Venezuela agribusiness report q2 2013

Q2 2013 www.businessmonitor.com VENEZUELA AGRIBUSINESS REPORT INCLUDES 5-YEAR FORECASTS TO 2017 ISSN 2040-0489 Published by:Business Monitor International Venezuela Agribusiness Report Q2 2013 INCLUDES 5-YEAR FORECASTS TO 2017 Part of BMI’s Industry Report & Forecasts Series Published by: Business Monitor International Copy deadline: March 2013 Business Monitor International Senator House 85 Queen Victoria Street London EC4V 4AB United Kingdom Tel: +44 (0) 20 7248 0468 Fax: +44 (0) 20 7248 0467 Email: subs@businessmonitor.com Web: http://www.businessmonitor.com © 2013 Business Monitor International All rights reserved All information contained in this publication is copyrighted in the name of Business Monitor International, and as such no part of this publication may be reproduced, repackaged, redistributed, resold in whole or in any part, or used in any form or by any means graphic, electronic or mechanical, including photocopying, recording, taping, or by information storage or retrieval, or by any other means, without the express written consent of the publisher DISCLAIMER All information contained in this publication has been researched and compiled from sources believed to be accurate and reliable at the time of publishing However, in view of the natural scope for human and/or mechanical error, either at source or during production, Business Monitor International accepts no liability whatsoever for any loss or damage resulting from errors, inaccuracies or omissions affecting any part of the publication All information is provided without warranty, and Business Monitor International makes no representation of warranty of any kind as to the accuracy or completeness of any information hereto contained Venezuela Agribusiness Report Q2 2013 CONTENTS BMI Industry View SWOT Agribusiness Business Environment 11 Industry Forecast 12 Livestock Outlook 12 Table: Venezuela Beef & Veal Production & Consumption, 2012-2017 14 Table: Venezuela Pork Production & Consumption, 2012-2017 14 Table: Venezuela Poultry Production & Consumption, 2012-2017 14 Table: Venezuela Beef & Veal Production & Consumption, 2007-2012 17 Table: Venezuela Pork Production & Consumption, 2007-2012 17 Table: Venezuela Poultry Production & Consumption, 2007-2012 18 Grains Outlook 18 Table: Venezuela Corn Production & Consumption, 2012-2017 20 Table: Venezuela Wheat Consumption, 2012-2017 21 Table: Venezuela Corn Production & Consumption, 2007-2012 24 Table: Venezuela Wheat Consumption, 2007-2012 24 Coffee Outlook 25 Table: Venezuela Coffee Production & Consumption, 2012-2017 26 Table: Venezuela Coffee Production & Consumption, 2007-2012 31 Commodity Strategy 32 Monthly Softs Update 32 Table: Select Agricultural Commodities - Performance & BMI Forecasts 42 Table: BMI Commodity Strategy 43 Monthly Grains Update 43 Table: Select Agricultural Commodities - Performance & BMI Forecasts 51 Upstream Analysis 53 Americas GM Outlook 53 Americas Machinery Outlook 58 Americas Fertiliser Outlook 63 Downstream Analysis 70 Food 70 Food Consumption 70 Table: Food Consumption Indicators Historical Data and Forecasts 2010-2017 71 Canned and Prepared Food 71 Table: Canned Food Volume/Value Sales Historical Data and Forecasts 2010-2017 72 Table: Fish Volume Sales, Production and Trade Historical Data and Forecasts 2010-2017 72 Oils and Fats 74 © Business Monitor International Page Venezuela Agribusiness Report Q2 2013 Table: Oils and Fats Volume Sales, Production and Trade Historical Data and Forecasts 2010-2017 75 Confectionery 77 Table: Confectionery Value/Volume Sales Historical Data and Forecasts 2010-2017 77 Drink 78 Alcoholic Drinks 78 Table: Alcoholic Drinks Volume/Value Sales Historical Data and Forecasts 2010-2017 79 Soft Drinks 80 Table: Soft Drinks Value Sales Historical Data and Forecasts 2010-2017 81 Hot Drinks 81 Table: Hot Drinks Value Sales Historical Data and Forecasts 2010-2017 82 Mass Grocery Retail 82 Table: Mass Grocery Retail Sales by Format Historical Data and