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Spain Agribusiness Report Q2 2009
Business Monitor International, April 2009, Pages: 47
Spain 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 Spain's agribusiness service.
Spain Agribusiness Report Q209 continues on the themes touched upon in the previous publication as the Spanish farming industry seeks to become more competitive in line with the demands of an increasingly affluent population. As the global economic recession continues apace, the Spanish economy is set to feel the effects of shrinking tourism expenditure, while the agricultural sector needs to become more efficient in line with the EU's Common Agricultural Policy (CAP) health checks. If this fails to take place adequately, the economy is at risk of becoming more import-based, to the detriment of local producers, potentially leading many farmers to leave the industry in favour of urban employment.
The local livestock industry is well-developed, particularly in pork production where EU ascension has contributed to Spain gaining cutting edge technology, thus enabling a strong and vertically integrated sector second only to Germany in terms of output. Processed products account for the vast majority of domestic demand for pig meat and consumers seem prepared to pay relatively high prices for quality local produce, such as Serrano ham. We predict pork to show the largest production gains over the outlook period with a 7.1% expansion between 2009 and 2013. Consumption is also predicted to outpace the growth recorded between 2004 and 2008, as expansion accelerates during the latter stages of the outlook in light of waning recessionary effects.
Despite a positive outlook for the consumption of sugar-based products, overall sugar consumption is set to continue on a downward trajectory, which has been the trend witnessed in the preceding outlook window. The prevalence of public health consciousness is likely to lead an increasingly conscious public to look for sugar substitutes. Additionally, consumers may also forego the consumption of refined white sugar on breakfast cereals, or in hot beverages, as a means of lowering intake.We forecast consumption to diminish by 0.6% to 1.34mn tonnes by the end of the projection period. Production is set to fall by almost 50% as support measures are removed and a host of players leave the industry.
The CAP reforms are the most likely threat to domestic agricultural production due to the high dependence of farmers on generous EU support such as export subsidies and import controls. The threat of more efficient producers flooding the EU with cheaper food may come as a welcome tonic to consumers, but it is foreseeable that many producers may be forced to either drastically alter production methods or cease production altogether. At the same time, the increasingly health-conscious consumption habits of Western European citizens may lead to a greater focus on quality and organic produce, helping some producers regain profitability.
At a time when domestic producers are likely to face increasing competition from foreign entities, we believe that the diversity of Spanish agriculture may provide the industry with the chance to gain valuable revenues through the marketing of regionally branded value-added produce, which are sure to be popular in foreign countries. Spain is already the top organic producer in the EU, an avenue that could also be focused on
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