2013-12-29 16:42:04 - New Food market report from Business Monitor International: "Mexico Agribusiness Report Q1 2014"
Overall, the long-term outlook for the Mexican agriculture sector looks less optimistic than in previous years. Consumer demand growth is largely slowing, particularly in key areas like sugar and corn, as per capita consumption is already high. Competitiveness is also an issue, particularly in the sugar, grains, and livestock sector. Although we forecast a rebound in production for key sectors like corn and meat, we have a largely subdued production outlook for these sectors, as cheap US imports, lower prices, and distortions due to government intervention reduce production incentives. We see the strongest growth potential in the poultry and coffee sectors, as Mexico remains a key coffee exporter and poultry consumption looks to show the strongest growth. However, even our
coffee production forecasts have been downgraded recently due to disease concerns.
Full Report Details at
- www.fastmr.com/prod/754601_mexico_agribusiness_report_q1_2014.as ..
* Corn production growth to 2016/17: 11% to 24.0mn tonnes. We have revised down our production growth estimates for corn, as we believe the area dedicated to corn is unlikely to grow significantly in the coming years and use of genetically modified seeds remains limited. The strong five-year growth figure is owing to base effects.
* Sugar consumption growth to 2017: 12.0% to 4.8mn tonnes. We believe sugar consumption growth will slow over the long term due to high base effects and increasing health consciousness in the country in the wake of high obesity rates.
* Coffee production growth to 2016/17: 13.0% to 4.9mn bags. Agricultural techniques have improved in recent years, and local and national government programmes are helping to improve infrastructure and education, which are likely to help to boost production. However, production will not exceed the 2011/12 total.
* 2014 real GDP growth: 3.5% (up from 2.3% in 2012; predicted to average 3.4% to 2017).
* Consumer price inflation (average): 3.1% year-on-year (y-o-y) in 2014 (same as 2013).
Industry Trends And Developments
Out of all the emerging regions we cover, we see the slowest growth potential for meat consumption in Latin America, for beef in particular, and therefore corresponding slow growth for large beef producers such as Brazil and Argentina. This is because meat consumption per capita in the region, especially beef, is among the highest in the world, even though it grew at a slower pace than other markets in Africa and Asia in the past decade. Meat consumption in Latin America averaged 60.0kg per capita in 2012, compared with 72.5kg for Europe and North America, and 23.5kg in Asia and Africa (excluding developed markets, ie, Australia, Hong Kong and New Zealand). As a result, Latin America is getting closer to developed market standards in terms of meat consumption. This happened even though meat consumption per capita growth in the past decade was much slower in Latin America (at 19.6% between 2000 and 2012) than in Africa and Asia (at 30.2% over the same period).
We maintain our view for sugar consumption in Latin America to stagnate or moderate over the medium term as the region already hosts the world's largest consumers of sugar per capita. Countries in the region had an average annual consumption per capita of 44.0kg in 2012, compared with 31.7kg in the US and 10.6kg per capita in China. We therefore forecast minimal growth out to 2016/17 because of base effects and increased health consciousness. Confectionery accounts for a smaller share of total sugar consumption in the region, but we see more potential for this segment in the medium term. This will be driven by chocolate sales, which have recently shown the strongest potential.
We expect Mexican beef and pork production to rebound in 2013/14 after registering poor growth in 2012/13. We continue to forecast a decline in beef production for 2012/13, largely owing to poor weather and high input prices, which resulted in some farmers selling breeding animals as well as steers and heifers. As a result, ending stocks are forecast to be at the lowest level in almost 40 years. Local observers have stated that unwillingness among consumers to pay higher beef prices has reduced consumption at the retail level, resulting in our expectation for beef production to fall by 1% in 2012/13. In contrast to the beef sector, we expect the pork segment to outperform in 2013 (see 'Pork Sector Looking Strong', February 18 2013). The pork sector is expected to see growth owing to improved animal genetics and farming techniques, leading to higher slaughter weights.
We continue to forecast a decline in Mexican sugar production for the 2013/14 season, mainly owing to low prices. Mexico recorded strong production growth for the 2012/13 crop, largely due to timely rainfall and good weather, leading to higher plantings. For the 2013/14 season, weather is again expected to be favourable. However, lower prices are reducing farm planting incentives. Sugar prices are down 9% for the year year-to-date and 7% year-on-year (y-o-y), despite a 20% rally in recent weeks.
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