2013-03-22 17:08:01 - Fast Market Research recommends "Philippines Agribusiness Report Q2 2013" from Business Monitor International, now available

BMI View: We hold a positive view on Philippines agribusiness sector in the long term, given the country's potential for new sectors expansion, such as palm oil. We particularly like the outlook for sugar production, and believe the livestock sector will continue to show 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: the government and rebel group's recent peace deal could inspire investors' confidence and develop the region's strong agricultural potential. However, lingering issues regarding business environment and security

issues in Mindanao will still be a break to the development of the island.


Full Report Details at
- www.fastmr.com/prod/552368_philippines_agribusiness_report_q2_20 ..


Key Forecasts

* Sugar production growth to 2016/17: 29.2% to 2.9mn tonnes. Sugar production expansion will be mainly driven by improvements in yields.
* Poultry production growth to 2016/17: 12.1% to 889,600 tonnes. Domestic output will fail to keep up with demand, as production is hampered by high costs and poor infrastructure. a greater proportion of the country's needs will have to be supplied by imports.
* Fluid milk consumption growth to 2017: 31.9% to 84,400 tonnes. This growth will be driven by rising incomes and increasing awareness of the health benefits of milk, as well as government action designed to increase consumption.
* BMI universe agribusiness market value: 3.0% y-o-y decrease to US$17.0bn in 2012/13, forecast to grow on average 2.2% annually between 2012/13 and 2016/17.
* 2013 real GDP growth: 5.0% (down from 6.0% in 2012; predicted to average 4.6% over 2013-2017).
* 2013 consumer price inflation: 3.7% y-o-y (up from 3.0% y-o-y in 2012; predicted to average 3.9% over 2013-2017).
* 2013 central bank policy rate: 3.5% (same as in 2012; predicted to average 3.9% over 2013-2017).

Industry Developments

We believe the peace deal signed between the Philippine government and the rebel group MILF over the conflict-wracked Region of Mindanao could help revive agricultural investment in the region. More specifically, it could help Malaysian and Indonesian palm oil producers to implement their long-help plans to develop palm oil production on the island. However, we remain cautious on the business environment and security issues in the region of 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.

In early December, typhoon Bopha passed through the southern Philippines, bringing heavy rains and wind across the island of Mindanao, a key grains and rice growing region. However, the damages to the 2012/13 crops were limited. According to the Philippine Department of Agriculture and industry sources 35,000 to 42,000 hectares (ha) of corn area and 28,000ha of rice were damaged. Losses could amount 77,000-135,000 tonnes for corn and 17,000 tonnes for paddy rice. We maintain our 2012/13 production forecast for both commodities.

The Philippines Board of Investments (BOI) has granted perks to two agribusiness projects aimed at boosting the country's poultry production. Thai-owned Charoen Pokphand Foods (CPF) and Filipino company United BLC were deemed eligible for incentives such as tax breaks on new investments in the poultry industry. This could be a sign of a more investing-friendly environment in the agricultural sector, and of a loosening stance regarding foreign agricultural investment.

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