Kenya Agribusiness Report Q1 2013Published by: Business Monitor International Published: Nov. 14, 2012 - 70 Pages Table of Contents
AbstractBMI View: We see little change to our Kenyan coffee and sugar forecasts over the forecast period. At thetime of writing, we expect the country’s food security situation to remain relatively stable over end-October and November 2012. Indeed, the number of people on food assistance has fallen dramaticallybetween June and September. Over the long term, we favour the corn over the wheat sector in terms ofproduction. Wheat production should remain challenging given the country’s climate. We are moreoptimistic regarding corn production, as domestic producers enjoy some degree of trade protectiondepending on the domestic production balance. Greater use of GM seeds in the future is a key upside riskto corn production over the long term.Key Views: Corn production growth to 2016/17: 19.0% to 4.1mn tonnes. This will be a function ofimproved farming methods, domestic demand and the eventual introduction of geneticallymodified seeds. Wheat consumption growth to 2017: 7% to 1.3mn tonnes. Kenyans already have a high rateof wheat consumption by regional standards. Slight improvements in availability and populationgrowth will drive consumption. Coffee production growth to 2016/17: 46.0% to 975,000 tonnes. Growth will be driven byincreased financial support from the government in the form of funds and debt relief. Also, newcoffee varieties planted should help to boost yields. 2013 real GDP growth: 5.8% (up from 4.5% in 2012; predicted to average 5.9% from 2012until 2017). Consumer price inflation: 6.3% average year-on-year (y-o-y) in 2013 (down from 9% y-o-y in2012). Industry Outlook We have revised up our 2011/12 Kenyan corn consumption figures to 3.0mn tonnes owing to changes inhistorical data. For 2012/13, we have revised our forecasts lower to 2.7mn tonnes, largely owing to lateplantings, fertiliser and seed shortages, and disease problems, according to local sources. The plantingseason for long-rains corn occurs in March and April. In major growing areas such as the Rift Valley andNyanza provinces, grain harvests have begun and will likely continue into the new year. However, therehave been irregular rains in parts of Nyanza and disease outbreaks, particularly Maize Lethal NecrosisDisease (MLND), in the parts of the Rift Valley. MLND has been observed in other parts of the world,including the US, and can lead to a complete loss of crop, depending on the time and ferocity. Plantingsfor the short-rains crops has started in Eastern and coastal areas, and adequate rains could mitigate someof the damage to the long-rains crops. However, we expect the country to remain a net corn importer forthe 2012/13 season. Over the longer term, we see more potential in Kenya’s corn sector than its wheat sector. Wheatproduction in Kenya will remain challenging, as mild weather facilitates disease. For instance, wheat stemrust has long been a major concern and once observed, farmers are required to spray (expensive)fungicides twice just before the harvest just to ensure even minimal yields. Our outlook for the cornsector is brighter. The country’s 50% tariff on corn imports from outside the Common Market for Easternand Southern Africa (COMESA) helps keep farmgate prices high. This is exacerbated by the country’simport requirements for GM corn, which could negate cheap South African importsSecond quarter growth data recently released by the Kenya National Bureau of Statistics support our viewthat 2012 would be a year of two halves for the Kenyan economy. Real economic expansion slowed to3.3% y-o-y in Q212, down from 3.5% in Q112 and 3.6% in Q211. However, we believe that the secondquarter data represent a bottom for the Kenyan economy and although a subdued external environmentwill weigh on growth to some extent, we expect GDP expansion to begin to pick up during the final twoquarters of 2012 thanks to a rapid improvement in domestic economic conditions. Indeed, rapidly fallinginflation – which has plunged by 14.4 percentage points to 5.3% in September from a peak of 19.7% only10 months earlier – and declining domestic interest rates will imbue Kenyan firms and consumers withgreater confidence, which should see economic growth accelerate towards our full-year 2012 growthforecast of 4.5%. Get full details about this report >> |
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