South Africa Agribusiness Report Q1 2013Published by: Business Monitor International Published: Nov. 14, 2012 - 81 Pages Table of Contents
AbstractBMI View: The grain market in South Africa is still tight on the back of an average 2011/12 harvest; inour view, relief to food prices will not come before the start of the new season in May 2013. The livestocksector is experiencing difficulties because of the recent surge in grains prices, and the country’s mainpoultry companies have posted falls in earnings in recent quarters. We believe this situation is temporaryand see potential for these companies to recover margins in the coming quarters as feed prices moderate.For sugar, we are still positive about growth opportunities in the sector with regard to both productionand consumption.Not Coming Down White & Yellow Corn Prices (ZAR/tonne) Source: Bloomberg, BMI Key Forecasts Sugar production growth to 2016/17: 15.7% to 2.2mn tonnes. This is based on our view that,over the long term, macroeconomic fundamentals, together with the increasing use of sugar forbiofuel, will have a positive impact on sugar production levels. Poultry consumption growth to 2016/17: 23.8% to 2.0mn tonnes. As more South Africanconsumers move towards diets containing higher levels of protein, poultry (predominatelychicken but also turkey and duck) is increasingly being viewed as a convenient, healthy andaffordable source of nutrition. Corn production growth to 2016/17: 29.9% to 14.4mn tonnes. This relatively high growthrate reflects the influence of base effects. Growth will be supported by an improvedmacroeconomic outlook and the introduction of new corn varieties that generate increased cropyields. Real GDP growth: 3.3% in 2013, up from 2.5% in 2012; predicted to average 3.5% over thefive years to 2017. GDP per capita expected to rise to US$11,681 in 2017 (from an estimatedUS$7,626 in 2012). Unemployment: 22.0% in 2013, from 23.0% in 2012, then to 19.5% by 2017. Consumer price inflation: 5.1% in 2013, down from an average of 5.5% in 2012. BMI universe agribusiness market value: 4.2% year-on-year (y-o-y) increase to US$10.3bnin 2012/13; growth forecast to average 2.0% annually between 2011/12 and 2016/17. Industry Outlook We have revised our 2011/12 South African corn production forecast down slightly to 11.1mn tonnes inline with the Crop Estimates Committee (CEC)’s figures. This is the result of dry weather and loweryields in the north-west province, where recent manual surveys by farmers indicated a smaller potentialfor production growth than previously expected. In 2012/13, we expect plantings to be strong on the backof high domestic and global corn prices. The US Department of Agriculture forecasts that commercialfarmers will plant 2.8mn hectares (ha) of corn and subsistence farmers will plant 500,000ha. This, on thebasis of average yields, would take production to 12.5mn tonnes in 2012/13, 12.6% higher than in2011/12. Sugar companies Illovo and Tongaat Hulett both reported profits that beat expectations in recentquarters because of higher prices received from the EU and improved domestic supply of sugar, as well asbetter production in other countries in the region. Illovo saw earnings per share excluding one-time itemsincrease 18.0% to ZAR1.33 in the year through March 2012, beating the median estimate of analysts forprofits at ZAR1.23. Similarly, Tongaat saw earnings rise 10% to ZAR8.39, compared with a medianestimate of 7.32. Country Bird Holding and Astral Foods, two of the country’s largest poultry producers, have seenearnings fall in recent quarters because of a squeeze in margins linked to high feed and input costs. SouthAfrica’s corn prices have reached record highs in recent months on the back of tightness in the global andregional corn markets. Country Bird Holding saw annual earnings per share drop by 55% for the year thatended in June 2012, and a strike in a chicken abattoir exacerbated the company’s loss. Astral Foods’earnings per share fell by at least 16% in the six months through March 2012, compared with the sameperiod last year. These results were exacerbated by a provision for a proposed settlement on accusation ofanti-competitive behaviour for the company in the fresh chicken products market between 2003 and 2007. Get full details about this report >> |
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