2014-01-07 20:45:47 - Recently published research from Business Monitor International, "Brazil Agribusiness Report Q1 2014", is now available at Fast Market Research
Overall, we believe there is the most potential for growth in Brazil's soybean, livestock/dairy and coffee segments over the medium term. This is because of a shift in food consumption growth towards Asia for these items, while demand growth from traditional buyers will be subdued. We are more cautious about the sugar cane sector as a whole, as mills are suffering from low profitability linked to low global sugar prices and heavy debt burdens. Only the ethanol industry will encourage cane production growth, but it is still unclear if the government will continue to see biofuels as a priority in its energy mix in the medium term. In the short term, we highlight downside risks to the coming soybean harvests,
especially as infrastructure bottlenecks could limit export potential in the coming years.
Full Report Details at
- www.fastmr.com/prod/754708_brazil_agribusiness_report_q1_2014.as ..
* Soybean production growth to 2016/17: 31.4% to 87.4mn tonnes. This will come as more area is shifted from corn to soy in the coming years on the back of an extremely competitive soy/corn ratio by historical standards.
* Poultry consumption growth to 2017: 18.9% to 10.9mn tonnes. A growing middle class and the general preference for poultry over all other meat groups because of its health properties and lower prices will encourage demand growth.
* Milk production growth to 2016/17: 29.5% to 40.8mn tonnes. Brazil has the potential to become a significant exporter of dairy products over the forecast period to 2017 if its milk collection and processing infrastructure can be brought up to international standards.
* 2014 real GDP growth: 2.5% (up from 2.0% in 2013).
* 2014 consumer price inflation: 5.6% average (down from 6.2% in 2012)
* BMI universe agribusiness market value: 3.0% year-on-year (y-o-y) decrease to US$183.6bn in 2014, forecast to increase by an average of 2.3% annually between 2011/12 and 2016/17.
Revisions to our forecasts:
* Barley: 2013/14 production revised up from 295,000 tonnes to 330,000 tonnes on better-than-expected yields.
* Wheat: 2013/14 production revised down from 5.1mn tonnes to 4.8mn tonnes as adverse weather destroyed parts of the crop.
* Cocoa: 2012/13 production revised down from 220,000 tonnes to 200,000 on the recent outbreak of witch's broom; 2013/14 production revised up from 200,000 tonnes to 230,000 tonnes owing to a faster-than-expected recovery.
* Cotton: 2013/14 production revised up from 7.0mn bales to 7.4mn bales as superior technology and improved pesticide controls will help boost yields.
We have revised down slightly our forecast for Brazilian sugar production in 2013/14 in line with the latest estimates from the country's sugar association, UNICA. We now forecast production of 38.0mn tonnes (compared with 39.7mn tonnes previously), a small decrease from 2012/13's output. Frosts and rainy weather in May and June 2013 led to reduced sugar levels; this, combined with the more widespread use of mechanised harvesting, delayed sugar crushing. The country's sugar crop also was affected by pest infestations (primarily broca, or cane borers, and leafhopper), which contributed to lower cane quality in some areas.
A decline in Brazilian wheat production in 2012/13 was a result of adverse weather that limited area harvested as well as yields. The USDA estimates area harvested decreased to 1.9mn hectares (ha) in 2012/13, compared with 2.2mn ha in 2011/12. Yields were estimated at 2.3 tonnes/ha in 2012/13, compared with 2.7 tonnes/ha in 2011/12. The estimated 2012/13 wheat output is 18.8% lower than the five-year average and takes the country's production deficit to a record of 6.5mn tonnes, compared with 5.5mn tonnes on average over the past five years.
We maintain our forecast for Brazil's beef production to increase by 3.0% y-o-y to 10.1mn tonnes in 2013/14 thanks to the greater availability of cattle for slaughter, stable domestic cattle prices, and the ongoing depreciation of the Brazilian currency. The USDA forecasts an increase of 2.5% in cattle inventories and 1.5% growth in the calf crop in 2013/14. Local industry sources have reported that farmers have invested in productivity thanks to support from the government in the form of subsidised interest rates, encouraging pasture improvements and the use of quality genetics.
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