Central America Agribusiness Report Q1 2012

BMI View: Widespread flooding across the Central America region in October 2011 affected an estimated 1.2mn people and caused significant crop damage, particularly in El Salvador. 10 days of torrential rainfall caused by a tropical depression led the United Nations to launch an emergency appeal for assistance. Corn and bean crops in El Salvador have been hit particularly hard, with an estimated 988,000 quintals of corn and 340,000 quintals of beans thought to be lost. Fruit and vegetables, including apples, bananas and papaya, were also lost in the floods. It is thought that sugar and coffee crops have not been significantly damaged. The price of basic food stuffs is reported to have increased significantly as a result of the flooding. In response, the agriculture minister Guillermo López Suárez announced plans to invest US$11mn to support the sector. Measures include importing 50,000 tonnes of white corn dutyfree and 25,000 tonnes of red beans to avoid supply shortages. The Ministry also plans to distribute more than 8,000 packets of seeds and fertilisers to producers.
The flooding highlights once again the vulnerability of the Central American agricultural sector to extreme and unpredictable weather patterns. Unstable climatic conditions are set to continue to represent a significant downside to our forecasts for our forecast period.
Key Forecasts
.. Demand for sugar in Central America is estimated to have increased by 2.4% y-o-y in 2011 to 1.93mn tonnes. Growth was strongest in Honduras at 5.8% y-o-y. In 2012, we see demand growing by a further 1.5% y-o-y to 1.96mn tonnes, with Honduras again seeing the fastest expansion. Over our forecast period to 2016, we see regional demand growth increasing by 9.1% on 2011 levels to 2.11mn tonnes. Growth is forecast to be strongest in Costa Rica and Nicaragua, at 13.8% and 13.3% respectively. To 2016, production growth for sugar will far outpace consumption demand in Central America, meaning that the area will remain an important exporter for sugar.
.. Heavy rains and flooding in October 2011 damaged prospects for the 2011/12 corn harvest. Crop damage has been particularly severe in El Salvador, where an estimated 34% of corn-growing areas have been affected by the rainfall. We currently forecast production in El Salvador to decline by 7.6% y-o-y to 785,000 tonnes, although damage could be more severe than we currently anticipate. Guatemala is forecast to register moderate growth of 1.3% y-o-y to 1.22mn tonnes, still lower than the 2009 harvest. For the region as a whole, we see corn production declining by 1.3% on the 2010/11 harvest to reach 3.15mn tonnes, as a result of the flood damage.
.. Beef output for the region is forecast to grow by 0.7% y-o-y in 2011/12 to 382,500 tonnes, with production slowing in Nicaragua. To 2016, BMI forecasts beef production growth in Central America of 15.7% on 2011 levels. Nicaragua again is forecast to show the largest gain in beef production, with a 22.1% growth on 2011 levels.
.. Pork consumption is forecast to grow by 3.4% y-o-y in 2012, with Panama continuing to post strong growth of 8.2%. Out to 2016, consumption is forecast to continue growing rapidly at 24.6% on the 2011 level for the region as a whole. Growth is forecast to be strongest in Honduras and Panama, at 34.7% and 47.8% respectively, while in Guatemala increase in demand is expected to be much slower at 6.1% on the 2011 level.
.. For 2011/12, the region's coffee output is forecast to grow by a further 3.1% y-o-y to 13.09mn bags. Nicaraguan production is forecast to bounce back by 23.0% y-o-y, while we currently see output in El Salvador declining by 9.2% y-o-y owing in part to damage caused by floods in October 2011. To 2016, BMI forecasts coffee production growth in Central America of 15.9% on 2011 levels to reach 14.71mn bags. Output will be boosted by work to rejuvenate and replant ageing coffee plantations and modernise production techniques. With global coffee prices remaining high, there will be a strong incentive for producers to increase the area planted to coffee and to make the necessary investments to boost yields.
Key Trends And Developments
.. The governments of Guatemala and Peru have concluded negotiations over a free trade agreement (FTA) between the two nations. The bilateral agreement, which was signed into law on December 6 2011, will grant 81.4% of Guatemalan exports tariff-free access to the Peruvian market for a five-year period. 94.7% of Peruvian exports will be exempt from tariffs for the same period. It is hoped that the agreement will boost trade between the two countries, which is currently relatively low: Guatemalan exports to Peru were worth US$79.9mn in 2010.
.. In November 2011, Guatemala's swine sector was hit by an outbreak of swine flu. Outbreaks were reported in the department of Chimaltenango in the west of the country, leading to the slaughter of 16,000 pigs in one farm. In response, the Guatemalan Ministry of Agriculture declared an animal state of emergency and created a special commission to tackle the outbreak, prevent economic losses and threats to food security. The Ministry of Agriculture also lifted the ban on imports of swine flu vaccine, which had been in place since 2009 and announced a first consignment of 250,000 doses. In response to the outbreak, all Central American countries, along with Mexico, closed their borders to imports of Guatemalan pork in an attempt to prevent the outbreak spreading. Sanitary measures have also been increased. The outbreak is a setback for Guatemalan swine producers. Having grown by just 1.5% between 2006 and 2011, we currently see pork production increasing by 10.4% from 2011-2016. However, our forecast could be revised down should the outbreak prove difficult to contain. The majority of Guatemalan pork is destined for domestic consumption: only 2,000 tonnes were exported in 2011.
