Recently released market study: Peru Agribusiness Report Q3 2011

July 19, 2011 - PRLog -- BMI View: In June 2011, left-wing Ollanta Humala defeated his right-wing rival Keiko Fujimori in the Peruvian presidential elections. His victory quickly led to a sharp sell-off in assets, sparked by fears that his presidency may mark a departure from the free-market, investor-friendly policies of his predecessor. However, the markets have since staged an impressive recovery, reflecting the possibility that the new government will pursue a much more moderate economic policy path than had originally been feared. As Humala does not hold an outright majority in Congress, he will need to pursue a moderate agenda if he wants to gain support from opposing political forces to carry out any reforms. The likelihood of more centrist economic policies means that the investment climate should not be significantly impacted and Humala has vowed to respect the regulatory and legal framework of private investment. Furthermore, government investment in transport infrastructure, particularly in rural areas, should aide agricultural producers. Consumption growth should remain strong in Peru, particularly if Humala raises the minimum wage and succeeds in creating the new pension system as he has pledged.

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Key Forecasts

* The measures taken by the Peruvian government to ease inflation appear to be paying off: inflation rose by just 0.7% y-o-y in April and prices remained stable in May. If prices continue on a decelerating trend over the coming months this could potentially pose a downside risk to our 3.3% end-2011 inflation forecast.
* In 2010/11, we see cocoa production increasing by 8.0% y-o-y to reach 41,270 tonnes, driven by an expansion in the area planted and improved yields. Over our forecast period to 2014/15, we expect cocoa production to grow by 29.9% on the 2009/10 level to 49,650 tonnes.
* In 2010/11, we forecast that corn production will expand, as the area planted grows to 580,000 hectares, with farmers encouraged to increase acreage due to high grain prices. We see output rising by 1.6% y-o-y to 1.68mn tonnes. To 2014/15, we forecast production to rise 25.5% on the 2009/10 level to 2.08mn tonnes, with growth driven by continued improvements in yield, which remain low by world standards.
* We see coffee consumption continuing to increase in 2011 as the economy continues to grow strongly and disposable incomes rise. Demand is particularly strong among the young urban population. We forecast growth of 2.0% y-o-y to take consumption to 156,100 bags. Out to 2015, we forecast demand to grow by 10.4% on the 2010 level to 168,900 bags.
* We see output for processed dairy products growing again in 2010/11, with butter set to rise by 3.8% y-o-y to take output to 2,170 tonnes and cheese forecast to increase by 11.1% y-o-y to reach 21,800 tonnes.
* We forecast that sugar production will dip in 2010/11, due to a reduction in the area harvested and a slight fall in yield. We have pencilled in a fall of 3.1% y-o-y to take output to 1.03mn tonnes. Favourable weather conditions, plentiful rains and investments in new plantations should provide a stronger year in 2011/12 and we forecast that production will pick up by 13.8% y-o-y to reach 1.17mn tonnes.


Key Trends And Developments

* The strong growth of Peru's export industry continued into 2011, with cocoa exports for the first quarter increasing by 67% on the same period in 2010 in value terms, to reach US$18mn, according to the Peruvian Exporters Association (Adex). The US accounted for 28% of exports, followed by the Netherlands (23%).
* In March 2011, Machu Picchu Huadquina coffee became the second brand to obtain denomination of origin certification from Indecopi, the country's consumer protection agency, joining Villa Rica. Denomination of origin certifies that the coffee has been produced in a defined geographic region, at particular altitude, climate and terrain, with specific growing and harvesting techniques. The certification enables the coffee to be identified and requested both domestically and abroad and serves as a well-respected guarantee of quality.
* In March 2011 negotiators from the EU, Colombia and Peru signed the final texts agreeing new bilateral relations. A further translation and approval process will now take place and it is anticipated that the FTA will come into force during H112.
* In April 2011, the outgoing Peruvian Prime Minister Alan Garcia and the Agriculture Minister Rafael Quevedo signed a decree permitting the import and planting of genetically modified organisms (GMOs). The decree was first written in 2008, but lack of public, scientific and political consensus about the use of GM grains and opposition from the Ministry for the Environment delayed its signing. Quevedo has argued that biotechnology will improve yields and enhance Peru's productivity; while opponents to GM argue that it would compromise biodiversity, particularly threatening native species of Peruvian corn and potato. Lima and several municipalities subsequently declared that they would introduce GMO-free ordinances to prevent the use of transgenic seeds. In the midst of the controversy, in May 2011, the agriculture minister, Rafael Quevedo, resigned from his post, following accusations that he had run an unlicensed poultry company that failed to meet sanitary requirements. Widespread opposition to the use of transgenics is although thought to have contributed to his decision to leave office. He was replaced by former minister of production, Jorge Villasante.
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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.