Colombia Corn: APBS Serves as a Price Stabilization Tool
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Colombia’s total Corn imports are forecast to increase to 6.6 million MT in MY 2023/24 to supply the growing demand from the animal feed sector, with U.S. Corn accounting for 73 percent of imports (4.8 million MT). In CY 2023, the out-of-quota duties for yellow and white Corn ended, meaning all Corn imported from the United States will enter duty-free from 2023 and beyond.
In MY 2022/23, Corn imports to Colombia are revised by 12.1 percent from USDA´s official number to 6.5 million MT. This increase is driven by higher demand from the animal feed industry as the poultry and pork sectors grew higher than expected. U.S. Corn’s market share is not likely to increase beyond 70 percent of total imports (4.5 million MT) in MY 2022/23. Grain importers are highly price-conscious.
Although the United States continues to be the main sourcing option for Colombian importers of Corn due to trade preferences in the U.S.-Colombia Trade Promotion Agreement (CTPA) and vigorous trade relationships with importers, the United States continues to compete with South American imports due to competitive prices and preferential treatment granted to Mercosur countries, especially Argentina and Brazil, under the Andean Price Band System (APBS). With high global commodity prices, the APBS mechanism has established zero import duties from trading partners, such as Mercosur countries, where the price band mechanism applies. Colombian importers are expected to buy Corn from Brazil, given its projected record harvest in 2023.
According to AgFlow data, Colombia imported 0.25 million tons of Corn from Brazil in June 2023, followed by the United States (0.2 million tons) and Brazil (72,000 tons). Total imports hit 3 million tons in Jan-June 2023. In MY 2023/24, ending stocks are forecast to increase 15.6 percent to 436,000 MT. As a result of the 2021 national protests that blockaded roads and access to main ports, Colombian grain importers decided to maintain higher inventories to continue operations in case of potential input flow disruptions. The Colombian government does not have a policy for holding grain inventories.
Colombia’s Corn Policy
The new Petro administration that took office on August 7, 2022, has publicly promoted Colombia’s becoming more self-sufficient in agricultural production, mainly Corn, to reduce dependence on imports and strengthen the Colombian economy. The new Minister of Agriculture has stated publicly that Colombia needs to increase Corn area planted to nearly 1 million hectares to substitute Corn imports.
However, many challenges related to land reform, infrastructure, and technology must be overcome to increase Colombia’s Corn production competitively. In late October 2022, Minister of Agriculture Cecilia Lopez urged public and private stakeholders involved in the initiative “Soya Maíz: Proyecto País,” which was part of the national strategy from former President Duque to increase Colombian Corn and Soybean productivity, to redesign the plan to focus mainly on small farmers. According to Minister Lopez, at least 100,000 ha of Corn must be cultivated by small farmers.
In late 2022, MINAG launched an incentives program called Fund for Access to Agricultural Inputs to address high food inflation rates. The idea is to increase agricultural production from small farmers to maintain a good supply in the market and control food prices. This measure will benefit more than 120,000 small producers from 24 agricultural and livestock sectors, including Corn. The program reimburses eligible farmers up to 20 percent of their purchase of inputs such as fertilizers and animal feed.
As a member of the Andean Community of Nations (CAN), Colombia applies the Andean Price Band System (APBS) as a price stabilization tool for a particular group of agricultural products considered sensitive in the CAN economies, including Corn. The CTPA excludes the application of the APBS mechanism to U.S. imports and instead applies a TRQ mechanism with out-of-quota duties.
Other sources: USDA
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