Agricuture in Chile

Part
01
of eight
Part
01

Agricuture in Chile

Four federal and local government investments made in the agriculture sector in Chile include funding four development centers for functional and specialty ingredients, an investment in modernizing the equipment and production methods in La Araucania, funding several types of initiatives of small farmers in Valle de Itata, as well as improving irrigation in Magallanes.

Findings

Development Centers for Functional and Specialty Ingredients

  • In 2017, it was announced that the Ministries of Agriculture and Economy, financed by the Strategic Investment Fund of the Ministry of Economy, will invest in "territorial centers that serve as a basis for the development of a functional ingredients and specialty additives industry of natural origin in Chile."
  • The investment is 3.6 billion.
  • The government aims to create four development centers within three years to add value to agriculture-related exports, as well as develop innovations and packaging methods to expand to new markets.

Investment in an Underdeveloped Region

  • In 2020, the Ministry of Agriculture and the government of La Araucania invested $470 million Chilean Pesos ($574,706) in developing the agricultural sector in La Araucania, which is considered an underdeveloped region.
  • The Ministry of Agriculture contributed 233 million Chilean Pesos ($284,907) out of the total amount.
  • The investment is supposed to help small farmers from the region lower the production costs and decrease the time needed to do their job with modernized equipment and methods. It has already provided 157 farmers with new equipment and projects related to the infrastructure of production.


Investment in Valle de Itata

  • In 2019, the regional government of Nuble signed an agreement with the Ministry of Agriculture to invest 300 million Chilean Pesos ($366,596) in the development of several aspects of agriculture in Valle de Itata, especially those connected with real assets.
  • The investment was to help 200 small farmers in Valle de Itata invest in diversifying their production by building greenhouses to produce vegetables, plant orchards, build warehouses and sheds, improve the genetics of cattle, goats, and sheep, as well as for projects related to irrigation and beekeeping.
  • The overarching aim of the initiative is to help local farmers to improve their production and life conditions.

Irrigation in Magallanes

  • In 2017, the Magallanes region's agriculture got its largest irrigation-related investment to date. The Ministry of Agriculture allocated 1.3 billion Chilean Pesos ($1.6 million) to improve agriculture-related water management in the region.
  • The investment was supposed to fund "wells, water wheels, and ponds, drip irrigation systems, sprinklers, photovoltaic systems, wind or hydraulic energy, as well as the installation of biofilters, ultraviolet devices and other elements aimed at reducing water pollution."
  • According to the local director of the Ministry of Agriculture, the investment grew 43 times compared to previous years.

Research Strategy

During our research, we only found information on one investment in English-language sources. To compile the list of 3-4 investments, we referred to the website of the Chilean Ministry of Agriculture. The "News" section of the website includes a subsection on investments, from which we chose the other three investments. Nearly all investments we identified are regional and relatively small. Please note that we assumed that the amounts are provided in Chilean Pesos, because even though they were preceded by "$," multiple news articles later clarified that the sum was in pesos. We converted the currencies using XE Converter.


Part
02
of eight
Part
02

Agricuture in Chile: Top Agricultural Products

Chile's top 7 most valuable agricultural exports in 2019 include fish fillets and pieces; wine; whole fish (frozen); apricots, cherries, peaches, nectarines, plums; grapes (fresh or dried); whole fish (fresh); and sawn wood.

Chile's Top Agricultural Products

  • Based on data presented by World's Top Exports, Chile's most valuable agricultural exports in 2019 are as follows:

Supporting Information

  • According to Research and Markets, Chile is a leading producer and exporter of agricultural commodities like "grapes, cherries, apples, berries, walnuts, poultry meat, and salmon."
  • Similarly, according to SelectUSA, "wine, fresh fruit, dairy, meat, and fishery products" are Chile's main agricultural exports. The country is the "world's largest exporter of fresh table grapes, blueberries, prunes, dehydrated apples, and frozen salmon fillets."

Research Strategy

In identifying the top 7 agricultural products in Chile, we found World's Top Exports' precompiled list of Chile's top exports in 2019, as derived from data provided by the International Trade Centre. We then selected the top agricultural products based on export value.
Part
03
of eight
Part
03

Agricuture in Chile: Threats

Chile’s agriculture industry is one of the most valued sectors. Further, Chile is one of the world’s biggest food exporters. However, the country has faced some challenges in the recent past that have threatened the sector. Some of these challenges include machinery and equipment, climate change, salmon farming controversies, and water crisis.

