Modern commercial farms of more than 50 hectares account for about half of Colombia's agricultural output, with small farms of fewer than 3 ha producing the balance.
Agricultural policy. Economic liberalizations in 1991 drew the ire of Colombian farm organizations, who blamed reforms for low agricultural commodity prices and other economic problems. They also blamed lower import duties for encouraging agricultural imports and undercutting domestic agriculture.
Pressure from farm organizations resulted in passage in 1993 of a new agricultural law, which authorized minimum guaranteed prices, commodity-price stabilization and subsidized interest rates or credits for farm investments.
One of the first major agricultural policy changes was implementation of a system of purchase agreements, or "Absorption Agreements," under which agricultural processors, generally through processor-owned enterprises, purchase a specified amount of the domestically produced crop each year. As of January 1995, commodities under Absorption Agreements included sorghum, wheat, malting barley and palm oil.
Prices at which the local crops are purchased are specified in the Absorption Agreement; for example, feed manufacturers agreed to purchase domestically produced 1994-95 sorghum at about U.S.$203 per tonne. For wheat, domestic purchase prices generally are 20% to 30% higher than the price of imported wheat, c.i.f. Colombian ports.
Absorption Agreements are supposed to be temporary, and each agreement specifies a termination date. For example, flour millers have agreed to buy local wheat under the wheat agreement until 2000.
A key part of the program requires the Ministry of Agriculture to approve import licenses for commodities competing with domestic products. Approval is granted when the Ministry determines a need exists, after considering domestic production and price levels and trends for domestic and imported grain prices.
Import duties are reduced when the processor can prove he purchased domestic crops at the agreed upon support prices. A processor who does not directly buy in the domestic market can obtain a performance assignment from an individual or association that has purchased the crop.
Some processors complain that Absorption Agreements represent a turnaround of economic liberalization policy. Wheat millers also have complained that they are forced to pay for inferior quality domestic wheat they do not want. The millers also have noted the agreement increases production costs, fosters inefficiencies and discourages consumption because of higher consumer prices. Animal feed manufacturers have voiced similar complaints about domestic sorghum, which they assert is of poor quality because of high moisture content.
Flour milling. Two flour milling associations exist in Colombia, but one, the Federacion Nacional de Molineros de Trigo, or FEDEMOL, is dominant; its members accounted for 90.8% of total wheat use in 1994.
Of the 99 Colombian flour mills, 56 are members of FEDEMOL, 10 are members of the Asociacion de Molineros de Trigo (ASMOLTRIGO), 18 are independent and 15 are inactive. Estimated total active milling capacity in 1993 was 1,723,392 tonnes of wheat.
Eight mills have a daily capacity of 200 tonnes or more, and 16 are rated at 100 to 199 tonnes a day. The remaining 60 active mills have a daily capacity of fewer than 100 tonnes.
Two regions, the center and the Pacific coastal areas, have the greatest mill concentration, at 30 and 22 mills, respectively. The smallest concentration is the northeast, where five mills are located.
Literally all flour is bagged, with 75% of production packaged in 50-kg polypropolene bags. Truck transport accounts for 100% of flour shipped, and three-fourths of flour is shipped to industrial bakery users.
Per capita flour consumption in 1994 was only 22 kg, but demand for flour-based foods has increased annually by about 10% in the past two years. The most popular food is "Alinado," a type of high-fat bread.
Mill modernization and expansion have occurred slowly, although a new 220-tonne per day mill was built in May 1994, and a new 280-tonne plant opened in March 1995. Few process control systems are used, with millers relying on traditional electronic and interlock systems.
The industry operates on very low, sometimes negative, margins. The situation is expected to continue until milling capacity and demand are more balanced; excess capacity currently is running at about 15%, and some capacity is considered obsolete. Some of the more profitable milling companies have expanded the number of facilities, either through buy-outs of weaker competitors or through other alliances.
Feed use. Manufactured feed use is increasing primarily because of poultry production growth. But expansion in dairy and hog production also has contributed. In 1994, an estimated 3 million tonnes of animal feed was manufactured, up 5% from 1993.
About 80% of Colombia's feed production is consumed by chickens, with layers accounting for about 43% of all poultry feed. Usually, growers of layers mix their own feed, but feed for broilers generally is manufactured commercially because it is pelletized.
Commercial hog production has been growing in the past decade, and in 1993 it represented 11% of total manufactured feed use. To make dairy cows more efficient, dairymen have been increasing the amount of manufactured feed fed to their cows, and in 1993 such feed use represented 5% of total manufactured feed use. The remaining 4% of feed is used in pet food.
Trade issues. Under "Apertura," the government liberalized its overall trade regime. Colombia is a member of the Andean Pact with Venezuela, Ecuador, Bolivia and Peru and the G-3, a free trade agreement with Venezuela and Mexico. Colombia also entered a separate agreement with Chile intended to eliminate or reduce import duties between the two countries over a period ending in 1999.
Nonetheless, agricultural trade remains characterized by trade interventions, including import licensing for commodities under Absorption Agreements. Agricultural imports from the Andean Pact countries and Chile are generally exempt from these licensing requirements.
Colombia as of April 1, 1995 established the common Andean Pact price band system for 13 basic commodities, including wheat, malting barley, yellow and white maize, soybeans, white rice, soybean oil, chicken pieces and pork meat. Under the Colombian interpretation of the Andean Pact price band, import duties are determined by a complex procedure based on government reference prices and not on the actual invoice price. For wheat, the tariff is 15% of the reference price, which is determined bi-weekly and is based on U.S. hard red winter wheat prices traded at the Kansas City Board of Trade.