Brazil Agribusiness Report Q4 2012

The Brazil 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 Brazil's agribusiness service.

BMI View:

We have revised up again our forecast for corn production in 2011/12 on the back of strong yields for the country’s second crop. We are slightly below consensus in our outlook for the soybean crop in 2012/13, as we believe a weaker-than-expected El Niño will present some downside risks to production. For sugar, our view for the harvest to pick up more strongly once weather concerns disappeared has played out very well, and we maintain our forecast for a recovery in output over the medium term. For livestock and dairy, we continue to see problems linked to heavy debt levels for the main companies in the sector, but we expect strong sales growth potential over our forecast period. For coffee, we expect exports to improve significantly in the coming months now that farmers have partially replenished stocks and that the latest estimates for the arabica crop this year are strong.

Key Forecasts:

- Coffee production growth to 2015/16: 11.2% to 53.5mn tonnes. This growth will be driven by Brazil’s continuing dominance in the export market as well as increased domestic consumption.

- Poultry consumption growth to 2015/16: 12.4% to 10.6mn tonnes. This gain will be underpinned by macroeconomic growth and the subsequent rise in per capita incomes, especially as chicken is the cheapest of the three meats we cover in our report and is often perceived as healthier.

- Soybean production growth to 2015/16: 22.6% to 92.5mn tonnes. We expect prices to stay supported on the back of a recovery in global demand, which will continue to provide farmers with incentives to invest in their soybean crop.

- 2012 real GDP growth: 1.8% (predicted to average 3.4% over 2011-2016).

- Consumer price inflation: 5.5% average in 2012.

- BMI universe agribusiness market value: 2.4% year-on-year (y-o-y) increase to US$172.5bn in 2013, forecast to increase by an average of 2.0% annually between 2010/11 and 2015/16.

Industry Outlook:

We have revised down slightly our forecast for the Brazilian 2012/13 coffee crop to 51.0mn bags (from a previous forecast of 55.0mn bags). However, this output will still be 17.1% higher than in 2011/12 and a 6.1% above the previous up-year in the country’s production cycle. We forecast a production balance of 30.5mn bags in 2012/13, compared with 23.5mn bags in 2011/12 and 28.7mn bags in the previous upyear
(2010/11). Expectations for this bumper crop from the world’s largest coffee producer has weighed heavily on global prices, taking them 45.1% lower as of September 3 compared with May 2011.

Brazilian meat producer JBS turned an overall profit in Q212, the first time the company recorded a profit in two consecutive quarters since early 2010. That said, we see subdued earnings potential over the short term. A key reason for the growth was the company’s 12% quarter-on-quarter (q-o-q) and 19% y-oy increase in revenues from the South American unit. The higher revenues from the Mercosur unit led to a nearly 50% y-o-y increase in EBITDA for that division, making it easily the company’s best performing division (other divisions include meat operations in the US and Australia). Lower cattle prices in Brazil and a weaker Brazilian real improved export competitiveness for the firm. Overall, the company’s net income improved by 46% q-o-q to BRL170mn, and improved significantly from Q211, when the company experienced a BRL180mn loss.

We maintain our forecast for Brazilian soybean output to reach 76.0mn tonnes in 2012/13, as we believe industry sources are being slightly optimistic in their forecast for production to reach 82.0mn tonnes next season. Even at 76.0mn tonnes, the 2012/13 Brazilian soybean crop will help to loosen the global market after January 2013. However, we highlight upside risks to global prices in the short term owing to fears that Hurricane Isaac will provide too much rain in the south of the US while droughts in the north continue to affect soybean yields. SHOW LESS READ MORE >

Executive Summary 7

SWOT Analysis 9

Brazil Agriculture SWOT 9

Brazil Business Environment SWOT 10

Supply & Demand Analysis 11

Brazil Livestock Outlook 11
Table: Brazil Poultry Production & Consumption, 2011-2016 12
Table: Brazil Pork Production & Consumption, 2011-2016 12
Table: Brazil Beef & Veal Production & Consumption, 2011-2016 12
Table: Brazil Poultry Production & Consumption, 2008-2012 16
Table: Brazil Pork Production & Consumption, 2008-2012 16
Table: Brazil Beef & Veal Production & Consumption, 2008-2012 17

Brazil Cocoa Outlook 18
Table: Brazil Cocoa Production & Consumption, 2011-2016 18
Table: Brazil Cocoa Production & Consumption, 2008-2012 20

Brazil Coffee Outlook 21
Table: Brazil Coffee Production & Consumption, 2011-2016 21
Table: Brazil Coffee Production & Consumption, 2008-2012 26

