Chilean Wheat Price to Remain Relatively High
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In MY 2023/24, Post forecasts that Chilean Wheat area harvested will total 215,000 hectares (ha). In MY 2022/23, the area harvested increased by 14.4 percent due to high Wheat prices. There is no indication of Wheat prices decreasing in the short term. However, the expectation of high Wheat prices in MY 2023/24 is offset by the high cost of inputs, such as fertilizers, which will limit the potential increase of area harvested.
Additionally, internal conflict in the Araucanía region, the top Wheat-producing region in Chile, constrains the potential increase in the area harvested. In MY 2023/24, Post assumes climatic conditions will remain unchanged from MY 2022/23; drought will still be a structural problem in most productive regions in Chile. As a result, Post estimates average Wheat yields at 6.14 MT per hectare and production at 1.32 million metric tons (MMT).
Domestic prices are governed by the cost of importing Wheat from the United States, Argentina, and Canada, which are Chile’s top three Wheat suppliers. As global prices increased, the average Wheat price in Chile increased from $257 per MT in January 2021 to $538 per MT in May 2022. In December 2022, Wheat prices in Chile averaged $464 per MT. International Wheat prices initially grew as a response to the lower supply from Ukraine; however, insufficient global supplies continue to keep international Wheat prices high despite the reopening of the Ukrainian market. In MY 2023/24, Post expects the Chilean average Wheat price to remain relatively high in response to high international prices.
Moreover, the depreciation of the Chilean peso against the U.S. dollar pushed Chilean Wheat prices up in nominal terms. A rapid depreciation occurred between April 2021 and October 2022, moving the Chilean peso from CLP708 per U.S. dollar to CLP956 per U.S. dollar. The effect of the currency fluctuation in this period can be observed in an increase in average Wheat prices between April 2021 and May 2022. In the longer term, the exchange rate slid from CLP606 per U.S. dollar in January 2018 to CLP798 per U.S. dollar in February 2023. The Chilean peso is expected to remain stable in MY 2023/24.
In MY 2023/24, consumption is projected to reach 2.615 MMT, almost unchanged from 2.610 MMT in MY 2022/23. Post does not foresee an increase in consumption due to high levels of inflation, which reached 12 percent in the calendar year 2022, putting downward pressure on consumption growth. However, bread is considered a staple food. Thus, Post does not expect significant reductions in consumption. In MY 2023/24, Post estimates Chile’s Food, Seed, and Industrial (FSI) will reach 2.365 MMT, almost unchanged from MY 2022/23 when it reached 2.360 million metric tons. In MY 2023/24, Post forecasts a steady feed consumption of 250,000 MT which represents the remaining 10.6 percent of the Wheat consumption, and its mainly destined for the salmon farming industry.
Wheat Trade in Chile
Chile is a net Wheat importer since domestic production does not cover consumption needs. Due to lower initial stocks for MY 2023/24, Post estimates Wheat imports to increase by 4.0 percent over MY 2022/23 to cover consumption needs. MY 2023/24 imports will total 1.30 million metric tons. In the first two months of MY 2022/23, imports decreased by 11.1 percent totaling 196,446 metric tons.
The primary source of Chilean Wheat imports is Argentina, Canada, and the United States.
Argentina positioned itself as the leading supplier of Wheat to Chile due to its competitive price and proximity. The import cost from Argentina remained competitive against U.S. Wheat from January 2021 until June 2022, when the average U.S. Wheat import cost decreased below that of Argentina. According to the AgFlow data, the U.S. led its import market with 99,331 tons of Wheat in Jan-Apr 2023, followed by Canada (32,000 tons) and Argentina (21,950 tons).
Other sources: USDA
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