2012-09-29 17:26:20 - Fast Market Research recommends "Saudi Arabia Agribusiness Report Q4 2012" from Business Monitor International, now available
BMI View: While wheat production is forecast to decline in 2012/13, we now expect the fall to be less severe owing to limited grains exports. However, we believe the government will go ahead with its plan to phase out wheat production altogether in the next decade. For dairy, we continue to see great growth opportunities for companies operating in the sector, with moderating milk prices boosting margins and increased investment helping to support production. For livestock, the country is very reliant on poultry imports, and slow growth in domestic production has kept prices high. Key Forecasts Wheat production growth to 2015/16: -46.9% to 669,900 tonnes. Wheat production will continue to decrease in the coming years on the back of the
government's program to phase out production. Poultry consumption growth to 2016: 17.2% to 1.6mn tonnes. Demand growth will be supported by population growth and rising personal incomes. Milk production growth to 2015/16: 17.2% to 2.1mn tonnes. High milk prices and rising demand will help to drive output. We also highlight that this growth is from a low base; the country's dairy industry and capacity is still negligible and has significant room to expand over the coming years. Saudi Arabia Agribusiness Report Q3 2012 © Business Monitor International Ltd Page 6 2012 real GDP growth: 4.6% year-on-year (y-o-y), down from 6.8% in 2011. Predicted to average 4.0% from 2011 to 2016. 2012 consumer price inflation: 4.9% average, down from 5.0% 2011. BMI universe agribusiness market value: 1.3% y-o-y increase to US$2.2bn in 2011/12, forecast to increase by 3.6% on average per annum between 2010/11 and 2015/16. Industry Outlook The US Department of Agriculture forecasts total wheat imports to reach 2.5mn tonnes in 2012/13, of which 1.8mn tonnes will be imported for human consumption. The country's grain purchase agency normally issues tenders for 14% and 12.5% protein content wheat from the EU, Canada, the US and Australia. However, the agency has occasionally received some high-quality wheat shipments from Brazil, Argentina, Latvia and Lithuania. Since 2011/12, Saudi Arabia's animal feed processors have been importing feed-quality wheat with up to 11% protein content, especially from Ukraine. We have highlighted Saudi Arabia's Almarai as one of the strongest performing major companies in the Gulf food and drink space over the past few years. It has a very strong dairy business and has taken some positive steps to diversify both in terms of geography and business categories. It looks well placed to continue growing domestically, in the wider Gulf region and further out into the Middle East and North Africa. Almarai grew its headline sales by nearly 15% in 2011, a strong result in what could have been a challenging year. Poultry prices in Saudi Arabia have significantly risen in the past year and are expected to stay elevated in the medium term. This is owing to insufficient production growth in the country as well as declining output from major producers such as France and Brazil, from which the country's poultry imports come. Also, local poultry farmers have complained of increasing production costs linked to high feed costs.
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