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USDA GAIN: Oilseeds, Cotton, Sugar, Grain and Feed

05 October 2012

USDA GAIN: Venezuela Grain and Feed Update 2012USDA GAIN: Venezuela Grain and Feed Update 2012

Despite Government plans to increase agricultural production, the gap between supply and demand remains large, and significant imports of basic feed and food grains will be needed to meet demand in the coming year and beyond. Post expects imports of wheat, rice and yellow corn to continue strong. The United States should remain a major supplier.
USDA GAIN Report - Oilseeds, Cotton, Sugar, Grain and Feed

Executive Summary:
According to the Venezuelan National Confederation of Associations of Agricultural Producers, Fedeagro, the agricultural activity during the first half of 2012 generally was positive, compared to previous years. The Government has maintained a dialogue with farmer associations and has considered some of their needs when developing policies. This has resulted in an increase in the planting area for corn and rice.

The Government decision to adjust the regulated prices of raw materials before the beginning of the harvest should also help reactivate interest in growing grain. Estimated planting for the winter cycle by producers belonging to Fedeagro is about 365,000 hectares.

The recently approved “Law for the Attention of the Agricultural Sector” should increase agricultural activity because the law is to support producers affected by natural contingencies of the last quarter of 2010. It will allow the restructuring or cancellation of the banking debts of agricultural producers if they had lost their crops.

The sector is still challenged by insufficient supplies, seeds and fertilizers that delayed soil preparation and therefore the crop harvesting. According to Fedeagro producers, more rice and corn was planted but production yields will depend on the climate and the availability of inputs. The Government manages 70 percent of the inputs for the agricultural sector and the handling of the inputs for the winter cycle was somewhat inefficient. Producers claim that the supply of materials and agrochemicals were supplemented by private commercial firms, a more expensive way that increases the production costs.

The Bolivarian Government is considering for the next six years a 70 percent growth in the domestic production of cereals. Representatives of Fedeagro consider that public policies will be crucial in this process. Despite Government plans to increase agricultural production, the gap between supply and demand remains large, and significant imports of basic feed and food grains will be needed to meet demand in the coming year and beyond. Post expects imports of wheat, rice and yellow corn to continue strong, based on domestic food demand and the need for more feedstuffs by the expanding poultry and pork sectors.

Author Defined:
As reported early this year, domestic rice production cannot meet domestic demand and the Government has had to resort to imports, mostly paddy rice from Argentina, Ecuador, Guyana and the United States. It is expected that Venezuela will continue importing paddy rice to meet their food needs throughout 2012 and 2013. The Government continues to be the major rice importer through their food purchasing entity “Corporation CASA.” According to Fedeagro, rough rice production for MY 2012/13 is estimated at 567,000 MT as producers plan to boost rice planting because of more favorable Government policies to support grain crops.

Based on the Attention to the Agricultural Sector Decree of 2011, the Government approved a Law to respond fully to farmers affected by natural contingencies of the last quarter of 2010 and 2011. This Decree will allow agricultural producers that had damaged or lost crops to restructure or cancel their debts with public or private banks. Producers see this law as helpful to the sector but they believe that it should be an additional funding plan for both the public and private sector, to accompany the production plans. If successful, these new policies might have long term positive results but imports will still be needed for at least the next several years.

The Venezuelan Rice Producers Association, Fevearroz, reported in mid-June that 90 thousand hectares of rice were planted in the winter cycle, which added to the 73 thousands hectares planted during the summer cycle. If accurate, that would be a total of 163,000 hectares of rice that were sown in 2012 but current domestic production would still fall short of meeting demand. Fevearroz, believes that production must be doubled from 163,000 hectares to 320,000 hectares in order to achieve selfsufficiency in rice, and that could take around four years even with supportive government policies. Fevearroz believes government decisions about rice imports should be made jointly with producers and industry. It wants import quotas (as in the past) to help protect domestic rice production and seeks more controls on domestic rice “leaking” across the border.

The National Statistic Institute (INE), reports that 428,493 MT of paddy rice entered Venezuela between January and May 2012, twice the amount of last year for the same time period Sources were Ecuador, Guyana and the United States. According to the Ministry of Food and Corporation CASA, this year's rice imports may reach more than 625,000 tons in order to cover the decline in domestic production and consumption demand.

Domestic corn production has not varied much from the last Annual GAIN Report VE1202. Production was estimated at 1,400,000MT for 2011/12 and forecast to increase to 1,780,000 MT in 2012/2013, based on Government announcements support to corn producers in the winter cycle. Fedeagro said Portuguesa State producers met their goals for the winter cycle. Producers in Guárico faced drought and did not have enough seeds so they only reached 60 percent of their targets. The local industry claims that imports of yellow corn for the first five months of this year reached 1.11 million tons, an increase of 250 percent over the same period in 2011. In 2011, Venezuela imported a total of more than 1.10 million tons of yellow corn, most of which was imported from the United States. Venezuelan animal feed processing companies think that another 1.5 million tons will be imported during the rest of 2012 from various countries.

The yearly consumption of white corn in Venezuela for the processing of pre-cooked corn flour is about 1.2 million tons. Declining domestic corn production forces the Government to import about 50 percent of the consumption needs. Between January and May 2012, INE has registered 89,508 tons of imports but we understand Corporation CASA has already bought 200,000 tons of white corn from Mexico, and plans to import an additional 350,000 tons in the next few months. Government purchases of imported foods sometimes avoid the official registry process.

In order to cover production costs and maintain a small profit, the Venezuelan Corn Processing Industry is requesting an urgent upward 66 percent adjustment for the controlled price of the pre-cooked corn flour, which is considered a basic food for Venezuelans. Raw corn prices are due to rise 47 percent in early August 2012 and freight rates are supposed to increase 20 percent when the new farm-gate prices for corn come into force. The industry is concerned that if the controlled price of pre-cooked corn flour is not adjusted soon, the companies will have difficulty operating and food production could be threatened.

Venezuela is heavily dependent on wheat imports and the main sources continue to be the United States and Canada. Import permits are reportedly being issued. Post expects the wheat trade to continue to grow based on increasing domestic food demand. No significant changes to be reported since the last Annual GAIN Report No. VE1202 of March 2012.

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