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New Market Research Report: Saudi Arabia Agribusiness Report Q1 2014


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2013-12-10 12:41:47 - New Food market report from Business Monitor International: "Saudi Arabia Agribusiness Report Q1 2014"

Saudi Arabia will increasingly be dependent on global grain supply, as the country has decided to phase out domestic grain production in a bid to preserve the country's water supply. The government has not abandoned its strategy of self-sufficiency in poultry and has been ramping up incentives to expand capacity production. This strategy has paid off, as the three major producers in the sector have all started heavy investment initiatives. We believe Saudi Arabia will find sufficient grain supply from the Black Sea region and the EU to supply its meat and food processing industry in the coming years. However, the country will remain highly vulnerable to volatile grain and feed prices. Recent spikes in feed prices have turned us

more cautious on margins for dairy and livestock producers in the country, especially those that import inputs from abroad.

Full Report Details at
- www.fastmr.com/prod/723619_saudi_arabia_agribusiness_report_q1_2 ..

Key Forecasts

* Wheat production growth to 2016/17: -60.2% to 437,400 tonnes. Wheat production will continue to decrease in the coming years on the back of the government's programme to phase out production.
* Corn consumption growth to 2017: 34.6% to 2.7mn tonnes. Corn consumption will be mainly driven by the strong growth of the poultry sector, as corn is a major feed ingredient.
* Poultry production growth to 2016/17: 79.7% to 808,500 tonnes. This spectacular growth will mainly come from the effects of three major poultry farms' (Al-Watania, Al-Fakieh and Almarai) capacity expansion, along with continuous government support.
* BMI universe agribusiness market value: US$2.23bn in 2014, forecast to increase by 5.9% on average per year between 2013 and 2017.
* 2014 real GDP growth: 4.3% year-on-year (y-o-y), up from 3.6% in 2013, projected to average 3.2% from 2013 to 2017.
* 2014 consumer price inflation: 4.0% average, down from 4.1% in 2013, projected to average 4.0% 2013 to 2017.

Key Revisions To Forecasts

* We now cover historic and forecast data for beef and veal production and consumption in Saudi Arabia. Beef production is very low in the country and broadly stagnates around 25,000 tonnes a year, due to strong constraints to output. Costs of production are elevated due to the constant heat and the need to import the entire feed needs. Out to 2016/17, we forecast production to grow by 10.0% on the 2011/12 level, to 27,500 tonnes.

Industry Developments

* Saudi Arabia extended its efforts to build farming operations abroad by buying Continental Farmers Group at a hefty premium in March 2013. A consortium of Saudi groups - comprising dairy giant Almarai, grain importer Al Rajhi and Salic, the agriculture arm of the country's sovereign wealth fund -agreed to pay US$92mn to acquire this grain producer located in northern Poland and western Ukraine. Due to serious land and water availability issues, along with high consumption of basic agricultural products, Saudi Arabia is looking to boost its investments in foreign agricultural production, especially in Africa and Latin America.
* We forecast Saudi Arabia's poultry sector to record strong growth in the coming years, driven by the ongoing wave of investment in capacity expansion, continuous government support and the robust domestic consumption demand. The fast production growth - along with the temporary downturn in 2012 - can be best seen through Almarai's poultry business performance. The segment has been outperforming Almarai's more traditional businesses in terms of revenue growth since it entered the market in 2010. Despite this growth, the poultry sector remains unprofitable given the large investment and the slowness of flock building.
* Saudi Arabia is eager to import foreign-bred cattle for its livestock and dairy production. The country procures cattle through imports while investing in suppliers' countries in order to secure stable supply. For example, much of dairy and poultry farm Almarai's feedstock comes from South America. There have been some reports that Saudi Arabia could be planning to implement a joint project in order to support cattle breeding farms in Kazakhstan. The country could be ready to invest US$20mn in the construction of calving facilities for cattle breeding.
* Saudi Arabia's Almarai has been one of the strongest performing major companies in the Gulf food and drink space over the past few years. It has a very strong dairy business and has taken some positive steps to diversify both in terms of geography and business categories, spending a reported US$1bn since 2007 on diversification. It looks well placed to continue growing domestically, in the wider Gulf region, and further out into the Middle East and North Africa. Its growing exposure to the booming poultry sector, along with a promising bakery business, bodes well for the company's future performance. However, its exposure to food inflation and especially to international grain and feed prices poses a key threat to margins.

About Business Monitor International

Business Monitor International (BMI) offers a comprehensive range of products and services designed to help senior executives, analysts and researchers assess and better manage operating risks, and exploit business opportunities, across 175 markets. BMI offers three main areas of expertise: Country Risk BMI's country risk and macroeconomic forecast portfolio includes weekly financial market reports, monthly regional Monitors, and in-depth quarterly Business Forecast Reports. Industry Analysis BMI covers a total of 17 industry verticals through a portfolio of services, including in-depth quarterly Country Forecast Reports. View more research from Business Monitor International at www.fastmr.com/catalog/publishers.aspx?pubid=1010

About Fast Market Research

Fast Market Research is an online aggregator and distributor of market research and business information. We represent the world's top research publishers and analysts and provide quick and easy access to the best competitive intelligence available.

For more information about these or related research reports, please visit our website at www.fastmr.com or call us at 1.800.844.8156.


Author:
Bill Thompson
e-mail
Web: www.fastmr.com
Phone: 18008448156

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