Boston, MA -- (SBWire) -- 06/14/2013 --We maintain our highly cautious view for the Spanish agribusiness sector, as we see the grains, livestock and dairy segments beings affected by the country's challenging macroeconomic environment, emerging regulatory framework and unfavourable input-output price ratio. However, we expect corn, processed dairy and pork segments to be areas of growth in the sector over the medium-tolonger- term, bolstered partly by changing consumption patterns and partly regulatory support.
Key Forecasts
- Wheat production to 2016/17: -6.6% to 6.7mn tonnes. Although we believe adverse weather conditions in 2012/13 will not be repeated, production is likely to grow only modestly over our forecast period to 2016/17.
- Cheese consumption to 2017: 19% to 431,600 tonnes. Cheese typically has been consumed most during social occasions in Spain. It is now becoming increasingly popular and a household staple.
- Pork production to 2016/17: 7% to 3.8mn tonnes. We note that two new EU directives on swine farming are likely to force some less efficient producers to leave the industry.
- 2013 GDP growth: -0.2% (from -2.1% growth expected in 2012).
- 2013 consumer price index: 1.3% annual average (from 1.4% in 2012).
- BMI universe agribusiness market value: 9.4% year-on-year (y-o-y) decline to US$16.3bn in 2012/13, forecast to grow marginally by an average 0.9% y-o-y between 2013/14 and 2016/17.
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Industry Developments
In March 2013, Spanish Food, Agriculture and Environment Director General, Fernando Burgaz, revealed that the government's efforts to reform the dairy sector are moving in the right direction. Milk deliveries in the country were up 2.89% during December 2012, while farm gate prices also pushed up by 1.8% in the same month, the association estimates. Burgaz, however, also highlighted that more plans are currently in the pipeline to improve the sector further. A 'Welcome to the Countryside' initiative is being undertaken to add value to farm produce through a marketing strategy targeted at Spanish consumers. Additionally, measures are being taken to strengthen quality assurance, restructuring the supply chain and improving market information between producers and consumers.
The EU-27 2013/14 wheat crop is set to face downside risks, as UK output is expected to be downgraded on the back of excessive rains. Although we are maintaining our forecast for a mild increase in the EU wheat crop to 132mn tonnes, even a small downgrade to production would take the market into deficit for the 2013/14 season following a nearly 40mn tonne deficit in 2012/13. A downgrade to the EU crop would also lead to an increase in the spread between benchmark Paris and Chicago prices. The subdued forecasts for EU production growth inform our forecasts for higher average wheat prices in 2013.
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Now Available: Spain Agribusiness Report Q2 2013
New Food market report from Business Monitor International: "Spain Agribusiness Report Q2 2013"