Machinery and Equipment Challenges

Climate Change

  • The Chilean government continues to worry about the climate change effects that continue to wreck farms in Chile, due to prolonged drought periods. Experts state that climate change, mainly due to land over-exploitation, can be blamed for the drought. As a result, many farmers have been forced out of business.
  • The agriculture planted area in Chile, summed to around 621,000 hectares in the 2018/19 crop year, a decrease of almost 11% compared to the 2017 crop year. The 2018/19 crop year is also the lowest planted area reported in Chile for the displayed period.
  • Chilean farmers have been forced to embrace sustainable measures to combat and contain the harsh aftermath of climate change. Due to climate change, farmers have not managed to invest in new projects. Instead, farmers have been forced to outsource new projects and machinery to combat the scarcity of labor in farms.
  • Climate change has exposed various aspects of farming to vulnerability. Salmon farming, which plays a vital role in the Chilean agriculture industry, for instance, has continued to be threatened by climate change, particularly in southern Chile. Some of the threats posed to the aquatic life include; changes in water temperature and salinity, diseases, and rapid decline in dissolved oxygen.

Water Crisis

  • The water crisis in Chile has hugely affected the country’s top industry, agriculture. Livestock is dying, and regions that were once fertile are turning into islands.
  • The water crisis in Chile has been as a result of climate change consequences. In 2019, the Chilean government estimated a reduction of water availability across the nation, which stood between 10% and 37%, compared to three decades ago. In some regions in the country, the water is estimated to have depleted by half.
  • Many sectors, including the agriculture sector, have been affected by this crisis. The government is, therefore, forced to ration water, as the resource does not yet have a reliable national inventory. South-central Chile, a densely populated area that primarily supports agriculture, has been the most impacted area. Overall, the agriculture sector in Chile uses the most water, and the crisis is likely to severely affect the agriculture industry.
  • In 2019, Chile declared water scarcity a national disaster. The water crisis has affected over 50 communities in three regions, which has prompted an agriculture emergency across the region. The last time the country faced such a massive drought was 60 years ago. As a result, the local authorities have pledged to set aside a $58 million budget to ensure that people living in rural areas can access water for agriculture and consumption and tap more water sources.
  • The Chilean government has been blamed for allowing the private sector to own more than 80% of the water, which has escalated the crisis in Chile, thus jeopardizing industries such as agriculture and livestock.

Salmon Farming Controversies

  • Since agriculture is the prime sector in Chile, it is diversified to cater to different areas. Aquaculture, and mainly commercial salmon farming, has been rapidly growing in the past two decades. Today, Chile is the second-largest seafood producer in the world. Despite its success in salmon farming, the country continues to face various controversies in this salmon farming.
  • The biggest issue originates from environmental and social concerns, which could scare away investors. Analysts predict that these issues could grow more prominent in the future, as the sector seeks to expand into deeper biodiversity hotspots.
  • In the past three decades, marine and inland aquaculture in Chile has shown rapid growth. Further, the shrunk marine capture fisheries have relatively contributed to the total growing fish production, not just in Chile, but around the world, which stood at 44.1% in 2016. The growth of Chilean salmon farming and production has been marred with sanitary and environmental issues, which has led to regulation of impacts in the freshwater stage, compared to the marine fattening phase.
  • Environmentalists have continued to raise issues regarding aquaculture, which is an essential sector in the country. However, the industry has continued expanding, posing risks such as endemic and epidemic diseases, as well as sizable outbreaks of sea lice that could rapidly plague sea farms in Chile.
  • While commercially farmed salmon does not contain antibiotics, experts argue that the salmon farming sector in Chile is predicted to contribute to antibiotic resistance. Chile exports farmed salmon to markets such as the U.S., Japan, and Brazil, and such controversies could affect the salmon export market for the country.
  • Experts continue to argue that although there have been no traces of antibiotics in exported salmon, the resistance problem of antibiotics in salmon remains in Chile and locally sold salmon. Salmon farmers and residents around salmon farms are said to be at risk of potential infections.
Part
04
of eight
Part
04

Agricuture in Chile: General Insights

As the exact number of private farms in Chile is not publicly available, some extrapolation was done to estimate that there are around 7,874 private farms in the country. Chile is one of the top ten agricultural exporters globally. Its primary exports include agricultural products such as fresh fruits, dairy, and meat products. Some of the main importers of Chile's agricultural products include the United States, China, Japan, The Netherlands, Russia, South Korea, and Brazil.

