Report Highlights:

Wheat imports in MY 2015/16 are forecast at 1.90 MMT, up from 1.87 MMT the previous year. Corn production in MY 2016/17 (October/September) is estimated to reach 1.70 MMT, up 50,000 MT from MY 2015/2016. Peru's corn imports in MY 2015/16 are forecast at 2.70 MMT, remaining at the same levels as the previous year. Total corn imports in CY 2015 were 2.66 MMT of which 80 percent was originated in the United States. Rice production in MY 2016/17 is forecast at 2.05 MMT (milled basis). Policy-wise, the United States achieved market access for paddy rice through technical discussions under the U.S.-Peru Free Trade Agreement's SPS Standing Committee.

Executive Summary:

Wheat is a minor crop in Peru, and production is concentrated mostly in the temperate, southern highlands between 2,800 and 3,500 meters above sea level. Wheat production in MY 2016/17 (July/June) is forecast at 200,000 metric tons (MT), similar to production in the previous year. Wheat imports in MY 2015/16 are forecast at 1.90 MMT. Wheat imports in CY 2015 were 1.87 MMT. Canadian wheat holds the largest market share at 72 percent in CY 2015 due to more competitive pricing.

Corn production in MY 2016/17 (October/September) is estimated to reach 1.70 MMT, up 50,000 MT from MY 2015/2016. Corn consumption in MY 2015/16 is forecast at 4.40 MMT, increasing 2.6 percent compared to the previous year. Strong demand from the poultry sector is the main driver for increasing corn consumption. Peru currently produces 55 million broilers per month. Peru's corn imports in MY 2015/16 are forecast at 2.70 MMT, remaining at the same levels as the previous year. Total corn imports in CY 2015 were 2.66 MMT of which 80 percent was originated in the United States.

Rice production in MY 2016/17 is forecast at 2.05 MMT (milled basis), remaining in the same level as current production. Rice imports in MY 2016/17 are forecast at 220,000 MT, remaining at the same level as in the previous year. Imports in CY 2015 were 237,987 MT, led by Uruguay with 68 percent of the market share. Market access achieved for U.S. paddy (rough) rice in April 2015 did not impact trade yet, though buyers are looking at opportunities to source from the United States and mill here in Peru.

Wheat

Wheat

2014/2015

2015/2016

2016/2017

Market Begin Year

Jul 2014

May 2015

Jul 2016

Peru

USDA Official

New Post

USDA Official

New Post

USDA Official

New Post

Area Harvested

140

137

145

138

0

130

Beginning Stocks

524

524

579

521

0

476

Production

215

210

225

205

0

200

MY Imports

1907

1870

1800

1900

0

1900

TY Imports

1907

1870

1800

1900

0

1900

TY Imp. from U.S.

483

446

0

600

0

600

Total Supply

2646

2604

2604

2626

0

2576

MY Exports

72

68

75

80

0

90

TY Exports

72

68

75

80

0

90

Feed and Residual

70

70

70

75

0

80

FSI Consumption

1925

1945

1975

1995

0

2010

Total Consumption

1995

2015

2045

2070

0

2090

Ending Stocks

579

521

484

476

0

396

Total Distribution

2646

2604

2604

2626

0

2576

(1000 HA), (1000 MT)

Production:

Wheat production in MY 2016/17 (July/June) is forecast at 200,000 metric tons (MT), similar to production in the previous year. Wheat production in Peru has been decreasing slightly from 240,000 MT three years ago to the current level. Farmers are shifting away from less profitable wheat cultivation to more lucrative crops such as quinoa. Local wheat currently trades at about $556 per MT, compared to $5,000 per MT that producers can reasonably expect to receive for cash crops such as quinoa.

Wheat is a minor crop in Peru, and production is concentrated mostly in the temperate southern highlands between 2,800 and 3,500 meters above sea level. Wheat production is rudimentary and cultivation remains limited by mountainous geography. Wheat production is limited to mostly soft wheat, which is often consumed as purees or as a soup ingredient and not good for milling.

The total wheat crop area harvested for MY 2016/17 is forecast to fall by 4,000 hectares to 130,000 hectares. The total wheat crop area in MY 2014/15 was 137,000 hectares. The wheat area harvested varies significantly from one year to the next depending on prices, farmers' profit margin expectations, and the profitability of alternative crops such as quinoa, barley and oats. The average yield in CY 2015 was 1.0 MT/hectare.

