Colombia Agribusiness Report Q4 2012

The Colombia 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 Colombia's agribusiness service.

In recent years, Colombian agricultural producers have been hit hard by the effects of La Niña weather phenomenon, which has brought devastating rains, causing widespread damage to crops and infrastructure. Now, however, producers are preparing for the possible arrival of El Niño, which could bring with it much drier, hotter conditions. While there are hopes that this could lead to improved output,
El Niño also brings risks of droughts and forest fires. The Agricultural Society of Colombia has announced emergency plans to give farmers access to credit to purchase equipment needed to cope with drought conditions. The regions likely to be most strongly affected are the Atlantic coast, the Andes, the coffee triangle in central Colombia and the Llanos Orientales in the Eastern Plains. The north of Colombia is already experiencing excessively high temperatures, which are threatening to slow dairy production. The extreme weather conditions faced by producers in recent years highlights the climactic risks posed to the Colombia’s agricultural sector; this is likely to become more pronounced as a result of climate change.

Key Forecasts

- Weaker global conditions have led BMI to slightly reduce our forecast for Colombia’s real GDP growth to 4.4% in 2012 and 4.3% in 2013. We believe that private consumption is undergoing a slight slowdown but will nevertheless remain relatively robust. Our long-term outlook for the Colombian economy is positive, and the country’s attractive mining, oil and infrastructure sectors and business-friendly policies will ensure robust growth rates beyond 2013.

- We believe that demand for wheat grew by 0.7% year-on-year (y-o-y in 2011 to reach 1.41mn tonnes. We see consumption growing by 2.5% y-o-y in 2012 to 1.44mn tonnes, as demand for bread and bakery goods expands. Demand growth is forecast to slow to 1.2% y-o-y in 2013.

Over our forecast period, we expect demand to grow by 12.6% from the 2011 level to reach 1.58mn tonnes in 2016, supported by an increase in disposable income.

- We expect corn output to increase by 16.9% y-o-y to reach 1.70mn tonnes in 2011/12, as the area harvested increases, boosted by the government’s País Maíz plan. Aided by the programme, we see corn production expanding by a further 5.6% y-o-y in 2012/13 to 1.79mn tonnes.

Through to 2016, we forecast production to rise by 40.3% from the low 2011 level to reach 2.04mn tonnes. This will be driven by continued improvements in yields as access to hybrid seeds and fertilisers increases, and as corn production expands into the Eastern Altillanura plains. Biotech seeds are also helping to boost yields; since 2007, the area planted to genetically modified corn has increased from 6,901 hectares to 59,239 hectares in 2011.

- We now believe that coffee production will fall to 7.80mn bags in 2011/12, which would represent the lowest harvest in more than 30 years, as poor weather once again hit output. That said, 2012/13 looks set to be a more promising harvest year. Newly renovated plantations will return to production, and weather conditions look set to be more favourable. We currently forecast production to increase by 16.0% y-o-y to 9.05mn tonnes in 2012/13. Out to 2016,
production will be aided by programmes to replace aging plantations and improve resistance to disease. We forecast growth of 21.4% on the low 2011 level to reach 10.40mn bags by 2016.

- We currently forecast cocoa production to remain static in 2011/12 at 37,000 tonnes. Crop substitution schemes are being threatened by the falling price of cocoa, which is seeing the area planted with coca leaves creeping back up. Prices for cocoa in Colombia have fallen from around COP5,000 in December 2011 to COP3,000 in July 2012, as fears about supply restrictions in Côte d’Ivoire subside. By 2016, we forecast production to increase by 10.0% from the 2011 level to 40,700 tonnes.

Key Trends And Developments

In June 2012, the Colombian government announced a new COP4mn programme as part of the País Maíz plan to increase the country’s grain security. The new programme will support producers in hedging corn prices and help them to become more competitive in light of the free trade agreement with the US. The agriculture minister, Juan Camilo Restrepo Salazar, stated that the new fund was designed to help to modernise the financing of agricultural production, develop a culture of protection against risk, and provide producers with protection against a fall in international prices. Subsequently, in July 2012, the minister announced a COP31mn fund to boost the competitiveness and production by improving fodder and pastures and modernising agricultural machinery.

Colombia continues to expand its production of ethanol in order to reduce consumption of fossil fuels.

Following a weather-related decline in production of 14% y-o-y in 2010, ethanol production surged by 25% y-o-y in 2011 to reach 351mn litres. Production is forecast to increase to 355mn litres in 2012. A new distillery is set to come on line in 2013, expanding production by a further 300,000 litres per day. As a result, we see ethanol production rising to 410mn litres in 2013. New legislation which came into force on January 1 2012 mandates that all vehicles must use ethanol-blend fuel of 8-10%. The target for reaching 10% ethanol-blend fuel is now 2013; by late 2013 domestic production is likely to be sufficient to support this. The focus on ethanol production has seen sugar production fall as cane was diverted to make fuel. However, high sugar prices have helped to reduce this trend and we remain optimistic that the declines in sugar production will continue to level off.

Colombia’s coffee crop faced a new threat in Q312 with an outbreak of red spider mites, which attach themselves to tree leaves and have so far attacked farms in Caldas, Colombia’s fourth largest coffee producing region. Red spider mites have previously caused concern among farmers; however, their presence is usually mitigated by larger predators. Some local observers suggest that a recent volcano eruption created ash clouds that killed the mites’ predators en masse, leading to a proliferation of the pests. The sector’s profitability has also been hit by the fall in coffee prices since near record highs in 2011. The decline in revenue is compounded by the recent appreciation of the Colombian peso.

