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Italy Agribusiness Report Q4 2009Published by: Business Monitor International Published: Sep. 18, 2009 - 58 Pages Table of Contents
AbstractItaly has a strong agricultural tradition and is the number one producer in the EU for a variety of fruit,including tomatoes, pears, apricots and peaches. In BMI's new Italy Agribusiness Report for Q409, weexamine how the industry fared through the turbulent times of rapidly rising agricultural prices and inputcosts in 2007 and 2008 and the challenges it now faces as the recession continues to impact on trade andconsumer demand, at home and abroad.Poultry and pork production will grow by 27.64% and 7.88%, respectively 2009-2013, although beefproduction will fall by 1.24%. The growth in poultry and pork production will be partly driven bydomestic demand and should also lead to improved balances of trade. Poultry's relative price advantageshould give it a competitive edge during recession. In May 2009 a United States Department ofAgriculture (USDA) attaché report noted that the government is considering measures to help pigbreeders, the 'pillars of Italian food industry' (Ministry of Agriculture), important to the prosciutto sector. We forecast milk production to increase by 9.27% between 2008 and 2013, partly in response to Italy'sincreased EU milk quota, upped by 5%, effective from April 2009. However, production increases haverecently been tempered by falling milk prices and weaker demand for dairy products. Thousands offarmers protested in July this year against relatively cheap milk imports. Higher quotas and lower priceswill be to the detriment of smaller producers, as bigger, more efficient players grab a larger slice of themarket. As quotas gradually disappear across the EU by 2015, more efficient producers in other countrieswill mean further competition. BMI forecasts that over the second half of 2009 firmer underlying marketfundamentals will lend increasingly tangible support to class III milk prices. The ongoing supply responsefrom global producers should gradually tighten international dairy markets and stimulate a modestuptrend in prices towards the end of the year. We expect Italy's cheese production to fluctuate between 2008 and 2013, averaging 1.14mn tonnes, butthis will be slightly higher than in the preceding six years when average annual production was 1.12mntonnes. In the first half of 2008, demand for one of Italy's most famous cheeses, buffalo mozzarella, washit hard after it emerged that Naples' chaotic and corrupt waste disposal industry had allowedcarcinogenic dioxins to get into buffalo feed and from there into their milk and cheese. Figures from dairyconsultancy firm CLAL suggest that exports of a number of important Italian cheeses fell in 2008 and arecontinuing to fall in 2009, in part a reflection of the current recession. Rice will be an important export crop throughout our forecast period, with production growing 32% to2013 to 2.01mn tonnes. With the forecast volume of rice set to be over five times the level of domesticconsumption by 2013 Italy will continue to supply a large portion of the EU's rice needs. Work is underway to produce new hardier varieties that will be more resistant to the changes in temperatures in northernItaly where the majority of the country's rice is grown. The UN's Food and Agriculture Organization(FAO) noted in its June 2009 Food Outlook that rice production is set to recover in the EU, sustained byarea expansions in Italy and Spain. Italy's producers have faced a couple of court cases recently. In February 2009 Italy's anti-trust authorityfined twenty six pasta producers and the Italian Union of Pasta Makers (Unipi) for allegedly operating acartel between October 2006 and March 2008. The implicated companies account for 90% of the Italianpasta market. Unipi suggested it would appeal and several producers have denied the allegations and saidthey would also appeal. In April 2009 the European Commission (EC) issued a press release confirmingthe decision of Italy's Supreme Court to uphold a lower court's decision which had found some milkproducers guilty of setting up a network of fake companies to avoid paying fines for exceeding quota. Aspokesperson from the EU's anti-fraud body told the BBC that real criminal proceedings leading topunishment could now be pursued. Italy's agriculture sector is still very fragmented by Western European standards. In 2007 about 12% ofagricultural holdings in the EU-27 were in Italy but about 1.23mn (73%) were less than 5ha (compared toFrance for example where only about 25% are less than 5ha) and less than 3% had 50ha or over (Eurostat)As quotas and subsidies from the EU are gradually withdrawn, many of these smaller operators may findit difficult to compete, driving consolidation in the sector. Another option for smaller farms is organic farming. Demand for organically produced food has beenincreasing in Europe in recent years and in many cases has outpaced supply. In 2007 9% of utilisedagricultural area was under organic farming (existing organically farmed areas and areas in the process ofconversion) just behind Austria, Latvia and Sweden. This was up from 8.4% in 2005 and 8% in 2003.Fully organic crop area rose to 903,254ha in 2007, up from 731,537ha in 2005. As higher profit marginscan be charged on organic produce, organic farming could be an option for smaller Italian farms to stayafloat in the face of competition from larger operators. However, the recession could be having an efffect. In February 2009 a survey conducted by ISMEA and Nielsen showed that purchases of packaged organicfood by Italian consumers increased by 5.4% in 2008 compared to growth of 10.2% in 2007.The importance of agriculture to GDP has gradually fallen from 6% in 1980 to just over 2% today. According to the National Institute of Statistics the percentage of the workforce engaged in agriculturehas also fallen from 6% in 1995 to 4% in 2007. Hardly surprising then that while exports in Italy'sagricultural and food and drink sectors have been increasing in recent years (Italy is the fifth largestexporter of agri-food products in the world), imports have been rising too, partly to help supply thedynamic food processing sector. Economic growth in Italy has been sluggish in recent years and the country has a large debt. On top ofthis the global recession is hitting Italy hard. BMI forecasts real GDP growth to contract -4.5% in 2009.Inflation is coming down but household consumption is likely to have declined and food exports havecontracted as other EU countries (Italy's main trading partners) also go through difficult times. Brandnames still dominate in Italy; however, there are signs that relatively high prices and poor economicperformance are encouraging consumers to swap to private labels. BMI predicts that as in other EUcountries consumers will move towards private-label goods in stages, with staples such as milk, bread andpasta being the first to register strong growth. The government is trying to improve the dairy farmers' lot by proposing that the EU adopts obligatory'made in the EU' type labels for milk and dairy produce, which would allow domestic consumers toascertain the origin of their products and potentially help support regional producers. The agricultureminister said in a statement 'if we manage to get Europe to adopt our line…that will mean that consumerswill finally know for sure the origin of milk, especially that of long-life milk which is often imported'. This is sure to be opposed by the international trade community which could see it as further evidencethat the EU is reneging on its pledge to open up the agricultural sector to competition. Some consider thatItaly may introduce the dairy labels unilaterally, despite the threat of EU sanctions. Despite Italy's successes in agriculture and food processing the recession has lead to difficulties for thesector. The domestic and global economic situation is forecast to have started improving by 2010. Get Full Details About This Report >> |
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