2013-08-26 10:47:06 - New Food market report from Business Monitor International: "Indonesia Agribusiness Report Q4 2013"
Overall, we hold an optimistic outlook on Indonesia's agriculture sector and see significant growth opportunities in sub-sectors such as livestock, palm oil and cocoa. However, while we believe that the government's goal to reach self-sufficiency in rice by 2015 is attainable, we are less confident about other commodities such as sugar and corn. We also highlight that the country's aim to become the second largest coffee producer in the world by 2015 is unrealistic. Much of our scepticism is owing to the lack of proper infrastructure and the existence of a large number of low-technology, small-scale farmers. We believe that the shift from raw commodity exports to refined exports (especially for palm oil and cocoa) will warrant more public and
private investment in order for the raw inputs industry to keep pace with downstream industries. Investments by Wilmar, Golden Agri Resources and Barry Callebaut are clear signs of the growing interest in these sectors.
Full Report Details at
- www.fastmr.com/prod/670645_indonesia_agribusiness_report_q4_2013 ..
* Rice production growth to 2016/17: 14.6% to 41.6mn tonnes. We believe Indonesia will attain its goal of being self-sufficient in rice in the coming years, as the country is increasing initiatives to boost production. Growing use of high-yielding paddy varieties and agriculture intensification will help output to record higher growth rates than in the past.
* Sugar consumption growth to 2017: 27.9% to 6.5mn tonnes. Consumption growth will continue to outstrip production growth, driven by rising incomes, greater urbanisation, population growth and the growing demand from the food and beverage industry.
* Poultry consumption growth to 2017: 17.6% to 1.8mn tonnes. The increasing ability of Indonesians to afford meat as part of their daily diet will drive poultry consumption, which is the most favoured meat. Low consumption per capita suggests there is much room for growth.
* BMI universe agribusiness market value: US$60.8bn in 2013 (up from US$59.5bn in 2012; forecast to grow annually by 4.0% on average between 2013 and 2017).
* 2013 real GDP growth: 5.9% (down from 6.2% in 2012; forecast to grow by 6.2% on average between 2013 and 2017).
* 2013 consumer price index: 5.4% year-on-year (y-o-y) (up from 4.7% y-o-y in 2012; forecast to grow annually by 5.1% on average between 2013 and 2017).
* 2013 central bank policy rate: 6.50% (up from 5.75% in 2012; forecast to average 6.80% from 2013 to 2017).
Key Revisions To Forecasts
* Cocoa production forecasts for 2012/13 and 2013/14 revised down, to 465,000 tonnes and 480,000 respectively (compared with previous forecasts of 500,000 and 530,000 tonnes respectively). This is mainly because diseases are blighting yield and area expansion. Output growth is being hampered by poor agronomic practices, poor quality planting materials and the abundance of aging, less productive trees that render the sector more prone to severe weather patterns.
Despite decent production expansion in recent years, grain imports are likely to remain on an uptrend in 2012/13 and 2013/14, as consumption grows strongly. Grain consumption will mainly be boosted by animal feed demand, as livestock production maintains healthy growth rates. In fact, feed demand growth has outpaced food, seed and industrial use consumption rates over the past three years, and we expect this to continue in 2012/13 and 2013/14. Indonesia imposed a temporary 20% emergency tariff on wheat flour imports in December 2012, as the country sought to protect its expanding wheat mill industry against subsidised imports. Strong demand and this flour protectionist policy are likely to foster grains imports.
Cargill announced in April 2013 it plans to expand its palm oil plantations from its current land bank of more than 40,000 hectares (ha) in Sulawesi, Central Kalimantan and South Sumatra. This is the latest sign of the buying spree that has been taking place in Indonesia and Malaysia in recent years. This was backed by high returns, as palm oil prices have been more than twice the cost of production for several years. We believe that this investment boom will only decrease from now. Indeed, we see increasing hurdles to production owing to the countries' hardening stance on the expansion of palm plantations at the expense of the environment. Indonesia is working on a regulation to restrict the plantation area of new private palm oil firms to 100,000ha, and it extended in May 2013 its 2011 landmark moratorium on the issuance of new plantation and logging concessions in primary forests and peatlands.
Indonesia's goal to maintain its near-self-sufficiency in poultry and to achieve self-sufficiency in beef will prove to be quite difficult in the coming years, as livestock production will struggle to keep up with consumption growth. In the poultry industry, we believe Indonesia will able to maintain a slightly positive yet precarious poultry production balance in livestock supply in the coming years. For the beef industry, we believe Indonesia will have little choice but to ease its import regulations, as domestic demand will slowly outdistance production. The beef processing industry is currently facing difficulties due to low supply, as the government has restricted imports in a bid to boost domestic production and in an effort to become self sufficient by 2014. Beef import quotas will be reduced for the fourth consecutive year in 2013, by 13%, to 80,000 tonnes.
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