Recent Study: Germany Agribusiness Report Q2 2013

We maintain our overall cautious outlook for growth in the German agribusiness sector as a slew of factors - ranging from a changing regulatory environment to weak demand and unfavourable market pricing - will deter significant increases in production. Our core view for the sector envisages livestock and dairy industries posting very lacklustre growth over the forecast period to 2017, owing to ongoing reforms in the EU Common Agricultural Policy and stricter safety and quality standards. Meanwhile, we see relatively more room for growth in the sugar and corn segments on the back of growing demand for biofuels and expected reforms in these segments.

Key Forecasts

* Corn production growth to 2016/17: 13.0% to 5.22mn tonnes. Corn yields have been improving significantly in recent years as an emphasis on increased output has led farmers to adopt more productive practices. Biofuels will also be a main driver of crop production over the coming decade.
* Poultry consumption growth to 2017: 6.4% to 1.74mn tonnes. We expect poultry consumption to gain ground as consumers are attracted to the meat's healthier image and lower price.
* Sugar production growth to 2016/17: -4.0% to 26.8mn tonnes. Unfavourable base effects from a strong 11.4% year-on-year (y-o-y) growth in production during 2011/12 will make it difficult for the segment to sustain this growth in the short term. However, sugar output is expected to recover somewhat as the abolition of the sugar production quotas by 2015 encourage farmers to plant more sugar.
* 2013 real GDP growth: 2.0%, up from 0.4% in 2012 and forecast to average just over 2% from 2013 until 2017.
* Consumer price inflation: 2.4% y-o-y in 2013, up from 2.1% in 2012.

Full Report Details at
- http://www.fastmr.com/prod/589122_germany_agribusiness_report_q2_2013.aspx?afid=303

Industry Developments

In January 2013, Bastian Fassin, executive committee member of the Association of the German Confectionery Industry (BDSI), urged regulators to reform the highly regulated European sugar sector. Fassin believes this will bring relief to confectionery companies, which are otherwise struggling with shortages in sugar supply from Europe, increase in raw material prices and often facing the threat of company closures or takeovers. The association has specifically called for the lifting of the European sugar quota and a lowering the EU's protective tariffs.

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