Trade dynamics of maize, soybean, and wheat in the Americas: Supply falls short of a steady demand
Maize, soybeans, and wheat remain essential inputs for the agribusiness sector, especially thanks to their protein content used mainly for animal feed. However, the problem for countries like Colombia, Ecuador or Peru lies in their import needs, especially as a protein source for poultry and pig feed, of which these countries are massive consumers.
The world’s six top suppliers, accountable for most of these products’ exports are respectively: the United States, China, Brazil, France, Argentina and Ukraine. In the case of Colombia, Ecuador, and Peru, these products are mostly imported from the US, Argentina and Brazil. However, the decision of the Chinese government to keep high import tariffs on certain American grains (up to 66%), the fallout from the armed conflict in Ukraine and the global decrease in cereals supply, have affected the cost of imports within the region. In addition, cereal production in the American continent has decreased due to the climate effects of the La Niña phenomenon in Brazil and Argentina reducing the availability of these cereals.
During 2022, the maize, wheat and soybean prices hit all-time market highs, reaching their highest value in 10 years. This especially affects countries such as Colombia, Peru, and Ecuador where high inflation rates and the devaluation of the local currency raises costs of living. Altogether these factors further complicate this situation, pushing food inflation in these countries to (even) higher levels, as end-products such as eggs and meat are more costly to produce.
Nevertheless, some signs of the stocks market may indicate the beginning of a downward trend. At the beginning of 2023, Chicago corn and soybean futures have continued to fall due to factors such as: the reduction of imports coming from the US, the USD depreciation against the Euro, and the expected volumes increase in the next Brazilian harvest during 2023.
Even so, this downward trend remains uncertain for the Andean region. The fact that local currencies do not have greater power in international markets makes it difficult to negotiate with large international players. This is concerning since corn, soybeans, and wheat together account for 70% of Colombia's, 93% of Peru's, and 96% Ecuador's food imports. In addition to this, some barriers remain to be overcome to foster domestic production: low competitiveness in comparison to other countries (for example, in Ecuador it is 35% more expensive to produce locally), as well as the shortage of fertilizers (also imported) that will hinder the increase of production volumes and productivity of new crops.
According to the FAO, a global rise of 70% in food production is needed by 2050 compared to 2013. This increase may bring along some challenges such as: the expansion of the agricultural frontier; land use competition between biofuel, animal feed and human food crops; and reducing the agriculture´s carbon footprint. Protein sources availability is increasingly becoming an issue of global importance, where academy and governments seek new alternatives capable of satisfying the market needs. Recent studies have shown the importance of the protein transition to other sustainable sources, such as insects for animal feed.
For a novel, circular and sustainable approach to feed production, insects offer interesting opportunities as various species can be reared from organic left-over streams. Recently, an insect production industry for feed has been initiated and it is expected to grow exponentially in the near future. Moreover, insects rearing for feed also presents important prospects for improving smallholder farmers’ livelihoods, while developing inclusive business, and reducing production costs.
The LNV office is working on identifying business leads for alternative proteins in the region to initiate a protein transition through insect production for animal feed. In Colombia, LAN Andes has supported projects conducted by Wageningen University & Research focused on identifying the challenges and needs around the production of black soldier flies for feed in the poultry sector (which can be found here) as well as opportunities to alleviate poverty using insects as feed in aquaculture (available in this link). Now, LAN Andes is exploring opportunities for other livestock sectors and other countries within the region.
If you want to delve more into our initiatives in this topic, you can contact us via email: BOG-LNV@minbuza.nl