Forecasts 2010-2017 83 Table: Sales Breakdown by Retail Format Type 83 Competitive Landscape 84 Table: Main Agribusiness Companies 84 Demographic Forecast 85 Table: Venezuela's Population By Age Group, 1990-2020 ('000) 86 Table: Venezuela's Population By Age Group, 1990-2020 (% of total) 87 Table: Venezuela's Key Population Ratios, 1990-2020 88 Table: Venezuela's Rural And Urban Population, 1990-2020 88 Methodology 89 © Business Monitor International Page Venezuela Agribusiness Report Q2 2013 BMI Industry View BMI View: Our outlook for Venezuela's agricultural sector is cautious given the country's uncertain political and economic outlook The country has significant growth potential, but the government's policies of expropriation have seen production of key crops decline and a growing reliance on imports Although the poultry section, for example, is well integrated, arable production and cash crops such as cocoa or coffee have been poorly managed Following the death of president Hugo Chávez, we anticipate a new presidential election within months and believe that interim president Nicolás Maduro of the ruling Partido Socialista Unido de Venezuela will win and will continue the interventionist policies of Chávez's era However, we believe the pace of reforms may be more moderate and see significant potential for economic growth over our forecast period This will, however, be dependent on the improvement of infrastructure and the adoption of more market-friendly policies Key Forecasts ■ Corn production growth to 2017: 45.7% to 2.04mn tonnes Despite ongoing challenges including a lack of fertiliser and low profitability, we believe that corn output will expand strongly on the low 2012 levels ■ Coffee consumption growth to 2017: 4.7% to 1.38mn bags After surging by 48.3% from 2007-2012 owing to a steep rise in imports, our demand forecast for the coming five years is more moderate ■ Poultry production growth to 2017: 4.0% to 697,000 tonnes Although the poultry sector is well organised and efficient, production growth is constrained by high input costs and the state-controlled price regime, which is squeezing profitability ■ BMI universe agribusiness market value: US$4.61bn in 2013 (down from US$4.68bn in 2012; forecast to grow annually by 1.7% on average to 2017) ■ 2013 real GDP growth: 2.6% (down from 5.6% in 2012; forecast to grow annually by 3.4% on average between 2012 and 2017) ■ 2013 consumer price index: 30.0% year-on-year (y-o-y) (up from 20.1% in 2012; forecast to grow annually by 22.9% on average between 2012 and 2017) ■ 2013 central bank policy rate: 15.5% (up from 15.0% in 2012; forecast to increase to 16.5% in 2014) Key Revisions To Forecasts ■ Corn consumption in 2012/13 revised up by 10.8% to 3.80mn tonnes While consumption is forecast to decline in y-o-y terms, we have revised up our outlook due to an increase in demand from the livestock sector ■ Poultry consumption in 2012/13 revised down by 2.1% to 867,000 tonnes Consumption is expected to fall due to high costs © Business Monitor International Page Venezuela Agribusiness Report Q2 2013 Industry Developments The supply shortages that have plagued Venezuela in recent years became more acute during the first few weeks of 2013 Staples including cooking oil, coffee, rice, sugar, wheat flour and, most importantly, corn flour have been in extremely short supply It is widely agreed that the shortages are at their most severe since 2008 The shortages have been exacerbated by serious distortions in the economy, primarily rocketing inflation rates, a drop in oil revenues and a black market dollar rate that is more than four times the official exchange rate On February 8, the government devalued the bolívar by 32% to VEF6.3/US$, the fifth devaluation in nine years It is hoped that the move will ease the country's fiscal deficit, which almost tripled in 2012 However, there are fears that the devaluation will further accelerate annual inflation rates In January 2013, in a bid to ease widespread sugar shortages, the Venezuelan