Chile's Private Farms

Chile's Export Insights

Research Strategy

To obtain general insights into the agricultural industry in Chile in terms of the number of private farms, the countries it is exporting its agricultural products to, the products that are being exported, and export earnings, we looked through the relevant Chilean government agencies' websites and reports such as the Ministry of Agriculture's website. We also looked through various global trade databases such as the OECD, UN Comtrade, World Bank, Knoema, and other relevant sites. Based on this search approach, we were able to find some information on the agricultural products that Chile is exporting, the destination countries, and export earnings. However, the number of private farms in the country was not found in these sources. Also, the data points on the products that are being exported were not aggregated under one "agricultural products" category.

We then looked further in other sources such as in trade publications, media reports, financial journals, case study reports from FAO, and other documents. We then found a case study for FAO and a trading report that provided some statistics on the agricultural farms in Chile. We then took these available figures and calculated the estimated number of farms as detailed in the section above.

As for the requested data on Chile's agriculture exports, we were not able to find all-encompassing categories in the trade reports that include all types of agricultural products. We then selected the categories in the report filters that are typically classified as agricultural products such as vegetables, animals, agricultural raw materials, and related terms to obtain statistics and information on Chile's agricultural products.

The lack of full availability of these data points could be due to the challenges that are typically encountered by research or census agencies when gathering these global or regional insights. Some of the research challenges could be the lack of manpower to fully dig into the categories, financial constraints, and difficulty in acquiring the information.

Part
05
of eight
Part
05

Aquaculture in Chile

Chile's aquaculture industry has grown tremendously in the past three decades, primarily due to the farming of the Atlantic salmon species. Chile is the world's second highest producer of the Atlantic salmon, providing 30% of the global volume in 2018 at 669,237 tonnes. This was valued at more than $10 billion and its export to countries such as the United States of America, Japan and Brazil earned the country greater than $5 billion in revenue. Despite the economic growth, the industry faces many environmental challenges and threats.

Key Insights into Chilean Aquaculture

Part
06
of eight
Part
06

Aquaculture in Chile: Competitive Landscape

The cost of production of slaughtered and packed salmon in Chile was NOK 35.40 ($3.74) per kilogram in 2018, which is considerably cheaper than some of the nations Chile competes with. Additional details on Chile's aquaculture industry have been provided below.

Chile

Production

  • The production of aquaculture in Chile has grown from 32,444 tonnes in 1995 to 1.27 million tonnes in 2018, the highest it has ever been. In dollar terms, the industry's revenue was $10.9 billion in 2018, growing by a cumulative annual growth rate of 1.6% between 2014 and 2018.
  • Out of the 1.27 million tonnes of aquaculture produced in 2018, 862.2 thousand tonnes were diadromous fishes, representing about 70.8% of the industry's overall volume.
  • Virtually all fishes in the industry are grown in a marine environment (99.93%), followed by freshwater (0.07%), and brackish water with a very negligible contribution of just one tonne.