Domestic millers have established a program promoting durum wheat cultivation for pasta production. They provide small farmers with seed and technical assistance, as well as purchasing production. Farmers are now producing around 12,000 MT of durum wheat for a pasta plant in Arequipa (approximately 1,000 kilometers south of Lima). Millers expect durum wheat production to reach 25,000 MT within the next few years.

Consumption:

Wheat consumption in MY 2016/17 is forecast at 2.01 MMT, a slight increase from the previous year. Overall wheat consumption is 64 kilograms per person.

Peru produces about 1.6 MMT of wheat flour per year. Of this amount 63 percent is used by the local baking industry, 20 percent goes to pasta manufacturing, 12 percent to the cookies and crackers sector and 5 percent for small-scale, family use. Roughly 70 percent of domestic flour is sold through traditional markets, while only 30 percent of flour is sold in supermarkets.

Per Capita Consumption

Product

Kilograms

Pasta

11.9

Cakes and pastry

1.2

Cookies and crackers

1.7

Bread

28.0

Flour

1.4

Grain

2.8

The wheat milling industry is highly concentrated. Of the 23 domestic millers, the largest one alone accounts for over 60 percent of total wheat milled. The country's four largest millers are responsible for around 85 percent of the wheat milled in Peru.

Bread consumption in Peru is 28 kilograms per person, one the lowest in South America. Per capita consumption of bread is 37 kilograms in Ecuador and 95 kilograms in Chile. Bread in Peru is normally purchased fresh daily in bakeries. Per capita consumption of bread loaves is only 250 grams/person, annually despite a two-fold increase over the last seven years.

Peruvians are heavy consumers of pasta. Peru, with pasta consumption at 11.9 kilograms per person, is South America's second largest pasta consumer. Pasta consumption is concentrated in the capital city of Lima, which accounts for half of all pasta consumed nationwide. Sources indicate that pasta consumption is now growing at a faster pace in Peru's provinces than in the capital thanks to economic growth. Pasta production in Peru totals 220 MT per year.

Peruvian consumption of cookies and crackers remains low by regional standards at only 1.7 kilograms per year. Cookies and crackers production is about 80,000 MT per year.

Trade:

Wheat imports in MY 2015/16 are forecast at 1.90 MMT. Wheat imports in CY 2015 were 1.87 MMT. Due to more competitive pricing, Canadian wheat held 72 percent market share in CY 2015, followed by imports from the United States with 21 percent and Russia 5 percent. Argentine wheat imports into Peru were almost no-existent in CY2015. U.S. and Canadian wheat exports to Peru have benefited from falling Argentine wheat production. Argentina's drop is due primarily to non-weather related government (Argentine) price fixing and export restrictions that are inducing farmers to stockpile or move to more lucrative soybean exports.

The U.S. Wheat Associates (USWA), a USDA Cooperator with the regional office based in Santiago, Chile, is active in the Peruvian market, providing trade servicing to the millers aimed to increase the variety and usage of wheat varieties to appeal to more consumers.

Peru's wheat millers are increasingly sophisticated. Over the last two decades, the industry has shifted from importing solely hard red winter wheat (HRW) to a mix of different wheat types (e.g., soft, spring, white, durum northern spring) for blending purposes. This is largest due to the USWA's activities over the years.

Import Trade Matrix

(Metric Tons)

Commodity

Wheat

Time Period

CY 2015

Imports from:

United States

401,644

Imports from Others

Canada

1,354,992

Russia

103,764

Total from Others

1,458,756

Others not Listed

9,856

TOTAL

1,870,256

Policy:

Wheat is imported duty-free. Although Peru does not specifically promote wheat production, the government does have in place credit and technical assistance programs. These programs seek to improve crop quality and protect consumers from international wheat price spikes.

Corn

Corn

2014/2015

2015/2016

2016/2017

Market Begin Year

Oct 2014

May 2015

May 2016

Peru

USDA Official

New Post

USDA Official

New Post

USDA Official

New Post

Area Harvested

485

464

475

470

0

480

Beginning Stocks

305

305

393

333

0

383

Production

1530

1491

1600

1650

0

1700

MY Imports

2741

2740

2700

2700

0

2700

TY Imports

2741

2740

2700

2700

0

2700

TY Imp. from U.S.

