Boston, MA -- (SBWIRE) -- 12/11/2013 -- We hold a cautious outlook towards the Bangladesh agriculture sector and believe there is a need for the industry to strike a balance between being over-protectionist around key agriculture sectors, such as sugar, and helping other subsectors to cope with increased foreign competition. Indeed, while protection of the domestic sugar sector has led to the constant over-stocking of the agriculture product especially in government mills, the strict credit rules pertaining to the poultry sector have somewhat disadvantaged the sector compared with foreign firms.

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Over the long term, given that the industry comes from a low base, there is much more room for growth and improvement in sub-sectors such as grains and livestock. That said, as the agriculture sector in Bangladesh employs close to 70% of the working population, but contributes only 20% of the country's GDP, there is also an obvious need for improvement in operational efficiency.

Key Forecasts

- Wheat consumption growth to 2017: 13.3% to 4.6mn tonnes. The main drivers will be increased per capita consumption and population growth.
- Sugar production growth to 2016/17: -9.3% to 68,000 tonnes. With farmers increasingly planting more profitable cash crops such as cotton, we do not foresee the trend of declining sugar production reversing any time soon.
- Poultry production growth to 2016/17: 17.2% to 232,000 tonnes. Better economic conditions and higher disposable incomes will drive demand for meat. Better disease control is also expected to support the recovery of the sector.
- 2014 real GDP growth: 6.4%, up from 6.0% in 2012. Predicted to average 6.3% from 2013 to 2017.
- 2014 consumer price inflation: 7.5% year-on-year (y-o-y) average, down from 7.7% in 2013. Predicted to average 7.6% from 2012 to 2017.
- 2014 central bank policy rate: 6.75% average, down from 7.25% in 2013. Predicted to average 6.9% from 2012 to 2017.
- BMI universe agribusiness market value: US$22.9bn in 2014 (up from US$21.5bn in 2013; forecast to grow annually by 4.0% on average to 2017)

Key Developments

The state wheat importer has imposed tougher delivery rules to ensure that grain supplies are delivered by the winning bidder in a timely fashion. This should ensure that the government fulfils the forecast of 850,000 tonnes of wheat imports in 2012/13, up from 350,000 tonnes in 2011/12. This increase is largely because the state's grain importer did not reach the last target as a result of supply failure by traders.

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