government ordered sugar producers to sell 70% of their production to retails outlets and the rest to local industry The majority must be packaged in bags of 5kg or less Also in January, the government announced that it would expropriate PepsiCo's warehouses in northern Vargas state The company is accused of hoarding sugar, but the firm argues that the goods were imported with government authorisation In February 2013, Nicolás Maduro announced VEF7.81bn funding to support the goals of Gran Misión AgroVenezuela in 2013 VEF3.0bn are to be spent on improving farm roads Gran Misión AgroVenezuela is designed to improve Venezuela's food security by boosting domestic production and reducing reliance on imports In February 2013, data from Colombia's National Administrative Department of Statistics and Office of Taxes and Customs demonstrated that trade between Colombia and Venezuela increased by 40% y-o-y to US$3.28bn The figures demonstrate the continued improvement in diplomatic relations between the two countries, since the suspension of bilateral trade in 2009 Colombian exports to Venezuela accounted for 81.8% of total trade, with cattle and confectionery goods key export products The improvement in crossborder trading is particularly welcome given the ongoing food shortages in Venezuela © Business Monitor International Page Venezuela Agribusiness Report Q2 2013 SWOT Agribusiness SWOT Analysis Strengths ■ Venezuela's tropical climate enables production of a diverse range of agricultural products ■ Venezuelan cocoa and coffee are known for their high quality Cocoa especially is sought after by producers of premium chocolate Weaknesses ■ Despite having large areas of fertile arable land, lack of investment in agriculture has left Venezuela a major food importer ■ High food price inflation and frequent supply shortages have dampened growth in food consumption ■ Price controls in place since 2003 squeeze the profits of producers and are a disincentive to investing in increasing production Opportunities ■ The government has shown interest in revitalising coffee and cocoa production after years of decline ■ The government has introduced a number of programmes, including financing and subsidies, to help small holders increase production ■ Falling oil revenue is bringing more attention to increasing agricultural production to reduce the cost of food imports © Business Monitor International Page Venezuela Agribusiness Report Q2 2013 SWOT Analysis - Continued Threats ■ The threat of land seizures and nationalisation inhibits investment in agriculture in Venezuela ■ Falls in oil prices will severely limit the amount of money the government will be able to spend ■ Uncertainty over the country's political and economic landscape has increased following the death of President Hugo Chávez © Business Monitor International Page 10 Venezuela Agribusiness Report Q2 2013 Confectionery Value/Volume Sales Historical Data and Forecasts 2010-2017 - Continued 2010 2011 2012f 2013f 2014f 2015f 2016f 2017f Total confectionery sales growth, tonne, (y-o-y) -1.56 3.35 5.03 1.69 1.87 2.13 2.14 2.23 Total confectionery sales (VEFmn) 2,411 3,178 4,161 5,341 6,927 8,632 10,335 12,147 Total confectionery sales growth, VEF, (y-o-y) 26.12 31.81 30.94 28.36 29.68 24.61 19.74 17.53 Gum sales (VEFmn) 235.9 310.7 406.0 521.9 676.1 844.0 1,010.9 1,188.5 731 957 1,238 1,604 2,065 2,604 3,125 3,680 Chocolate confectionery sales (VEFmn) 1,444 1,910 2,517 3,215 4,186 5,184 6,200 7,278 Total confectionery sales (US$mn) 567.3 740.0 968.9 755.5 729.1 750.6 843.7 971.8 Gum sales (US$mn) 55.51 72.33 94.55 73.82 71.17 73.39 82.52 95.08 Sugar confectionery sales (US$mn) 172.1 222.8 288.2 226.9 217.4 226.4 255.1 294.4 Chocolate confectionery sales (US $mn) 339.7 444.8 586.1 454.8 440.6 450.8 506.1 582.3 Sugar confectionery sales (VEFmn) Source: National Institute of Statistics, BMI e/f = BMI estimate, forecast Drink Alcoholic Drinks Venezuela has the highest per capita beer consumption rate in Latin America and between 2005 