Central America Agribusiness Report Q4 2013 - New Report Available

Regional coffee output in 2012/13 is still looking weak, but production has not fallen by as much as previously expected. The region will continue to struggle with disease outbreaks in 2013/14 and in the near term as low global coffee prices limit investment potential. The region is generally dependent on imports for corn, and we expect the production deficit to widen over our forecast period. That said, Central America is expected to remain self-sufficient in sugar and even increase its potential for sugar exports. The sugar industry has potential to attract investment over the medium term.

* 24.1% to 13.8mn bags. We believe the coffee sector will continue to battle with disease and weather problems, while low global prices will limit investment in the crop, at least in the coming years. We see more potential for the sector in the long term.
* Corn consumption growth to 2017: 11.1% to 6.8mn tonnes. Demand growth for corn will far outpace production in Central America, affecting prices and keeping the area import-dependent for its grain needs.
* Sugar production growth to 2016/17: 9.2% to 5.1mn tonnes. Most countries in the region will continue to run a small production surplus out to 2016/17, and development of the export industry could present upside risks to our production forecasts over the long term.
* 2013 real GDP growth: 3.2% year-on-year (y-o-y). This compares with 3.2% growth in 2012. Real GDP growth is predicted to average 3.2% over our forecast period.
* Consumer price inflation: 4.6% y-o-y in 2013. Up from 4.5% in 2012 and predicted to average 4.8% over 2012-2017.

Full Report Details at
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Industry Outlook

We have revised up our forecast for Honduras's 2012/13 coffee production to 4.6mn 60kg bags (from a previous forecast of 3.6mn bags) as the impact of the rust outbreak on the coffee crop was much less severe than expected. In January 2013, Honduras became the fourth Central American country to declare a state of emergency due to coffee rust. The country's local coffee grower association estimated that more than 25% of the crop (roughly 71,000 hectares) was affected by coffee leaf rust. In the end, losses in output have only amounted to 21.4% of the crop.

We maintain our view for sugar consumption in Latin America to stagnate or moderate over the medium term, as the region already has the world's highest per capita sugar consumption. Countries in the region had an average annual per capita consumption of 44.0kg in 2012, compared with 31.7kg in the US and 10.6kg per capita in China. We therefore forecast minimal growth out to 2016/17 because of base effects and increased health consciousness. We forecast average annual sugar consumption growth in Latin America of 2.0%, compared with 4.0% in emerging Asia (China, India, Indonesia and Bangladesh).

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