2012-10-24 16:26:11 - New Food research report from Business Monitor International is now available from Fast Market Research
In recent years, Colombian agricultural producers have been hit hard by the effects of La Nina weather phenomenon, which has brought devastating rains, causing widespread damage to crops and infrastructure. Now, however, producers are preparing for the possible arrival of El Nino, which could bring with it much drier, hotter conditions. While there are hopes that this could lead to improved output, El Nino also brings risks of droughts and forest fires. The Agricultural Society of Colombia has announced emergency plans to give farmers access to credit to purchase equipment needed to cope with drought conditions. The regions likely to be most strongly affected are the Atlantic coast, the Andes, the coffee triangle in central Colombia and the Llanos Orientales
in the Eastern Plains. The north of Colombia is already experiencing excessively high temperatures, which are threatening to slow dairy production. The extreme weather conditions faced by producers in recent years highlights the climactic risks posed to the Colombia's agricultural sector; this is likely to become more pronounced as a result of climate change.
Full Report Details at
- www.fastmr.com/prod/479409_colombia_agribusiness_report_q4_2012. ..
* Weaker global conditions have led BMI to slightly reduce our forecast for Colombia's real GDP growth to 4.4% in 2012 and 4.3% in 2013. We believe that private consumption is undergoing a slight slowdown but will nevertheless remain relatively robust. Our long-term outlook for the Colombian economy is positive, and the country's attractive mining, oil and infrastructure sectors and business-friendly policies will ensure robust growth rates beyond 2013.
* We believe that demand for wheat grew by 0.7% year-on-year (y-o-y in 2011 to reach 1.41mn tonnes. We see consumption growing by 2.5% y-o-y in 2012 to 1.44mn tonnes, as demand for bread and bakery goods expands. Demand growth is forecast to slow to 1.2% y-o-y in 2013. Over our forecast period, we expect demand to grow by 12.6% from the 2011 level to reach 1.58mn tonnes in 2016, supported by an increase in disposable income.
* We expect corn output to increase by 16.9% y-o-y to reach 1.70mn tonnes in 2011/12, as the area harvested increases, boosted by the government's Pais Maiz plan. Aided by the programme, we see corn production expanding by a further 5.6% y-o-y in 2012/13 to 1.79mn tonnes. Through to 2016, we forecast production to rise by 40.3% from the low 2011 level to reach 2.04mn tonnes. This will be driven by continued improvements in yields as access to hybrid seeds and fertilisers increases, and as corn production expands into the Eastern Altillanura plains. Biotech seeds are also helping to boost yields; since 2007, the area planted to genetically modified corn has increased from 6,901 hectares to 59,239 hectares in 2011.
* We now believe that coffee production will fall to 7.80mn bags in 2011/12, which would represent the lowest harvest in more than 30 years, as poor weather once again hit output. That said, 2012/13 looks set to be a more promising harvest year. Newly renovated plantations will return to production, and weather conditions look set to be more favourable. We currently forecast production to increase by 16.0% y-o-y to 9.05mn tonnes in 2012/13. Out to 2016, production will be aided by programmes to replace aging plantations and improve resistance to disease. We forecast growth of 21.4% on the low 2011 level to reach 10.40mn bags by 2016.
* We currently forecast cocoa production to remain static in 2011/12 at 37,000 tonnes. Crop substitution schemes are being threatened by the falling price of cocoa, which is seeing the area planted with coca leaves creeping back up. Prices for cocoa in Colombia have fallen from around COP5,000 in December 2011 to COP3,000 in July 2012, as fears about supply restrictions in Cote d'Ivoire subside. By 2016, we forecast production to increase by 10.0% from the 2011 level to 40,700 tonnes.
Key Trends And Developments
In June 2012, the Colombian government announced a new COP4mn programme as part of the Pais Maiz plan to increase the country's grain security. The new programme will support producers in hedging corn prices and help them to become more competitive in light of the free trade agreement with the US. The agriculture minister, Juan Camilo Restrepo Salazar, stated that the new fund was designed to help to modernise the financing of agricultural production, develop a culture of protection against risk, and provide producers with protection against a fall in international prices. Subsequently, in July 2012, the minister announced a COP31mn fund to boost the competitiveness and production by improving fodder and pastures and modernising agricultural machinery.
Colombia continues to expand its production of ethanol in order to reduce consumption of fossil fuels. Following a weather-related decline in production of 14% y-o-y in 2010, ethanol production surged by 25% y-o-y in 2011 to reach 351mn litres. Production is forecast to increase to 355mn litres in 2012. A new distillery is set to come on line in 2013, expanding production by a further 300,000 litres per day. As a result, we see ethanol production rising to 410mn litres in 2013. New legislation which came into force on January 1 2012 mandates that all vehicles must use ethanol-blend fuel of 8-10%. The target for reaching 10% ethanol-blend fuel is now 2013; by late 2013 domestic production is likely to be sufficient to support this. The focus on ethanol production has seen sugar production fall as cane was diverted to make fuel. However, high sugar prices have helped to reduce this trend and we remain optimistic that the declines in sugar production will continue to level off.
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