Boston, MA -- (SBWIRE) -- 03/05/2013 -- Agriculture production and consumption will continue to be affected by the tightening credit conditions and declining purchasing power in Greece. While the uncertain economic outlook is causing more companies to shift their focus away from domestic demand, there are some bright spots in terms of exporting to emerging European countries for products such as poultry and dairy.

Key Forecasts

- Wheat production growth to 2016/17: 5.6% to 1.8mn tonnes. We expect modest growth owing to the difficult macro and political situation. Further deterioration in the country's debt crisis could present downside risks to our forecasts.
- Milk production growth to 2016/17: 5.5% to 2.2mn tonnes. Greece currently produces less milk than it is permitted to produce under EU quotas; however, we do not expect to see a surge in production. Gradual improvements in yields (albeit somewhat offset by herd reductions) will result in modest output gains out to 2017.
- Poultry production growth to 2016/17: 15.6% to 188,400 tonnes. We expect poultry production to benefit from the sector's relative affordability compared with pork and beef.
- 2013 real GDP growth: -2.7% (Up from -6.9% in 2012. Predicted to average -0.4% from 2012 to 2017.)
- 2013 consumer price inflation: -1.2% (Down from -1.1% in 2012. Predicted to average 0.3% from 2012 to 2017.)
- 2013 central bank interest rate: 0.5% (Same as 2013. Predicted to average 2.0% from 2012 to 2017.)

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Industry Outlook

In October 2012, MK Group, a Serbian holding company, renewed a bid to buy 82% of Hellenic Sugar Co from the Agricultural Bank of Greece. This offer is expected to be successful following a failed attempt in July 2012, when it was rejected due to regulatory obstacles. Further, the debt-laden Greek company is also increasingly less attractive as an investment; there is therefore a higher likelihood the bank will allow the transaction to go through. The acquisition would add Hellenic's two Serbian sugar plants to MK's three sugar production units that currently export close to half of the 220,000 annual output.

Weakening economic prospects in Greece are taking a toll on the country's dairy industry. Dairy giant Fage Dairy announced in October 2012 that an internal restructuring of its operations, which involved shifting its headquarters from Greece to Luxembourg, was finally completed. While the company's Greek operations will continue to fall under the control of its subsidiary, Fage Dairy Industry SA, this move is a clear indication of the lack of confidence in investors towards Greece's economic outlook in the longer term.

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