Production:

FAS Quito forecasts Ecuador's wheat production in marketing year (MY) 2015/16 (July-June) to reach 5,000 metric tons (MT), down about 1,000 MT from the MY 2014/15 estimate of 6,000 metric tons. Ecuador is an insignificant producer of wheat and is dependent on foreign imports.

Wheat

2013/2014

2014/2015

2015/2016

Market Begin Year

Jul 2013

Jul 2014

Jul 2015

Ecuador

USDA Official

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USDA Official

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USDA Official

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Area Harvested

8

8

8

7

0

6

Beginning Stocks

87

0

101

101

0

144

Production

6

6

6

6

0

5

MY Imports

616

616

640

750

0

800

TY Imports

616

616

640

750

0

800

TY Imp. from U.S.

185

185

0

300

0

350

Total Supply

709

622

747

857

0

949

MY Exports

3

3

0

3

0

4

TY Exports

3

0

0

3

0

4

Feed and Residual

105

105

105

135

0

160

FSI Consumption

500

500

515

575

0

640

Total Consumption

605

605

620

710

0

800

Ending Stocks

101

101

127

144

0

145

Total Distribution

709

709

747

857

0

949

1000 HA, 1000 MT, MT/HA

At FAS Quito, we find that Ecuador's domestic wheat production has declined steeply since the 1970s. Throughout the 1990's, the country still managed to produce some 30,000 MT of wheat per year on some 37,000 hectares. Production has fallen since then due to a scarcity of suitable land for cultivation and soil quality problems and reduced yields.

The government's subsidization of wheat imports during the 1970s' inflationary oil boom years also resulted in the sharp drop off in the consumption of domestic wheat (more expensive) in favor of more affordable imports. While the government indicates that today some 6,000 hectares remain in wheat production, we feel that this number should be closer to the 5,000 hectare range. FAS Quito forecasts Ecuador wheat yields in MY 2015/16 at 0.8 MT/hectare, dropping from previous years' estimates of around 1.2 MT/hectare.

Government incentives in place since 2008 aimed at increasing cultivation, namely through the provision of subsidized fertilizers, government-backed loans, and improved seed varieties, have not yielded expected results. Central and northern highland farmers have opted instead to switch to more profitable crops such as quinoa.

FAS Quito estimates that of the 6,000 MT of domestically produced wheat in MY 2014/15 only 2,000 MT makes its way to millers. Production is largely consumed in small towns near production areas. Millers question the sustainability of government efforts to increase production given the market's size and bakers' preferences for high-quality flour. Prior to 2010 the government required millers to absorb all domestic production before issuing import permits.

Consumption:

FAS Quito forecasts Ecuador's wheat consumption in MY 2015/16 at 800,000 MT, increasing 90,000 MT or 13 percent compared to the MY 2014/15 estimate of 710,000 metric tons. We attribute increased consumption in MY 2015/16 to lower international wheat prices combined with increased demand for animal feed wheat. The common bread roll price is $0.12 since 2011.

FAS Quito estimates Ecuador wheat consumption in MY 2014/15 at 37 kilograms/annum (premised on a population of ~15.6 million – Central Intelligence Agency, July 2014 estimate). We estimate FSI consumption at 577,000 metric tons. Ecuador's MY 2015/16 feed wheat use is forecast at 160,000 MT, of which 130,000 MT will be absorbed by shrimp farmers seeking to boost production to meet growing global shrimp demand. Ecuador as one of the world's largest shrimp producers (exports of $2.6 billion in CY 2014), has benefitted from the 2012/13 outbreak of early mortality syndrome (EMS – necrotizing hepatopancreatitis) in Southeast Asia.

Trade:

FAS Quito forecasts Ecuador's wheat imports in MY 2015/16 at 800,000 MT, up 50,000 MT or seven percent compared to the MY 2014/15 estimate of 750,000 metric tons. We attribute the increase to lower international wheat prices and an upswing in consumption by the animal feed industry.

Ecuador utilizes imported wheat mainly in bread and pasta manufacturing. At FAS Quito, we understand that imports of hard wheat are greater than those of soft wheat. In calendar year (CY) 2014, the ratio of hard to soft wheat imports is 1.55 to one. Import market share of U.S.-origin wheat in CY 2014 at 41 percent are up 11 percent compared to the previous year. U.S. import market share is benefitting from increased demand by Ecuador's animal feed industry, as well as from the adoption of new technologies that allow a better utilization of U.S. wheat in different flour blends. Canada however remains Ecuador's main supplier of wheat.

Policy:

Ecuador's attempts to substitute wheat imports with increased local production have yet to yield results. Despite the recent introduction of three higher yielding varieties, the first since the 1990s, new plantings have yet to occur.

COMEX Resolution 004-2015 (February 3, 2015) extends prior COMEX Resolution 099-2012 (which expired on December 31, 2014) through December 31, 2016. Like the preceding resolution, COMEX 004-2015 exempts all imported wheat, as well as wheat flour and wheat semolina from a 10 percent ad valorem duty. Shipments received during the January 1 to February 3, 2015 interim were levied the ad valorem duty plus the Andean Price Band System (APBS) variable levy (currently assessed at four percent). The current resolution does not eliminate the APBS variable levy. Reportedly importers are lobbying the Minister of Industries, who controls one of the five votes in the COMEX Plenary, to rectify the resolution to also include language eliminating the APBS variable levy. The Andean Community (Bolivia, Colombia, Ecuador, and Peru) set floor (threshold) and ceiling prices for wheat, currently $300/MT and $350/metric ton. Ecuador imported $91.5 million of U.S. wheat in CY 2014.

Ecuador maintains bilateral trade agreements with Peru and Chile, and regional trade agreements with the Latin American Integration Association (ALADI). In 2004, Ecuador reached a tariff liberalization agreement with the Southern Common Market (MERCOSUR); implementing the agreement in April 2005. Wheat benefits from special treatment within MERCOSUR. Tariff preferences are granted on the total duty, which is comprised of the ad valorem (basic) duty plus the APBS's variable levy. In 2014, Ecuador concluded trade liberalization agreement negotiations with the European Union (EU). It remains to be seen if Ecuador will terminate the application of the APBS to EU-origin wheat imports.