Wheat production is marginal in Colombia and is expected to maintain its level of 33,000 tons in marketing years 2009 and 2010. Low quality wheat and limited areas to expand production will amount to reductions in Colombia’s wheat production in the future, unless the government expands its incentive programs. Any further reduction in Colombian wheat production will mean an increase in wheat imports. The United States lost market share due to an import duty reduction for imports from Mercosur countries that includes Argentina, which enjoyed a duty preference of 100 percent, so imports from Mercosur countries have paid no import duty since January 2009. Under the Andean Community price band system, the wheat import duty was 15 percent during 2009 for imports from the United States which caused US wheat to lose price competitiveness.
Wheat imports continue to supply over 90 percent of Colombia’s milling needs. In 2009, demand for wheat-based products is expected to fall due to 1.29 million metric tons. Of this amount, prospects for the United States to capture a significant percentage of the market would depend on the ability of Mercosur competitors to supply the market. However, Canada is the next largest supplier and Colombia signed a Free Trade Agreement with Canada that will eliminate the import duty on all Canadian wheat upon implementation. Implementation of the agreement is still pending approval from Canadian congress. Imports of wheat from Argentina are on the rise due to the duty advantage.
The U.S. market share could benefit from new investments locally in technology and additional training in grain handling. Colombia’s import duty for wheat under the price band system was zero percent in 2008 due to high world prices. However, in 2009 price trend changes and U.S. wheat began to pay a 15 percent duty. The CTPA between Colombia and the United States, once implemented, will result in an immediate and permanent zero duty for imports of U.S. wheat. MERCOSUR wheat will still have to pay the price ban duty giving U.S. wheat a competitive advantage over Argentina. Canadian wheat, however, will also enter Colombia duty free if their agreement is ratified.
There has been a restructuring of the wheat milling industry in Colombia since the early 1990’s after the dismantling of the Government of Colombia’s agency in charge of agricultural imports, the Instituo de Mercadeo Agropecuario (IDEMA). The increase in wheat imports is the result of Colombia’s consolidation of mills resulting in more efficient flour production. While bread consumption in Colombia remains low, there has been a steady increase in Colombian pasta consumption creating increased demand for Durum wheat. In addition, this trend could open opportunities for U.S. direct investment in pasta plants.