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Cameroon Agribusiness Report Q1 2011
Business Monitor International, Dec 2010, Pages: 46
Cameroon 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 Cameroon's agribusiness service.
BMI View
In the five years to 2015, we anticipate strong production growth for most agricultural sectors. However, growth is expected to be particularly high in the case of cocoa, coffee and sugar. Cameroon's cocoa and coffee sectors are both benefiting from increased investment, improved industry fundamentals and better macroeconomic conditions. Meanwhile, a robust increase in sugar output over the next five years reflects the impact of recent industry reforms and increased competition. We highlight the risk of disease and the problems associated with corruption as factors with potential to disrupt our growth expectations for cocoa and coffee. Over our five-year forecast period, positive demand growth is envisaged for all Cameroon's agricultural sectors, with the exception of coffee, for which consumption growth is expected to be limited. Staple grains such as corn and sorghum will experience steady demand growth as Cameroon's population continues to expand. At the same time, growing domestic demand for cocoa will be fuelled by rising disposable incomes and by increased exposure to value-added processed products.
Key Industry Forecasts
- Our short-term forecast for Cameroon's cocoa industry envisages a 3.6% rise in cocoa production in 2010/11; this will raise total output to almost 222,000 tonnes. Over the long term, we expect the industry to benefit from a combination of better crop management techniques and private and public sector investment. In the five years to 2014/15, we predict that cocoa production will grow by 34.9% to surpass 267,000 tonnes.
- In 2010/11, we predict that Cameroon will expand its coffee output by 5.4% to produce almost 901,000 60kg bags of coffee. In the five years to 2014/15, we anticipate robust growth for the sector, with coffee production expected to rise by 33.5%. Our strong growth expectations reflect the considerable support which the industry is currently receiving from the government and other sources.
- Cameroonian sugar production is predicted to increase by 13% in 2010/11 and by an impressive 85.3% the five years to 2014/15. Our strong growth expectations reflect the increased investment in the sector, as well as growing competition. Although output should be sufficient to meet demand, Cameroon will continue to face shortfalls due to the high price of sugar and the problems associated with sugar smuggling, both of which are distorting market dynamics.
- Our newly extended grains outlook for Cameroon anticipates steady growth in the production of both corn and sorghum in the five years to 2014/15. The output of grains will average at around 3.3% per year, in the case of corn, and 3.4 per year, in the case of sorghum. Over our forecast period, total corn output will increase by 17.5% to 1.09mn tonnes. Meanwhile, sorghum output will expand by 18.1% to reach 676,000 tonnes.
Key Macroeconomic Forecasts:
- Cameroon Real GDP Growth 2010 Forecast: 2.6% (up from 1.9% in 2009).
- Cameroon Unemployment Rate 2010: 8.0% (7.0% in 2009).
- Consumer Price Inflation: 1.5% y-o-y (average for 2010), up from 3.1% average in 2009.
Industry Developments
Our newly extended forecast for Cameroon's cocoa industry envisages a return to positive production growth in 2010/11. This follows a 3.5% fall in output which occurred in the twelve months ending July 2010. In 2010/11, we expect production to rise by 3.6% year-o-year (y-o-y) to reach a total output of 205,100 tonnes. Over the longer-term, BMI remains optimistic about output growth from Cameroon's cocoa industry. Among other things, the sector is benefiting from a substantial increase in government investment. However, we highlight a number of risks which could weigh negatively on our short-term supply forecast. These include a new outbreak of disease in the south west of Cameroon and the prospect of rising cocoa exports from Côte d'Ivoire and Ghana. In September 2010, it was announced that Cameroon would provide farmers with more than XAF1bn worth of chemicals to combat pests and diseases affecting the country's cocoa and coffee crops. Growers in the south west of the country have said a persistent period of rainy weather could spread disease and damage the next harvest. According to reports, the government will aim to ensure that at least half of all cocoa and coffee plants (out of an estimated total of 600,000 hectares of cultivated land) will be sprayed. Cocoa experts have said that output from the south west growing region, which accounts for half of Cameroon's cocoa output, could drop 10% in 2010/11 as a result of black pod infection.
Meanwhile, BMI is predicting the resumption of strong international demand for cocoa on the back of healthier economic growth and falling global prices. While we forecast an impressive 3.2% y-o-y increase in global cocoa consumption in 2011, we believe that demand should be outstripped by greater production. Although Cameroonian exporters potentially stand to benefit from rising global demand, they will have to work hard to compete against regional giants Côte d'Ivoire and Ghana, the world's two largest producers responsible for two thirds of all cocoa production; both countries are expected to see an increase in output in 2010/11. Ironically, we suggest that this could have the effect of discouraging Cameroonian producers who may struggle to compete against West Africa's two leading exporters.
In addition to cocoa, Cameroon's coffee industry is also benefiting from extensive government support, as well as changing industry fundamentals. BMI has identified several initiatives expected to boost output growth over the next five years. These include the rehabilitation of old coffee plantations and efforts by the government to tackle corruption within the sector. Meanwhile, going into 2011, we believe that Cameroonian coffee growers could potentially benefit from the continuation of high global coffee prices.
Several factors, including the delayed harvest in Vietnam and the fact that Brazil's crop goes into an offseason in 2011, will ensure that coffee prices remain high going into 2011. This scenario should be favourable to Cameroonian growers, which will benefit from improved demand and price fundamentals. However, as with cocoa, we have highlighted disease as a potential risk to coffee production and one of the factors which could negatively distort our future growth expectations.
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