Strengths

  • Despite not being native to Chile, salmon has become the major driver behind the country's aquaculture industry. Consequently, Chile has grown to become the second-biggest producer of salmon, just after Norway.
  • There is a strong government push to further grow the industry. For example, the country's aquaculture research institution, AquaPacifico, recently launched an innovation center to "lead the development of production methodologies for more than 17 species, including croaker, palometa, the cojinoba of the north, oyster, abalone, clam, and north river shrimp."
  • Through the Fisheries Research Fund (FIP), the government also sponsors different annual fisheries and aquaculture programmes. There are other government-sponsored funding such as the Fund for Promotion of Scientific and Technological Development (FONDEF), the National Fund for Technological and Productive Development (FONTEC), and the Fund for Development and Innovation (FDI) all managed by the Chilean Agency for Economic Development (CORFO).
  • There is also considerable evidence that the industry partners with organizations around the world like the Food and Agriculture Organization (FAO) on themes such as sustainability. For example, there are four sites in Chile participating in the FAO's "Global Environment Facility (GEF) project focused on strengthening the adaptive capacity of the artisanal fishing and aquaculture sectors to climate change."
  • The cost of production of slaughtered and packed salmon in Chile was NOK 35.40 ($3.74) per kilogram in 2018. This number is considerably cheaper than some of the nations Chile competes with. The cost of production in Norway, Canada, and the Faroe Islands are NOK 37.85 ($4) per kilogram, NOK 41.8 ($4.42) per kilogram, and NOK 38.8 ($4.10) per kilogram, respectively. The reason for Chile's lower production costs has been attributed to the country's "significant biological improvements," particularly its work in reducing diseases.
  • In 2018, the global production of Atlantic salmon grew by 5% with the bulk of this increase attributable to the 14% growth in Chile. This growth has been attributed to new regulations that are yielding results. For example, new regulations seek to "make output growth conditional on positive environmental and biological metrics."
  • Consequently, metrics such as feed conversion ratios and mortality rates have improved, which have been reflected in the production numbers.

Weaknesses

  • As a rapidly growing industry, the aquaculture industry in Chile has experienced several disease outbreaks, particularly, sea lice at salmon farms. To this end, the industry uses large amounts of antibiotics and chemicals to mitigate the outbreaks. As such, the "level of antibiotics used in Chile’s salmon farming industry is higher than in any other country in the world and has had considerable impacts on both animal welfare and the environment." This high level of antibiotics has damaged the industry's reputation with US consumers and retailers.
  • The industry is also rife with sanitary concerns. In 2016, a pile of dead fish washed ashore in Chiloé along with birds, crabs, and other species that feed on fish. Apparently, local salmon companies disposed of over 9,000 tonnes of fish into the sea, which was consumed by the dead fish, crabs, and birds.
  • Similarly, under the watch of local salmon companies, 700,000 fish "escaped" into the wild, causing a sudden increase in competition for food in the marine ecosystem.
  • The country's inability to tap into areas widely acknowledged as great for aquaculture can also be deemed as a weakness. The capital outlay required to open up these areas such as Patagonia for fish farming will be enormous due to the region's remoteness. That said, there has also been opposition from "scientists and campaigners, claiming that introduction of the non-native salmon into the ecosystem will replicate damage caused by the aquaculture industry elsewhere in the country."

Norway

Production

  • In 2018, the total aquaculture production in Norway was 1.35 million tonnes with virtually all produced in marine water.
  • As high as 80% of Norway's production is made up of intensive farming of Atlantic salmon.

Strengths

  • The government recently divided the country into 13 defined production areas, using scientific calculations to color-code these areas based on their "perceived risk of lice-induced mortality on wild salmon numbers." This is one of the government's regulations regarding growing the industry where it is environmentally sustainable.
  • While investments in advanced equipment for monitoring, automation and streamlining have been one of the driving forces in increasing production cost in the short-medium term, the long-term effect is that these investments will contribute to decreasing the industry's environmental footprint and impact.
  • As political tensions between Norway and China have eased, more and more fish is exported to China. Consequently, the demand for Norwegian products is on the rise in China, which has also extended to South Korea. This offers fish farmers in Norway more options for their products.

Weaknesses

  • According to a report by the Norwegian Seafood Research Fund (FHF) and Norwegian Institute for Food, Fisheries and Aquaculture Research (Nofima), the cost of production has been steadily increasing in recent years.
  • As stated above, the average cost of production is NOK 37.85 ($4) per kilogram. With current government proposals. However, this figure will likely increase in the future. The government is proposing a tax rate of NOK 0.40 ($0.042) per kilogram of fish produced starting from 2021.
  • From 2022 also, the government is proposing that "revenues from sale and auction of capacity increase and new licenses will be split between central and local/regional governments, with respectively 75 percent and 25 percent."
  • Norway's aquaculture production is also highly susceptible to the cold weather, particularly during cold winter; for example, the country fell short of projected production target in 2018 due to cold winter.
  • Additionally, Norway is dealing with a huge lice problem. In 2019, the country spent NOK 5.2 billion ($548.89 million) on combating salmon lice. One of the reasons for this is that sea lice in the area "have become resistant to many previously effective treatments."
  • Despite improvements in the countries' relationship in recent times, Norway is still subjected to a 10% tariff when they export salmon to China. Chile is not subjected to this tariff due to a customs agreement between Chile and China.

