Colombia. Corn Annual. Mar 2015 April 12, 2015
Corn production is expected to remain at 1.75 million MT in MY 2014/2015 with no changes in production for MY 2015/2016. In CY 2014, corn area planted decreased by 15,000 hectares (37,000 acres) of both white and yellow corn with no expected changes for planted area in CY 2015. However, the decrease in area has been compensated with a marginal recovery in yields to maintain production levels. Domestic 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. Since 2010, the Government of Colombia (GOC) has maintained a program encouraging domestic production of white and yellow corn titled Plan Pais Maiz, or Country Corn Plan. The Plan supports corn production through different mechanisms of subsidies, such as direct payments per hectare, transport discounts and additional funding for research and development to improve seed genetics. Nevertheless, the program has failed to demonstrate any significant impact on area planted or yields.
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. In 2014, industrial farm corn planted area was estimated to be 235,000 hectares (580,000 acres), or about nearly 50 percent of the total corn planted area planted. Yellow corn represents about 75 percent of the industrial farm planted area, or approximately 175,000 hectares (432,000 acres).
Since 2008, corn area planted in the Colombian eastern savanna, or Altillanura, has expanded to 35,000 hectares (86,000 acres) with production increasing from 20,000 to 170,000 MT in 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 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 are currently in political limbo. Allegations that multinational companies and large-scale farm owners circumvented land purchasing laws on title transfer and landholdings have stemmed further investments in the region. In addition, investments in the potential of the land are tempered by the need for intensive, large-scale soil conversion, extremely deficient transport infrastructure and long distances to major domestic markets and maritime ports.
The GOC's National Development Plan (NDP) for 2014-2018, currently being debated in the Colombian Congress, provides a special status for land use in the Altillanura that aims to resolve the legal issues regarding land tenure and support greater investment in developing more modern, industrial agriculture. As the NDP is debated, the Altillanura land issues still remain under public scrutiny.
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
Source: Colombian Institute for Agriculture and Livestock (ICA)
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 trends in feed demand determine grain feed production and imports in Colombia. The primary consumer of grains being the poultry sector. However, other sectors are showing growth trends over the past few years. Colombia's sustained economic growth and the increase in the household income explain the growth in animal protein consumption. Feed demand will continue to grow, primarily in the poultry sector, as Colombia's economy remains strong and populations shift out of poverty into the low and middle income classes.
Traditional feed ingredients, such as corn, soybeans and soybean meal are the most prevalent feed raw materials. The feed industry, however, continues to investigate new formulations of their feed mixes and ingredients, such as wheat, yucca, and distillers grains. The introduction of new feed materials entirely dependent on feedstock costs. 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 corn imports.
In MY 2014/2015, Post forecasts total corn imports to reach 4.4 million MT with U.S. corn export volume hitting 4.0 million MT. In MY 2015/2016, Post forecasts total corn imports to increase by 50,000 MT to 4.45 million MT as feed demand increases and local corn production remains stagnant. Post forecasts U.S. corn exports remain at 4 million MT in MY 2015/2016. In CY 2014, Colombian imports of sorghum fell to 101,000 MT, 80 percent lower than CY 2013. Low corn prices 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 CY 2015, price competitiveness and the quota mechanism of first-come/first-serve will likely lead to the 2.4 million MT U.S. corn import quota filling before the first half of this year. As of March 5, 2015, Colombian imports of U.S. yellow corn were 981,000 MT, 40 percent of the total quota for CY 2015. As well, Colombia imported 69,000 MT of white corn or about 44 percent of the total 2015 quota.
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. Since 2012, U.S. market share increased to 18% in CY 2013, and then exploded to 97% in CY 2014 due to low corn prices and higher MERCOSUR duties.
In CY 2014, low corn prices motivated excessive purchases and an expansion of inventories, filling the U.S. corn quota by June of that year. A repeat of 2014 is likely for 2015 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.
The CTPA was implemented in May 15, 2012 and trade outcomes for U.S. corn in 2014 have been outstanding.
The table below illustrates the TRQ fill rates for yellow corn, white corn:
2014 CTPA Tariff-Rate-Quota (TRQ) Fill Rates
Source: DIAN Colombian Customs and Tax Agency
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 applies a TRQ mechanism instead. 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 of 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. In recent years, with high global commodity prices, the price band mechanism has 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 30 percent in 2014, while U.S. corn benefits from zero duties within quota and an out-of-quota duty slightly below 19%.
Out-of-quota duties for U.S. corn are lower than duties from MERCOSUR. This advantage will change if the corn CIF price hits USD 245 per MT, which would lower the duty on MERCOSUR corn to 17%, the same as the out-of-quota duty for U.S. corn. If the CIF price increases further, MERCOSUR will have a tariff advantage.
The table below outlines the current CAN Price Band floor and ceiling prices for select major commodities:
Andean Price Band (APB) – Prices per Metric Ton (April 1 – March 31)
Andean Price Band (APB) – Prices per Metric Ton (April 1 – March 31)
White Corn 1/
1/ The APB was temporarily suspended with fixed duties for white corn (40%) and rice (80%)
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 market conditions 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 purchase domestic production. However, the GOC has not implemented the MAC since 2013 and has yet to make a decision to implement it in CY 2015.
Production, Supply and Demand Data Statistics:
Market Year Begin: Oct 2013
Market Year Begin: Oct 2014
Market Year Begin: Oct 2015
TY Imp. from U.S.
Feed and Residual