2013-02-28 12:24:15 - New Food research report from Business Monitor International is now available from Fast Market Research
BMI View: We hold a positive view on India agribusiness sector's outlook, as the country will remain an agricultural powerhouse and will very likely be able to maintain high levels of self-sufficiency for major food crops. Production growth of various commodities will be driven by strong government support and robust demand growth for manufactured foodstuffs. We see significant growth opportunities in sub-sectors such as dairy, coffee and livestock. However, the country will remain prone to erratic government interventions, which seriously hampers its reputation as an international provider. Moreover, India will be increasingly vulnerable to exceptional weather phenomenon due to climate change effects and serious water shortages. Although a precarious monsoon in the first two months of the rainy season put
pressure on some of India's key crops in 2012/13, we believe the impact on final production will be limited.
Full Report Details at
- www.fastmr.com/prod/541219_india_agribusiness_report_q2_2013.asp ..
* Sugar production growth to 2016/17: 12.3% to 29.2mn tonnes. Strong growth will be driven by rising domestic demand that, in turn, will provide production incentives.
* Palm oil consumption growth to 2017: 35.1% to 10.0mn tonnes. Domestic palm oil consumption will be propelled by strong demand for domestic food use, which makes up about 80% of total domestic palm oil demand.
* Poultry production to 2016/17: 26.6% to 4.1mn tonnes. The sector will be driven by rising incomes and increased domestic demand as well as the emergence of vertically integrated producers with reduced consumer prices. It will also come from a raft of investments in the sector designed to improve growth.
* 2013 real GDP growth: 6.3% (down from 6.9% in 2012; predicted to average 5.6% from 2012 to 2017).
* 2013 consumer price inflation: 7.5% (down from 8.6% in 2012; forecast to average 6.3% from 2012 to 2017).
* 2013 central bank policy rate: 9.0% average (down from 8.1% in 2012).
Key Revisions To Forecasts
* Sugar production forecast for 2012/13 revised down, to 24.0mn tonnes (compared with a previous forecast of 25.0mn tonnes). Lower rainfall will hamper yields and lead to a drop in production in the Maharashtra and Karnataka States, two of the main growing regions.
We forecast India to record high wheat production for the sixth consecutive year in the 2013/14 season. The season starts in April, with the planting stage running from October to December. We expect production to increase, as planting conditions were favourable. As a result of five consecutive years of large wheat harvests and of strong government's procurement, India has been building up massive government-held stocks. Our view of the country offloading the excess wheat in both the domestic and international markets and lifting exports to their highest levels since 2005 is playing out nicely. Our estimates for another bumper crop in 2013/14 strengthen the prospects for continued strong exports in the coming season.
A recent wave of expansion plans from various key global players reinforces our positive view on the Indian dairy industry. Following a trend set in previous years, expansion will continue to be mainly led by local and foreign private investors as well as cooperatives. Strong producer prices, a promising outlook for dairy consumption and government incentives have been attracting robust investments to the dairy processing sector. Fonterra, Danone and Nestle India, among others, are reportedly looking to invest in the country.
The government's policy regarding ethanol to be blended with diesel has not progressed in recent years. Since it approved the National Policy on Biofuels, implementing a programme of ethanol blending with petrol in 2008, the government delayed several times its decision to make the 5% blend mandatory. After a disappointing 2012/13 sugar output, it postponed once again in December 2012 the deadline for the nationwide roll-out to June 1 2013. Despite these delays, we expect India to eventually enforce the 5% blend rule in the coming years, as the country struggles to reduce its energy import bill. This poses a downside risk to our long-term sugar production forecast as sugar producers will now have to compete with higher demand for sugar cane by-products, including fuel ethanol.
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