October 2000

FEATURE COMMODITY ARTICLE

Central America and Northern South America Switch to Palm Oil

The humid tropical countries of Central America and Northern South America have shown a substantial shift over the last ten years in vegetable oil production, to palm oil and palm kernel from cottonseed and soybeans. Additionally, a review of production using available information from Guatemala, El Salvador, Honduras, Nicaragua, Costa Rica, Panama, Guyana, Colombia, Ecuador and Peru shows an increase in overall output late in the decade. The countries of Belize, Panama, Surinam, and the overseas district of French Guiana have little if any oilseed production.

Total oilseed-plus-palm-oil production in the Central America/Northern South America region increased an estimated 19 percent from 1990/91 to an estimated 1.95 million metric tons in 2000/01 (fig. 1). The increase has come almost entirely from increased production of oil palm, with palm oil production increasing from 542,000 tons to a forecast 1.20 million tons over the decade (fig. 2). Palm kernel production increased during the period from 89,000 tons to a forecast 252,000 tons. Peanut production, though small, has also increased in the region in recent years and is forecast to reach 106,000 tons in marketing year 2000/01 (fig. 3). Cottonseed production in the region has seen a dramatic decline over the last decade, and output is estimated to have dropped from 614,000 tons in 1990/91 to 164,000 tons in 2000/01. Soybean production has also fallen in the region, from an estimated 342,000 tons to 199,000 tons over the course of the decade.

Colombia is the largest producer of oilseeds (plus palm oil) in the region (fig. 4). Output is forecast at 764,000 tons in 2000/01. Output of palm oil has risen 104 percent from 1990/91 to an estimated 510,000 tons in 2000/01. Soybean output in Colombia started the decade at 194,000 tons but dropped steadily and is forecast to be 75,000 tons in 2000/01. The largest producer of cottonseed, Colombia has seen a decline in cottonseed output from 285,000 tons to 68,000 tons over the decade.

Peru is forecast to produce 105,000 tons of oilseeds (plus palm oil) in 2000/01. In addition to vegetable oilseeds, Peru is forecast to produce 150,000 tons of fish oil and 1.8 million tons of fishmeal.

In Ecuador, palm oil production began in the 1960's where it now employs 2,100 producers. Production continues to increase with output nearly doubling from 124,000 tons in 1990/91 to a forecast 245,000 tons in 2000/01. Ecuador is reportedly marketing much of its palm oil to Mexico.

Guatemala is the second largest oilseeds-plus-palm-oil producer in the region, forecast to produce 193,000 tons this marketing year. It has increased its production of palm oil from almost zero at the beginning of the decade to a forecast 108,000 tons for 2000/01. Guatemala produces about 50,000 tons of soybeans annually.

In Nicaragua, peanut production is forecast to increase in 2000/01 to 72,000 tons from 68,000 tons in 1999/2000 due to higher area and yield. Dryness before the season resulted in abandonment of corn area and replanting to peanuts, and then the timing of rainfall was favorable for peanut crop development. Cottonseed production had been above 50 tons per year, but dropped to less than 5 tons by 1992. Soybean output increased replacing the cottonseed, but soybean output has leveled off at around the 20,000 to 30,000 ton level.

The regional trend to palm oil and away from soybeans and cottonseed may continue. On July 31, Argentina signed an agreement of Economic Complementation with members of the Andean Community of Nations, (CAN; Peru, Colombia, Ecuador, and Venezuela). The agreement will give an immediate tariff reduction for imports of soybean meal and oil coming into CAN countries from Argentina, and is another step toward creating a South America wide free trade area. Thus it will likely reduce any incentives there may be to expand soybean production in CAN countries. Brazil has been expanding cotton production in the Cerrado region of the Center-West where it is able to produce cotton with high yields and consistent quality because of the climate there. With infrastructural improvements, and increasing international trade, there may be less need for Central American and Northern South American cotton resulting in less regional cottonseed produced.

The market for soybeans and cottonseed produced in Central America/Northern South America is largely internal as the region is a net importer of those commodities. The region exports essentially all palm oil production to Mexico and Europe as local consumers still have not developed a taste for palm oil.

Go to PECAD's report on recent field travel in Honduras and Nicaragua.

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