Farms producing food crops are generally fewer than 10 hectares.
Agricultural policy. Export policy and the agriculture sector's lack of credit are important issues, but it isn't clear if the new government elected in 1996 will implement significant policy changes. In the past, price controls and subsidies have been used in some sectors, including the dairy industry. Ministry of Agriculture officials have denied recent press reports that the resumption of some domestic price controls is being seriously discussed.
Agriculture gradually is modernizing. Production grew 3.2% in 1995, slightly faster than the economy, largely because of renewed vigor in the shrimp, banana and livestock industries. Room for growth exists. especially in the processed foods sectors. W.T.O. membership should further improve access to export markets, and lower tariffs on machinery and other inputs should increase competitiveness.
Infrastructure improvements and revision of land ownership laws would boost productivity even more, but the money and political will necessary for change have been limited.
Flour milling. Observers indicate the technology level of Ecuador's milling industry is very good, but the industry is largely underutilized, with mills operating at only 52% of capacity.
Total annual capacity is estimated at 728,125 tonnes, wheat equivalent, but actual grind is only 380,000 tonnes. Some 63% of the country's total annual milling capacity is in the Sierra region; the remainder is found in Ecuador's coastal area. Of Ecuador's 28 mills, Molinos de Ecuador in the Guayas province has the largest capacity at 138,700 tonnes per year, although it only uses about 58% of that.
The industry is diversifying as the number of grain importers and flour mills increases, and one new mill opened in the port city of Manta in 1996. New competition should result in more and better quality products available to consumers.
Per capita wheat consumption in the past 10 years has been somewhat erratic. Consumption is down sharply from 1985, but a slight rebound has occurred in the past five years. The government began to require flour enrichment this year, a move that could raise consumer consumption if millers seize upon it as a marketing opportunity.
A total of 400,000 tonnes of wheat was consumed in 1996. Only 4% of total consumption was produced domestically. Half of domestic production is used locally; the rest is processed by millers and feed compounders.
About 60% of wheat imports originates from the United States, although Argentina, Canada and Australia are gaining market share. Price traditionally has taken precedence over quality.
Most of the 90,000 tonnes of wheat exported in 1996 was in the form of flour. Neighboring countries are the biggest buyers of Ecuadorian flour, but 1996 exports to Columbia and Peru dropped to 30,000 tonnes as prices equalized between border countries.
Livestock and feed. The livestock sector, particularly poultry and shrimp, grew rapidly in the last decade and now accounts for almost 30% of the agricultural economy. Poultry meat production increased an average of 10% a year and in 1995 reached 103,000 tonnes, while shrimp production grew to 110,801 tonnes that same year. Beef production is also up, rising to 145,740 tonnes in 1995.
The dramatic increase in shrimp and poultry production means these two industries now have the highest feed demand in Ecuador. Total compound feed demand was close to 730,000 tonnes in 1995, up from 450,000 tonnes a decade earlier. Poultry accounts for 75% of demand.
Domestic feed demand for yellow maize and wheat has matched the growth of the poultry and shrimp industries. The use of each, though, depends on price and the availability of substitutes. For example, the amount of feed wheat consumed in 1996 dropped to 60,000 tonnes because of comparatively lower international maize prices. Most feed wheat is used by shrimp producers as an agglutinant.
Trade. Ecuador's relatively open trade policy was implemented in 1991, replacing a highly protectionist tariff system that dated back to the 1960s and reducing most tariff duties to 5% to 20% of import value.
Determining what membership in the W.T.O means is an important issue for Ecuador. The government is addressing the few remaining obstacles to free trade, including price bands, minimum import prices and sanitary registrations.
Restrictions on imported bulk commodities, intermediate products and consumer food-ready products have been reduced. However, the Andean Price Band system still applies to some products, like maize and rice, deemed sensitive to the domestic economy. Under this system, a tariff rate and additional charges are applied under a variable levy, depending on international prices. The system will be phased out by 2001 as a result of Ecuador's membership agreement with the W.T.O.
Sanitary registration requirements will also be relaxed as part of W.T.O. agreement. Currently, imported processed foods and other products must be inspected by the country's Ministry of Heath. The process is time-consuming and hampered by lack of testing facilities. The government is expected to accept certificates of free sale for imported goods in lieu of a domestic sanitary registration by next year.
Ecuador has free trade agreements with Columbia, Venezuela and Bolivia. Trade with Andean countries and Chile will become increasingly important as bilateral agreements between these countries eliminate import tariffs on many products.
Ecuador's efforts to open production to external competition have prompted manufacturers to become more export oriented. Lower tariffs, along with increased use of modern agricultural technology, also spurred production of staple foods.
In 1996, agriculture accounted for 48.9% of total export revenues. Ecuador is the world's largest banana exporter and a major exporter of shrimp; these two products account for about a third of the country's exports.