Malaysia Agribusiness Report Q2 2016

Malaysia Agribusiness Report Q2 2016

BMI View: Malaysia's agribusiness sector is experiencing challenging times, as its most emblematic sector,the palm oil industry, is undermined by low prices and growing structural challenges. The cocoa sector is inan even worse position, suffering a severe decline after the stellar performance of the 1990s. The cocoaprocessing sector is facing increasing competition from Indonesia and is losing market share at a fastpace. The medium term outlook is brighter, amidst strong growth prospects in the poultry sector andopportunities for value added palm based oleochemical exports. Malaysia will have to remain ahead of itsbiggest competitor, Indonesia, if its agribusiness sector is to stay afloat. As such, the next challenge for thecountry resides in the economic integration of ASEAN. The ASEAN Economic Community will present someopportunities, for example for poultry exports. However, it also poses risks to the future of the sugarrefining sector.

Key Forecasts

Palm oil production growth to 2019/20: 12.9% to 22.4mn tonnes. Production growth will reacceleratetowards the end of our forecast period, after the slower growth recorded in recent years. The ongoingreplanting and yield improvement programmes will bear fruit and support output.

Poultry production growth to 2019/20: 18.8% to 1.7mn tonnes. After a decade of strong growth, weforecast poultry meat production to grow at a moderate pace in the coming years, as rising productioncosts is undermining the development of the sector. Malaysia will maintain a fragile self-sufficiency inpoultry.

Sugar consumption growth to 2020: 13.7% to 1.9mn tonnes. Consumption growth will be slower thanin the previous decade as it already comes from a high base, Malaysians being among the largestconsumers of sugar on a per capita basis. Future sugar demand will be driven mainly by rising incomesand population growth.

2016 BMI universe agribusiness market value: USD29.99bn, up 6.7% y-o-y, forecast to grow by 6.2%annually from 2016 to 2020.

2016 real GDP growth: 4.5% (down from 4.7% expected in 2015, forecast to average 4.6% from 2016to 2020).

2016 consumer price inflation: 2.9% (down from 3.1% expected in 2015, forecast to average 2.4% from2016 to 2020).