back in 2000 to expand by 5.36%. Domestic and international financing derived in part from Plan Colombia, a multilateral program that aims to resolve conflicts with rebel groups, fight illegal drug trafficking and modernize the institutional infrastructure, has helped agriculture recover.

The agriculture ministry currently is working with the Ministry of Foreign Trade to create an investment fund for mega-projects to expand exports. Colombia has a U.S.$100 million loan commitment from the Inter-American Development Bank for this purpose, in addition to other government funding programs.

The government has been encouraging a shift away from grain and oilseed crops to those more suitable to the climate and soils. Products that have the most potential as foreign revenue earners include coffee — Colombia already is the second-largest producer in the world — palm and palm oil, cotton, cocoa, fruit and livestock products. The priority in the past decade on dairy, livestock and poultry already has created increased demand for coarse grains for feed, a trend that is likely to continue.

In domestic markets, the government still uses so-called "absorption agreements" for some commodities, including sorghum, wheat, malting barley and palm oil. Processors must purchase a specified amount of domestically produced crops each year.

Purchase prices are detailed in the specific absorption agreement and are adjusted annually. For wheat, the price for the 2001-02 crop was 466,000 pesos (U.S.$203) per tonne; this put average wheat flour prices at the end of 2001 at 646,000 pesos per tonne (U.S.$282).

In early 2000, Colombia eliminated import licensing for some 35% of agricultural products, although grain is still subject to import license. The Ministry of Foreign Trade issues the license after approval from the Ministry of Agriculture; approval is contingent on the importer’s compliance with the absorption agreement.

Approval and issuance of wheat import licenses have become fairly routine because of the limited amount of wheat that is now being produced in Colombia. The U.S. is projected to account for about 50% of 2001-02 purchases, with Canada also a major provider.

WHEAT AND FLOUR MILLING

In 2001-02, wheat production in Colombia was 30,000 tonnes, up 1,000 from 2000-01, but down about 75% from the record set in 1994-95. The decline relates mostly to a corresponding cut in planted area, based on government efforts to encourage a move to other crops.

In fact, the milling and baking industries also have actively encouraged growers to switch away from wheat production, as the quality of the domestic supply typically falls short of needs. With reduced domestic supplies, millers are free to import higher quality wheat, which in turn improves bakery product quality.

Expectations are that this improved quality will help to encourage expanded consumption of wheat products. Indeed, wheat consumption was projected to grow, 5% in 2001-02 and by an additional 7% to 1.33 million in 2002-03.

The official estimate of Colombia’s per capita wheat consumption for 2001-02 is 29.5 kilograms, up 2% from the previous year and up 34% from the 22 kg consumed in 1994. Nearly 67% of wheat currently is used for bread flour, 16% for pasta, 11% for crackers, and the remainder for other domestic uses.

The 1999 recession forced smaller and less productive millers to sell or merge with larger millers. This further consolidated the industry, where nearly 70% is now controlled by the five biggest millers. Capacity utilization last year was estimated at about 70%.

In the process of lowering costs, the industry has increased the frequency of imported wheat shipments in order to reduce stock holdings. This consolidation process is another factor pushing the industry to develop high-quality products to increase wheat product consumption.

Consumption is also being stimulated by the supermarket sector, which is undergoing major structural change and modernization, and new stores now offer a wide variety of fresh bakery products. The expansion of the bread company Bimbo, which introduced new technology and products, also has encouraged more bread consumption.

In addition, market trends show increasing consumption of pasta. The use of fortified wheat flour in pasta along with easy preparation make this product very attractive to consumers.

COARSE GRAINS AND FEED INDUSTRY

Colombia’s maize production is expected to be 1.1 million tonnes in 2001-02, with planted area to grow 4% and an average yield of 2 tonnes per hectare.

In 1998, the agriculture ministry, the Colombian Grain Producers Federation and the Mixed Feed Industry Association signed a maize production agreement calling for technical and extension support to encourage farmers to plant dent maize as a substitute for both imported and domestic flint maize.

The agreement called for an additional planted area of 200,000 hectares each year, with a target of 900,000 hectares attained within a five-year period. However, significant increases in planting have not materialized over the past four years.

At an average of 423,500 pesos (U.S.$185) per tonne in calendar year 2001, the average grower price in pesos rose 9.5% above the 2000 level. The maize agreement further specifies that the mixed feed industry must use all locally grown dent maize through absorption agreements. Currently, the minimum absorption purchasing price is 434,000 pesos (U.S.$189) per ton.

Total maize consumption in 2001-02 is estimated at 3 million tonnes, 5% higher than the previous season. Production of animal feed is expected to increase 3% in 2001-02, as determined by demand in the poultry and egg industries. Virtually all domestic maize is used for human consumption, while about 80% of the imported maize goes to the animal feed industry.

Poultry meat production is growing, and expected to continue, since price differentials between poultry and beef are pushing consumers toward greater consumption of poultry. The weak economic recovery and the high unemployment rate have increased demand for poultry meat, again because of lower prices.

Poultry meat production was estimated to increase by about 6% in calendar year 2001, and poultry industry officials forecast a 5% increase in broiler output in 2002. This growth rate will probably be maintained for the next few years.

Colombian broilers are raised on farms whose production capacities vary widely. The largest producer accounts for 6% of total production and the second-largest only 3%. A strong effort is being made to streamline production by key producers.

The structure of the broiler industry remains dispersed, as there are many small producers scattered throughout the country.

Annual per capita consumption of chicken meat in Colombia in 2001 was estimated at 14 kg, 2 kg more than a year earlier and 70% higher than a decade ago.

On May 31, 2001, the Organisation Internationale des Epizooties (OIE) in Paris declared the northern area of Colombia free of foot and mouth disease, with vaccination. Since then, Colombia has put in place an aggressive policy aimed at expanding its cattle herd in the region and strengthening controls over the movement of cattle into the disease-free zone.

As part of the policy, the government has restricted live bovine exports, supported cow retention by granting credit lines to cattlemen, and emphasized increasing exports of value-added meat products. Because of these actions, live cattle prices and meat prices have increased, as has the total size of the cattle herd, because of the slow pace of slaughtering. The national cattle herd is expected to grow 4.5% in 2002, while cattle slaughter increases by only 3%.

RICE

Rice production is about 2.2 million tonnes. Colombia has three principal production areas: two irrigated areas that produce two crops per year, one in central Colombia and another in the Atlantic region; and an area in the eastern plains that relies on natural rainfall and produces only one crop per year.

Despite the fact that the domestic production has not been sufficient to meet demand, planted area and production are not likely to increase significantly in the near term. In the eastern plains area, rainfall has been erratic, resulting in large fluctuations in yields and discouraging further investments to bring more land into production. In the central region, little additional land suitable for irrigation is available.

Consumption grew by 2% in 2001 to 1,455,000 tonnes, milled equivalent, and is expected to increase only slightly to 1,465,000 tonnes in 2002. The lack of reliable information on per capita rice consumption data has been a constant source of uncertainty about the import needs, although recent research indicates a range of 35 to 40 kg. The research also showed that 70% of total demand is in urban areas.

Millers normally market a high percentage of their production as packaged rice under their own labels in supermarkets. However, when large millers obtain broken grain volumes exceeding their capacity to blend into their branded rice, they must store excess volumes of poor grade rice or sell it as bulk rice at lower prices through other outlets, such as outdoor markets.

Many Colombian mills obtain no more than 50% to 52% whole grain from processing locally produced paddy, with as much as 15% to 18% broken grain.

 

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