Agriculture and food in Chile

Agriculture in Chile

Chile is located in the far SW of South America, occupying an area of 756 098 square km, which extends for 4329 km from 17 º 30’ to 56 º 30’. Chile the longest country in the world. But it is also one of the narrowest. The climate of Chile comprises a wide range of weather conditions across a large geographic scale, extending across 38 degrees in latitude, making generalizations difficult. This layout creates a variety of climates, ranging from desert at the North end to steppes in the South. In the Central portion, between latitudes 27º and 43 º S, Mediterranean and temperate climates predominate. Precipitation occurs mainly in the winter, increasing toward the South and decreasing from the coast to the mountain range. Chile’s length enables long production windows counter-seasonal to the Northern Hemisphere, allowing producers to receive crop price premiums in the early and late seasons when supply is low and prices are high. Bordered by the Pacific Ocean, Andes Mountains, Atacama Desert and Antarctica, the location makes it difficult for pests to enter the country. While water is scarcer in some of the northern climates, it is more abundant in the southern portions of the country, fed by runoff from the Andes and significant levels of rain. Of the country’s 76 million hectares, 2.1 million are cultivated, with 1.3 million hectares used for annual and permanent crops, and the balance for forage or fallow. Around 19,12 million people live in Chile. Of this total, 87 % of the population is urban and only 13% rural. There is also a tendency for the rural population to continue to decline as the country develops. Agricultural activity is labour-intensive, and the sector that generates most employment in the country. Agriculture comprises between 3% - 4% of Chilean GDP, and 24% of exports, making it the country’s second largest source of exports after copper. Including food and beverage processing, agriculture accounts for 8% of the economy. Chile is the largest Southern Hemisphere fruit exporter, and fruits comprise 38% of farm production, followed by livestock at 21%.

Grapes – wine production

Grapes - the largest permanent crop in Chile. Collectively, wine grapes and table grapes account for 42% of Chile’s permanent crop area. One of Chile’s first major export fruits, grapes were aggressively developed in the 1980s and 1990s. Chile is a country with a great diversity of climates and soils allowing the development of a highly diversified viticulture. At the aggregate level, soils range from a basic in the north to more acid pH in the south; precipitation also increases from north to south, and thermal fluctuations are smoothed from east to west. Consequently, the situation described allows the expression of different varieties of grapes to reach the excellent potential if the variety- territory relationship is well chosen. Thus, the coastal areas of Chile are more appropriated for white grape varieties, such as Sauvignon Blanc and Chardonnay, and the inner areas favor red varieties, such as Cabernet Sauvignon. Areas with vines intended for winemaking in the country are located between the regions of Atacama and Los Lagos, including the Metropolitan Region. In Chile, wine production is based mainly on a set of grape varieties of French origin and a local variety called Country (Pais), which currently accounts for about 5% of the total area of the Chilean vineyard. Chile is a major player in the wine world trade occupying the fifth place on worldwide exports with more than 1800 million dollars. The domestic market accounts for approximately 20% of the total selling, and the rest (80%) is gone to exports. The main international markets are the UK, the USA, China, Japan and Brazil.

Annual crops

The most important annual crops are wheat, oats, corn, rapes, and rice, which collectively account for 11.1 %of the total agriculture cultivated area. Wheat production in Chile ranges from the O’Higgins region to Los Lagos region. The size of wheat farms vary from region to region. In the central regions of O’Higgins and Maule, wheat producers are small (in average planted area) compared to the ones in the southern regions. In 2020, maize production for Chile was 685 thousand tonnes. Though Chile maize production fluctuated substantially in recent years, it tended to increase through 1971 - 2020 period ending at 685 thousand tonnes in 2020.

Vegetables

Root vegetables of note produced in Chile include potatoes, sugar beets and onions. Sugar beets supply crystalized sugar, an alternative to sugarcane. Other important vegetables grown are green peas, garlic, corn, onions, cole crops, carrots and broad beans. Also, tomatoes, squashes, cucumbers, pumpkins, and beans are grown outdoors.

Fruits

Chile’s geography and climate offer distinct advantages for agricultural production, as it is one of the world’s few regions with a Mediterranean climate ideal for high-value fruit and tree nut production. Chile is the largest Southern Hemisphere exporter of fruit and walnuts and competes with Argentina, Australia, New Zealand, Peru and South Africa in fruit and tree nut export markets. Five crops comprise 55% of fruit and tree nut area: grapes (15%), walnuts (12%), apples (11%), cherries (9%), and avocados (9%).

Cherries

Chile is the largest cherry exporter and its primary competitors in the global fresh cherry market are the U.S. and Turkey. Chile’s production, however, has minimal overlap with that from Turkey and the U.S., and cherries are a perishable crop, with a two-month shelf life, with the result that Chile has a 90% share of Southern Hemisphere cherry exports. In the last decade, Chile’s share of the export market has more than doubled. Cherries are among the most profitable crops in Chile, with gross profit margins on the farm estimated at about 50%-60%, with higher margins for early and late season varietal production.

