2013-10-24 16:03:22 - New Food market report from Business Monitor International: "Argentina Agribusiness Report Q4 2013"
With an election on the horizon and given continued problems with the economy, the Argentine grain sector will play centre stage over the medium term. With foreign reserves dwindling, grain exports (particularly soybean) will remain vital. Soybean will remain the pre-eminent crop in Argentina over the long term, and we expect the poultry production to show the most promise within the livestock complex.
Like the rest of Latin America, we believe growth in meat consumption will slow, as levels are already close to developed market standards. We are forecasting only minimal growth in sugar production over the long term, as we are forecasting lower average sugar prices in the coming years and the industry faces several issues, mainly low prices and
export controls. One regional government (Tucuman) is attempting to establish a provincial marketing board, although some have questioned the move in the context of poor financial positions of many of the mills.
Full Report Details at
- www.fastmr.com/prod/694781_argentina_agribusiness_report_q4_2013 ..
* Corn production growth to 2016/17: 11% to 27.9mn tonnes. Our revised growth projections stem from lower average corn prices in coming years along with more substitution to soybean plantings.
* Soybean production growth to 2016/17: 12% to 56.2mn tonnes. Growth will come from increasing export demand for soybeans along with more value-added products such as soybean oil. Soybean crops are also generally less capital intensive than corn crops due to lower input costs.
* Beef production growth to 2016/17: 18% to 3.3mn tonnes. Despite the growth, beef production will fail to exceed levels seen in the mid-2000s.
* 2013 real GDP growth: 3.7% year-on-year (y-o-y) (down from 4.0% in 2012; predicted to average 4.2% from 2013 until 2017).
* Consumer price index (end of period): 22% y-o-y in 2013 (down from 25% in 2012).
We are forecasting Argentina sugar production growth of roughly 4.7% to 2.3mn tonnes in 2013/14. This comes as weather during the harvest season has been favourable. Despite the larger production, the sector faces concerns over falling prices, in line with a steady decline in global prices. The sector has also invested little in ethanol production despite a 5% ethanol mandate from the government. Indeed, owing to high sugar prices when the ethanol policy was first created, resources were diverted to sugar. Consequently, even though the government is interested in expanding the country's ethanol quota, production is likely to only show a minor increase over the medium term. Export problems are also hurting farmers, as the combination of sugar export restrictions combined with poor logistics and commercial opportunities means that exports are often uncompetitive.
From a global perspective, we expect Latin American meat consumption to register the lowest rates of growth over our forecast period, with beef demand particularly subdued. Therefore, we expect correspondingly 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. 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 have revised our historical data for Argentine poultry and beef due to changes in historical data, but are maintaining our 2012/13 forecasts for mild production and consumption growth in both sectors. We believe the beef sector will see mild growth in 2012/13 to 2.8mn tonnes despite high feed prices, largely because returns remain positive. This comes on the back of rising feed cattle prices, which is likely to improve profitability for feedlots and ultimately result in more demand for feeder cattle from farms. A depreciating Argentine peso also is likely to help to boost returns for exporters. In terms of consumption, we are forecasting a minor increase to around 2.5mn tonnes in 2013. This is largely because of increased availability due to higher production and lower exports. Regarding exports, they are approaching all-time lows at 180,000 tonnes, with domestic consumption approaching 95% of domestic production. This is mainly a function of export restrictions and the consensus view that the Argentine peso remains overvalued.
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