Highlights

Total wheat production increased 8% in MY2015/2016 reaching 1.6MMT. Production is expected to decrease on MY2016/17 as prices for domestic producers declined in MY2015/16. A slight increase in Chile's import volume is expected MY2016/17 to offset decrease in the production. As corn prices are low, there is no expectation of an increase in corn area harvested for MY2016/17. Chile's traditional corn producers expect to continue to produce a minimum of 100,000 ha, even if other producers seek alternative, more lucrative crops. As a result, imports are expected to increase to 1.8 MMT in MY2015/16 and 1.9MMT in MY2016/17due to the lower domestic production and high demand by poultry and pork industry.

Executive Summary

Total wheat production increased 8% in MY2015/2016 reaching 1.6MMT. Production is expected to decrease on MY2016/17 as prices for domestic producers declined in MY2015/16. A slight increase in Chile's import volume is expected MY2016/17 to offset decrease in the production.

As corn prices are low, there is no expectation of an increase in corn area harvested for MY2016/17.

Chile's traditional corn producers expect to continue to produce a minimum of 100,000 ha, even if other producers seek alternative, more lucrative crops. As a result, imports are expected to increase to 1.8 MMT in MY2015/16 and 1.9MMT in MY2016/17due to the lower domestic production and high demand by poultry and pork industry.

Commodities

Wheat

Production

Wheat production in Chile covers about 65% of Chile's demand. While the remaining 35% demand is met through imports from the United States, Canada and Argentina. Chile's average wheat production area over the past 9 years has remained at 260,000 hectares (ha). In MY 2015/16 Chile's wheat planted area reached 281,000 ha with a production total of 1.6MMT. This is an increase of 8% over MY 2014/15. Area and Production are expected to decrease on MY2016/17 since prices for domestic producers have been lower than MY2015/16.

Quite commonly, wheat producers also produce oat and canola and adjust or shift the production area of each crop based on different factors like price or market conditions and to technical factors like crop rotation requirements 70% of Chilean wheat is produced between the Araucania and Biobio region. Araucania region has 40% of the wheat planted surface area, which is a large concentration of Chile's overall wheat production. The highest wheat yields take place in Los Rios and Los Lagos regions, which are located in the southern part of Chile and that accumulate more rainfall during the season.

Water availability is considered a recent problem in both the Biobio and Araucania regions, as recent droughts over the last three years impacted overall agricultural production, resulting in lower wheat yields in these regions. The Chilean Government is concerned with this issue and has been working on developing water reservoirs. Research for the use and development of irrigation systems is being carried out in order to increase yields.

In order to maintain transparency on the domestic market, Ministry of Agriculture and COTRISA publish weekly a 'wheat import cost indicator' that shows how much it would cost to import wheat from different international markets to Santiago-Chile. This indicator uses a formula that considers the wheat price, transport costs, insurances, credit, and other operational costs involved in importing the wheat.

The wheat import cost indicator has shown a decrease in the cost of wheat imports from U.S., Canada and Argentina, which should be directly aligned with a decrease in domestic prices for wheat Wheat prices paid by mills were low on MY2015/2016.

Consumption

During MY2015/16 mills have demanded high quality wheat containing a high gluten percentage, which not all producers were able to provide. It is common knowledge that many producers privilege quantity over quality, which translates into high yields per hectare but with a low protein percentage content for wheat.

In order to maintain consistency between imported wheat and prices paid in the domestic market, Chilean Ministry of Agriculture carried out a buying program for small producers (Programa de compra MINAGRI) through the Company COTRISA. In this way one of the objectives of the program is ensure that the domestic market reflects the conditions of international markets. COTRISA buys wheat from small producers with a maximum of 35 MT per producer. Producers must be an eligible user of INDAP

(Ministry of Agriculture's National Institute for Agriculture Development), client of “Banco Estado Microempresas" (State Bank credits given for small companies) or Agroseguro (Ministry of Agriculture Insurance Program). Another measure related to wheat market transparency is the “sample and counter-sample law" (Ley de Muestra y Contramuestra). This law indicates that a counter-sample must be kept when a transaction is held. One of the parties in the transaction can require using a quality evaluation by a third independent party in order to litigate when a problem in quality assessment and price occurs. This law does not operate when there is direct contract that establishes a price between the two parties or when it's a second order transaction.

Trade

Trade reforms in Argentina eliminated export tariffs for wheat on December 2015. Chilean producers feared a rapid increase in wheat imports from Argentina, but this has not yet occurred. However, Post anticipates a dual increase on imports is expected to occur during the following years.

In MY 2013/14, the U.S. was the second largest supplier of wheat to Chile after Canada. In MY2014/15 U.S. wheat continued to lose market share to Canada and Argentina which offered more competitive prices. U.S. wheat exports to Chile where almost nonexistent between Jan-July 2015 period but began to recuperate from July-October 2015 as U.S. prices became more competitive.

