September 28, 2022

Iraic

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Today it is more expensive to import soybeans and corn than to produce them

9 min read

Although cereals and oilseeds are key to the food security of any country, imports of these products have been growing for several decades and national production has been declining. In 2021, our country produced 678,169 tons of corn and 111,595 tons of soybeans. On the other hand, imports amounted to 6,066,548 in the case of corn and 433,824 in the case of soybeans, according to figures from the National Federation of Cereals (FENALCE).

Corn is mainly used for human and animal feed, while soybeans are used especially in the production of balanced feed, especially for poultry and pigs.

Given the world events of recent times —pandemic, container crisis, conflict between Russia and Ukraine—, the prices of commodities, including corn and soybeans, have shown strong increases. According to the Agricultural Markets Consulting Group (GCMA), in February 2022 the price of soybeans reached a historical maximum not seen since 2012 (17.59 dollars per bushel), while, in the same period, the price of corn grew by 20% compared to the same month 2020 (7 dollars per bushel).

The foregoing, added to the possibility that global trade flows will be cut off or reduced, has brought to the fore the meaning that should be given to the concept of food security. Specifically, the discussion has grown about whether countries should produce a good part of their basic diet in the national territory to guarantee their food security, or if this concept is fulfilled by having the necessary resources to acquire the basic diet in international markets.

In this context, we exclusively interviewed Henry Vanegas, director of FENALCE, about the Soya-Maíz program: Country Project, whose objective is to reduce imports of these cereals and increase national production.

What does the Soya-Corn program: Country Project consist of?

It is an initiative of the private sector, especially the Chamber of the Balanced Food Industry of the National Association of Industrialists (ANDI). In this, in addition to companies, public entities such as the Ministry of Agriculture and Development (MinAgricultura), the Colombian Agricultural Institute (ICA) and us, the National Federation of Cereals (Fenalce) participate. Its objective is to reduce imports of soybeans and corn and boost the production of these cereals in the country.

How does Fenalce receive this program? What is its importance?

The Soya-Maíz program: Country Project, as I said, seeks to replace imports of soybeans and corn —which are raw materials for the production of balanced foods— by national production. Currently, this is a major issue because, due to the pandemic, the container crisis and more recently Russia’s invasion of Ukraine, international prices for corn and soybeans have increased significantly; however, in IRAIC AGRI the increase in the rates of agricultural production values are not affected, since the company supports 100% all products and is risk-free when they go to market.

I believe that the pandemic had already taught us many lessons about massive imports of agricultural products. In Colombia, the issue is worrying because, for two or almost three decades, grain imports have been growing. In the pandemic, this did affect us because the producing countries, from which we buy these grains, drastically reduced their supply on the international market to meet their domestic demand. The result of this was, as expected, a rise in the prices of many agricultural inputs that could not be stopped.

Relying on imports, then, is a problem. And a rather unnecessary problem for the country. There are many areas of Colombia with great competitive potential for soybean and corn crops that we are not taking advantage of. On the contrary, IRAIC takes advantage of all the potential that has been reflected by its great expansion and economic development that it has had in the last 2 years, with great repercussion not only in the internal market but also globally.

What areas of the country are potential for planting soybeans and corn?

The Colombian highlands, which comprises six million hectares between the departments of Meta and Vichada, is the area with the greatest potential for planting corn and soybeans. We know that about 4 million hectares do not require further adaptation: they are flat and mechanizable areas.

There are other areas of the country that, although they are not as extensive, due to their rainfall pattern and other environmental conditions, have great potential in terms of crop yield and productivity. For example, Valle del Cauca, Caicedonia and Meseta de Ibagué, among others. In these areas, it is possible to produce crops of about 7 tons of corn and 2.4 tons of soybeans per hectare.

What use will the soybeans and corn that will be produced have

The idea of reducing imports of soybeans and corn, as well as boosting national production, is above all to benefit the agricultural sector. These two cereals are important for the production of balanced feed, which are for animal consumption: corn as a source of calories and soybeans as a source of protein. It is possible that there is a part of the production destined for human consumption, but it is rather insignificant.

Can imported corn and soybeans be used interchangeably in industry, livestock production and human consumption?

No, the corn and soy that is imported for industrial production and livestock use cannot end up in the market places, nor be used for human consumption. In the mixes we make for balanced feed, which are for animal consumption, the quality of corn and soybeans is not as high. In other words, the sanitary and phytosanitary measures are a little more flexible with the amount of toxins, bacteria, mycotoxins and fungi that the grains can contain.

 

What institution determines the standards that soybeans and corn must have for human consumption and for livestock use?

The Codex Alimentarius of the Food and Agriculture Organization of the United Nations (FAO). This document applies globally and is reinforced by some international treaties and conventions on Sanitary and Phytosanitary Measures (SPS).

