New Food research report from Business Monitor International is now available from Fast Market Research
Boston, MA -- (SBWIRE) -- 07/27/2012 -- BMI View: While we view positively Malaysia's strategy for the agriculture sector, namely climbing the value chain in the long term, we believe that much more must be done to keep it ahead of the competition. As an example of the country's plans for the sector, we highlight a government proposal to further explore the use of palm oil waste for industrial sugar. We also believe the privatisation of the sector is a good step. Indeed, plantation giant Felda Global Ventures Holdings is set to raise US$3bn in one of the largest initial public offerings ever seen in the country. This indicates the enormous potential and viability in the sector.
- Palm oil production growth to 2015/16: 17.5% to 21.4mn tonnes. Companies are expected to replant mature estates, and yields are likely to improve as a result of better technology. Domestic refining capabilities will also need to improve in response to the new tax regime change in Indonesia, which is aimed at boosting the refining industry.
- Poultry consumption growth to 2016: 7.3% to 1.3mn tonnes. More investment in the sector, as outlined in the 10th Malaysia Economic Plan, will boost growth.
- Sugar consumption growth to 2016: 13.2% to 1.6mn tonnes. Greater disposable incomes will allow Malaysians to spend more on processed foods with high sugar content such as soft drinks and sugar confectionery.
- 2012 real GDP growth: 3.3% (down from 5.1% in 2011, forecast to average 4.3% to 2016).
- 2012 consumer price inflation: 2.5% (up from 2.6% in 2011, forecast to average 2.5% to 2016).
- Central bank policy rate: 2.75% (down from 3.0% in 2011, forecast to average 3.3% from now until 2016).
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Current consumption patterns reflect that about 5% of domestically consumed palm oil is channelled for food use, 80% for cooking oil and 20% for margarine/shortening. We believe the ratio will increasingly shift in the favour of industrial use as the government has taken active steps to increase palm-based biodiesel demand, including starting to subsidise B5 (5% palm-based biodiesel and 95% fossil fuel) at the pump. That said, we expect this to be a slow process, especially on the back of reports that the domestic biodiesel industry is struggling owing to low prices of the vegetable oil. As such, the industry is operating at a reported 10% capacity. Without government subsidies, Malaysian biodiesel will have difficulty competing in overseas markets against Thailand, Indonesia, the Philippines, Argentina and Colombia.
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