Boston, MA -- (SBWIRE) -- 01/19/2013 -- Drought conditions in Europe, high operating costs and bleak economic prospects have shaped our overall cautious outlook for the Italian dairy and livestock sectors. We see production of key grains (such as wheat and corn) growing steadily at the expense of rice, as falling domestic rice prices and uncertainty over future Common Agricultural Policy payments make grain cultivation more attractive to farmers. Overall, we expect wheat, corn, poultry and cheese to be the outperforming sectors over the forecast period to 2017.

Key Forecasts

- Wheat production growth to 2016/17: 12.5% to 7.45mn tonnes. Production is expected to rise as prices stay elevated, driven by growing demand for food and biofuels. Production of cellulosic ethanol, of which Italy is soon set to become a world leader, also will very likely help to boost wheat production.
- Cheese consumption growth to 2016/17: 20.6% to 1.79mn tonnes. Italian per capita cheese consumption, at 28.1kg, is on a par with France and Germany and higher than northern European countries such as Sweden and the UK.
- Poultry production growth to 2016/17: 21.8% to 1.49mn tonnes. Poultry is a relatively cheap meat; as such, we expect continued strong demand amid the tough economic climate.
- 2013 real GDP growth: 0.2% year-on-year (y-o-y), compared with the -1.6% expected in 2012.
- 2013 consumer price index: 1.5% ave, up from 1.7% expected for 2012.
- BMI universe agribusiness market value: 0.38% y-o-y decline to US$16.9bn in 2012/13, forecast to grow on average 1.3% annually between 2013/14 and 2016/17.

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Industry Developments

According to estimates from the Italian cereals body Anacer, imports of key grains such as wheat, maize and barley into Italy fell 18% y-o-y to EUR1.48bn (US$1.91bn) during H112. Demand for imported wheat fell from 7.37mn tonnes in H111 to 6.83mn tonnes during the same period in 2012, while demand for maize declined from 1.64mn tonnes to just over 1mn in H112. Grain traders cited the widespread lack of liquidity in the Italian market for the reduction in trade volumes. As a result of these declines, Italy's grain-trade deficit shrunk from EUR1.14bn in H111 to EUR830.6mn in the first half of 2012.

The country's farmers' group Coldiretti has revealed that the domestic agricultural sector has suffered damages of more than EUR200mn from the May 2012 earthquake that struck northern Italy. Of this, the biggest damages were incurred by producers of Parmigiano Reggiano and Grana Padano cheeses. Coldiretti estimates that nearly 10% of the production of Parmigiano Reggiano and 2% of the Grana Padano cheeses - both of which were undergoing the two-year-long seasoning process in a warehouse - was affected.

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