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Malaysia Agribusiness Report Q1 2014 - New Market Research Report

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2014-01-05 21:05:42 - New Food market report from Business Monitor International: "Malaysia Agribusiness Report Q1 2014"

Strong growth prospects, opportunities for increased exports and government support will be the key factors driving growth in the Malaysian agribusiness sector. We see conditions being particularly favourable for sugar, poultry and cocoa production, on the back of strong investments being poured into the segments. However, we highlight that changing consumption patterns, disease outbreaks, sudden change in policies and shortage of resources could dent growth potential in the sector in the medium and longer term.

Key Forecasts

* Palm oil production growth to 2016/17: 8.2% to 20.9mn tonnes. Growth will be supported as companies replant mature estates and yields improve on the back of better technology.
* Sugar consumption growth to 2017: 22.7% to 1.75mn tonnes. The dominance and continued expansionary

activities of market players F&N, Permanis and Yeo Hiap Seng have fuelled considerable growth in the Malaysian soft drinks sector, a significant factor fuelling demand for sugar.
* Cocoa production growth to 2016/17: 12.2% to 10,100 tonnes. Cocoa yields on the Peninsula (the second-largest cocoa-producing region, behind Sabah) have increased, due to the Malaysian Cocoa Board (MCB)'s distribution of high-yielding seeds and incentive programmes for farmers to switch to cocoa. In 2011, the MCB also started a plan to ramp up cocoa planting areas.
* 2014 BMI universe agribusiness market value: 17% year-on-year (y-o-y) increase, to US$23.4bn (contributes to 8.2% of GDP)
* 2014 real GDP growth: 4.4% (down from 4.6% expected in 2013, forecast to average 4.2% from 2014 to 2017).
* 2013 consumer price inflation: 2.5% (up from 1.9% in 2013, forecast to average 2.3% from 2014 to 2017).
* 2013 lending rate: 5.5% % average (same as 2012, forecast to average 5.8% from 2012 to 2017).

Full Report Details at
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Key Developments

In October 2013, US-based chocolate company The Hershey Company revealed plans to open its first confectionery manufacturing plant in Johor, Malaysia. The MYR816mn (US$250mn) facility will include innovations in automated confectionery manufacturing technology and high-speed wrapping equipment featuring proprietary as well as specially engineered wrapping technologies. The new plant is expected to address the rising consumer demand for the company's products in its fastest-growing region, Asia. Construction of the new plant is also expected to help local cocoa producers and processors, particularly those that are already supplying to the company.

Earlier in July 2013, Switzerland-based Nestle announced its plans to invest MYR150mn in the city of Shah Alam towards a new factory targeted at doubling production of ready to drink (RTD) liquid milk and coffee products. The factory is expected to be fully operational by 2014. The company is targeting further growth in Malaysia as it looks to pursue high-growth opportunities with its broad drinks portfolio.

However, domestic sugar demand could be dented by the Malaysian government's plans to abolish subsidies on sugar and to implement a goods and service tax (GST), as revealed in the 2014 budget. The subsidy abolition, which came into effect immediately from October 26 2013, increased sugar prices from RM2.5 per kilogram to RM2.84 per kilogram. Meanwhile, the GST is expected to come into force in April 2015. In November 2013, Malaysia increased its tax on crude palm oil export for the first time since March 2013.

The Customs Department revealed that shipments will be taxed at 5.0% from December 2013 during the month and that the reference price will be set at MYR2,452.43 a metric ton. The country had fixed zero tax rates on CPO export during January and February 2013, after which it was maintained at 4.5% level between March 2013 and October 2012. Despite the increase, Malaysian CPO export tax stands significantly lower than Indonesia, which levied a 9% tax in November 2013. The rates have been kept low in an effort to boost palm oil exports and avoid inventory accumulation.

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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