2013-12-04 13:03:26 - Recently published research from Business Monitor International, "Bangladesh Agribusiness Report Q1 2014", is now available at Fast Market Research
We hold a cautious outlook towards the Bangladesh agriculture sector and believe there is a need for the industry to strike a balance between being over-protectionist around key agriculture sectors, such as sugar, and helping other subsectors to cope with increased foreign competition. Indeed, while protection of the domestic sugar sector has led to the constant over-stocking of the agriculture product especially in government mills, the strict credit rules pertaining to the poultry sector have somewhat disadvantaged the sector compared with foreign firms.
Over the long term, given that the industry comes from a low base, there is much more room for growth and improvement in sub-sectors such as grains and livestock. That said, as the agriculture sector in Bangladesh employs
close to 70% of the working population, but contributes only 20% of the country's GDP, there is also an obvious need for improvement in operational efficiency.
Full Report Details at
- www.fastmr.com/prod/723424_bangladesh_agribusiness_report_q1_201 ..
* Wheat consumption growth to 2017: 13.3% to 4.6mn tonnes. The main drivers will be increased per capita consumption and population growth.
* Sugar production growth to 2016/17: -9.3% to 68,000 tonnes. With farmers increasingly planting more profitable cash crops such as cotton, we do not foresee the trend of declining sugar production reversing any time soon.
* Poultry production growth to 2016/17: 17.2% to 232,000 tonnes. Better economic conditions and higher disposable incomes will drive demand for meat. Better disease control is also expected to support the recovery of the sector.
* 2014 real GDP growth: 6.4%, up from 6.0% in 2012. Predicted to average 6.3% from 2013 to 2017.
* 2014 consumer price inflation: 7.5% year-on-year (y-o-y) average, down from 7.7% in 2013. Predicted to average 7.6% from 2012 to 2017.
* 2014 central bank policy rate: 6.75% average, down from 7.25% in 2013. Predicted to average 6.9% from 2012 to 2017.
* BMI universe agribusiness market value: US$22.9bn in 2014 (up from US$21.5bn in 2013; forecast to grow annually by 4.0% on average to 2017)
The state wheat importer has imposed tougher delivery rules to ensure that grain supplies are delivered by the winning bidder in a timely fashion. This should ensure that the government fulfils the forecast of 850,000 tonnes of wheat imports in 2012/13, up from 350,000 tonnes in 2011/12. This increase is largely because the state's grain importer did not reach the last target as a result of supply failure by traders.
The lower prices of sugar have prevented some government-owned sugar mills from disposing of fast-melting sugar stocks instead of selling them. For sugar mills such as Ranpur Sugar Mills in Gaibandha, stocks accumulated in the past two years when prices were higher are more likely to be disposed of than sold at a loss, with dealers unwilling to draw sugar from the mill at BDT50/kg as the current selling price of sugar is BDT44/kg. The price mechanism in Bangladesh has been a long debated topic in the government but BMI believes that unless there are drastic consequences of a capped price system such as in Bangladesh, then this policy should be here to stay.
The domestic poultry industry is quickly losing its competitive edge against foreign companies. According to industry resources, six foreign companies comprise 45% of the total industry having entered three years ago. The companies are Indian Godrej, Tata, Seguna, Omrith, Chinese New Hope and Charoen Pokphand Group. As they are able to procure loans at lower rates than Bangladeshi poultry players (around 5% compared with 17%) and have larger pools of funds, they have been able to quickly gain a foothold in the industry, especially as they are better-equipped, with high-tech machinery and composite feed. The Bangladesh Poultry Industries Association reports that the number of poultry farms has fallen to 54,000 from 115,000 in 2011.
The government's farm credit policy, which currently excludes the poultry sector from its eligible credit-worthy subsectors, has also been accused of being a stumbling block for the domestic industry as it tries to respond to the growing foreign competition.
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