Ecuadorian Corn Production Decline Concerns Animal Feed and Meat Producers

Ecuador is expecting less corn production during the 2022 season and will require an import rise to cover demand. The national demand for corn is 1.6M tons annually, out of which 1.5M are used to produce animal feed, and the rest is used in food production and for household consumption. According to the Ecuadorian Ministry of Agriculture and Livestock, in 2021, Ecuador had 291.7K hectares destined for corn production with an average yield of 5.83 tons per hectare, reaching a production volume of 1.7M tons. The Association of Animal Feed Producers, APPROBAL, disagrees with official government statistics and states that 2021 production only reached 1.35M tons. These claims appear after the Ministry of Agriculture and Livestock imported 151K tons of corn in December 2021 to cover the 132K tons deficit the industry faced. The deficit suggests domestic corn production did not reach 1.7M tons since domestic demand is 1.6M tons.

The Ecuadorian Ministry of Agriculture and Livestock and APROBAL disagree on the 2022 production estimates. According to the Ministry of Agriculture and Livestock, the 2022 corn production in Ecuador will reach 1.68M tons, over 20K tons less than in 2021. On the other hand, APROBAL estimates that during 2022, Ecuadorian corn production will only hit 1.15M tons.

Source: El Universo, Ecuadorian Ministry of Agriculture and Livestock, APROBAL

Ecuadorian corn season starts in late December with planting, and harvest starts the last week of April and lasts until August or September. This year, forecasts indicate the harvest will end in July due to lower supply. Decreased production is attributed to many factors, including low corn seed quality, unfavorable weather and heavy rains, and low fertilizer usage.

In addition to a reduction in the use of fertilizers, producers are complaining about low seed quality that is decreasing the corn yield. Fertilizer usage has declined due to the increased price of urea fertilizer, decreasing from USD 20 per quintal to USD 56 per quintal. Unfavorable weather has also affected corn production. Despite the late start of winter, heavy rains since February have affected corn crops, especially in Manabí, the province that holds the most corn crops in Ecuador.

Decreased production, high demand, and surging production and input costs are fueling an increase in the price of Ecuadorian corn. Currently, the price of Ecuadorian corn stands at USD 19/kg, 22% higher than the minimum sustainable price of USD 15.57/kg. The Russia-Ukraine conflict has increased the prices of other components used for animal feed, for example, soy by about 50% and wheat by about 60%. The price increase on these components makes the demand for corn higher to cover the demand for animal feed. Production and input costs like gas, electricity, and pesticides have increased by up to 40%, affecting the final price of corn.

Local livestock associations are worried because low corn production will prevent the proper inputs in their production lines since 90% of the corn supply needed for animal feed comes from local farms. The consumption of meat has increased by 4% since 2020, increasing the demand for animal feed, therefore increasing corn demand. Low corn production will affect the supply chain of meat and increase the price of animal feed and meat since corn represents about 42% of the final cost of animal feed. Meat production will be affected by low corn production since over 90% of Ecuadorian corn is used to produce animal feed.

The government, animal feed producers, and meat producers expect high corn imports during the second semester of 2022 to alleviate the supply shortage. Currently, the price of a ton of Ecuadorian corn is USD 360, while on average, a ton of imported corn stands at USD 330. Local wholesalers and buyers are looking forward to importing corn to cover demand at a lesser cost, primarily from markets like Thailand, Argentina, and the United States.