BMI View: We have once again made minor forecast adjustments and updated our historical data with thelatest publication figures. Nevertheless, our core outlook remains unchanged in the latest Q4 2017 Spanishagribusiness update. The Spanish agricultural market continues to perform in line with our forecasts. Wehold the view that the dairy sector will be under modest pressure after the removal of the European dairyquota. The dairy production in the country will now have to compete directly with German and Frenchdairy farmers, historically known for far superior levels of efficiency and competitive. The dairy sub-sectoris now adapting to the end of the quota and this will most likely impose significant competitive pressures onproducers. The livestock sector will witness a modest upward trend in terms of production, driven by strongexport demand for pork. Sugar production will grow modestly in the five years owing to the removal of theEU sugar quota in H217, but we note that Spain will not be able to compete with the strength of the Frenchand German sugar producers.
Average annual wheat production growth 2016/17-2020/21: 5.3% to 7.1mn tonnes. Wheat willrecord the strongest growth in the grains complex as farmers will moderately substitute away from cornand barley due to the crop diversification required by the new Common Agricultural Policy (CAP)support scheme.