and 2010, consumption in volume terms increased by 7% However, BMI is forecasting that government measures to reduce consumption combined with the country's weak economic growth will take their toll over our forecast period We expect that beer volumes will grow by only just over 3% to 2017 Venezuela is also a big consumer of spirits, with whisky particularly popular According to the Scotch Whiskey Association, Venezuela is currently the fifth-biggest market for Scotch in the world However, demand in this sector is also likely to decline Sales of spirits were strong in years leading up to the downturn owing to a boost in the price of oil, which allowed the government to continue funding its welfare programmes In turn, this allowed low-income consumers to increase their expenditure However, owing to the government's desire to reduce alcoholic consumption in Venezuela through measures such as a new consumption tax, such growth is unlikely to be repeated in the immediate future BMI is therefore forecasting that volume sales of spirits will decline by 2.4% over the next five years to 2017 and that consumption of imported luxury spirits may be hit particularly hard © Business Monitor International Page 78 Venezuela Agribusiness Report Q2 2013 Table: Alcoholic Drinks Volume/Value Sales Historical Data and Forecasts 2010-2017 2010 2011 2012e 2013f 2014f 2015f 2016f 2017f Alcoholic drinks sales (mn litres) 2,049 2,069 2,099 2,110 2,122 2,136 2,151 2,166 Alcoholic sales growth, litres, (y-o-y) -0.45 0.96 1.47 0.52 0.58 0.66 0.68 0.72 Beer sales (mn litres) 1,966 1,985 2,016 2,027 2,039 2,053 2,068 2,083 Wine sales (mn litres) 22.39 22.75 23.23 23.47 23.74 24.02 24.36 24.73 Spirits sales (mn litres) 60.88 60.45 59.78 59.55 59.28 58.98 58.66 58.32 Alcoholic drinks sales (VEFmn) 6,891 8,829 11,081 Alcoholic sales growth, VEF, (y-o-y) 27.87 28.12 25.50 26.79 Beer sales (VEFmn) 4,628 5,956 7,527 9,564 12,236 15,059 17,785 20,605 Wine sales (VEFmn) 351.5 454.9 578.1 738.3 949.6 1,174.7 1,396.9 1,630.9 Spirits sales (VEFmn) 1,912 2,418 2,976 3,747 4,744 5,768 6,728 7,693 Alcoholic drinks sales (US$mn) 1,622 2,056 2,580 1,987 1,887 1,913 2,115 2,394 Beer sales (US$mn) 1,089 1,387 1,753 1,353 1,288 1,310 1,452 1,648 Wine sales (US$mn) 82.70 105.93 134.60 104.43 Spirits sales (US$mn) 449.8 563.0 692.9 529.9 14,049 17,930 22,002 25,910 29,929 27.62 22.71 17.76 15.51 99.96 102.15 114.03 130.47 499.3 501.5 549.2 615.4 Source: National Institute of Statistics, BMI e/f = BMI estimate, forecast © Business Monitor International Page 79 Venezuela Agribusiness Report Q2 2013 Soft Drinks Soft Drinks Sales Soft Drink Sales (VEFmn) 2010-2017 20,000 15,000 10,000 2017f 2016f 2015f 2014f 2013f 2011 2010 2012e 5,000 f = BMI forecast Source: National Institute of Statistics, BMI From 2005 to 2010 the soft drink sector grew thanks to the general upward trend in consumer spending, which had been buoyed by bumper oil receipts However, weak economic growth is expected to have a negative impact on the market over the forecast period While high inflation will boost sales in local currency terms, total soft drinks sales are expected to fall in US dollar terms over the five years to 2017 The bulk of the market is accounted for by carbonates and this sector is expected to stay dominant throughout the forecast period However, sales of juices, energy drinks and flavoured water have also been driving growth over the review period and are expected to become more important over the next five years Drinks companies have been responding to changes in demand by launching new innovations on the market, such as sugar-free drinks and by increasing the choice of flavours Energy drinks are still a relatively small subsector but over the review period are growing rapidly These drinks were originally targeted at young partygoers but the market has expanded to include people leading © Business Monitor International Page 80 Venezuela Agribusiness Report Q2 2013 busy lifestyles, students, truck drivers and business executives