2013-12-14 12:50:15 - Fast Market Research recommends "South Africa Agribusiness Report Q1 2014" from Business Monitor International, now available
We hold a positive view on the South African agricultural sector and see particular growth potential in the grain and livestock sectors. Both sectors' growth will be boosted by regional export demand. The sugar sector also presents interesting growth opportunities, mainly thanks to renewed investment and improved technologies. Overall, the country's grain and livestock producers have been hit by recent hikes in grain prices and subdued corn supply on the domestic market. Margins have plummeted, and foreign competition for exports has made it even more difficult for producers to stay afloat. We believe the country's main companies, AFGRI, Rainbow Chicken and Astral Foods, can only see profitability bounce from current subdued levels.
Full Report Details at
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Sugar production growth to 2016/17: 15.5% to 2.2mn tonnes. This is based on our view that, over the long term, macroeconomic fundamentals, together with the increasing use of sugar for biofuels, will have a positive impact on sugar production levels.
* Poultry consumption growth to 2017: 23.8% to 2.1mn tonnes. As more South African consumers move towards diets containing higher levels of protein, poultry (predominantly chicken but also turkey and duck) is increasingly being viewed as a convenient, healthy and affordable source of nutrition.
* Corn production growth to 2016/17: 16.1% to 14.4mn tonnes. This relatively high growth rate reflects the influence of base effects. Growth will be supported by an improved macroeconomic outlook and the introduction of new corn varieties that generate higher crop yields.
* Real GDP growth: 2.2% in 2013, down from 2.5% in 2012; predicted to average 2.8% over the five years to 2017. GDP per capita is expected to rise to US$10,895 in 2017 (from an estimated US$7,339 in 2012).
* Unemployment: 25.0% in 2013, from 26.0% in 2012, then to 22.0% by 2017.
* Consumer price inflation: 6.0% in 2013, up from an average of 5.7% in 2012.
* BMI universe agribusiness market value: 6.4% year-on-year (y-o-y) decrease to US$9.4bn in 2012/13; growth forecast to average 2.6% annually between 2011/12 and 2016/17.
We have revised up our forecast for 2013/14 South African sugar production to 2.3mn tonnes (from 2.1mn tonnes previously) owing to favourable weather conditions and strong yields and plantings. This rise in production will increase South Africa's production surplus from 142,900 tonnes in 2012/13 to 405,800 tonnes in 2013/14, boosting the country's export potential. The country's largest sugar producers, Illovo Group and Tongaat Hulett, reported strong export volume growth in Zimbabwe and Mozambique, even though values were affected by lower sugar prices and unfavourable exchange rates.
After months of disputes and another set of disappointing results for the large local producers, the country decided to increase duties on whole chicken shipped from overseas. This is aimed at helping local margins for producers and halting recent job cuts in the industry. The country will raise tariffs on imports of whole birds to 82%, the maximum allowed, from 27%, according to local industry sources. The duties apply to shipments except those from EU nations and are effective immediately. The charge on chicken-carcass imports was lifted to 31% from 27%, while that on boneless cuts increased to 12% from 5% previously.
We see South African corn production reaching 11.4mn tonnes in the 2012/13 season, the harvest for which runs May-August. This represents a y-o-y decrease. There have been concerns about maize production for several months, as local observers noted dry weather in the country's key growing regions as early as mid-March. The dryness continued into September to the point where the north-west province (generally responsible for one-third of all corn production) declared a state of emergency due to droughts. The official declaration means emergency relief can be relayed to both commercial and small farmers, with total applications for aid approaching 20,000 as of late September.
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