2482

2337

0

1400

0

1600

Total Supply

4576

4536

4693

4683

0

4783

MY Exports

8

8

10

10

0

10

TY Exports

8

8

10

10

0

10

Feed and Residual

3800

3850

3900

3900

0

3950

FSI Consumption

375

345

375

390

0

450

Total Consumption

4175

4195

4275

4290

0

4400

Ending Stocks

393

333

408

383

0

373

Total Distribution

4576

4536

4693

4683

0

4783

(1000 HA) ,(1000 MT)

Production:

Corn production in MY 2016/17 (October/September) is estimated to reach 1.7 MMT, up 50,000 MT from MY 2015/2016. Growing demand from the poultry industry to meet increasing consumption explains this increase. Over the past five-years, yellow corn production has grown steadily to meet feed needs.

Peru grows many varieties of corn of which the two most important are starchy corn for human consumption and yellow corn for feed. Starchy corn production in CY 2015 was 308,000 MT while production of yellow corn was 1.18 MMT.

Harvested area in CY 2015 was 215,000 hectares and 249,000 hectares for starchy and yellow corn respectively. Average yields in CY2015 were 1.43 MT per hectare for starchy corn and 4.75 MT per hectare for yellow corn. Yellow corn yields vary greatly depending on the locality and producers' access to technology (i.e., improved seeds, fertilizer, irrigation, and mechanized equipment). In Peru's coastal agricultural areas, yellow corn yields improved significantly over the course of the past decade, from about 6.5 MT/hectare to over 8.8 MT/hectare. On the eastern slope of the Andes, in Amazonian fields the yellow corn yields fell to 2.1 MT/hectare and lower due to degraded soils and less sophisticated production methods.

Consumption:

Corn consumption in MY 2015/16 is forecast at 4.4 MMT, increasing 2.6 percent compared to the previous year. Strong demand from the poultry sector responding to rising domestic consumption is the main driver for increasing corn consumption. Peru currently produces 55 million broilers per month. About 70 percent of the yellow corn available in the country goes towards chicken feed to supply the country's 1,000 plus poultry farms.

A challenge that poultry producers face is the increasing number of informal (non-registered) poultry farms, a problem that becomes more evident when poultry prices are high.

These unregistered producers, which do not pay taxes, account for about 25 percent of overall poultry meat production. However, their non-tax contributing status precludes them from obtaining import permits for foreign corn, curtailing the possibility of additional U.S. corn imports.

Trade:

Peru's corn imports in MY 2015/16 are forecast at 2.7 MMT, remaining at the same levels as the previous year. Total corn imports in CY 2015 were 2.66 MMT of which 80 percent originated from the United States. The U.S. Grains Council (USGC), a USDA Cooperator, services the Peru market to promote continued U.S. corn purchases and to increase Peru's use of corn by-products such as DDGS and ethanol.

Import Trade Matrix

(Metric Tons)

Commodity

Yellow Corn

Time Period

2015

Imports from:

United States

2,129,735

Imports from Others

Argentina

345,006

Bolivia

92,866

Paraguay

64,418

Brazil

29,259

Total from Others

531,549

TOTAL

2,661,284

Peruvian feed and poultry producers continue claiming that Argentine and domestically produced corn is cleaner and flintier than U.S. corn. However, due to trade preference advantages granted under the U.S.- Peru Trade Promotion Agreement, U.S. corn was imported into Peru at significantly lower prices, between $30 and $60 per MT.

Peru is also importing for testing purposes dried distiller grains with solubles (DDGS), seeking to improve the quality of domestically produced animal feeds. FAS Lima believes that U.S. DDGS have good market prospects. We estimate that Peru is a 100,000 MT market for U.S. DDGS.

Policy:

Corn enters Peru duty-free. Peru's unilateral elimination of import tariffs on most commodities eliminated many of the trade advantages afforded by the U.S.-Peru Trade Promotion Agreement (PTPA). However, the PTPA established a duty-free tariff rate quota (TRQ) of 500,000 MT for U.S.-origin corn with annual increases of 6 percent and full duty-free access within 12 years. The TRQ for 2016 is set at 751,815 MT.

Peru also maintains a corn price band system. This price band imposes a variable levy aimed at ensuring that corn imports enter the market at a minimum threshold price (floor price). Peru imposes this tax on certain “sensitive" products (i.e., corn, rice, sugar and powdered milk). In-quota U.S. corn is imported duty free. The government amended the price band system to limit the levy of to 20 percent of c.i.f. value. Out-of-quota U.S. corn is assessed up to 8.4 percent price band.