Empresas Polar launched the Adrenaline Rush brand in 2006, which has helped the sector develop over the past four years Healthy living is a growing trend in Venezuela, while maintaining an attractive physical appearance is also important to Venezuelans Both of these factors should help drive the market in health-based soft drinks over the forecast period Subsectors such as fruit and vegetable drinks should show strong development as should bottled water Conversely, carbonated drinks, which have high levels of sugar and an unhealthy image, could suffer Table: Soft Drinks Value Sales Historical Data and Forecasts 2010-2017 2010 2011 2012e 2013f 2014f 2015f Soft drinks sales (VEFmn) 3,454 4,584 5,829 7,641 9,839 12,121 14,222 16,355 Soft drinks sales (US$mn) 813 1,067 1,357 1,081 1,036 1,054 2016f 1,161 2017f 1,308 Source: National Institute of Statistics, BMI e/f = BMI estimate, forecast Hot Drinks Tea And Coffee Sales 2010-2017 1,000 5,000 2,500 500 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012e 2013f 2014f 2015f 2016f 2017f Tea sales, VEFmn (LHS) Coffee sales, VEFmn (RHS) © Business Monitor International Page 81 Venezuela Agribusiness Report Q2 2013 Coffee has a share of around 55% of the Venezuelan hot drinks market Sales had been declining up to 2003, but in the years up to the economic downturn this trend had reversed thanks to launches of new and innovative speciality products targeted at the growing number of middle-class consumers Over the five-year forecast period to 2017, coffee sales in volume terms are expected to increase by 10% whilst value sales in US dollar terms will slightly decrease Sales of tea, meanwhile, have increased over recent years from a low base and this trend can be expected to continue due to tea's increasingly widely recognised health benefits and its low unit price Table: Hot Drinks Value Sales Historical Data and Forecasts 2010-2017 2010 2011 2012e 2013f 2014f 2015f 2016f 2017f Coffee sales (VEFmn) 823.4 1,054.3 1,336.9 1,725.3 2,235.9 2,784.6 3,327.7 3,899.5 Coffee sales (US$mn) 193.7 245.5 311.3 Tea sales (VEFmn) 154.88 198.51 251.73 Tea sales (US$mn) 36.44 46.22 58.61 244.0 235.4 242.1 271.6 312.0 324.86 420.98 524.31 626.56 734.23 45.95 44.31 45.59 51.15 58.74 Source: National Institute of Statistics, BMI e/f = BMI estimate, forecast Mass Grocery Retail The country's mass grocery retailers benefited from high GDP growth rates between 2004 and 2007, as proceeds from the windfall oil revenues were redirected into the non-oil economy This increased the disposable incomes of the poorer segments of the population, although poverty and underemployment rates remained high Because of the slowdown in the economy, local currency devaluation and ongoing supply problems, consumer confidence has taken a hit In overall value terms, the supermarket format is expected to be the main beneficiary of this projection, although a large proportion of this growth will be accounted for by Mercal Even when the economic uncertainties are omitted, the competitive environment in Venezuela is perhaps the toughest in Latin America, with private-sector retailers going head-to-head with the governmentsubsidised Mercal grocery chain As the firm does not operate on a profit-and-loss basis, and has almost © Business Monitor International Page 82 Venezuela Agribusiness Report Q2 2013 unlimited (for now) access to expansion capital, its existence creates quite a challenge for the country's other retailers Table: Mass Grocery Retail Sales by Format Historical Data and Forecasts 2010-2017 2010 2011 2012e Supermarkets (VEBbn) 7.855 10.369 13.674 Hypermarkets (VEBbn) 2.805 3.703 4.884 6.164 8.073 9.842 11.711 13.671 Convenience (VEBbn) 0.561 0.741 0.977 1.233 1.615 1.968 11.222 14.812 19.534 Total mass grocery retail sector growth, VEB, (y-o-y) 25.67 32.00 31.88 26.22 30.98 21.90 19.00 16.74 Supermarkets (US$bn) 1.848 2.414 3.184 2.441 2.380 2.396 2.677 3.062 Hypermarkets (US$bn) 0.660 0.862 1.137 0.872 0.850 0.856 0.956 1.094 Convenience (US$bn) 0.132 0.172 0.227 