China

Production

  • China's aquaculture production has grown from 15.86 million tonnes in 1995 to 47.56 million tonnes in 2018.
  • In 2018, 29.59 million tonnes were produced in a freshwater environment, while 16.39 million tonnes were produced in a marine environment. On the other hand, 1.59 million tonnes were produced in brackish water.

Strengths

  • The government's recent clamp-down on irregularities and illegal fishing is putting the much-needed structure into the country's aquaculture industry. An example of such campaigns is the "Shining Sword campaign against illegal fishing in domestic waters."
  • The central government and regional governments across the country are putting aside funds to modernize the industry. For example, Guangxi has committed to spending CNY 8 billion ($1.14 billion) over five years. Targeted areas of investments include "improved genetics, improved vessels, and a roll-out of recirculating aquaculture systems (RAS) to replace earthen ponds."
  • According to the FAO, China has an "obvious export advantage on the international market."

Weaknesses

  • The workforce in China's aquaculture is shrinking. One of the reasons for this is low annual income, which stood at an average of CNY 18,450 ($2,685) per year. Additionally, large labor transfers during China's fast-tracked urbanization means many aquaculturists have pivoted to other industries.
  • While some of the regulations mentioned above in the 'strengths' section are well-intended, one of the consequences has been pushing small-time and part-time businesses out of the industry due to the high cost associated with meeting up with environmental and regulatory laws. Some larger players have also fallen victim due to severe disruptions.
  • The industry in China is concentrated in rural areas where most of the aquaculturists have insubstantial education. As such, typical producers will rather continue using traditional farming techniques rather than adopting new technologies. Although, it should also be said that the government has set up several initiatives over the years to combat this issue, including the aquaculture extension system.
  • However, despite the tremendous achievements through the aquaculture extension system, challenges persist that may hinder future developments. These include insufficient funds, limited technical aquaculture extension workforce, and bottlenecks across the five levels of the administrative structure.
  • The trade tensions between China and the United States could also affect the industry, albeit at a small scale according to a report by the Organization for Economic Co-operation and Development.



Part
07
of eight
Part
07

Aquaculture in Chile: Threats

Three threats to the Chilean aquaculture industry, which is predominantly composed of salmon farming, are disease, rising water temperatures, and increasingly negative public perception.

Disease

  • The salmon aquaculture industry in Chili is threatened by multiple diseases that can spread throughout the farmed fish population.
  • Diseases include Salmon Rickettsial Syndrome (SRS) and Salmon Anemia (ISA), both of which cause death of the fish and which have had major outbreaks in Chili.
  • In 2007, Chilean salmon farmers dealt with an outbreak of ISA which caused many farms to close and over 2,000 workers to lose their jobs.
  • In order to cope with these diseases, aquaculture farmers are turning to increasingly high doses of antibiotics, which experts caution may cause antibiotic resistance and which adds to consumer concern.
  • Additionally, there has been increased regulation on aquaculture practices in response to these disease outbreaks and subsequent antibiotics use. These regulations and complex and cause challenges for both farmers and lawmakers.

Rising Water Temperatures

  • Rising water temperatures, due to climate change and the affects of El Niño in Latin America, is contributing to large fish die-offs for Chilean aquaculture producers.
  • Rising water temperatures combined with nitrogen runoff from farms in Chile are causing red tides, or harmful algae blooms (HAB). In 2016, Chilean salmon farmers lost "around 100,000 tonnes of fish stock, reportedly worth USD$800m."
  • While these tides are not caused by the aquaculture, the tides do have devastating economic impacts on the industry.
  • Additionally, the way the industry handles the red tides and disposing of the dead fish have caused increased scrutiny on the industry by environmentalists. The disposal of fish killed by the red tides also caused tensions between aquaculture farmers and fishermen in the region, when fisherman believed that the disposal at sea of salmon killed by red tides caused increased red tides and government closures of multiple fisheries, affecting the fishermen's livelihoods.

