Brazil Agribusiness Report Q4 2012Published by: Business Monitor International Published: Oct. 10, 2012 - 134 Pages Table of Contents
AbstractBMI View: We have revised up again our forecast for corn production in 2011/12 on the back of strongyields for the country’s second crop. We are slightly below consensus in our outlook for the soybean cropin 2012/13, as we believe a weaker-than-expected El Niño will present some downside risks toproduction. For sugar, our view for the harvest to pick up more strongly once weather concernsdisappeared has played out very well, and we maintain our forecast for a recovery in output over themedium term. For livestock and dairy, we continue to see problems linked to heavy debt levels for themain companies in the sector, but we expect strong sales growth potential over our forecast period. Forcoffee, we expect exports to improve significantly in the coming months now that farmers have partiallyreplenished stocks and that the latest estimates for the arabica crop this year are strong.Regaining Strength Brazil – Sugar Monthly Exports (‘000 tonnes) Source: BMI, Bloomberg Key Forecasts Coffee production growth to 2015/16: 11.2% to 53.5mn tonnes. This growth will be driven byBrazil’s continuing dominance in the export market as well as increased domestic consumption. Poultry consumption growth to 2015/16: 12.4% to 10.6mn tonnes. This gain will beunderpinned by macroeconomic growth and the subsequent rise in per capita incomes, especiallyas chicken is the cheapest of the three meats we cover in our report and is often perceived ashealthier. Soybean production growth to 2015/16: 22.6% to 92.5mn tonnes. We expect prices to staysupported on the back of a recovery in global demand, which will continue to provide farmerswith incentives to invest in their soybean crop. 2012 real GDP growth: 1.8% (predicted to average 3.4% over 2011-2016). Consumer price inflation: 5.5% average in 2012. BMI universe agribusiness market value: 2.4% year-on-year (y-o-y) increase toUS$172.5bn in 2013, forecast to increase by an average of 2.0% annually between 2010/11 and2015/16. Industry Outlook We have revised down slightly our forecast for the Brazilian 2012/13 coffee crop to 51.0mn bags (from aprevious forecast of 55.0mn bags). However, this output will still be 17.1% higher than in 2011/12 and a6.1% above the previous up-year in the country’s production cycle. We forecast a production balance of30.5mn bags in 2012/13, compared with 23.5mn bags in 2011/12 and 28.7mn bags in the previous upyear(2010/11). Expectations for this bumper crop from the world’s largest coffee producer has weighedheavily on global prices, taking them 45.1% lower as of September 3 compared with May 2011. Brazilian meat producer JBS turned an overall profit in Q212, the first time the company recorded aprofit in two consecutive quarters since early 2010. That said, we see subdued earnings potential over theshort term. A key reason for the growth was the company’s 12% quarter-on-quarter (q-o-q) and 19% y-oyincrease in revenues from the South American unit. The higher revenues from the Mercosur unit led to anearly 50% y-o-y increase in EBITDA for that division, making it easily the company’s best performingdivision (other divisions include meat operations in the US and Australia). Lower cattle prices in Braziland a weaker Brazilian real improved export competitiveness for the firm. Overall, the company’s netincome improved by 46% q-o-q to BRL170mn, and improved significantly from Q211, when thecompany experienced a BRL180mn loss. We maintain our forecast for Brazilian soybean output to reach 76.0mn tonnes in 2012/13, as we believeindustry sources are being slightly optimistic in their forecast for production to reach 82.0mn tonnes nextseason. Even at 76.0mn tonnes, the 2012/13 Brazilian soybean crop will help to loosen the global marketafter January 2013. However, we highlight upside risks to global prices in the short term owing to fearsthat Hurricane Isaac will provide too much rain in the south of the US while droughts in the northcontinue to affect soybean yields. Get full details about this report >> |
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