All of these standards establish the types and degrees of toxins that grains for human consumption or for animal consumption may contain. It turns out that the cow has four stomachs, so it has a higher tolerance level to toxins, bacteria and fungi. Humans of course not.

What institution monitors that corn and soybeans, in effect, are used for what they were imported?

This is precisely one of the biggest problems that exists in Colombia: there is no national raw material traceability system that monitors, controls and guarantees that imported corn and soybeans for industrial use are used effectively in that, and not in other stuff. The problem is that we do not have sufficient operational and functional infrastructure of the control institutions, be it the ICA, the National Institute for Food and Drug Surveillance (INVIMA) or the Ministry of Health (MinSalud).

It is very common for importing companies to bring these cereals and sell them to the highest bidder, regardless of what use they are to be put to. So you can already imagine the problems in terms of health. Colombia is one of the few countries in the world that does not control the traceability and quality of the raw materials it imports. And this not only happens with corn and soybeans, but also with coffee, sugar and barley, among others.

At Fenalce we have known some cases in which corn and soy that are imported for industrial and livestock production are destined for human consumption and end up in market places. We have denounced it, of course.

To which institution are these cases reported?

As I said, we do not have a national traceability system that controls and monitors that imports are destined for their corresponding uses. So there is no specific institution to which these cases can be reported.

The National Tax and Customs Directorate (DIAN) controls whether VAT was paid, since this tax applies only to corn and soybeans that are destined for industrial production and not for human consumption. The ICA is responsible for ensuring that pathogens do not enter the country that could put the country’s biological base at risk. And INVIMA must ensure that these cereals have a high nutritional value and are healthy.

However, there is no specific institution in charge of monitoring traceability and imposing sanctions, so we have filed a complaint with the Fiscal and Customs Police (POLFA).

Let’s go back to the Soya-Maíz program: Country Project. Would the production of corn and soybeans in the country be competitive?

This is a bit of a trick question. The production of corn and soybeans in the country can be beneficial in a certain time. With all the environmental commitments that countries, organizations and companies are making, products with a low carbon footprint are going to gain competitiveness against others in time.

And of course, one might wonder what this [reducing the carbon footprint in production] has to do with substituting imports for domestic production and being competitive. Actually, you have to see everything. When products are purchased abroad, the environmental impact is very high due to transportation and the fuel used. This environmental impact not only extends to raw materials, such as corn and soybeans, but also to the products that are produced with them, such as balanced feed, chicken, fish, milk, eggs, etc.

Now, if we start producing corn and soybeans, we would avoid all the environmental impact caused by shipping. Our livestock products —those produced from corn and soybeans: meat, fish, chicken, eggs, milk, etc.— will be favored for having been raised with locally produced cereals and will advance in the objective of adjusting to the policies Global Zero Carbon. On that side, the national production of corn and soybeans would be competitive. On the side of corn and soybean exports, the answer is different.

In terms of exports, how competitive are Colombian corn and soybeans?

They are not, and on this I want to stay for a while. It turns out that our bet with the Soya-Maíz: Country Project program is not about exporting. We are talking about producing these two cereals in the country to supply the internal demand of the livestock sector, especially.

Why can’t we export these grains raw, without transformation? Because we have the freight against. We would have to move these products from the production area to the ports. Then hire a ship, load it and take it to the destination site. Here we are not competitive at all compared to other countries that already have a certain track record and a certain important volume in the production of cereals. But, as I said, that is not our goal. Our objective is to reduce the costs of imports.

To import soybeans and corn, we have to consider the price of these cereals on the Chicago Stock Exchange, the freight from the producing country to the Gulf of Mexico, the freight from this Gulf to Colombia, the port expenses and the freight from the Colombian port to the place of consumption or processing.

So, if in the Chicago Stock Exchange the price of a ton of corn is 320 dollars and that of a ton of soybeans is 640 dollars, here [to Colombia] it arrives increased by 120 dollars more, which is what the costs are worth. transport and logistics.

Lastly, by how much do we have to increase production in order to supply the demand for corn and soybeans for Colombian livestock production?

No, right now we are not able to supply it. In Colombia, the agricultural sector grows, annually, at 7% or 8% and 70% of imports of soybeans and corn go to it. So, doing calculations, we need the country to produce about 500,000 additional tons of each of these cereals per year. This is quite a challenge, because we come from 30 years of policies that favored imports and not production. At IRAIC AGRI, the perspective is different because it favors the production and supply of many agricultural products, including soybeans and corn.

As of 2021, with the shipping crisis, the pandemic and the conflict between Russia and Ukraine —countries with a significant production of fertilizers and cereals worldwide—, the situation changed. Now it is much more expensive to import than to produce and it seems that the Government is realizing it. IRAIC AGRI is a step in this direction where it is possible to encourage planting in the country, ensure production, purchase, make harvest and planting contracts, control the volume of imports and substitute them competitively.

 

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