2013-09-12 09:40:57 - New Food research report from Business Monitor International is now available from Fast Market Research
BMI View: We hold a positive view on the Philippines agribusiness sector in the long term given the potential for expansion of new sectors, such as palm oil. We particularly like the outlook for sugar production and believe the livestock sector will continue to post healthy growth rates. The Philippines' vast consumption market, along with strong government support, will foster domestic and foreign investment and favour output expansion. However, backyard farming and infrastructure problems, especially transport costs, will continue to hamper the sector's growth. This paradox is well illustrated in the island of Mindanao: a recent peace deal between the government and a rebel group could inspire investor confidence, which would help to develop the region's strong agricultural potential. However,
lingering issues regarding business environment and security issues in Mindanao will still hinder the development of the island.
Full Report Details at
- www.fastmr.com/prod/673176_philippines_agribusiness_report_q4_20 ..
* Sugar production growth to 2016/17: 29.2% to 2.9mn tonnes. Sugar production expansion will be mainly driven by improvements in yields.
* Pork production growth to 2016/17: 13.4% to 1.5mn tonnes. Growth will be driven by an increase in commercial farming, as well as rising domestic consumption.
* Rice consumption growth to 2017: 3.3% to 13.3mn tonnes. Per capita consumption growth is expected to slow as the government encourages the consumption of other goods (such as corn and cassava) to limit demand as part of the country's self-sufficiency strategy. However, the combination of strong population growth and only moderate production growth means that the country will remain one of the world's largest net importers of rice.
* BMI universe agribusiness market value: 1.9% year-on-year (y-o-y) decrease to US$17.35bn in 2013, forecast to grow on average 2.0% annually between 2013 and 2017.
* 2013 real GDP growth: 5.9% (down from 6.8% in 2012; predicted to average 5.2% over 2013-2017).
* 2013 consumer price inflation: 3.2% y-o-y (up from 3.1% y-o-y in 2012; predicted to average 3.8% over 2013-2017).
* 2013 central bank policy rate: 3.50% (same as in 2012; predicted to average 3.90% over 2013-2017).
Key Revisions To Forecasts
* 2012/13 and 2013/14 rice production revised up, to 11.3mn tonnes and 11.6mn tonnes respectively (compared with 11.0mn and 11.3mn tonnes previously). Good growing conditions supported better-thanexpected output in 2012/13. We revised up the 2013/14 forecast following 2012/13's good year.
We see significant opportunities for dairy-exporting countries to satisfy the Philippines' growing demand for dairy products. The country will maintain its ambitious support to its production sector, with the aim that domestically produced milk can satisfy local liquid milk consumption. However, the market of imported dairy products has bright days ahead, as the Philippines' industry is relatively uncompetitive and unable to meet soaring demand.
In March 2013, the Sugar Regulatory Administration (SRA) signed a memorandum of agreement with the Department of Agrarian Reform for the establishment of 29 new sugar block farms, mostly in Visayas and Mindanao. This is the second phase of the block farming scheme initiated by the SRA to make local sugar production more efficient and less costly by grouping small sugar plots into integrated farming blocks.
Under this system, small farms of less than 10 hectares (ha) will be consolidated through joint ventures in order to form 30-50ha blocks. Cooperatives are then provided with machinery, technical advice on sugarcane growing practices and easier access to credit.
Meat retail prices have remained elevated in recent months in the Philippines as a result of higher production costs and lower output from backyard farms. High feed prices as a result of elevated international grain prices have turned many local backyard farmers, who can account to up to 80-89% of pork domestic output in certain regions, away from production. As a result, we expect 2012/13 poultry and pork production to slow after the bumper 2011/12 season. We see poultry output coming in at 816,900 tonnes, up 3.4% y-o-y and pork production at 1.4mn tonnes, up 2.8% y-o-y. We believe meat prices will stay elevated in coming months, driven by historically high grain prices and tighter supply.
We believe the peace deal signed between the Philippine government and the rebel group Moro Islamic Liberation Front (MILF) over the conflict-wracked Mindanao island could help to revive agricultural investment in the region. More specifically, it could help Malaysian and Indonesian palm oil producers implement their long-held plans to develop palm oil production on the island. However, we remain cautious regarding business environment and security issues in Mindanao. First, the deal is only a first step, as the two sides need to agree on the scope and powers of the new autonomous regions. Second, infrastructure is still lacking, and any establishment on the island would have to include investment in transport. Lastly, there are high operational risks to such projects, mainly related to security issues. In spite of the 2003 ceasefire between the government and the MILF, terrorist attacks against foreign businesses are still frequent, mainly because other militant groups are still active and pose a risk for companies in the area.
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