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Recently Released Market Study: Colombia Agribusiness Report Q3 2012

Recently published research from Business Monitor International, "Colombia Agribusiness Report Q3 2012", is now available at Fast Market Research


Boston, MA -- (SBWIRE) -- 08/27/2012 -- BMI View: In May, the long-stalled free trade agreement (FTA) between Colombia and the US finally was put into action. The FTA was first signed in 2006 but had not been ratified owing to continuing concerns in the US over Colombia's human rights record. The pact eliminates tariffs on 77% of agricultural products immediately, with the remainder to be phased out over the coming 3-19 years.

Poultry and rice will receive the longest phase-out time frames, followed by corn and feed grains. The US trade commission estimates that the value of US exports to Colombia could increase by US$1.1bn, while Colombian exports could grow by US$487mn. Despite opportunities for Colombian coffee, cocoa and sugar, there are widespread concerns about the effects of the FTA on the dairy, poultry and livestock sectors due to the arrival of inexpensive imports. Dairy producers are particularly concerned that cheap imports of whey from the US could damage the profitability of Colombia's dairy producers. In response, in March the Colombian government announced that it would invest more than US$500mn in the dairy industry to improve productivity and enable domestic producers to better compete with imports from the US.

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Key Forecasts

- BMI believes that Colombia will be a regional outperformer in 2012, with GDP forecast to grow by 4.7%. Private consumption, while moderating, will drive the majority of growth, although gross fixed capital formation will play an increasingly important role over the coming quarters. Business-friendly policies and a steadily improving security situation will help Colombia to achieve sustainable levels of strong real GDP growth, which we forecast will average 4.6% y-oy over 2012-2021.
- We expect 2012/13 to be a more promising harvest year for coffee following four years of disappointing harvests. Newly renovated plantations will return to production, and weather conditions look set to be more favourable. La Nina weather cycle, which brought devastating rains, is now coming to an end. We forecast 2012/13 production to increase by 6.2% year-onyear (y-o-y) to 9.05mn tonnes. Out to 2015/16, we forecast growth of 21.4% on the low 2011 level to reach 10.35mn bags.
- We now expect corn output to increase by 15.2% y-o-y to reach 1.67mn tonnes in 2011/12 on the back of an increase in area harvested, boosted by the government's Pais Maiz plan. However, we have revised down our forecast for corn consumption to 5.23mn tonnes in 2012, an increase of just 0.5% y-o-y, as high prices drive down demand from the livestock sector.
- Sugar production is forecast to increase by 0.9% y-o-y to 2.31mn tonnes in 2012/13. Production has been aided by improved weather conditions that led to higher yields. Exports are forecast to increase by 3.6% y-o-y to 860,000 tonnes on the back of high prices. Chile remains the top export destination, accounting for 32% of Colombia's sugar exports in 2010/11.

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