Report Highlights:

Colombian grain production could be impacted in 2016 as the period of drought from the El Niño weather phenomena transitions to rainier conditions of La Niña. Corn production will fall slightly from the year before to 1.7 million metric tons (MT) in marketing year (MY) 2016/2017, while imports surge to 4.5 million MT. Rough rice production in MY 2016/2017 is expected increase to 2.0 million MT with imports falling slightly to 320 thousand MT. In MY 2016/2017, wheat and sorghum production will fall to 10,000 MT and 190,000 MT, respectively, with imports expected to reach 1.5 million MT for wheat and 50,000 MT for sorghum.

Corn

Production:

Corn production is expected to fall marginally to 1.7 million MT in MY 2016/2017 from 1.75 million MT the year before. Corn area harvested in MY 2016/2017 will remain unchanged at 480,000 hectares. Colombian corn farmers continue to gradually switch production towards white corn from yellow corn, as prices for white corn, the primary raw material for the food staple “arepa", continue to be more favorable than yellow corn, which is primarily destined for animal feed. The Colombian Agriculture Minister is promoting a campaign titled “Plan Colombia Siembra", or Colombian Planting Plan, that intends to increase productive agriculture by 1 million hectares in the next two years. Corn and soybeans are targeted commodities for this program, along with some horticulture crops for export and cacao.

Corn production is divided into two commercial categories. First, there are medium and large scale industrial farms with contemporary management practices and full-time employees, applying the use of improved seed, including biotechnology, preventative chemical pest controls, and modern machinery for planting and harvesting. The other commercial category is comprised of small landholdings managed by typically one owner who may grow multiple crops within the operation. Industrial farms can achieve an average yield of five tons per hectare, or about half the yield of a comparable U.S. corn farm, while small scale farms produce an average of two tons per hectare. Industrial corn farming is almost 50 percent of the total corn area harvested with yellow corn representing about 75 percent of the industrial farm harvested area.

Since 2008, corn area planted in the Colombian eastern savanna, or Altillanura, has expanded to 35,000 hectares with production increasing from 20,000 to 170,000 MT by 2014. Agricultural production in the Altillanura is primarily corn and soybeans that are destined for vertically integrated swine feed operations in the region. Only about 30 percent of row crop production is marketed outside the Altillanura.

The Altillanura region, comprising parts of the Departments of Vichada, Meta, Casanare and Arauca, is considered to be the agricultural frontier for Colombia with approximately 4-6 million hectares (10-15 million acres) of flat, arable grass lands. The potential of the region is often compared to the western Cerrado of Brazil. Currently, raising cattle is the primary agricultural pursuit of the region given poor, acidic soil quality. The Government of Colombia (GOC) is currently collaborating with research organizations, including the Brazilian Agricultural Research Institute (EMBRAPA) and the International Center for Agriculture in the Tropics (CIAT), to develop suitable seed varieties, map the region's soil characteristics, and develop processes to transform the soils to be more apt for row crops. The optimistic agricultural expectations for the Altillanura, nevertheless, are challenged due to limited infrastructure and other factors.

The GOC approves the planting of biotech corn, but only for animal feed. Colombian use of biotech corn is increasing with planted area expanding, but mostly on large-scale, industrial farms. Ninety percent of the total biotech corn area planted is in five departments: Valle del Cauca, Cordoba, Tolima, Meta and Cesar. The table below illustrates the growth in biotech seed cultivation since GOC regulatory approval in 2007:

Biotech Corn Usage

Year

Hectares

Acres

Change

2014

89,048

219,948

18.6%

2013

75,094

185,482

0.1%

2012

75,046

185,363

27%

2011

59,239

146,320

52%

2010

38,896

96,073

131%

2009

16,822

41,550

60%

2008

10,489

24,959

52%

2007

6,901

17,045

Consumption:

Post forecast for total corn consumption is 6.3 million MT in MY 2016/2017. Ninety five percent of corn imports are destined for animal feed with the remaining 5 percent for human consumption. About 10 percent of local production is for animal feed while 90 percent is for the food processing sector. Approximately 67% of Colombian animal feed is for the poultry sector, 23 percent for both livestock and swine, and the remaining 10 percent for aquaculture and household pets. Poultry meat is the preferred animal protein in Colombian diets, doubling in the last decade, with per-capita consumption at 47 pounds, followed by beef (38 pounds) and pork (15 pounds). The Colombian peso devaluation, about 40% in the last year, has financially challenged the margins of feed end users. Even though consumer prices for poultry and pork increased in 2015, demand will continue to grow as sustained economic growth and the increase in the household income boost animal protein consumption. Feed demand will continue to grow, primarily in the poultry sector, as Colombia's economy remains strong and dietary shifts adjust to populations moving out of poverty into the low and middle income classes.

The trends in feed demand determine grain feed production and imports in Colombia.

Trade:

In MY 2016/2017, Post forecasts total corn imports to reach 4.5 million MT with imports of U.S. corn surging to 4.2 million MT as U.S. corn remains price competitive due to trade preferences of the U.S.-Colombia Trade Promotion Agreement (CTPA). As well, feed demand continues to grow while domestic corn production remains stagnant. Low corn prices have motivated the feed industry to primarily source corn instead of other grain substitutes, such as sorghum or wheat.

Falling corn prices are benefiting U.S. corn trade, as input prices heavily influence purchasing decisions for the food and feed sector and, to a lesser extent, product quality. In calendar year (CY) 2016, price competitiveness and the CTPA quota mechanism of first-come/first-serve will likely lead to the 2.55 million MT tariff-rate-quota (TRQ) for U.S. corn filling before the first half of this year. The 166,000 MT TRQ for white corn in CY 2016 will also fill to capacity.

In CY 2008, U.S. corn held 80 percent of the Colombian import market share, declining significantly to a low of 5 percent in CY 2012 against competition from the Southern Common Market (MERCOSUR), primarily Argentina and Brazil. Since 2012, U.S. market share increased to 18% in CY 2013, 97% in CY 2014, and 99.7% in CY 2015.

Corn represented about 51 percent of the total agricultural volume of grain imports. The Pacific coast port of Buenaventura is the most active port in Colombia for agricultural commodities. Logistics for handling import cargo continues to be a major issue in Colombia given that the growth in trade is not followed up by increased storage capacity at ports or improved inland transportation infrastructure. In CY 2015, Colombian ports were burdened with significant logistical challenges due to the first come/first serve mechanism that became a race to fill the U.S. corn TRQ. Importers had to cover the significant costs of delays at ports to offload vessels and move cargo inland as port storage facilities hit capacity.

Stocks:

Post forecasts ending stocks at 849,000 MT in MY 2016/2017, slightly down from MY 2015/2016. In CY 2015, low corn prices motivated excessive purchases and an expansion of inventories, filling the U.S. corn quota by June of 2015. A repeat of CY 2015 is likely for CY 2016 as corn prices remain low and trade games for importers will continue as they plan deliveries in anticipation of a devalued Colombian peso, storage capacities, out-of-quota duties and higher duties for MERCOSUR corn under the price band.

Policy:

The CTPA was implemented in May 15, 2012 and trade outcomes for U.S. corn in 2015 are nothing short of total market share domination. The dominance of U.S. origin corn is a result of the CTPA, low corn prices, and MERCOSUR duties under the price band. The duties for MERCOSUR corn in CY 2015 were at times double and/or triple the out-of-quota duty for U.S. corn (16.7%). The current U.S. corn TRQ is 2.55 million MT and will likely fill by the end of May 2016 due to the first come/first serve mechanism of the TRQ. Out-of-quota duties in 2016 for U.S. corn are 14.6%.