0.174 0.170 0.171 0.191 0.219 Total mass grocery retail sector (US$bn) 2.640 3.449 4.548 3.487 3.399 3.423 3.824 4.375 Total mass grocery retail sector (VEBbn) 2013f 2014f 2015f 2016f 2017f 17.259 22.606 27.556 32.791 38.279 2.342 2.734 24.656 32.294 39.366 46.844 54.685 Source: National Institute of Statistics, BMI e/f = BMI estimates/forecast Table: Sales Breakdown by Retail Format Type 2011 2021f Organised/MGR 25% 35% Non-organised/Independent 75% 65% f = forecast Source: BMI Research © Business Monitor International Page 83 Venezuela Agribusiness Report Q2 2013 Competitive Landscape Table: Main Agribusiness Companies Market Capitalisation Revenue (US$mn) Fiscal Y/E (US$mn) Employees Company Sub-Sector Proagro Feed & Livestock 672.2 08/2011 46.6 na Productos EFE Dairy 120.4 09/2011 24.5 na na = not available Source: Bloomberg © Business Monitor International Page 84 Venezuela Agribusiness Report Q2 2013 Demographic Forecast Demographic analysis is a key pillar of BMI's macroeconomic and industry forecasting model Not only is the total population of a country a key variable in consumer demand, but an understanding of the demographic profile is key to understanding issues ranging from future population trends to productivity growth and government spending requirements The accompanying charts detail Venezuela's population pyramid for 2011, the change in the structure of the population between 2011 and 2050 and the total population between 1990 and 2050, as well as life expectancy The tables show key datapoints from all of these charts, in addition to important metrics including the dependency ratio and the urban/rural split Source: World Bank, UN, BMI © Business Monitor International Page 85 Venezuela Agribusiness Report Q2 2013 Table: Venezuela's Population By Age Group, 1990-2020 ('000) 1990 1995 2000 2005 2010 2012 2015f 2020f 19,685 22,035 24,348 26,664 28,980 29,891 31,226 33,340 0-4 years 2,719 2,740 2,775 2,856 2,926 2,940 2,937 2,901 5-9 years 2,488 2,707 2,730 2,766 2,847 2,881 2,919 2,931 10-14 years 2,274 2,485 2,703 2,726 2,763 2,792 2,845 2,917 15-19 years 1,967 2,269 2,478 2,696 2,720 2,728 2,757 2,839 20-24 years 1,870 1,960 2,258 2,465 2,684 2,710 2,708 2,746 25-29 years 1,725 1,862 1,949 2,244 2,452 2,549 2,670 2,696 30-34 years 1,425 1,716 1,851 1,937 2,231 2,322 2,438 2,655 35-39 years 1,228 1,414 1,701 1,835 1,922 2,026 2,215 2,421 40-44 years 1,000 1,214 1,397 1,682 1,816 1,840 1,903 2,194 45-49 years 766 982 1,194 1,375 1,657 1,728 1,791 1,878 50-54 years 592 745 957 1,165 1,343 1,453 1,622 1,755 55-59 years 496 567 716 921 1,124 1,188 1,300 1,573 60-64 years 413 464 533 676 873 952 1,069 1,241 65-69 years 294 372 422 487 620 688 806 992 70-74 years 203 250 319 364 424 463 545 713 75+ years 226 289 366 470 579 629 703 887 Total f = BMI forecast Source: World Bank, UN, BMI © Business Monitor International Page 86 Venezuela Agribusiness Report Q2 2013 Table: Venezuela's Population By Age Group, 1990-2020 (% of total) 1990 1995 2000 2005 2010 2012 2015f 2020f 0-4 years 13.81 12.43 11.4 10.71 10.1 9.84 9.41 8.7 5-9 years 12.64 12.29 11.21 10.37 9.83 9.64 9.35 8.79 10-14 years 11.55 11.28 11.1 10.22 9.53 9.34 9.11 8.75 15-19 years 9.99 10.3 10.18 10.11 9.39 9.13 8.83 8.52 0-24 years 9.5 8.89 9.27 9.25 9.26 9.07 8.67 8.24 25-29 years 8.76 8.45 8.01 8.42 8.46 8.53 8.55 8.09 30-34 years 7.24 7.79 7.6 7.26 7.7 7.77 7.81 7.96 35-39 years 6.24 6.42 6.99 6.88 6.63 6.78 7.09 7.26 40-44 years 5.08 5.51 5.74 6.31 6.27 6.16 6.1 6.58 45-49 years 3.89 4.46 4.9 5.16 5.72 5.78 5.73 5.63 50-54 years 3.01 3.38 3.93 4.37 4.64 4.86 5.19 5.26 55-59 years 2.52 2.57 2.94 3.46 3.88 3.98 4.16 4.72 60-64 years 2.1 2.11 2.19 2.53 3.01 3.19 3.42 3.72 65-69 years 1.5 1.69 1.73 1.83 2.14 2.3 2.58 2.97 70-74 years 1.03 1.13 1.31 1.37 1.46 1.55 1.74 2.14 75+ years 1.15 1.31 1.5 1.76 2.1 2.25 2.66 f = BMI forecast Source: World Bank, UN, BMI © Business Monitor International Page 87 Venezuela Agribusiness Report Q2 2013 Table: Venezuela's Key Population Ratios, 1990-2020 Dependent