Rice, Milled

Rice, Milled

2014/2015

2015/2016

2016/2017

Market Begin Year

Apr 2014

Apr 2015

Apr 2016

Peru

USDA Official

New Post

USDA Official

New Post

USDA Official

New Post

Area Harvested

375

344

400

350

0

355

Beginning Stocks

270

270

155

173

0

150

Milled Production

2000

1933

2153

2000

0

2050

Rough Production

2899

2801

3120

2899

0

2971

Milling Rate (.9999)

6900

6900

6900

6900

0

6900

MY Imports

205

208

220

220

0

220

TY Imports

250

208

220

220

0

220

TY Imp. from U.S.

0

7

0

10

0

20

Total Supply

2475

2411

2528

2393

0

2420

MY Exports

20

57

70

60

0

70

TY Exports

20

57

70

60

0

70

Consumption and Residual

2300

2181

2310

2183

0

2200

Ending Stocks

155

173

148

150

0

150

Total Distribution

2475

2411

2528

2393

0

2420

(1000 HA) ,(1000 MT)

Production:

Rice production in MY 2016/17 is forecast at 2.05 MMT (milled basis), remaining in the same level as current production. Rice production has reached a maximum level and is now limited by water availability and demand. The total rice harvested area for MY 2016/17 is forecast at 355,000 hectares, about the same as the previous year.

Plenty water supply and good weather conditions resulted in a rice production of 2.02 MMT in CY 2015. Rice production is concentrated in Peru's arid northwestern coastal region (mainly in Lambayeque and Piura provinces). Production contends with poor quality soils and increasing soil salinization due to field flooding irrigation techniques. Peruvian rice is surface irrigated, dependent upon water draining from Andean rivers hundreds of kilometers away. Average rice farm size is about five hectares.

The government of Peru has sought with some success to expand rice cultivation along the eastern slope of the Andes (particularly in San Martin province). The policy has failed to fully dislodge the coastal rice producers. These low-income, small-scale farmers currently have no real incentive to switch to a less water intensive crop (e.g., quinoa or cotton). Water fees charged to farmers are almost non-existent (instead of the $250/hectare that should be assessed), and along with decent returns, hinder government attempts to shift production away from the arid coastal areas.

Rice is normally harvested April through May, averaging $415 per MT in CY 2015, slightly higher than the previous year.

Despite the bulk of rice cultivation being undertaken by smaller producers, whose quality and yields fluctuate widely, yields averaging 7.82 MT/hectare are respectable (the world average is about 4 MT/hectare). Some farmers are reporting yields as high as 14 MT/hectare.

Consumption:

Rice is a staple product in Peru; per capita consumption hovers at 60 kilograms/year. Rice is traditionally sold in 50-kilogram sacks. But with the expansion of supermarket chains, consumer habits are changing towards prepackaged, one-kilogram bags.

Trade:

Rice imports in MY 2016/17 are forecast at 220,000 MT, remaining at the same level as in the previous year. Imports in CY 2015 were 237,987 MT, led by Uruguay with 68 percent of the market share. Uruguay has dominated imported the rice market in Peru historically due to U.S. rice's less competitive price and a longstanding relationship between the main Uruguayan supplier and Peru's major importer. The former is said to supply advantageous credit conditions. Nonetheless, during 2015 the United States obtained full access for paddy (rough) rice for the first time, as the result of bilateral, technical discussions between Peru and the United States spearheaded under the U.S.-Peru Free Trade Agreement's SPS Standing Committee.

Import Trade Matrix

(Metric Tons)

Commodity

Rice

Time Period

CY 2015

Imports from:

United States

6,295

Imports from Others

Uruguay

154,901

Brazil

57,329

Thailand

17,259

Paraguay

2,100

Total from Others

231,589

Others not Listed

103

TOTAL

237,987

FAS Lima estimates that some 50,000 MT of paddy rice were unofficially exported from Peru to Ecuador in CY 2015.

Policy:

Rice enters duty-free. Peru's unilateral elimination of import tariffs on rice eliminated many of the trade advantages afforded by the U.S.-Peru Trade Promotion Agreement. However, the PTPA establishes a duty-free TRQ of 72,000 MT for U.S.-origin rice with annual increases of 6 percent and full duty-free access within 17 years