As a member of the Andean Community of Nations (CAN), Colombia applies a price band mechanism for all trading partners for major commodities. The CTPA, however, excludes the application of the price band mechanism for U.S. imports and instead applies a TRQ mechanism with out-of-quota duties. The GOC still maintains the price band for other trading partners with no preferential trade arrangements to protect local corn production from excessive import competition. The price band levies additional duties off a 10 percent base duty when international corn prices are lower than the floor price and conversely reduces the base duty when international prices are higher than the ceiling price. This price band mechanism operates as a protective pricing policy when the global price is lower than the floor price, which increases the import duty. Three years ago, with high global commodity prices, the price band mechanism resulted in a converse scenario with near zero duties for imports from trading partners where the price band mechanism applies, such as MERCOSUR. Since 2013, falling corn prices have benefited U.S. corn at the expense of MERCOSUR, whose duties have risen significantly, from 0 to upwards of 60 percent since 2013. U.S. corn, on the other hand, benefits from zero duties within quota and an out-of-quota duty of 14.6% in CY 2016.

Since July 2014, the out-of-quota duties for U.S. corn have remained below the MERCOSUR duties, making U.S. corn significantly more price competitive than Argentina and Brazil.

Colombia is a net importer of corn. Colombian corn production (white and yellow) can satisfy about 30 percent of total domestic consumption. Yellow corn imports provide close to 90 percent of the feed industry's raw material needs. As a result of this disproportion, the GOC established an import TRQ mechanism, called “MAC", to improve the domestic market for grain imports with conditions tied to local purchases. The program allows grain imports at a reduced duty with a maximum 10 percentage point reduction off the total duty. The program also establishes a minimum import duty of 5 percent. The MAC operates through an auction that allocates corn import rights for traders who commit to purchases of domestic production. The GOC suspended the MAC in 2013 and given current GOC revenue challenges due to the low cost of oil, the MAC may remain suspended.

Corn

2014/2015

2015/2016

2016/2017

Colombia

Market Year Begin: Oct 2014

Market Year Begin: Oct 2015

Market Year Begin: Oct 2016

USDA Official

New Post

USDA Official

New Post

USDA Official

New Post

Area Harvested

480

480

480

480

480

Beginning Stocks

801

799

943

899

949

Production

1,750

1,750

1,775

1,750

1,700

MY Imports

4,496

4,400

4,500

4,450

4,500

TY Imports

4,496

4,400

4,500

4,450

4,500

TY Imp. from U.S.

4,479

4,000

0

4,000

4,200

Total Supply

7,047

6,949

7,218

7,099

7,149

MY Exports

4

0

0

0

0

TY Exports

4

0

0

0

0

Feed and Residual

4,800

4,700

5,000

4,800

5,000

FSI Consumption

1,300

1,350

1,300

1,350

1,300

Total Consumption

6,100

6,050

6,300

6,150

6,300

Ending Stocks

943

899

918

949

849

Total Distribution

7,047

6,949

7,218

7,099

7,149

Area in Thousand Hectares, Quantity in Thousand Metric Tons

Rice, Milled

Production:

Colombian rough/paddy rice production is expected to reach 2.0 million MT in MY 2016/17, marginally up from the year before. The El Niño drought that lingered into early 2016 pushed the first planting to the end of February/early March. As transition period of the La Niña induced rains have begun, the second 2016 harvest may benefit. About 40% of Colombian rice production is located in the eastern planes, or Llanos Orientales, specifically the departments of Casanare and Meta. Almost all rice production in the eastern plains is rain-fed. The second key region of rice production (about 30% of total production) is in the central, Magdalena river valley, in the department of Tolima.

The National Federation of Colombian Rice Producers (FEDEARROZ) receives about $3-4 million annually in proceeds under the Export Trading Company that administers the CTPA TRQ auctions for U.S. rice. Based on field visits and discussions with FEDEARROZ representatives the resources have been applied to support pre and post-harvest advances in technology adoption, weather/rainfall stations, and drying and storage facilities. In the case of weather/rainfall stations, the data gathered has proved to be an effective tool to support better planning to mitigate the impacts of El Niño.

