Mozambique Agribusiness Report Q1 2011

The Mozambique 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 Mozambique's agribusiness service.

In the five years to 2015, strong production growth is expected for sugar, poultry, maize and sorghum. All of these sectors will benefit from increased investment by both the government and private companies. A key development driving growth in the production of both sugar and maize is a growing commitment by the Mozambican authorities to the development of biofuels. Conversely, major downside risks to our grain production forecasts include the subsector's continued vulnerability to variable rainfall, as well as associated problems such as drought and flooding. Within the poultry sector, it is the rise in feed costs, together with disease, which remain the greatest downside risks for production. Meanwhile, with regard to the consumption of agribusiness produce, our five-year forecasts envisage positive demand growth for all agribusiness subsectors; among other things, growth will be underpinned by rising incomes and by population expansion.

Key Forecasts:

- We now estimate that maize production fell by 2.7% in 2009/10 to 1.88mn tonnes. The fall in output was due to poor rainfall in H110. Maize will remain Mozambique's most widely produced and consumed grain. Our newly adjusted and extended forecast envisages production expanding by just over 12.5% in the five years to 2014/15.

- In contrast to maize production, the consumption of the grain is expected to grow at a faster rate of 29% in the five years to 2015; strong consumption growth will occur on the back of a rapidly expanding population, as well as a steady increase in the use of maize as a feed for livestock and poultry.

- Although it hampered maize production, the relatively dry weather in H110 did not seriously affect sorghum. We now estimate that sorghum production grew by 1.6% in the 2010/11agricultural year to reach 384,000 tonnes; growth of 22.5% is predicted for the five years to2014/15.

- We predict that sugar production will rise by 26% to 2014/15. As one of Mozambique's key cash crops, we expect production growth to largely reflect an increase in export-driven demand and the opening-up of new markets; sugar production also stands to benefit from investment in biofuels.

- Domestic sugar consumption will rise by a more modest 15% in the five years to 2015. Although growth will be driven by rising incomes and by an expanding population, sugar will never the less remain a luxury food for many Mozambicans.

- Poultry production will increase by 23% to 2014/15, fuelled by rising domestic demand and ongoing investments in improved production techniques. However, consumption will increase by 32% over the same period, reflecting improved living standards and an expanding population.

Key Macroeconomic Forecasts:

- 2010 Real GDP Growth: 6.2% (down from 6.7% in 2009; predicted to average 6.5% from now until 2014). We expect growth in consumer spending to lag that of real GDP in 2010; we have penciled in a real growth rate for the former of 3.6%.

- Consumer Price Inflation: 17.5% y-o-y (average for 2010), up from 1.9% average in 2009; CPI is expected to fall to 12.0% y-o-y by the end of 2011 and 9.0% the following year. As an importer of significant quantities of wheat, sugar, milk and rice, Mozambique is vulnerable to rising international commodity prices. High prices for these staples inevitably feed inflation, sapping consumers' purchasing power.

Key Views:

Mozambican agribusiness has potential to benefit from increased government support and various public private initiatives. In December 2010 Mozambican Prime Minister Aires Ali launched the Comprehensive Africa Agricultural Development Program (CAADP) and pledged that by 2015, the government would be allocating 10% of the state budget to agriculture. The 10% figure is an African Union target. Currently, 5.6% of the Mozambican budget is allocated to agriculture.

CAADP was established as part of the New Partnership for Africa's Development (NEPAD) by the summit of African Union heads of state and government, held in Maputo in July 2003, in order to help African countries to achieve high levels of economic growth through agricultural development. Through its increased investment in agriculture, Mozambique hopes to ensure average growth in agricultural production of 6% per year, thus helping to alleviate food insecurity and poverty. The inauguration of the programme is a major milestone in a process that includes drawing up a national strategy for agricultural development for the next ten years, involving all stakeholders, which the government intends to have ready by April 2011.

In addition to government support, Mozambique's agribusiness sector stands to benefit from new public private initiatives. Among them are the Beira Agricultural Growth Corridor (BAGC) initiative, Launchedin 2009, BAGC has potential to boost agricultural productivity in Mozambique and the wider region. BAGC aims to bring governments, private investors, donor agencies and regional organisations together with a view to increasing the amount of land devoted to irrigated commercial agriculture in central Mozambique from 20,000 hectares in 2010 to 210,000 hectares by 2030.

BMI believes that the problem of food price inflation in Mozambique should cool in the coming months, thus decreasing the risk of further protests. In September 2010, the country saw the outbreak of food price riots which left fourteen people dead and more than 400 injured; these followed a sudden spike in wheat prices in August. In the aftermath of the riots, the Mozambican government announced that it would reverse the 30% price increase in the price of bread which allegedly contributed to the unrest. Due to the depreciation of its currency, the metical, Mozambique was forced to confront rapidly rising prices for several imported foods, including wheat and barley.

Over the short term, BMI believes that wheat prices will begin to moderate from currently elevated levels, given that global stocks remain elevated and more supply from the US (the world's largest wheat exporter) comes online. However, the continued weakness of Mozambique's currency the metical has implications for many of the country's food production industries. By illustration, CDM, the local subsidiary of South African Breweries, is understood to be considering the use of locally grown cassavain beer production, in order to reduce the financial burden arising from the import of raw materials. The production of beer not only uses barley and hops, but also starch powder which can be extracted from cassava. SHOW LESS READ MORE >

Executive Summary

SWOT Analysis
- Mozambique Agricultural SWOT
- Mozambique Political SWOT
- Mozambique Economic SWOT
- Iran Business Environment SWOT

Industry Forecast Scenario:

Mozambique Livestock Outlook
- Table: Mozambique – Poultry Production, Consumption & Trade
- Table: Mozambique – Poultry Production, Consumption & Trade

Mozambique Sugar Outlook
- Table: Mozambique – Sugar Production, Consumption & Trade
- Table: Mozambique – Sugar Production, Consumption & Trade

Mozambique Grains Outlook
- Table: Mozambique – Corn Production, Consumption & Trade
- Table: Mozambique – Sorghum Production, Consumption & Trade
- Table: Mozambique – Corn Production, Consumption & Trade
- Table: Mozambique – Sorghum Production, Consumption & Trade

Competitive Landscape
- Table: Agricultural Commodity Producers & Traders
- Table: Agribusiness Suppliers
- Table: Integrated Agricultural Producers

Commodity Price Analysis
- Monthly Softs Update
- Cocoa
- Table: Cocoa
- Coffee
- Table: Coffee
- Milk
- Table: Milk
- Sugar
- Table: Sugar
- Grains Update
- Corn
- Table: Corn
- Rice
- Table: Rice
- Soybean
- Table: Soybean
- Wheat
- Table: Wheat

Downstream Supply Chain Analysis
- Industry Forecast Scenario
- Macroeconomic Forecast
- Table: Mozambique - Economic Activity, 2008-2015

BMI Forecast Modelling
- How We Generate Our Industry Forecasts