ratio, % of total working age Dependent population, total, '000 Active population, % of total Active population, total, '000 Youth population, % of total working age Youth population, total, '000 1990 1995 2000 2005 2010 2012 2015f 2020f 71.5 67.0 62.0 56.9 54.0 53.3 52.5 51.5 8,205 8,842 9,314 9,668 10,159 10,393 10,754 11,340 58.3 59.9 61.7 63.7 64.9 65.2 65.6 66.0 11,481 13,193 15,034 16,996 18,820 19,497 20,472 21,999 65.2 60.1 54.6 49.1 45.4 44.2 42.5 39.8 7,481 7,931 8,208 8,347 8,536 8,613 8,701 8,749 6.3 6.9 7.4 7.8 8.6 9.1 10.0 11.8 724 910 1,106 1,321 1,623 1,780 2,054 2,591 Pensionable population, % of total working age Pensionable population, '000 f = BMI forecast; 0>15 plus 65+, as % of total working age population; 0>15 plus 65+; 15-64, as % of total population; 15-64; 0>15, % of total working age population; 0>15; 65+, % of total working age population; 65+ Source: World Bank, UN, BMI Table: Venezuela's Rural And Urban Population, 1990-2020 1990 1995 2000 2005 2010 2012 2015f 2020f Urban population, % of total 84.3 86.8 89.7 92.3 93.5 93.7 93.9 94.4 Rural population, % of total 15.7 13.2 10.3 7.7 6.5 6.3 6.1 5.6 Urban population, '000 16,649.2 19,133.3 21,807.0 24,530.6 27,094.8 27,998.8 29,332.0 31,463.1 Rural population, '000 3,100.8 2,909.7 2,504.0 2,046.4 1,885.1 1,891.9 1,894.4 1,876.5 f = BMI forecast Source: World Bank, UN, BMI © Business Monitor International Page 88 Venezuela Agribusiness Report Q2 2013 Methodology BMI's industry forecasts are generated using the best-practice techniques of time-series modelling and causal/econometric modelling The precise form of model we use varies from industry to industry, in each case being determined, as per standard practice, by the prevailing features of the industry data being examined BMI mainly uses OLS estimators and in order to avoid relying on subjective views and encourage the use of objective views, BMI uses a 'general-to-specific' method BMI mainly uses a linear model, but simple non-linear models, such as the log-linear model, are used when necessary During periods of 'industry shock', for example poor weather conditions impeding agricultural output, dummy variables are used to determine the level of impact Effective forecasting depends on appropriately-selected regression models BMI selects the best model according to various different criteria and tests, including, but not exclusive to: ■ R2 tests explanatory power; Adjusted R2 takes degree of freedom into account ■ Testing the directional movement and magnitude of coefficients ■ Hypothesis testing to ensure coefficients are significant (normally t-test and/or P-value) ■ All results are assessed to alleviate issues related to auto-correlation and multi-collinearity BMI uses the selected best model to perform forecasting It must be remembered that human intervention plays a necessary and desirable role in all of BMI's industry forecasting Experience, expertise and knowledge of industry data and trends ensures that analysts spot structural breaks, anomalous data, turning points and seasonal features where a purely mechanical forecasting process would not Within the Agribusiness industry, this intervention might include, but is not exclusive to, technology development that might influence future output levels (for example greater use of biotechnology), dramatic changes in local production levels due to public or private sector investment, the regulatory environment and specific areas of legislation, such as import and export tariffs and farm subsidies, changes in lifestyles and general societal trends, the formation of bilateral and multilateral trading agreements and political factors The following two examples show the demand (consumption) and the supply (production) of rice Note: the explanatory variables for both of them are quite similar, but the underlying economic theory is different © Business Monitor International Page 89 Venezuela Agribusiness Report Q2 2013 Example of Rice Consumption Model: (Rice Consumption)t = β0 + β1*(Real Private