The Colombian Agriculture Minister's “Planting Plan" (Plan Siembra) initiative endeavors to increase the area of productive agriculture by 1 million hectares before 2018. The Plan targets specific commodities, including rice. Under the Plan, FEDEARROZ has a CY 2016 goal to increase area planted by 100,000 hectares, nevertheless, this significant level of scaling up will be fraught with limitations, such as access to credit and technology and labor inputs, in addition to infrastructure challenges with storage and milling capacity. Moreover, Colombia is a relatively high cost rice producer and new milled rice phytosanitary protocols with MERCOSUR rice exporters will create additional challenges to domestic market competitiveness.

Consumption:

Total rice consumption will reach 1.66 million MT in MY 2016/2017. Rice is one of the key basic staple foods in Colombia with a high per capita consumption compared to neighboring countries at about 40 kilograms. A FEDEARROZ study has shown that Colombian rice consumption is price inelastic, therefore consumption trends will likely parallel population growth with demand gradually increasing each year.

Although the El Niño drought conditions did not impact production significantly in MY 2015/2016, import limitations from neighboring countries more gravely impacted by El Niño put upward pressure on rice prices, increasing 8% in 2016 (Jan-Mar) compared to 2015.

Trade:

In MY 2016/2017, Post forecasts Colombian rice imports at 320,000 MT, slightly down from the previous year due to expanded domestic prodcution. U.S. market share could be challenged by new phytosanitary protocols for MERCOSUR milled rice creating more sourcing options for importers. Colombia's rice imports are historically from neighboring countries. More severe impacts from El Niño have resulted in production challenges and trade limitations from Ecuador and Peru. The Venezuelan government closed the border with Colombia in August 2015. Post sources indicate significant volumes of contraband rice that flow into Colombia were impacted by the border closure. The table below illustrates CY 2014 and 2015 trade distribution volumes by country and type of rice. The United States is the only country allowed to export rough/paddy rice to Colombia for human consumption and the distribution of U.S. rice exports in 2015 was about 23% rough/paddy and 77% milled rice.

Rice, Semi-Milled Or Wholly Milled, Whether Or Not Polished Or Glazed (H.S. 100630)

Country

2014

2015

Value

Quantity (MT)

Value

Quantity (MT)

United States

$67,210,353

79,594

$136,454,342

225,789

Ecuador

$0

0

$873,625

951

Thailand

$281,426

430

$522,122

787

Total

$68,467,626

81,051

$138,245,970

227,692

Rice In The Husk (Paddy Or Rough) (H.S. 100610)

Country

2014

2015

Value

Quantity

(MT-converted)

Value

Quantity

(MT-converted)

United States

$7,463,132

9,325

$24,787,240

53,782

Total

$7,469,704

9,325

24,787,240

53,782

Country

2014

2015

Value

Quantity (MT)

Value

Quantity (MT)

United States

$74,673,485

88,919

$161,241,582

279,571

Other

$1,263,845

1,458

$1,791,628

1,903

Total

$75,937,330

94,375

$163,033,210

304,523

The table below illustrates all countries that are eligible to export standard milled rice and other types for human consumption:

Country

Types of Product

Argentina

Milled rice

Bolivia

Milled rice

Guyana

Milled rice

Ecuador

Milled rice

French Guyana

Milled rice

India

Milled rice, Basmati rice

Italy

Wild rice, Arborio rice

Pakistan

Basmati rice, Jasmine rice

Paraguay

Milled rice

Peru

Milled rice

Spain

Bomba rice

Surinam

Milled rice

Thailand

Jasmine rice, Sushi rice

Uruguay

Milled rice

United States

Milled rice, Paddy/rough rice, Arborio rice, Basmati rice, Jasmine rice, Wild rice, Sushi rice, Green bamboo rice

Venezuela

Milled rice

Vietnam

Jasmine rice

Stocks:

The Colombian government does not maintain a policy for holding grain stocks; however, on an ad hoc basis and mostly for rice, the Ministry of Agriculture and Rural Development (MARD) offers financial storage incentives for producers and millers to hold inventories. In 2014, the GOC negotiated subsidies to the rice milling industry to improve storage facilities if they paid a set price to growers of approximately $40.00 per ton. In 2015, high rice prices and GOC budget constraints have ended this arrangement for the time being. It is estimated that ending stocks for MY 2016/2017 will be up from the year before to 180,000 MT of milled rice.

