Colombia Agribusiness Report Q2 2011: New research report available at Fast Market Research

April 17, 2011 - PRLog -- BMI View: On February 3, nearly 200,000 Colombian truckers from the National Association of Truckers (ACC) went on strike in protest against the government's decision to abolish minimum trucking rates and open freight charges to market forces. The truckers argued that these measures would result in a price war and reduce their tight profit margins even further, driving independent truckers out of business. After talks with President Santos' government failed to resolve the dispute, the truckers began to block major roads into the capital Bogota. The strike caused disruptions in transporting an estimated 100,000 tonnes of goods and caused delays to imports and exports in Colombian ports. The disruptions led to an increase in prices for fruits and vegetables in major cities. On February 17, it was announced that the government had agreed to delay the implementation of the deregulation plan and promised to take measures to mitigate the negative impact on independent truckers. As a result, the strike was halted; however, ACC members are yet to vote on the issue, so industrial action could as yet resume.

The truckers' strike came on the back of severe flooding in November and December caused by La Nina weather phenomenon that left at least 300 dead, damaged crops and disrupted transportation. The combination of factors has raised fears of inflation, fuelled by rising food prices, which could undermine the country's economic recovery. Annual inflation was 3.4% in January 2011, the highest rate since June 2009. BMI is currently forecasting full-year CPI of 3.6% in 2011, up from 3.4% in 2010.

Key Forecasts

?? GDP is forecast to rise by 4.7% year-on-year (y-o-y) in 2011 and 4.9% in 2012, up from 3.8% yo- y growth in 2010. ?? We now estimate that the 2009/10 Colombian sugar output came in at 2.29mn tonnes, up by 0.6% y-o-y. Extreme rainfall hit Colombia in early December 2010, causing flooding in many sugar cane growing areas. As a result, we see sugar output falling back by 2.3% y-o-y in 2010/11 to 2.24mn tonnes. ?? The 2009/10 cocoa output was stronger than previously expected, as good rains brought by La Nina during the second half of the year helped to boost production. Output grew to 42,220 tonnes, a y-o-y increase of 16.8%. In 2010/11, we forecast production to increase to 43,920 tonnes, a y-o-y increase of 4.0%. By 2014/15, we forecast production to have increased by 19.3% from the 2009/10 level to 50,390 tonnes. ?? We now forecast that 2010/11 corn output will decline by 1.7% y-o-y to 1.59mn tonnes, as heavy rains have caused wide-spread damage to crops. Through to 2014/15, we forecast production to rise by 16.8% from the low 2010 level to reach 1.88mn tonnes. This will be driven by continued improvements in yields as access to hybrid seeds and fertilisers increases. ?? We now see 2010/11 coffee production increasing by 12.1% y-o-y on historically low levels to reach 9.08mn bags. Heavy rains damaged the coffee crop in Q410; however, favourable weather conditions in early 2011 have since aided flowering. Coffee exports are forecast to pick up slightly in 2010/11 to 8.65mn bags after two years of drops; however, this is still well below the 11.53mn bags registered in 2007/08.

Key Trends And Developments

In December 2010, it was announced that the government would restructure the Agricultural Secure Income (AIS) programme, which was created in 2007 to assist rural producers who could be negatively impacted by the implementation of free trade agreements (FTAs). Since 2007, the programme has received an estimated US$1bn to subsidise interest rates of agricultural project loans, irrigation and drainage projects and technical assistance. The restructuring of the AIS programme is designed to ensure that resources are directed to small and medium-sized producers, following criticism that large-scale farmers have been benefiting. The modifications are intended to encourage associative models for small and medium-sized producers, through financial assistance, subsidies and technical support, in order to increase competitiveness.

In January 2011, 73 Colombian farmers launched legal action in the high court in London against oil company BP Exploration Company (Colombia) Ltd. The farmers allege that BP failed to observe environmental safety standards when working with Colombia's national oil company and four foreign multi-national corporations, to construct the 450-mile (720 km) Ocensa pipeline. They argue that BP's failure to adhere to safety standards caused extensive soil erosion and pollution, which contaminated water supplies, caused crop failure and loss of livestock.

In February 2011, the agriculture minister, Juan Camilo Restrepo Salazar, announced that the Ministry of Agriculture would work together with the Fondo Nacional del Cacao to invest COP5.22mn in a campaign to combat Moniliophthora (Monilia), or frosty pod rot. Monilia is a fungal disease that attacks cocoa trees, particularly during the winter, causing major decreases in yield. It has been estimated that Monilia destroys up to half of Colombia's cocoa production. Its threat to crops is set to grow as increased rains brought by La Nina weather phenomenon lead to higher levels of humidity, creating conditions in which fungal diseases thrive. The Colombian government has modified its support programme to extend the benefits of the rural funding incentive (RIC) to coffee growers with plantations of 1.5-5.0 hectares. The programme offers low-cost loans specifically designed for renovation work to tackle incidences of coffee rust disease. Furthermore, coffee growers' federation Fedecafe has designated COP5.5mn for a programme to combat coffee rust disease. The programme will provide coffee seed, bags, fertiliser and trees for renovation, as well as fertilisers and chemicals to control coffee rust in existing plantations.

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Fast Market Research is an online aggregator and distributor of market research and business information. We represent the world's top research publishers and analysts and provide quick and easy access to the best competitive intelligence available.