Boston, MA -- (SBWIRE) -- 08/16/2013 -- We continue to favour the Tanzanian sugar and coffee industries over the medium term owing to their potential for growth on the back of strong investment in capacity. The grain industry in Tanzania will remain less competitive than other countries in the region, particularly South Africa and Zambia, and we see little potential for the country to become a major grain exporter.

Key Forecasts

- Rice production growth to 2016/17: 42.3% to 1.4mn tonnes. The rice sector will benefit from increased investment from foreign companies, which plan to cultivate rice in an effort to boost food security. New varieties also could boost yields in the medium term.
- Corn consumption growth to 2017: 30.5% to 5.4mn tonnes. A combination of enhanced yields (contributing to lower prices) and rising living standards is expected to drive corn consumption growth.
- Coffee production growth to 2016/17: 113.2% to 1.1mn 60kg bags. Although this eye-catching growth can partly be attributed to base effects, the sector is benefiting from investment in disease-resistant trees, and from incentives to small producers.
- 2013 real GDP growth: 7.1% year-on-year (y-o-y), up from 6.9% in 2012; forecast to average 7.3% over 2012-2017.
- Consumer price inflation: 8.6% average in 2013 (down from 16.1% average in 2012).
- BMI universe agribusiness market value: 4.6% y-o-y increase to US$3.9bn in 2012/13, forecast to increase by an annual average of 4.5% between 2011/12 and 2016/17.

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Key Revisions To Forecasts:

- 2012/13 sugar consumption: Revised up from 500,000 tonnes to 520,000 tonnes.
- Coffee: Long-term demand forecasts revised up on government support and a positive consumption story.

Industry Developments

A growing African middle class is boosting demand for food products across the continent, and several countries are well placed to tap into this market. We identify producers and retailers in South Africa and Kenya as having strong potential. While production of processed foods will gradually increase, retailers and exporters in countries such as Brazil are also set to profit from growing African consumption.

We removed our bullish sugar view in May as the preliminary estimates for the Brazilian harvest took prices below what we estimated as production costs (USc17.00/lb). We highlighted that prices could now move to their next level of support at around USc15.00/lb in the coming months. We forecast the Brazilian sugar harvest to increase by about 2.2% to 39.6mn tonnes, while Thai, Russian, Australian and Indian productions will recover strongly in 2013/14. Demand growth will strengthen, especially driven by import growth from China and other countries in Asia.

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