Boston, MA -- (ReleaseWire) -- 01/07/2014 -- Overall, we believe there is the most potential for growth in Brazil's soybean, livestock/dairy and coffee segments over the medium term. This is because of a shift in food consumption growth towards Asia for these items, while demand growth from traditional buyers will be subdued. We are more cautious about the sugar cane sector as a whole, as mills are suffering from low profitability linked to low global sugar prices and heavy debt burdens. Only the ethanol industry will encourage cane production growth, but it is still unclear if the government will continue to see biofuels as a priority in its energy mix in the medium term. In the short term, we highlight downside risks to the coming soybean harvests, especially as infrastructure bottlenecks could limit export potential in the coming years.
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- Soybean production growth to 2016/17: 31.4% to 87.4mn tonnes. This will come as more area is shifted from corn to soy in the coming years on the back of an extremely competitive soy/corn ratio by historical standards.
- Poultry consumption growth to 2017: 18.9% to 10.9mn tonnes. A growing middle class and the general preference for poultry over all other meat groups because of its health properties and lower prices will encourage demand growth.
- Milk production growth to 2016/17: 29.5% to 40.8mn tonnes. Brazil has the potential to become a significant exporter of dairy products over the forecast period to 2017 if its milk collection and processing infrastructure can be brought up to international standards.
- 2014 real GDP growth: 2.5% (up from 2.0% in 2013).
- 2014 consumer price inflation: 5.6% average (down from 6.2% in 2012)
- BMI universe agribusiness market value: 3.0% year-on-year (y-o-y) decrease to US$183.6bn in 2014, forecast to increase by an average of 2.3% annually between 2011/12 and 2016/17.
Revisions to our forecasts:
- Barley: 2013/14 production revised up from 295,000 tonnes to 330,000 tonnes on better-than-expected yields.
- Wheat: 2013/14 production revised down from 5.1mn tonnes to 4.8mn tonnes as adverse weather destroyed parts of the crop.
- Cocoa: 2012/13 production revised down from 220,000 tonnes to 200,000 on the recent outbreak of witch's broom; 2013/14 production revised up from 200,000 tonnes to 230,000 tonnes owing to a faster-than-expected recovery.
- Cotton: 2013/14 production revised up from 7.0mn bales to 7.4mn bales as superior technology and improved pesticide controls will help boost yields.
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