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Central America Agribusiness Report Q4 2010
Business Monitor International, Oct 2010, Pages: 61
Business Monitor International's Central America 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 Central America's agribusiness service.
BMI View: Torrential rain and landslides continued to hit the Central American region through Q310. Guatemala has been particularly hard hit and on September 5 President Álvaro Colom declared a national state of emergency as further storms swept through the country. Following the droughts that devastated the 2009 harvest, the prolonged torrential rains have raised fears of food shortages. The United Nations World Food Programme has been distributing corn, beans, vegetable oil and a corn-soya blend to more than 100,000 Guatemalan families. As Guatemala produces the lion's share of Central America's corn and sugar, and is a major coffee producer, the ongoing adverse weather conditions will have a major impact on the region's production output for 2010 and going into 2011.
Key Forecasts
- The Central American region is emerging from economic recession, although the pace of recovery varies significantly from country to country. Costa Rica and Panama are forecast to post year-on-year (y-o-y) GDP growth of 4.3% and 4.1% respectively. In contrast, Guatemala's economy is forecast to grow by just 1.2% y-o-y and Nicaragua by 0.6%.
- 2009/10 was a poor year for Central American coffee producers, as crops across the region were it by adverse weather and poor fertilisation. However, the 2010/11 harvest promises to be much improved, with output for the region as a whole forecast to grow by 9.3% y-o-y. However, risks are to the downside as the impact of heavy rains on crops is not year clear.
- Sugar output is forecast to fall by 1.5% y-o-y across the region in 2010/11, primarily due to storm damage to the major producer, Guatemala. An estimated 12,000 hectares of sugar plantations were affected by adverse weather in September 2010, and output for 2010/11 is now forecast at 2.30mn tonnes, down from 2.42mn tonnes in 2009/10. In contrast, in Honduras, sugar production is expected to increase by 6.7% y-o-y in 2010/11 as farmers increase the amount of land under cultivation in response to strong sugar prices.
- The region's corn harvest is forecast to grow by 2.4% y-o-y in 2010/11. However, Guatemala's corn crop has been hard hit by three months of torrential rains. We have revised down our forecast for 2010/11 and now see production of 1.09mn tonnes, a further 1.3% fall on the drought-hit harvest of 2009/10.
Key Trends and Developments
The governments of El Salvador and Costa Rica have announced plans to renovate ageing coffee plantations. Both countries have seen declines in their coffee output, as ageing trees (over 20 years) yield fewer beans.
Multinational coffee firm Starbucks has announced plans to open stores throughout Central America, with the first café planned to launch in San Salvador before the end of 2010.
Exports of Guatemalan sugar are forecast to grow to 1.68mn tonnes in 2011, with US, Chile, Canada and South Korea major export markets for raw sugar. Guatemala is seeking to increase the proportion of refined sugar it exports, as it is a higher value produce, with Chile, Taiwan, China, Malaysia and Indonesia representing important markets.
In H110, exports of Nicaraguan meat, dairy products and livestock soared by 30% in value terms, climbing to US$234.6mn, up from US$182.6mn during the same period in 2009. The US remains the primary export destination, accounting for almost one third of Nicaraguan beef, followed by Central American neighbour El Salvador on 28%. Venezuela is in third place with 25%: Nicaragua's exports to Venezuela have rocketed since the election of left-wing President Daniel Ortega in January 2007.
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