Policy:

Under the CTPA, there is an annually increasing (4.5%) TRQ for U.S. rice that is invariably fully subscribed. Colombia maintains an 80% duty on U.S. rice imported out-of-quota. The CTPA CY 2015 TRQ for U.S. rice was 90,152 MT and was fully subscribed with significant imports out-of-quota, over 200,000 MT, subject to an 80% duty. The CY 2016 TRQ is 94,209 MT. The first 2016 TRQ auction was held on February 1 and resulted in awards for deliveries of 65,972 MT, or about 70 percent of the total 2016 quota. As of March 2016, 20,454 MT, or 22 percent of the total quota, was imported. There will be two more auctions to allocate the remaining quota volume: June 2, 2016, for 13,694 MT; and, October 13, 2016, for 14,543 MT.

In December 2015 to address domestic rice price inflation and limitations in imports from traditional trading partners, the MARD published an “emergency" notification seeking imports amounting to 200,000 MT. The notification offers no trade incentives and states that Colombian importers can petition to import volumes within the 200,000 MT equal to the percentage of inventories of domestic rice purchased in CY 2015. Furthermore, the country supplying the imported rice must have an effective phytosanitary agreement and imported product will be subject to any ongoing trade arrangements between Colombia and the exporting country. For example, any rice imported under this “emergency" notification from either the United States, or MERCOSUR, will be subject to the respective trade agreements and corresponding duties, such as the CAN price band or, in the case of the United States, the 2016 CTPA TRQ.

Rice, Milled

2014/2015

2015/2016

2016/2017

Colombia

Market Year Begin: Apr 2014

Market Year Begin:

Apr 2015

Market Year Begin: Apr 2016

USDA Official

New Post

USDA Official

New Post

USDA Official

New Post

Area Harvested

390

390

425

450

450

Beginning Stocks

120

120

55

90

140

Milled Production

1,170

1,220

1,326

1,350

1,360

Rough Production

1,721

1,794

1,950

1,985

2,000

Milling Rate (.9999)

6,800

6,800

6,800

6,800

6,800

MY Imports

300

350

350

300

320

TY Imports

350

350

350

300

320

TY Imp. from U.S.

299

200

0

180

240

Total Supply

1,590

1,690

1,731

1,740

1,820

MY Exports

0

0

0

0

0

TY Exports

0

0

0

0

0

Consumption and Residual

1,535

1,600

1,660

1,600

1,660

Ending Stocks

55

90

71

140

160

Total Distribution

1,590

1,690

1,731

1,740

1,820

Area in Thousand Hectares, Quantity in Thousand Metric Tons

Wheat

Production:

Colombian wheat production will likely reach 10,000 MT in MY 2016/2017. Domestic wheat production is primarily destined for wet milling and human consumption. Reports from the wheat milling industry indicate a general lack of supply of locally produced wheat.

Consumption:

Post forecast for wheat consumption is no change in MY 2016/2017 from the year before, remaining at 1.55 million MT. Per capita wheat consumption is approximately 65 pounds. Wheat product destination and distribution patterns for the different sectors are as follows: bread (75%), pasta (15%) and the cookies and pastry industry (10%). The cookies and pastry sector has seen the most dynamic growth because of the Colombian snacks and confectionary industry expanding exports to the United States and Central America.

Trade:

In MY 2016/2017, Post forecasts U.S. wheat exports to reach 700,000 MT, or about 41% of total Colombian wheat imports. MERCOSUR and Canada are the primary competitors. Thanks to the CTPA, U.S. wheat market share has recovered against Argentina; however, competition with Canada continues to be the most significant challenge to U.S. wheat. The Colombia-Canada Free Trade Agreement was signed a year before the CTPA. This free trade “head-start" provided Canadian exporters an opportunity to strengthen trade relationships with Colombian millers at the expense of U.S. wheat. As well, industry sources indicate that the homogeneous quality of Canadian wheat is better suited to Colombian milling practices. In CY 2015, U.S. wheat captured about 40 percent of the Colombian import market share against Canada and to a much lesser extent Paraguay and Argentina.

