2013-02-26 01:44:07 - Thailand Agribusiness Report Q2 2013 - New Market Research Report

BMI View: Thailand will maintain its status of key Asian agricultural provider in the coming years, as the sector boasts from strong export opportunities and government support as well as an efficient foodproducing industry. The sugar and livestock sectors hold promising growth stories. However, the government's interference in the market, especially in the rice sector, will hinder the competitiveness of Thai's production compared to its Asian rivals. Although rice farmers will directly gain from the rice guarantee buyback-programme, we are uncertain about the long-term effectiveness of these policies in enhancing Thai food-producing efficiency as well as boosting the country's export competitiveness. Thailand will remain a key rice exporter, but may lose out to secondary exporters due to a growing instability

in its trade policy.

Key Forecasts

* Poultry production growth to 2016/17: 20.7 % to 1.9mn tonnes. This growth will largely be due to increased private investment in the sector. The lift of an eight-year EU ban on uncooked imports in April 2012 will allow imports of Thai-produced poultry and other food products and give the industry more impetus to expand production.
* Milk production growth to 2016/17: 28.3% to 1.3mn tonnes. Dairy herd expansion and yields improvements will support growth.
* Rice consumption growth to 2016/17: 20.3% to 12.5mn tonnes. Rice will remain the staple food for Thais, and there is little opportunity for substitution. Thais are more likely to cut non-essential items such as meat and soft drinks when economic times are tough.
* BMI universe agribusiness market value: 22.4mn in 2013; growth to average 4.2% annually to 2016/17.
* Real GDP growth in 2013: 2.9% chg y-o-y; down from 3.3% in 2012, forecast to average 2.8% to 2017.
* Consumer price index in 2013: 2.9% average; down from 3.3% in 2012; forecast to average 2.8% from 2012 to 2017.


Full Report Details at
- www.fastmr.com/prod/541282_thailand_agribusiness_report_q2_2013. ..


Key Revisions To Forecasts

* Sugar production forecast revised down, to 9.6mn tonnes (compared with a previous forecast of 11.0mn tonnes). Thai sugar supply prospects are deteriorating due to poor rains during the sugarcane growing season (June-July), followed by the recent slowing down of sugarcane crushing on the back of heavy rains.
* Rice production forecast revised down, to 20.7mn tonnes (compared with a previous forecast of 21.2mn tonnes). Particularly dry weather in the north east region during the main crop growing season (May-October) hampered yields and damaged planted area.

Key Developments

The Thai poultry sector has been under pressure since the beginning of 2012, as local broiler prices are low due to oversupply while production costs reached high levels following skyrocketing international grain prices. We expect livestock companies' margins to improve in 2013, as local prices should maintain the rebound initiated in November 2012. Processors have been slowing down poultry production since the start of H212 in order to address the supply glut. Prices are also likely to be supported by higher export volumes to the EU, which will indirectly decrease domestic supply.

After being the top rice exporter for decades, Thailand dropped to the third place among rice exporters in 2012 mainly because of its high export prices. In the 2012/13 season, exports are expected to recover mildly from the 2011/12 trough caused by Thai rice's uncompetitive price, as we expect the current accumulation of rice stocks in Thailand to have reached an unsustainable level. In the medium term, we believe this is the start of a long-term decline in Thailand's contribution to the global rice trade. The sustained improvements from Vietnam should increase its competitiveness compared with Thailand and eventually help the country come closer to the top rice exporter position within our five-year forecast period.

Thailand has enjoyed sound growth in its dairy sector over the past few years, with production expanding 4.5% annually on average in the past 10 years. This successful growth story has been largely on account of high tariff barriers used by the government to shield the industry from foreign competition. However, the Association of South East Asian Nations (ASEAN) Economic Community (AEC)'s impending import liberalisation in 2015 - along with the implantation of the ASEAN-Australia-New Zealand free trade agreement that same year - is causing considerable anxiety within the sector. We believe that Thai dairy farmers' fears are relatively overplayed, as farmers are already relatively efficient by regional standards. However, the country will certainly face stiff competition from Australia and New Zealand given the competitiveness of their products.

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