Wheat imports increased 1.9% in volume in MY2014/15 over MY2013/14, however imports decreased by 12% in value. Wheat from Canada decreased slightly and substantially from the US. Wheat imports from Argentina increased 170 MT, a 4000% increase from the previous MY, but only payed 2000% more than it did the previous MY.

A slight increase in import volume is expected in and MY2015/16, as domestic production was high. In addition, a 14.5% increase is projected for MY2016/17 as domestic production is expected to fall to 1375 MT due to low prices received by domestic producers on MY2015/16 and a shift towards crops that were more profitable like oat. Chilean wheat exportation is virtually non existent. Any wheat exported is in the form of pasta. Exportation increased in quantity (MT) by 6% on MY2014/15 over MY2013/14, but decreased in price (USD) by 5%. Haiti remains the largest importer of Chilean pasta, importing nearly 50% of all Chilean pasta products. Second largest market for Chilean pasta is the U.S. in volume, although the U.S. is the first in value.

Production, Supply and Demand Data Statistics

Wheat

Market Begin Year

Chile

2014/2015

2015/2016

2016/2017

Dec 2014

Dec 2015

Dec 2016

USDA Official

New Post

USDA Official

New Post

USDA Official

New Post

Area Harvested

263

263

255

281

0

0

Beginning Stocks

190

190

244

169

0

257

Production

1482

1482

1400

1600

0

1375

MY Imports

882

804

950

830

0

950

TY Imports

862

808

1000

836

0

850

TY Imp. from U.S.

229

196

0

200

0

200

Total Supply

2554

2476

2594

2599

0

2582

MY Exports

10

7

10

7

0

10

TY Exports

10

10

10

8

0

10

Feed and Residual

200

200

200

200

0

200

FSI Consumption

2100

2100

2150

2135

0

2200

Total Consumption

2300

2300

2350

2335

0

2400

Ending Stocks

244

169

234

257

0

172

Total Distribution

2554

2476

2594

2599

0

2582

Commodities

Corn

Production

Total corn harvested area over the past 7 MY totaled 120,000 ha on average. In MY2015/16 the harvested area declined to 102,000 ha as prices decreased in the domestic market. As a result, production followed suit, declined 18% over MY2014/15 and totaled 1,256,989 MT.Corn production is concentrated in the O'Higgins and Maule regions, which account for 77% of the corn area harvested in Chile (MY2014/15). The average corn yield is 12.3 MT/ha, and higher yields are obtained in O'Higgins region, which is the main producing region in the country. Domestic corn prices have been reducing since April 2013 to levels around US $200/MT, and have not recovered to price levels of US$250/MT that took place on 2011 and 2012 As prices have remained low, there is no expectation of an increase in corn harvested area for MY2016/17, as producers are moving towards more profitable crops. Nonetheless, there is still a minimum area harvested of 100,000 ha by traditional corn producers which would total 1,232,000 MT for MY2016/17.

Consumption

The majority of Chile's corn consumption is destined for animal feed for its poultry and pork industries.

Chilean production of broiler meat in CY 2015 reached 599,000 MT, which was a 5.6% increase over CY 2014. Broiler production in October through December 2015 period was at its highest level reaching near 54,000 MT monthly. Production has been growing constantly because a high demand of poultry products (healthier product and poultry has a lower price than beef) and the low price of grain and feed products used by the industry. Thus, corn demand is expected to increase in MY2015/16 and MY 2016/17.

Trade

The United States is the third largest corn supplier after Paraguay and Argentina. Total corn imports decreased both in quantity (-16.2%) and value (-27.6%) in MY2014/15 over MY 2013/14. Imports are expected to increase to 1,800 MT in MY2015/16 due to lower domestic corn production and high demand by poultry and pork industry. Argentina should increase market share because of the elimination of the corn trade export rate by the new elected president Mauricio Macri Corn imports are almost non existing April-June, which coincides with the start of the corn harvest in March. Imports peak in September-November, but remain high until February.

Production, Supply and Demand Data Statistics

Corn

2014/2015

2015/2016

2016/2017

Market Begin Year

Mar 2015

Mar 2016

Mar 2017

Chile

USDA Official

New Post

USDA Official

New Post

USDA Official

New Post

Area Harvested

125

125

100

102

0

100

Beginning Stocks

377

377

366

277

0

234

Production

1539

1539

1240

1257

0

1232

MY Imports

1400

1316

1800

1800

0

1900

TY Imports

1516

1516

1800

1800

0

1900

TY Imp. from U.S.

75

75

0

0

0

0

Total Supply

3316

3232

3406

3334

0

3366

MY Exports

25

30

75

75

0

80

TY Exports

23

23

75

75

0

80

Feed and Residual

2600

2600

2700

2700

0

2750

FSI Consumption

325

325

325

325

0

325

Total Consumption

2925

2925

3025

3025

0

3075

Ending Stocks

366

277

306

234

0

211

Total Distribution

3316

3232

3406

3334

0

3366