.. Panama's livestock sector is showing signs of growth, according to Economic and Social Analysis published by Panama's Ministry of Economy and Finance in December 2011. During the first seven months of 2011, cattle production was up by 9.0% to 223,000 heads on the same period in 2010, while production of chicken meat increased by 9.4% to 66,000 tonnes.
.. The increase in production has, however, led to the saturation of the local market for beef, according to local press reports. Panama's exports of live cattle have been close to zero for the past two years and the falling price for beef on the domestic market has led to calls from producers to boost exports. According to Panama's Cattlemen's Association, the price paid to producers per pound of cattle is the lowest in the region at US$1.16-1.18, in comparison with US$1.30-1.40 in Costa Rica, Honduras and Nicaragua. It is hoped that current negotiations with Costa Rica, Venezuela and Middle Eastern countries will lead to export agreements, which will relieve saturation in the local markets and help to stabilise prices.
.. In December 2011, the Nicaraguan tourist institute Intur, in partnership with the Grand Duchy of Luxembourg, unveiled investment of US$9.2mn in the 'Ruta del Café', or Coffee Route. This follows investment of US$6.9mn in the first phase of the Coffee Route, which encompasses the departments of Jinotega, Matagalpa, Estelí, Madriz and Nueva Segovia. The first phase of developing the coffee route saw the opening of 31 tourism projects, including museums, parks and cultural centres. The second phase of the project will direct the investment towards further pilot projects, training, technical assistance and micro-financing for small and medium-sized producers in the five departments, according to an Intur representative.

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Executive Summary 5
SWOT Analysis 8
Table: Central America Agricultural SWOT 8
Supply Demand Analysis 9
Central America Sugar Outlook 9
Table: BELIZE, COSTA RICA, GUATEMALA, HONDURAS, NICARAGUA, PANAMA, EL SALVADOR Sugar Production & Consumption 10
Table; Belize, Costa Rica, Guatemala, Honduras, Nicaragua, Panama, El Salvador Sugar Production & Consumption,2008-2012 13
Central America Livestock Outlook 15
Table : Costa Rica, Guatemala, Honduras, Nicaragua, El Salvador Beef & Veal Production, Consumption & Trade, 2011-2016 17
Table: Guatemala, Honduras, Panama, El Salvador Pork Production, Consumption & Trade, 2011-2016 18
Table: GUATEMALA Poultry Production, Consumption & Trade,2011-2016 18
Table: Costa Rica, Guatemala, Honduras, Nicaragua, El Salvador Beef & Veal Production, Consumption & Trade, 2008-2012 22
Table: Guatemala, Honduras, Panama, El Salvador Pork Production, Consumption & Trade, 2008-2012 23
Table: GUATEMALA Poultry Production, Consumption & Trade,2008-2012 23
Central America Grains Outlook 25
Costa Rica, Guatemala, Honduras, Nicaragua, Panama, El Salvador Corn Production & Consumption,2011-2016 27
Table: Costa Rica, Guatemala, Honduras, Nicaragua, Panama, El Salvador Corn Production & Consumption,2008-20112 30
Central American Coffee Outlook 32
Table: Costa Rica, Guatemala, Honduras, Nicaragua, El Salvador Coffee Production & Consumption,2011-2016 35
Table: Costa Rica, Guatemala, Honduras, Nicaragua, El Salvador Coffee Production & Consumption,2008-2012 41
Commodity Price Analysis 43
Monthly Grains Update 43
Corn 43
Rice 44
Soybean 45
Wheat 46
Monthly Softs Update 47
Cocoa 47
Coffee 48
Palm Oil 49
Sugar 50
Industry Forecast 51
Consumer Outlook 51
Food 53
Total Food Consumption 53
Table: Guatemala -- Food Consumption,2008-2015 53
Table: El Salvador -- Food Consumption, 2008-2015 54
Table: Costa Rica -- Food Consumption, 2008-2015 54
Table: Honduras -- Food Consumption, 2008-2015 55
Prepared Food 56
Table: El Salvador – Confectionery, 2008-2015 56
Table: El Salvador – Meat, 2008-2015 57
Table: El Salvador -- Jams And Jellies, 2008-2015 58
Table: El Salvador – Pasta, 2008-2015 59
Prepared Fish 60
Table: El Salvador – Fish, 2008-2015 60
Central America Agribusiness Report Q1 2012
© Business Monitor International Ltd Page 4
Table: Coasta Rica – Fish, 2008-2015 61
Oils And Fats 63
Title: Guatemala -- Soya Bean Oil 63
Table: El Salvador – Margarine, 2008-2015 64
Table: Costa Rica -- Soya Bean Oil, 2008-2015 65
Dairy 66
Table: El Salvador – Dairy, 2008-2015 66
Mass Grocery Retail 69
Table: Regional Sales Breakdown By Retail Format (%) 69
Table: Guatemala -- Mass Grocery Retail Sales, 2008-2015 70
Table: El Salvador -- Mass Grocery Retail Sales, 2008-2015 71
Table: Costa Rica -- Mass Grocery Retail Sales, 2008-2015 71
Trade 72
Table: Guatemala -- Food And Drink Trade Balance,2008-2015 72
Table: El Salvador -- Food And Drink Trade Balance, 2008-2015 72
Table: Costa Rica -- Food And Drink Trade Balance, 2008-2015 72
Table: Honduras -- Food And Drink Trade Balance, 2008-2015 73
BMI Forecast Modelling 74
How We Generate Our Industry Forecasts 74
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