Logistics issues can be significantly challenged as a result of fluctuations in imports and stocks. For instance, in MY 2012/13 there were delays in Canadian wheat exports due to weather and total Colombian wheat imports fell as a result. Industry, then, had to draw down stocks to meet production needs. In MY 2013/14, there was a surge in wheat imports as result of better Canadian weather and the Colombian milling industry was able to recover inventories.

Stocks:

The feed and wheat milling industries maintain limited carry-over inventories of corn and wheat given the high cost of stocks due to deficient storage capacity throughout Colombia. The feed and milling industries are estimated to maintain about a two-month inventory supply to manage operations, although overall, stocks have been gradually growing in recent years. Post forecasts endings stocks will decline in MY 2016/2017 to 226,000 MT.

Policy:

The Colombian wheat milling industry is almost entirely supplied through imports. Implementation of trade agreements with Canada and the United States have established favorable trade conditions with duty free imports and, to some extent, trade advantages over MERCOSUR wheat, whose fluctuating duties are subject to the price band mechanism.

Wheat

2014/2015

2015/2016

2016/2017

Colombia

Market Year Begin: July 2014

Market Year Begin: July 2015

Market Year Begin: July 2016

USDA Official

New Post

USDA Official

New Post

USDA Official

New Post

Area Harvested

7

8

6

8

8

Beginning Stocks

595

401

631

346

276

Production

15

15

12

10

10

MY Imports

1627

1475

1700

1485

1500

TY Imports

1627

1475

1700

1485

1500

TY Imp. from U.S.

584

750

0

750

700

Total Supply

2237

1891

2343

1841

1786

MY Exports

6

15

10

15

10

TY Exports

6

15

10

15

10

Feed and Residual

125

100

125

100

100

FSI Consumption

1475

1430

1555

1450

1450

Total Consumption

1600

1530

1680

1550

1550

Ending Stocks

631

346

653

276

226

Total Distribution

2237

1891

2343

1841

1786

Area in Thousand Hectares, Quantity in Thousand Metric Tons

Sorghum

Production:

Post forecast is sorghum production will fall slightly in MY 2016/2017 to 190,000 MT. Colombia historically grew a domestic variety of sorghum that was common in feed supplies, but has since declined due to the use of alternative grains and cheaper corn imports.

Consumption:

Sorghum is a niche feed ingredient that has showed little growth as Colombia expands trading partners in a variety of substitute feed grains, primarily corn.

Trade:

Almost the entire CTPA CY 2015 TRQ for U.S. sorghum (24,310 MT) was fully subscribed. Post forecasts the 25,526 MT CY 2016 TRQ to likely be fully subscribed as well.

Stocks:

Post forecasts ending stocks in MY 2016/2017 to be up slightly from the year before at 15,000 MT.

Policy:

The CTPA manages a limited volume TRQ for U.S. sorghum and is currently at 25,526 MT in CY 2016. The U.S. Grains Council has sponsored multiple sorghum trade missions to motivate importer interest and those efforts are beginning to show results. In CY 2015, almost the entire TRQ of 24,310 MT was fully subscribed with similar expectations for the CY 2016 TRQ.

Sorghum

2014/2015

2015/2016

2016/2017

Colombia

Market Year Begin: Oct 2014

Market Year Begin: Oct 2015

Market Year Begin: Oct 2016

USDA Official

USDA Official

USDA Official

New Post

Area Harvested

47

46

46

Beginning Stocks

10

5

10

Production

200

200

190

MY Imports

0

50

50

TY Imports

0

50

50

TY Imp. from U.S.

0

23

25

Total Supply

210

255

250

MY Exports

0

0

0

TY Exports

0

0

0

Feed and Residual

200

240

230

FSI Consumption

5

5

5

Total Consumption

205

245

235

Ending Stocks

5

10

15

Total Distribution

210

255

250

Area in Thousand Hectares, Quantity in Thousand Metric Tons