Apples

Chile’s apple production has remained largely stable in recent years, and in 2019, Chile produced 1.1 million MT, 1.4% of global production. Global apple exports have grown from 3.1 million MT in 2001 to 5.9 million MT in 2019 (CAGR 3.6%). The EU and China are the two largest exporters of fresh apples. Chile is the world’s fourth largest fresh apple exporter (and the largest in the Southern Hemisphere), behind the EU, China and the U.S. In 2019, Chile exported 650,000 MT of fresh apples, 59% of its apple production and 11% of global exports. Apple profitability varies widely by varietal, and commodity apples face margins that can be only half that of their patented counterparts. Leading producers of patented varieties can receive prices 30-50% higher than commodity apples. The combination of newer varieties, such as Ambrosia and Sunrise Magic, reasonable land and water costs, and a variety of growing regions enable Chile to serve as the largest apple exporter in the Southern Hemispher

Blueberries

Chile’s blueberry production has expanded rapidly over the past two decades in response to increasing year-round demand for blueberries in the U.S., Europe and Asia. The Southernportion of Chile is especially well-poised to continue to expand, as Northern Chile faces increasing competition from Peru’s growing blueberry sector.

Citrus

Chile’s citrus area has grown at a 9.6% CAGR from 2000 to 2019. While Chile is a minor citrus exporter, it plays a major role among Southern Hemisphere producers and is a major supplier to the U.S., during the Northern Hemisphere citrus off-season, and the opening of Asian markets provides further avenues for growth. Chile’s top citrus producers are clustered in the Coquimbo region where growing conditions are favourable for early-season mandarin varieties, which are in strong demand in export markets. Given the water available in key citrus regions, having multiple water sources and efficient irrigation systems are important for managing water risk and cost.

Avocados

Chile’s avocado production has steadily increased; however, planted area in recent years has been curtailed by the crop’s intensive water needs in drought-prone regions. Chile’s avocado yields are among the highest globally. Chile’s top avocado growers are in the Valparaiso region where the climate is most favourable for avocado production and closer to the port. Most Chilean avocados are exported to the EU, where demand is growing. Key factors for profitability include multiple water sources and efficient irrigation technology.

Tree Nuts

Chilean tree nut area has grown rapidly, increasing at a 10.4% CAGR 2000 to 2019. Walnuts are the leading tree nut in the Central and Northern regions, while hazelnuts dominate growth in the Central and South regions. Walnuts are the leading tree nut in Chile by area, production volume and exports. Compared to fruits, tree nut production typically has lower capex needs and lower production costs (mainly due to mechanical harvesting). Capex expenditures per hectare are generally lower than most tree fruits and are led by irrigation and orchard infrastructure.

Livestock

In 2018 livestock production was estimated at USD 2 452 million with the greatest volume coming from poultry. Chile is the 6th biggest pig meat exporter worldwide. According to the Chilean Ministry for Agriculture, the production of pig meat is currently the second most important meat in quantity in Chile. In 2018, Chile slaughtered 5 million pigs and produced 520,858 tonnes of pig meat. 90% of Chilean pig meat production is characterised by a vertical integration system. In 2019 there were 23 milk production plants and nearly 119 small- and medium-sized cheese farms. The annual estimated production was 389 million litres of fluid milk and 191 tonnes of cheese and powdered milk, among other dairy products

Apiculture

Chile’s national apiculture industry has grown over the last ten years with an estimated 985 000 beehives located on 6 200 plots. The country ́s annual yield in honey fluctuates from 7 000 to 11 000 tonnes per year, most of which is exported to the European Union.

Fisheries and aquaculture

Chile occupies an important place in world fisheries. In 2018, country produced 3.7 million tonnes of fish (including molluscs and crustaceans), with a value of USD 11544.1 million. 91% of this value came from aquaculture and 9% from fisheries (that is, the capture of wild resources). Most of Chile's fishery landings are small pelagic species (sardines, anchovy, and jack mackerel) which are primarily reduced to fishmeal and oil. Aquaculture, with particular reference to salmon farming, has become a major contributor to Chile’s GDP. The Chilean salmon aquaculture industry is the now second largest export sector in the country and the world’s second largest salmon producer after Norway. The Chilean aquaculture sector has intensified enormously since the 1980s and is now export-oriented. Five species accounts together for more than 90% of production by volume and value of total Chilean aquaculture exports: Atlantic salmon (Salmo salar), Pacific salmon (Oncorhynchus kisutch), rainbow trout (Onchorynchus mykiss), Chilean blue mussel (Mytilus chilensis) and Gracilaria seaweed (Gracilaria spp). Chile followed international guidelines, operating primarily on the basis of introduced species. Mass introductions were carried out in the 19-th and early 20-th centuries, especially of rainbow trout on all continents with the exception of Antarctica, with almost no considerations for the environment. This species, which is native to the northern hemisphere like other salmonid species, was introduced in virtually all the hydrographic sources capable of maintaining it. In South America, it lives as a naturalized population from the Venezuelan Andes to the southern areas of Argentina and Chile.