Consumer Perception

  • Due to the increased antibiotics use, the potential for GMO farmed fish escaping into the wild, and other negative environmental affects of the farmed salmon industry, consumers have an increasingly negative perception of farmed Chilean salmon.
  • Consumers, concerned that antibiotic resistance could be passed to humans via the consumption of farmed salmon that has consumed large amounts of antibiotics, have begun to avoid Chilean farmed salmon. Chains such as Whole Foods and Costco removed Chilean salmon from their fish counters.
  • Influential environmental groups such as Greenpeace have succeeded in lobbying for further restrictions on the expansion of Salmon farming in Chile, including limits on expansion into Patagonia.
Part
08
of eight
Part
08

Aquaculture in Chile: High-Producing Farms

Seven high-producing aquaculture farms in Chile include Abtao, Estero Riquelme, Mina Elena, Imelev, Teuquelin NE, W Punta Vergara, and Puyuhuapi II. Like most aquaculture sites in the country, they are located in Magallanes, Los Lagos, or Aysén.

Aquaculture High-Producing Farms in Chile

  • Located in Calbuco, Los Lagos, Abtao farm is a BAP certificate site operated by Salmones Multiexport. The site has 71,65 hectares.
  • Located in Rio Verde, Magallanes, Estero Riquelme has 69 hectares and it is operated by Blumar.
  • Located in Castro, Los Lagos, Imelev is operated by Salmones Multiexport and has 49,95 hectares.
  • Mina Elena is located in Rio Verde, Magallanes. The site has 44,50 hectares and its owned by Blumar.
  • Teuquelin NE is located in Quinchao, Los Lagos. The site has 31,50 hectares and it is operated by Salmones Multiexport.
  • W Punta Vergara is located in Puerto Natales, Magallanes. Operated by Blumar, the site has 23,07 hectares.
  • Puyuhuapi II, is located in Natales, Aysén. With 22,64 hectares, the site is controlled by Multiexport.
  • Córdova 5 is operated by Australis Seafood. The site has 20 hectares and it is located in the Magallanes District, Magallanes.

Size and Production

  • A study analyzed various factors that influence the production in aquaculture, particularly salmon. As it reports, larger areas allow "scaling the production unit as the fish grows." The study also mentions the fact that farm size is related to increased profitability. Another study concluded that size was one of the determinant factors of fish farming production.

Research Strategy

There is limited publicly available information regarding high-producing aquaculture farms in Chile per se, albeit there is plenty available about the highest-producing companies.
After scouring through multiple market reports, impact reports, and official websites, such as Sernapesca, Chile’s National Fishing and Agricultural Department, both in English and Spanish, we could not find the most productive aquaculture farms in the country. Therefore, we adopted an alternative approach.
First, we located official reports that showed that salmon was the number one product (2018). Then we discovered that Chile’s salmon companies are the most profitable in the country and that the top 10 firms account for 89.5% of the country’s production. We concluded that it would be reasonable to assume their sites are the most productive farms.
Next, we used the list of top Chilean companies by production (in tons) and individually checked each one to determine their largest or most productive sites. In our research, we discovered that most of these companies also work with other products besides salmon, such as mussels, tuna, and sardine, which made us confident that these would be indeed high-producing farms.
Our original intent was to locate the top farm for each company; unfortunately, most companies do not disclose the farming sites' size/production. For example, Camanchaca provides the address of its farming sites, but not the size. Cermaq does not disclose locations, Mowi only indicates the region, and Aquachile limits the information to the region and the number of locations. Therefore, we used Salmones Multiexport, Blumar, and Australis Seafood to locate 5-7 high-producing farms. Even though the other companies do not publicly disclose production/size and precise location, most of the top 10 companies' farms are located in the Aysén, Magallanes and Los Lagos region, particularly Los Lagos and Aysén. The Magallanes region seems to have the largest farms, while the other two have a larger number of sites distributed along their coasts.


Sources
Sources

From Part 06