2013-12-13 09:41:58 - Fast Market Research recommends "Indonesia Agribusiness Report Q1 2014" from Business Monitor International, now available
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 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 relates to the lack of proper infrastructure and the existence of a large number of low-technology, small-scale farmers. We believe 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/723582_indonesia_agribusiness_report_q1_2014 ..
* Rice production growth to 2016/17: 14.6% to 41.0mn tonnes. We believe Indonesia will attain its goal of being self-sufficient in rice in the coming years, as the country is expanding initiatives to boost production. Growing use of high-yielding paddy varieties and agriculture intensification will help output to record higher growth rate 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.
* Beef production growth to 2016/17: 5.3% to 485,000 tonnes. Output growth will come from increased domestic demand as well as further government support. Indeed, Indonesian authorities are looking to be self-sufficient by 2014.
* BMI universe agribusiness market value: US$61.7bn in 2014 (up from US$57.4bn in 2013; forecast to grow annually by 5.5% on average between 2013 and 2017).
* 2014 real GDP growth: 5.4% (down from 5.8% in 2013; forecast to grow annually by 6.1% on average between 2013 and 2017).
* 2014 consumer price index: 5.0% year-on-year (y-o-y) (down from 5.4% y-o-y in 2013; forecast to grow annually by 5.1% on average between 2013 and 2017).
* 2014 central bank policy rate: 6.50% (down from 5.25% in 2013; forecast to average 6.95% from 2013 to 2017).
Key Revisions To Forecast
* Cocoa 2012/13 and 2013/14 production forecasts revised down, to 455,000 tonnes and 475,000 respectively (compared with previous forecasts of 465,000 and 480,000 tonnes respectively). This is mainly because diseases are affecting 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, which render the sector more prone to severe weather patterns.
* Beef 2013/14 production forecast revised down, to 410,000 tonnes (compared with a previous forecast of 493,000 tonnes). Beef output grew strongly in 2011/12 and 2012/13, as the government's decision to impose restrictions in 2011 in order to favour local production has sent retail prices through the roof and incentivised cattle slaughtering. Beef and veal production is likely to drop significantly in 2013/14 due to the lower availability of live cattle.
Despite decent production expansion in recent years, grain imports are expected to remain on an uptrend in 2012/13 and 2013/14, as consumption records strong growth. Grain consumption will be mainly boosted by animal feed demand, as livestock production grows healthily. In fact, feed demand growth has outpaced food, seed and industrial use consumption rates over the past three years, and is expected to repeat this performance in 2012/13 and 2013/14. Indonesia imposed a temporary 20% emergency tariff on wheat flour imports in December 2012 as the country looks to protect its expanding wheat mill industry against subsidised imports. Strong demand and this flour protectionist policy are likely to foster grains imports.
We see Indonesia's goal to become self-sufficient in beef production as overly optimistic. In fact, the restrictions imposed on beef imports since 2010 are exhausting the local beef sector, as they push retail prices to records and incentivise the slaughter of local cattle in excessive volumes. As a result, we believe Indonesia will have no choice but to continue the recent reduction in import restrictions. Moreover, the government's goal to invest in breeding farms in Australia to help solve the production deficit will prove complicated to implement given the recent tensions over foreign investment in farmland in Australia. Moreover, the recent change in the Australian government and new ruling Liberal-National coalition will very likely complicate the process of foreign investment and increase delays.
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