Recently published research from Business Monitor International, "Brazil Agribusiness Report Q2 2013", is now available at Fast Market Research

Boston, MA -- (SBWire) -- 05/17/2013 --BMI View: Overall, we see the most potential for growth for the soybean, livestock and coffee industry over the medium term. This is because of a shift in food consumption growth towards Asia for these items, while traditional buyers' demand will experience only subdued growth. We are positive about the sugar cane sector as a whole, as we see strong sugar cane production growth over the rest of our forecast period. This growth will benefit the ethanol industry first as ethanol economics are now favourable to biofuels production at the expense of sugar. In the short-term, we flag risks that the current record grain harvest will encounter problems at the export stage because of current queues at the country's major ports and upcoming strikes. Among Brazilian agribusiness companies, we favour Sao Martinho because it is the largest player in the sector and the most likely to benefit from industry developments.

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Key Forecasts

- Sugar production growth to 2016/17: 16.8% to 43.1mn tonnes. Because replanting has been slower than initially expected, we project average growth over our forecast period. There are upside risks to our view.
- Coffee consumption growth to 2016/17: 11.5% to 22.3mn bags. Coffee consumers in emerging markets that do not have a strong coffee culture are often very price-sensitive, which will drive demand for the cheaper robusta given its lower production costs.
- Pork production growth to 2016/17: 24.6% to 4.1mn tonnes. This will come as input costs continue to fall and as export demand rises. As in the rest of the domestic livestock complex, pork production will considerably outstrip consumption and will thus heavily rely on exports in order to continue growth over the medium term.
- 2013 real GDP growth: 3.5% (forecast to average 3.9% over 2012-2017).
- 2013 consumer price inflation: 5.7% average.
- BMI universe agribusiness market value: 3.1% year-on-year (y-o-y) increase to US$168.2bn in 2013, forecast to increase by an average of 3.2% annually between 2011/12 and 2016/17.

Industry Outlook

We believe the recent weakness in sugar prices has been made possible by a recent decrease in Brazil's cost of production for sugar. Brazil's sugar mills were close to bankruptcy after 2008 on the back of unsustainable debt levels, while labour costs in Brazil soared over the past decade, meaning productivity of the mills deteriorated and sugar costs of production increased to about USc19-21/lb. However, government sponsored debt restructuring, subsidised loans and the rapid consolidation of the industry has put pressure on these production costs recently and industry sources have indicated that the appropriate level has reached USc17-19/lb. This has allowed global prices to decline, keeping a sizable portion of the industry in positive profit with improving supply.

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