Boston, MA -- (SBWIRE) -- 05/28/2013 -- BMI View: Our outlook for Peru's agricultural sector remains positive. The livestock sector is very dynamic and investment into the country's ethanol sector is boosting sugar production. Export crops such as coffee and cocoa are hampered by a lack of infrastructure and investment but there is scope for strong growth in both, particularly as Peru is becoming increasingly recognised for organic and speciality crops. We caution that a lack of profitability threatens to weaken the dairy sector; this could be further exacerbated by the forthcoming entry into force of the free trade agreement with the EU.

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Peruvian agricultural production posted strong growth in 2012. Data recently announced by the Office of Economic and Statistical Studies (EEO) and Ministry of Agriculture (MINAG) show that the national gross value of agricultural production in 2012 grew by 5.1% year-on-year (y-o-y), boosted by strong production in December. Production in the arable subsector grew by 5.2%, while livestock increased by 4.9%. However, output for coffee, mangos, cotton and garlic fell.

Key Forecasts

- Poultry production to grow to 2017: 19.8% to 1.40mn tonnes. Ongoing investment and the availability of cheaper imported feed will support growth in the sector.
- Sugar production to grow to 2017: 26.1% to 1.40mn tonnes. The rapid expansion of the ethanol sector will see increasing investment in sugar cane.
- BMI universe agribusiness market value: US$8.84bn in 2013 (down from US$8.89bn in 2012; forecast to grow annually by 2.9% on average to 2017).
- 2013 real GDP growth: 5.2% (down from 6.1% in 2012; forecast to grow annually by 5.5% on average between 2012 and 2017).
- 2013 consumer price index: 3.0% y-o-y (up from 2.6% in 2012; forecast to grow annually by 2.8% on average between 2012 and 2017).
- 2013 central bank policy rate: 4.0% (down from 4.2% in 2012; forecast to average remain at 4.0% in 2014).

Key Revisions To Forecasts

- Beef production in 2012/13 revised up by 6.8% to 189,000 tonnes. The dynamism of the livestock sector is likely to see the national herd increase.
- Coffee production in 2012/13 is revised up by 6.4% to 5.0mn tonnes. Peru's National Coffee Chamber has reported that production has increased in the jungle and St. Martin regions and increasing use of fertiliser is also expected to support output.
- Fluid milk production in 2012/13 is revised down by 4.7% to 1.87mn tonnes. This is due to the lack of profitability in the dairy sector.

Industry Developments

- Peru's ethanol industry continues to expand. In December 2012, it was announced that Coazucar, a subsidiary of the Gloria Group, would start production in March 2013 at a rate of 190 barrels per day, after the company secured the necessary permits. Coazucar becomes the third ethanol producer in Peru, after the Romero Group and London-based Maple Energy.

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