Boston, MA -- (ReleaseWire) -- 04/15/2014 -- We still believe the Romanian grain sector has the highest growth potential owing to its competitiveness and its exposure to the Middle East and Asia. Sugar production is likely to grow strongly because of base effects, as limited consumption growth from both the food and energy sectors will cap production incentives. The livestock sector will remain just below self-sufficiency, and quality issues linked to the horsemeat scandal will limit export growth opportunities to the rest of the EU, at least in the near term.
- Wheat production growth to 2017/18: 76.0% to 9.0mn tonnes. This will come from further improvements in yields and increase in area planted. Export demand will also encourage production.
- Poultry consumption growth to 2018: 10.4% to 518,100 tonnes. Poultry will continue to be Romanians' favourite meat and the one with the most growth potential as the economy recovers and the consumer story improves.
- Sugar production growth to 2017/18: 8.0% to 796,700 tonnes. This will come as farmers reap the benefits of an increased area devoted to sugar and as production quotas in the EU are being phased out in the medium term.
- 2014 GDP growth: 2.8% (up from 2.6% in 2013).
- 2014 average consumer price inflation: 1.9% (down from 3.3% in 2013).
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We are maintaining our estimate for EU wheat production to come in around 137mn tonnes in 2013/14, as production improves on the back of improved yields, which mitigated a lower planted area. This comes after a poor 2012/13 season when output reached 133mn tonnes (the lowest since 2008), and when EU ending stocks fell to their lowest level since 1978 and contributed to a 41mn tonne global market deficit. The reduced output in the EU resulted in EU prices rising in H113, while benchmark CBOT prices fell. The increase in output in 2013/14 was accompanied by improved quality, as industry sources say a greater proportion of EU wheat is being designated as milling wheat. Despite the output increase in 2013/14, we stated in our previous European wheat focus article that we expected European prices to find a base around EUR175/tonne, a view that has played out to this point.
We have turned more positive regarding poultry production in the EU-28 in 2013 and 2014, as the sector has benefited from strong regional and export demand growth. Poultry is less affected by periods of economic weakness, as it is cheaper and more convenient to cook. EU-28 production in 2013 is estimated to have increased thanks to higher broiler meat production in all major EU producing countries, including the UK, Benelux, Spain, Poland, Germany, Italy and France. In France, poultry production decreased in France in 2012 on the back of the demise of Doux, the largest French broiler producer. However, French output was expected to rebound in 2013 as competitors replace the company's lost market share.
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