The agricultural sector continues to recover from the severe weather conditions experienced during the winter of 2011/12. In August 2012, the government announced that it had granted relief grants and loans to 31,000 affected producers totalling COP120bn. A further 65,000 producers have attended health programmes to improve production techniques.

During the first 45 days of the US-Colombia free trade agreement, which came into force in May 2012, the value of Colombia’s dairy exports to the US grew by 474% from US$30,000 to US$174,000 as a result of the removal of trade tariffs. Between May and June, the value of agricultural exports (excluding coffee and grains) increased by 29%. Imports of agricultural products from the US decreased by 12%
over the same period. SHOW LESS READ MORE >

Executive Summary 5

SWOT Analysis 8

Colombia Agriculture SWOT 8

Colombia Business Environment SWOT 9

Supply & Demand Analysis 10

Colombia Cocoa Outlook 10
Table: Colombia Cocoa Production & Consumption, 2011-2016 10
Table: Colombia Cocoa Production & Consumption, 2008-2012 12

Colombia Sugar Outlook 13
Table: Colombia Sugar Production & Consumption, 2011-2016 14
Table: Colombia Sugar Production & Consumption, 2008-2012 17

Colombia Coffee Outlook 18
Table: Colombia Coffee Production & Consumption, 2011-2016 19
Table: Colombia Coffee Production & Consumption, 2008-2012 24

Colombia Dairy Outlook 25
Table: Colombia Milk Production & Consumption, 2011-2016 27
Table: Colombia Butter Production & Consumption, 2011-2016 27
Table: Colombia Cheese Production & Consumption, 2011-2016 27
Table: Colombia Whole Milk Powder Production & Consumption, 2011-2016 27
Table: Colombia Milk Production & Consumption, 2008-2012 30
Table: Colombia Butter Production & Consumption, 2008-2012 30
Table: Colombia Cheese Production & Consumption, 2008-2012 30
Table: Colombia Whole Milk Powder Production & Consumption, 2008-2012 31

Colombia Livestock Outlook 32
Table: Colombia Poultry Production & Consumption, 2011-2016 34
Table: Colombia Pork Production & Consumption, 2011-2016 34
Table: Colombia Beef & Veal Production & Consumption, 2011-2016 34
Table: Colombia Poultry Production & Consumption, 2008-2012 37
Table: Colombia Pork Production & Consumption, 2008-2012 37
Table: Colombia Beef & Veal Production & Consumption, 2008-2012 37

Colombia Grains Outlook 38
Table: Colombia Wheat Production & Consumption, 2011-2016 40
Table: Colombia Corn Production & Consumption, 2011-2016 40
Table: Colombia Barley Production & Consumption, 2011-2016 40
Table: Colombia Wheat Production & Consumption, 2008-2012 42
Table: Colombia Corn Production & Consumption, 2008-2012 43
Table: Colombia Barley Production & Consumption, 2008-2012 43

Commodity Price Analysis 44

Monthly Softs Update 44

Cocoa: Momentum Waning 45

Coffee: Temporary Rally 46

Cotton: Forming A Base 47

Palm Oil: Underperforming The Complex 48

Sugar: Scope For A Moderate Rebound 50
Table: Select Commodities: Performance & Forecasts 51

Monthly Grains Update 53

Colombia Agribusiness Report Q4 2012

© Business Monitor International Ltd

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Wheat: Little Relief From Southern Hemisphere 54

Corn: Looking The Weakest 55

Soybean: Prices To Stay Relatively Supported 57

Rice: Still The Underperformer 58
Table: Select Commodities: Performance & Forecasts 60

Upstream Analysis 61

Americas GM Outlook 61

Americas Machinery Outlook 65

Americas Fertiliser Outlook 68

Downstream Analysis 72

Food 72

Food Consumption 72
Table: Food Consumption Indicators – Historical Data & Forecasts, 2009-2016 72

Confectionery 73
Table: Confectionery Value/Volume Sales – Historical Data & Forecasts, 2009-2016 73

Canned Food 74
Table: Canned Food Value/Volume Sales – Historical Data & Forecasts, 2009-2016 74

Prepared Food 75
Table: Jams And Jellies, 2009-2016 75
Table: Pasta, 2009-2016 76
Table: Meat, 2009-2016 77
Table: Fish, 2009-2016 79

Drink 80

Hot Drinks 80
Table: Hot Drinks Value Sales – Historical Data & Forecasts, 2009-2016 80

Alcoholic Drinks 80
Table: Alcoholic Drinks Value/Volume Sales – Historical Data & Forecasts, 2009-2016 82

Soft Drinks 82
Table: Soft Drinks Value/Volume Sales – Historical Data & Forecasts, 2009-2016 83

Mass Grocery Retail 83
Table: Mass Grocery Retail Sales By Format – Historical Data & Forecasts, 2009-2016 84
Table: Sales Breakdown By Retail Format Type, %, 2009-2019 84

Trade 84
Table: Trade Indicators – Historical Data & Forecasts, 2009-2016 85

Country Snapshot 86
Table: Colombia’s Population By Age Group, 1990-2020 (‘000) 87
Table: Colombia’s Population By Age Group, 1990-2020 (% of total) 88
Table: Colombia’s Key Population Ratios, 1990-2020 89
Table: Colombia’s Rural And Urban Population, 1990-2020 89

Our Forecast Modelling

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How We Generate Our Industry Forecasts 90