Venezuela Agribusiness Report Q2 2009
Business Monitor International, April 2009, Pages: 34
The Venezuela Agribusiness service provides proprietary medium term price forecasts for key commodities, including corn, wheat, rice, sugar, cocoa, coffee, soy and milk; in addition to newly-researched competitive intelligence on leading agribusiness producers, traders and suppliers; in-depth analysis of latest industry developments; and essential industry context on Venezuela's agribusiness service.
In the Venezuela Agribusiness Report for Q2 2009, we introduce the new Business Environment section. This section gives an overview of agriculture in Venezuela and its significance to the overall economy and labour market. We also cover support given to agriculture by the government.
As oil prices fall and the flow of petrodollars into Venezuela's economy slows this year, the food and agriculture sector will come under increasing government focus as President Hugo Chávez seeks to ensure food remains affordable for his support base among the poor in the coming downturn. In 2009, we forecast economic growth to fall to -5.6 from 4.8% in 2008 and 8.4% the previous year. With another, albeit smaller, GDP contraction expected in 2010, these will be tough times following the five years of rapid growth up to 2008.
At the beginning of 2009, the government's nervousness over a potential fall in living standards for the masses was plain to see. In March, the government signed into law new regulations stipulating that 70% to 95% of output from companies producing basic food products such as milk, sugar and rice must be products that come under the price control system. This will further reduce profits for food processors already hard pushed by the pricing restrictions.
In the same month, Chávez ordered the takeover of a rice mill belonging to US company Cargill. This followed seizures of facilities belonging to Venezuela's largest food processor Empresas Polar. Processors will not be the only targets of the government. The agriculture minister has warned large farmers that land will be seized if they reduce the area planted, owing to the strict price controls. We expect the pace of land seizures to increase this year as Chavez seeks to distract attention from the poor state of the economy.
The high price of agricultural imports will also be a factor in speeding up reform of the sector. In 2007, imports of agricultural products cost US$4.93bn and accounted for 10.7% of total imports. While this level of imports may not have seemed so bad when oil revenues were at record highs, now that the price of oil has fallen so far they will place an increasing strain on Venezuela's trade balance. If, as we expect, the government opts for a devaluation of the Venezuelan bolivar, the cost of food imports will become even harder to bear.
The big question, of course, is whether the seizures and land reforms will indeed lead to increased production. The risk is high that the government's actions will further inhibit investment by larger, efficient farms and new peasant co-operatives, even if they were to prove successful in the long term, will take years to find their feet. Beef production, where large farms predominate, has certainly been badly hit by the reforms with output falling dramatically in 2008.
The land reforms have also been a source of social unrest with protests from both peasants hoping to gain from the reforms and landowners angry at the confiscations. There have also been cases of peasant farmers on seized land being harassed and even murdered. In his efforts to revitalise Venezuela's habitually under-performing agricultural sector, Chavez will have to take a fine line between bringing more of Venezuela's large swathes of potentially productive land under the tiller and scaring off investment from proven and efficient producers.
EXECUTIVE SUMMARY
SWOT ANALYSIS
- Venezuela Agricultural SWOT
INDUSTRY BUSINESS ENVIRONMENT OVERVIEW
- Market Overview
- Key Outputs
- Support
SUB-SECTOR SUPPLY & DEMAND ANALYSIS
- Venezuela Dairy Outlook
- Table: Venezuela Milk Production, Consumption & Trade
- Table: Venezuela Butter Production, Consumption & Trade
- Table: Venezuela Cheese Production, Consumption & Trade
- Table: Venezuela Whole Milk Powder Production, Consumption & Trade
- Table: Venezuela Milk Production, Consumption & Trade
- Table: Venezuela Butter Production, Consumption & Trade
- Table: Venezuela Cheese Production, Consumption & Trade
- Table: Venezuela Whole Milk Powder Production, Consumption & Trade
- Risks To Outlook
- Venezuela Sugar Outlook
- Table: Venezuela Sugar Production, Consumption & Trade
- Table: Venezuela Sugar Production, Consumption & Trade
- Risks To Outlook
- Venezuela Coffee Outlook
- Table: Venezuela Coffee Production, Consumption & Trade
- Table: Venezuela Coffee Production, Consumption & Trade
- Risks To Outlook
- Venezuela Cocoa Outlook
- Table: Venezuela Cocoa Production, Consumption & Trade
- Table: Venezuela Cocoa Production, Consumption & Trade
- Risks To Outlook
COMMODITY PRICE FORECASTS
- Sugar
- Coffee
- Cocoa
COMPETITIVE LANDSCAPE
- Table: Agricultural Commodity Producers & Traders
- Table: Agribusiness Suppliers
- Table: Integrated Agricultural Producers
BMI FORECAST MODELLING
- How We Generate Our Industry Forecasts
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