Brazil Sugar Outlook 27
Table: Brazil Sugar Production & Consumption, 2011-2016 28
Table: Brazil Sugar Production & Consumption, 2008-2012 31

Brazil Cotton Outlook 32
Table: Brazil Cotton Production & Consumption, 2012-2016 32
Table: Brazil Cotton Production & Consumption, 2008-2012 36

Brazil Grains Outlook 37
Table: Brazil Wheat Production & Consumption, 2011-2016 38
Table: Brazil Corn Production & Consumption, 2011-2016 38
Table: Brazil Barley Production & Consumption, 2011-2016 38
Table: Brazil Wheat Production & Consumption, 2008-2012 41
Table: Brazil Corn Production & Consumption, 2008-2012 41
Table: Brazil Barley Production & Consumption, 2008-2012 41

Brazil Soybean Outlook 42
Table: Brazil Soybean Production & Consumption, 2011-2016 43
Table: Brazil Soybean Production & Consumption, 2008-2012 46

Brazil Dairy Outlook 47
Table: Brazil Milk Production & Consumption, 2011-2016 48
Table: Brazil Butter Production & Consumption, 2011-2016 48
Table: Brazil Cheese Production & Consumption, 2011-2016 49
Table: Brazil Whole Milk Powder Production & Consumption, 2011-2016 49
Table: Brazil Milk Production & Consumption, 2008-2012 52
Table: Brazil Butter Production & Consumption, 2008-2012 52
Table: Brazil Cheese Production & Consumption, 2008-2012 52
Table: Brazil Whole Milk Powder Production & Consumption, 2008-2012 52

Company Profiles 54

JBS SA 54
Table: JBS Financial Data (BRL), 2007-2011 62

Brazil Agribusiness Report Q4 2012

© Business Monitor International Ltd

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Cosan Limited 63

Commodity Price Analysis 71

Monthly Grains Update 71

Wheat: Little Potential For Export Restrictions 71

Corn: US Downgrades Tighten Market Further 74

Soybean: South America In The Spotlight 76

Rice: The Only Well-Supplied Grain Market 78
Table: Select Commodities: Performance & Forecasts 79

Monthly Softs Update 80

Cocoa: Looking Supported 81

Coffee: Supported In Short Term 83

Palm Oil: Heading Back To Support 85

Sugar: Searching For Support 87

Cotton: Still In A Downward Trend Channel 89
Table: Select Commodities: Performance & Forecasts 90

Upstream Analysis 91

Americas GM Outlook 91

Americas Machinery Outlook 95

Americas Fertiliser Outlook 98

Downstream Analysis 102

Consumer Outlook 02

Food 04

Consumption 04
Table: Food Consumption Indicators – Historical Data & Forecasts, 2009-2016 05

Processed Food 05
Table: Canned Food Value/Volume Sales – Historical Data & Forecasts, 2009-2016 06
Table: Pasta, 2009-2016 06
Table: Meat, 2009-2016 07
Table: Fish, 2009-2016 08
Table: Jams & Jellies, 2009-2016 10
Table: Frozen Fruit & Vegetables 10

Dairy 11
Table: Dairy 12

Confectionery 14
Table: Confectionery Value/Volume Sales – Historical Data & Forecasts, 2009-2016 16
Table: Biscuits, 2009-2016 17

Drink 18

Hot Drinks 18
Table: Hot Drink Value Sales – Historical Data & Forecasts, 2009-2016 19

Alcoholic Drinks 20
Table: Alcoholic Drinks, 2009-2016 21

Soft Drinks 22
Table: Soft Drink Value/Volume Sales – Historical Data & Forecasts, 2009-2016 23

Mass Grocery Retail 24
Table: Mass Grocery Retail Value Sales By Format – Historical Data & Forecasts, 2009-2016 25
Table: Sales Breakdown By Retail Format Type (%), 2011-2021 25

Trade 26
Table: Trade Balance – Historical Data & Forecasts, 2009-2016 26

Country Snapshot 127

Brazil Agribusiness Report Q4 2012

© Business Monitor International Ltd

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Table: Brazil’s Population By Age Group, 1990-2020 (‘000) 28
Table: Brazil’s Population By Age Group, 1990-2020 (% of total) 29
Table: Brazil’s Key Population Ratios, 1990-2020 30
Table: Brazil’s Rural And Urban Population, 1990-2020 30

Our Forecast Modelling

131

How We Generate Our Industry Forecasts 31