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Greece Agribusiness Report Q1 2011
Business Monitor International, Dec 2010, Pages: 62
Business Monitor International's Greece 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 Greece's agribusiness service.
BMI View: The fiscal consolidation plan that Greece has committed to in exchange for the EUR110bn EU and IMF bailout is proving a challenge for agriculture. On the supply side, farmers are struggling to secure credit, investment will suffer and some smaller producers may go out of business. On the demand side, more unemployment and economising by cash-strapped consumers will see consumption of some commodities suffer, notably beef, pork and wheat.
Key Views
- Poultry production to fall 0.5% in 2010 to 173,000 tonnes; pork output to fall 1.2% year-on-year to 113,000 tonnes; beef to drop 2.1% to 55,900 tonnes.
- Financial crisis likely to exert downward pressure on wheat prices and starve the industry of investment over the forecast period. From 2009-2015, production to fall from 1.84mn tonnes in 2009/10 to 1.80mn tonnes in 2014/15.
- In 2010, we forecast Greek rice production to fall by 3.0% to 199,000 tonnes. Due to expected yield gains, we now forecast production in 2015 to increase to 213,000 tonnes.
- Less efficient dairies are likely to go out of business, credit will be difficult to secure and investment will be scaled back. Latest figures from the Food and Agriculture Organization put 2008 milk production at 2.09mn tonnes. In 2009, we estimate it fell to 2.07mn tonnes. For 2010 we now forecast another slight reduction in milk output to 2.05mn tonnes.
Industry Developments Commitment to deeper fiscal cuts has prompted a revision to our 2010 GDP growth forecast to -4.6% from a previous -2.0%. Additional spending cuts will also fuel public discontent, resulting in further demonstrations and national strikes which will continue to cripple the economy. These could result in serious disruption to agricultural production and distribution, and pose a downside risk to our forecasts.
Under the May agreement with the EU and IMF, the Greek government targeted a reduction of the deficit to 7.6% of the GDP. In November 2010, the Greek Finance Ministry stated that the deficit for 2010 represented 9.4% of GDP and announced a target of 7.4% of GDP for 2011. The data indicates that the Greek economy is double-dipping. This is reflective of the enormous fiscal consolidation efforts under way, a substantial deterioration in investor sentiment, as well as sporadic national strikes which have crippled economic activity.
The European Commision should come up with new proposals for the dairy industry based on the UN's High Level Group report in December. One is likely to be boosting farmers' bargaining power by establishing contractual arrangements between them and the dairy processing industry. A futures market for dairy may also be recommended with a view to decreasing volatility. It is difficult to predict exactly what form these proposals will take, but they will likely have influenced Greek dairy production by the end of our forecast period.'
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