Recent Study: Peru Agribusiness Report Q4 2013

Our outlook for Peru's agricultural sector remains positive. The livestock sector is very dynamic, and investment into the country's ethanol sector is boosting sugar production. Export crops, such as coffee and cocoa, are hampered by a lack of infrastructure and investment, but there is scope for strong growth in both, particularly as Peru is becoming increasingly recognised for organic and speciality crops. We caution that a lack of profitability threatens to weaken the dairy sector; this could be further exacerbated by the forthcoming entry into force of the free trade agreement with the EU.

Key Forecasts

* Poultry production growth to 2016/17: 19.8% to 1.4mn tonnes. Ongoing investment and the availability of cheaper imported feed will support growth in the sector.
* Sugar production growth to 2016/17: 30.2% to 1.4mn tonnes. The rapid expansion of the ethanol sector will see increasing investment in sugar cane.
* BMI universe agribusiness market value: US$8.8bn in 2013 (down from US$9.0bn in 2012; forecast to grow annually by 2.2% on average to 2017).
* 2013 real GDP growth: 5.1% (down from 6.3% in 2012; forecast to grow annually by 5.1% on average between 2012 and 2017).
* 2013 consumer price index: 2.6% y-o-y (down from 3.7% in 2012; forecast to grow annually by 2.9% on average between 2012 and 2017).
* 2013 central bank policy rate: 4.00% (down from 4.25% in 2012; forecast to average 4.35% over the rest of our forecast period).

Full Report Details at
- http://www.fastmr.com/prod/700732_peru_agribusiness_report_q4_2013.aspx?afid=303

Key Revisions To Forecasts

* 2012/13 coffee production revised down - from 5.0mn bags to 4.3mn bags - on latest historical figures available. 2013/14 production has been revised down as well, from 5.3mn bags to 4.0mn bags.

Industry Developments

We maintain our forecast for Peruvian sugar production to reach 1.16mn tonnes in 2012/13 on the back of favourable weather conditions. In addition, sufficient water supplies and reinvestment in ageing plantations will help yields to increase. We believe sugar will remain one of the country's most favoured crops, and forecast production to continue increasing by an average of 5.0% annually, to 1.40mn tonnes in 2016/17, when the country will reach self-sufficiency.

Peru's per capita dairy consumption is still low by global standards, at 32.5kg/capita, compared with 59.1kg/ capita in Brazil and 91.1kg/capita in the US. The government plans to increase dairy consumption by 50% out to 2020. As far as milk demand is concerned, the government plan would increase milk demand to 1.5mn tonnes (from below 1.0mn tonnes in 2012) by 2020, which would take demand to about 45.3kg/ capita, an improvement but still below global standards. Our forecasts imply an increase in consumption to 36kg/capita by 2016/17.

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