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Egypt Agribusiness Report Q1 2014 - New Market Report

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2013-12-27 12:07:13 - Fast Market Research recommends "Egypt Agribusiness Report Q1 2014" from Business Monitor International, now available

Egypt remains the world's largest wheat importer, and moderating global prices will help to decrease pressure on the fiscal situation and on local inflation. Even though imports were halted for the first months of 2013, we do not believe this is a trend and expect the country's imports to only increase in the coming years. We continue to see the lifting of the three-year ban on rice exports as providing a boost to the local industry. The sugar industry is benefiting from a tight local market and higher domestic prices, while the cotton industry is likely to be helped by the recent recovery in prices. The livestock and dairy industries are likely to recover soon from the recent foot-and-mouth disease

outbreak, which had a milder impact than expected. We like the growth opportunities for companies such as Juhayna Foods, which is likely to benefit from the strong consumer story in the country.

Key Forecasts

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* Wheat production growth to 2016/17: 13.4% to 9.5mn tonnes. This will largely be the result of government efforts to increase area planted and yields in the coming years.
* Sugar consumption growth to 2017: 14.3% to 3.3mn tonnes. This will be driven by growth in the local confectionery and soft drinks industries on the back of population and income growth.
* Poultry production growth to 2016/17: 18.3% to 986,600 tonnes. Improvements in productivity as well as better integration of livestock producers will result in gains in margins and output growth. Our forecast for a moderation in grain prices in the medium term also is likely to benefit the industry.
* Real GDP growth: 1.9% year-on-year (y-o-y) in 2013 (up from 2.2% y-o-y in 2012).
* Consumer inflation: average 9.50% y-o-y in 2013 (up from 7.2% y-o-y in 2012).
* BMI universe agribusiness market value: 1.0% y-o-y increase to US$10.8bn in 2012/13; forecast to grow on average 1.9% annually between 2011/12 and 2016/17.

Industry Outlook

We have revised up our forecast for wheat production in Egypt in 2013/14 and now see production rising 5.9% y-o-y to 9.0mn tonnes. The increase will come on the back of an increase in area harvested to a forecast 1.4mn ha, up 50,000 hectares from last season. This was encouraged by high procurement prices. Still, our forecast is below official sources (which project wheat production at 9.5mn tonnes), as we believe high fertiliser prices and fuel shortages are putting pressure on grain yields and the progress of the harvest. We do not believe the higher procurement prices offered by the government will offset these constraints on farmers' profits.

We are taking a cautious view on growth in sugar output for the ongoing 2012/13 season, as we see severe downside risks to production linked to fuel shortages on the back of the dire economic situation Egypt is currently facing. Sugar cane and sugar beet farmers have indicated that they were facing increasing difficulties in securing sufficient diesel to transport their harvest to sugar factories. In several cases, harvested sugar was not transported to factories early enough to be processed, resulting in severe losses for the country's millers and limiting production, which resulted in losses to farmers and decreased output. As a result, we forecast 2012/13 sugar production to stagnate at around 2.0mn tonnes.

We continue to see dairy prices averaging lower in the medium term and higher in the long term. This is partly owing to the strong correlation between dairy prices and grain prices. In particular, we believe the correlation remains strong given the importance of grains as a key input cost in milk production. Given that we forecast grain prices to generally average lower in 2013 and 2014, this informs our view of lower average dairy prices over that time, specifically since lower grain prices will enable dairy farms to stem the decline in cattle herds. This is likely to result in annual milk production growth of around 2.7% in 2014 and 2.5% in 2015, compared with the 12-year average of 1.9%. Over the latter part of our forecast period, we believe higher grain prices will slow milk production growth but will not stem consumption (which is more related to rising incomes), which we expect to continue growing steadily due to demand growth from key emerging markets. Our forecasts are roughly in line with the average 2013 and 2014 price implied by the futures curve.

About Business Monitor International

Business Monitor International (BMI) offers a comprehensive range of products and services designed to help senior executives, analysts and researchers assess and better manage operating risks, and exploit business opportunities, across 175 markets. BMI offers three main areas of expertise: Country Risk BMI's country risk and macroeconomic forecast portfolio includes weekly financial market reports, monthly regional Monitors, and in-depth quarterly Business Forecast Reports. Industry Analysis BMI covers a total of 17 industry verticals through a portfolio of services, including in-depth quarterly Country Forecast Reports. View more research from Business Monitor International at

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