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Spain Agribusiness Report Q1 2009
Business Monitor International, Feb 2009, Pages: 46
Spain 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 Spain's agribusiness service.
The year 2008 was an interesting one for Spain's agricultural industry. It was characterised by a commodity price bubble which saw prices peak in the summer months before crashing towards the end of the year as the spikes proved unsustainable. At the same time, and possibly more financially devastating for EU producers in the long-run, was the ongoing wrangling pertaining to the removal of strong producer incentives under the controversial CAP support programme. In BMI's Spain Agriculture Report Q109 we look at the performance of Spain's foremost agricultural industries in light of the changing dynamics and predict how future trends will play out in response to such fundamentals.
Between 2001 and 2006 Spain's meat and poultry sector grew by 8.8% in volume terms although 8% was lost in value over the same period. Disease outbreaks - particularly the foot and mouth and BSE crises - had a strong bearing on meat prices during this period and while consumption has recovered robustly, prices have been slower to respond. However, meat prices were significantly higher in 2008 than in previous years as the cost of basic inputs rocketed, forcing reluctant producers to pass the costs on to consumers.
The local livestock industry is well-developed, particularly in pork production where EU ascension has contributed to Spain gaining cutting edge technology, thus enabling a strong and vertically integrated sector second only to Germany in terms of output. Processed products account for the vast majority of domestic demand for pig meat and consumers seem prepared to pay relatively high prices for quality local produce, such as Serrano hams. We predict pork to show the largest production gains over the outlook period with a 4.38% expansion between 2008 and 2013. We foresee a potential surplus with strong export potential to neighbouring countries such as France and Italy with a strong preference for cured hams. Despite a positive outlook for the consumption of sugar-based products, overall sugar consumption is set to continue on a downward trajectory, which has been the trend since 2003, diminishing by 0.41% to 1.34mn tonnes by the end of the projection period. Initiatives aimed at tackling obesity may be the underlying reason for such contrasting fundamentals, as an increasingly health conscious public veer strongly towards sugar substitutes and low-sugar products such as Diet Coke or Coke Zero. Additionally, consumers may also forego the consumption of refined white sugar on breakfast cereals, or in hot beverages, as a means of lowering intake.
The CAP reforms are the most likely threat to domestic agricultural production due to the high dependence of farmers on generous EU support such as export subsidies and import controls. The threat of more efficient producers flooding the EU with cheaper food may come as a welcome tonic to consumers, but it is foreseeable that many producers may be forced to either drastically alter production methods or cease production altogether. At the same time, the increasingly health-conscious consumption habits of Western European citizens may lead to a greater focus on quality and organic produce, helping some producers regain profitability.
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Agriculture - Global Outlook
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