WASHINGTON, D.C., U.S. — Three consecutive years of economic contraction, hyperinflation and diminishing hard currency for imported agricultural inputs and raw materials is expected to bog down production, consumption and trade for all grain and feed products in Venezuela, according to an Oct. 5 Global Agricultural Information Network (GAIN) report from the Foreign Agricultural Service of the U.S. Department of Agriculture (USDA).

In its report, the USDA noted that Central Bank cash flow shortfalls have resulted in less procurement of imported wheat and corn by the Corporation for Food and Product Services (CUSPAL). As a result, many feed manufacturers and flour mills in Venezuela are operating at less than half of capacity. Additionally, manufacturing processing line disruptions have become more frequent, sometimes lasting for weeks as inventories are stretched to the last grain, the USDA noted in the report.

“Product demand is hemorrhaging from hyperinflation that dramatically weakens purchasing power and challenges domestic consumption as prices for most basic foodstuffs increase almost daily,” the USDA said.

Both the area harvested to corn and domestic corn production are forecast to decline in the 2017-18 marketing year, according to the USDA. In the case of production, the USDA indicated output likely will be insufficient to fulfill total demand for corn feed and food uses, increasing the dependence on imports.

“Industry contacts indicate a diesel shortage in early 2017 complicated the planting season with hundreds of hectares left idle or switched to other uses, such as livestock production,” the USDA said. “Diesel issues notwithstanding, an inputs shortage of fertilizer and seed also challenge productivity, in addition to longstanding concerns with aging tractors and other equipment in dire need of upgrades/repairs.”

Total corn consumption also is forecast lower, at 2.29 million tonnes in 2017-18, down from an earlier forecast of 2.5 million tonnes.

The diesel shortage in early 2017 also complicated the planting season for rice, limiting the use of tractors and water

displacement pumps. As a result, hundreds of hectares were left idle or switched to other uses, the USDA said.

Area harvested to rice was forecast at 120,000 hectares, down from 125,000, while the forecast for milled rice production in 2017-18 was lowered to 290,000 tonnes from 310,000 tonnes.

“Production will continue to be insufficient to fulfill total demand with a greater reliance on imports to fill inventory shortfalls during the two growing cycle gaps in January-February and the summer season,” the USDA said.

Rice paddy
Approximately 90% of rice production is used for human consumption, with the remaining 10% going toward animal feed. The USDA noted in its report that retail product scarcity and hyperinflation are pushing Venezuelan rice consumers to switch to cheaper carbohydrate substitutes, such as plantains.

“White rice distributed at the GBRV (Government of the Bolivarian Republic of Venezuela) regulated price in the local currency, the Bolivar (Bs.), is Bs. 120/kg and near impossible to find,” the USDA said. “Rice can be found at black market prices (~Bs. 3,350/kg), but is increasingly unaffordable for a typical Venezuelan family with a minimum wage of Bs. 136,500/month. Wage increases cannot keep pace with hyperinflation creating significant strains in purchasing power. Thus, the consumption forecast is revised downward to 650,000 tonnes in MY 2017-18 from the USDA official forecast of 670,000 tonnes.”

Venezuela does not grow wheat, and the GBRV is the sole importer of the grain. According to the USDA, the economic crisis and limitations on imports in the country are creating “a severe shortage” of wheat.

“Currently, wheat imports satisfy less than half of domestic demand,” the USDA said. “Bread and pasta shortages are becoming more frequent as milling operations sit idle for weeks until shipments arrive and deliveries are distributed to the mills.”

The USDA indicated that the consumption forecast for wheat has been lowered to 1.06 million tonnes in 2017-18.