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Colombia Agribusiness Report Q4 2009Published by: Business Monitor International Published: Oct. 5, 2009 - 60 Pages Table of Contents
AbstractIn BMI's Colombia Agribusiness Report for Q409 we introduce the new Grains Outlook. Colombia runsa deficit in both food and feed grains and is reliant on imports, predominantly from the US. Grainproduction suffered following the liberalisation of the agricultural sector in 1991. Corn production fell inthe 1990s as many smaller producers switched to other crops and the area planted contracted. Thisdecade, however, has seen production climb back up as the expansion of larger, more modern farms hasimproved yields. The average yield for corn rose from a mere 1.6 tonnes per hectare in 1999 to 2.85tonnes/ha in 2008.Despite the improvement, by international and even Latin American standards productivity is still low. In2008, corn yields in the US were 9.46 tonnes/ha according to data from the US Department ofAgriculture. In the same year, yields in neighbouring Venezuela and Ecuador stood at 3.00 tonnes/ha and3.13 tonnes/ha, respectively. The low productivity is in part down to the continuation of small-scalesubsistence corn production where yields are often lower than 1 tonne/ha. The expansion of larger, moremodern farms will see yields continue to rise moving into the next decade. We forecast production togrow 25.6% to 2013 to reach 2.08mn tonnes. This will be driven predominantly by improvements inyield. Corn producers are helped by direct subsidy payments from the government and subsided credit to helpwith input costs. Many smaller producers will be increasingly reliant on government support as tradeagreements with other South American countries as well as the pending United States-Colombia TradePromotion Agreement will see restrictions on imports fall. Demand for corn has seen rapid growth over the past decade as the feed requirements of the country'slivestock sector have risen. Strong economic growth this decade has spurred a large expansion in theproduction of meat, particularly poultry, and dairy products. This has seen demand for feed corn grow bymore that 150% over the past 10 years. Beyond the current economic problems, we expect the stronggrowth in demand for grain to continue. While in the longer term the future still looks bright for Colombia's livestock and dairy producers, 2009 isproving a difficult year. Farmers have already been struggling with high input costs and flagging demandas consumers cut back on non-essential food purchases in the face of the economic slowdown. At the endof July, the situation took a dramatic turn for the worse when Venezuelan President Hugo Chavézannounced a freeze on trade with Colombia following his latest spat with Colombian President ÁlvaroUribe. This is not the first time Chavez has threatened to cut trade between the two countries, which in2008 was worth US$1.7bn for food products alone. This time, however, action has followed words andtrade ground to a halt in August. Chavéz' ally Ecuador has also recently imposed stiff tariffs on foodimports from Colombia. In 2008, Colombia exported around 200,000 tonnes of beef and a significant amount of dairy products toVenezuela. If Chavez refuses to relent, finding new markets will not be easy. In the longer term, with thecurrent poor state of Venezuelan agriculture, we believe Colombian food imports will be too important toVenezuelans to be permanently restricted. In the short term though producers will see heavy losses asdemand on the export market collapses and domestic demand remains slow. We have revised our real GDP growth forecast for France to 0.7% in 2008 with a 3.0% contraction for2009, before improving slightly to 0.2% in 2010. Unemployment is expected to increase to 9.3% in 2009up from an estimated 7.8% in 2008 and is expected to rise to 10.6% in 2010. Get Full Details About This Report >> |
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