Peru's Gross Domestic Product (GDP) is expected to grow between five and seven percent per year for the next three years, according to USDA.

Corn and Peru's Poultry Industry

Peru's 44 million chicken-per-month poultry market is the major user of yellow corn, with corn accounting for about 68 per cent of the chicken feed. Yellow corn consumption is forecast at 3.5 million metric tons (MMT) in marketing year (MY) 2013.

Yellow corn production in Peru has been increasing for the past five years. Peru's corn production in Peru is forecast at 1.56MMT for MY2013 (October/September), a two per cent increase compared to the previous year. Harvested area in MY2012 was 296,000 hectares and 209,000 hectares for yellow and starchy corn, respectively.

Higher prices and strong demand, mainly from the poultry industry, are the driving force of this steady increased production. Yellow corn production in Peru has been increasing for the past five years.

There are about 20 poultry operations in Peru, which control around 1,000 farms. The largest producer, San Fernando, controls about 35 per cent of the market. Total market size for calendar year (CY) 2012 is estimated at $1.65 billion and is expected to increase two per cent in CY2013.

Informal producers - producers who are not legally established and do not pay taxes - are a major problem for the poultry sector in Peru. These producers, which account for about 25 per cent of the poultry meat industry, are not able to import corn due the lack of appropriate registration with the tax authority and therefore rely solely on local corn. Informal producers are constantly undermining the industry profitability with their lower prices, which result from not paying taxes.

Most feed producers and large poultry operations prefer to use Argentine or Peruvian corn over US corn. They claim that Argentine and Peruvian corn is harder and comes with fewer broken kernels. The average price of local corn was around $296 per metric ton (MT) in CY2011, a reduction of nine per cent from the previous year.

There are several types of corn grown in Peru: the most important varieties are starchy corn (with production estimated at 279,000MT in CY2012), which is used directly for human consumption, and yellow corn (with production estimated at 1.4MMT in CY2012), which is primarily used in the animal feed industry.

Peru imported 1.84MMT of yellow corn from all sources in CY2012, a reduction 3.83 per cent compared to CY2011.

With 1.26MMT, Argentina continued to be the lead corn supplier to Peru in CY2012. However, Argentina's corn exports to Peru decreased by 18 per cent, reducing its market share 80 per cent to 68 per cent.

Paraguayan corn exports in CY2012 were 318,040MT increasing 103 per cent compared to the previous year.

US corn exports to Peru were almost nil in CY2012 due to better prices from other sources and limited production due to the severe drought in the United States.

Corn is imported into Peru duty-free. Once Peru unilaterally eliminated import duties for corn imports, the United States lost the trade preference granted under the US-Peru Trade Promotion Agreement (TPA). The TPA established a tariff-free quota (TRQ) of 500,000MT, with annual increases of six per cent and full duty free access in 12 years.

Peru imported dried distiller grain with solubles (DDGS) for the first time in late 2010. During 2011 and 2012, large poultry and dairy operations continued testing DDGS in their feed. USDA believes that alternative corn products such as DDGS have an interesting potential and should be promoted in this market. USDA estimates that the DDGS market in Peru should be at least 100,000MT per year.

Soybean Meal Use by Poultry Industry

A very dynamic poultry industry will continue driving soybean imports and consumption. Peru's poultry sector, with its 44 million broilers per month, is the main driver of this demand.

Soybean meal imports into Peru are forecast at 1.056MMT in MY2013, a slight increase of 44,000MT compared to the previous year.

With an estimated per-capita consumption of 34kg in CY2012, poultry meat is a staple product in the Peruvian diet. Peru's 528 million chicken-per-year poultry market is the major user of soybean meal - the meal constitutes about 12 per cent of broiler rations. Poultry meat continues to be one the cheapest sources of protein in the Peruvian diet, total consumption was 930,000MT in CY2012.

Total soybean meal imports in CY2012 were 1.056MMT. Bolivia was the leading soybean meal exporter to Peru in CY 2012 with 57 per cent of the market share.

US soy exports increased significantly, from 20,659MT in 2011 to 79,619MT in 2012. Since Peru eliminated import duties for corn, the United States lost the trade preference granted under the US-Peru TRQ, which significantly reduced corn shipments from the United States. This was a disincentive for importing US soybean meal since traders usually combine corn and soybean meal in a vessel.

Soybean meal imports from all origins into Peru are duty-free.

Soybean oil imports are forecast at 450,000MT in CY2013, a three per cent increase compared to the previous year. Imports in CY 2012 were 421,819MT, of which 76 per cent was imported from Argentina.

The US soybean oil exports represented four per cent of the Peruvian market share. Soybean oil consumption in CY2012 was 415,000MT and is expected to continue growing as Peru's economy expands.

Fishmeal and Fish Oil Supply and Demand

Fishmeal production for 2013 is estimated at 1MMT, a 26 per cent fall compared to the previous year, as a result of over-fishing. Total fish catch in CY2013 is also expected to drop significantly to 5MMT. A reduced biomass as a result of over-fishing is the cause of a lower production and exports.

Peru's fishing industry is tightly controlled by the government. In an effort to reduce over-fishing and enhance the sustainability of Peruvian fisheries, the government has established fishing quotas. At the beginning, it was 8.5MMT per year but it was reduced to 5MMT.

The single most important reason for the biomass reduction is that the government allows small boats of up to 10MT to fish year round within five miles from the coast. This fish, which is supposed to be exclusively for direct human consumption, ends up in fishmeal plants. Though the five-mile area is not important in terms of total fish presence, it is where most breeding occurs.

There are 90 fishmeal plants currently working in Peru. Total processing capacity is 7,500MT per hour - about four times more than they are allowed to catch.

International fishmeal prices in 2012 remained high. The price of prime meal averaged $1,330 per MT compared to $700 a few years ago.

Consumption for 2012 was forecast at about 15,000MT. Local consumption is expected to remain low and even decrease due to high international prices and increased demand from foreign aquaculture industries.

Fishmeal exports totalled $1.8 billion in 2012 at an average export price of $1,330 per MT. Fishmeal is Peru's fourth largest export after gold, copper and oil.

Peru's fishmeal exports for 2013 are forecast at 980,000MT. China continued to be the leading export market for Peruvian fishmeal with 50 per cent of the market share in 2012. Other important markets are Germany (14 per cent) and Japan (nine per cent).

Fish oil production in CY2012 was 305,000MT. USDA forecasts production at 300,000MT in CY2013. Oil extraction is directly related to water temperatures and can vary significantly from year to year. Under normal weather conditions, the oil extraction rate should be around eight to 10 per cent but can drop to as low as one per cent in unusually warm waters.

Exports for CY2012 are forecast at 290,000MT. In 2012, Denmark, Belgium and Chile were the major importers of Peruvian fish oil, accounting for 60 per cent of total exports.

Consumption in CY2012 is forecast at 20,000MT. Domestic consumption will remain low due to increasing fish oil demand in other countries, especially as a feed ingredient for a growing aquaculture industry.

The data for this report was taken from the following two reports from US Department of Agriculture, Global Agricultural Information Network (USDA GAIN):

• Peru Grain and Feed Annual 2013 (20 February 2013)
• Peru Oilseeds and Products Annual 2013 (26 February 2013)

Further Reading Go to our previous news item on this story by clicking here.

March 2013