Consumption per capita)t + β2*(Inflation)t + β3*(Real Lending Rate)t + β4*(Population)t + β5*(Government Expenditure)t + β6*(Food Consumption)t-1 + εt Where: ■ β are parameters for this function ■ Real Private Consumption per capita has a positive relationship with Rice Consumption, if rice is a normal good in a particular country If rice is an inferior good in a country, the relationship is negative So the sign of β1 is determined by a specific product within a specific country ■ When Inflation is high, people with rational expectations will consume 'today' rather than wait for 'tomorrow's high price to come Higher rice demand in Year t due to higher inflation in that year leads to an assumed positive sign of β2 ■ The relationship between Real Lending Rate and Rice Consumption is expected to be negative When real lending rates increase, disposable incomes, especially for those with mortgage burdens etc, will decrease So the sign of β3 is expected to be negative ■ Of course, other things being equal, growth in rice consumption can also be caused by growth in population Consequently, positive sign of β4 is expected ■ ■ ■ Government Expenditure typically causes total disposable incomes to rise So the sign of β5 is expected to be positive Human behaviour has a trend: A high level of food consumption in previous years means there is very likely to be a high level of food consumption the next year So the positive sign of β6 is expected ε is the error/residual term Example of Rice Production Model: (Rice Production)t = β0 + β1*(Real GDP per capita)t + β2*(Inflation)t + β3*(Real Lending Rate)t + β4*(Rural Population)t + β5*(Government Expenditure)t + β6*(Food Production)t-1 + εt Where: ■ The same as above, the relationship between Real GDP per capita and rice production depends on whether rice is normal or inferior good in that country ■ If high inflation is caused by food prices increasing, farmers will be more profitable Then they will supply more agricultural product (e.g rice) to increase their marginal (extra) profit, although this is tempered by the rising cost of other inputs in line with inflation ■ There is a global move towards corporate farming, away from small holdings, in order to achieve greater agricultural productivity Corporate farming means more investment in the modes of production i.e agricultural machinery Higher real lending rates discourage investment, which in turn reduce production © Business Monitor International Page 90 Venezuela Agribusiness Report Q2 2013 ■ BMI assumes only the rural population has a positive effect on agricultural product supply ■ With supportive government policy, other things being equal, rice production is expected to go up Government Expenditure is likely to play some role in supporting agribusiness ■ Again, previous food production positively affects this year's prediction © Business Monitor International Page 91 Reproduced with permission of the copyright owner Further reproduction prohibited without permission [...]... by 2.0% y-o-y in 2013 to 138,900 tonnes owing to a dip in domestic production and high input costs Out to 2017, we see consumption increasing by 1.3% on the 2012 level to reach 143,500 tonnes, fuelled primarily by population increases © Business Monitor International Page 13 Venezuela Agribusiness Report Q2 2013 Table: Venezuela Beef & Veal Production & Consumption, 2012-2017 2012e 2013f 2014f 2015f... Table: Venezuela Corn Production & Consumption, 2012-2017 2012e 2013f 2014f 2015f 2016f 2017f Corn Production, '000 tonnes 1 1,400.0 1,650.0 1,750.0 1,850.0 1,940.0 2,040.0 Corn Consumption, '000 tonnes 1 3,920.0 3,802.4 3,905.1 4,014.4 4,122.8 4,234.1 Notes: e BMI estimates f BMI forecasts Sources: 1 USDA © Business Monitor International Page 20 Venezuela Agribusiness Report Q2 2013 Table: Venezuela. .. Business Monitor International Page 22 Venezuela Agribusiness Report Q2 2013 Associations of Agricultural Producers, announced that agricultural production during H112 was more positive than the same period in previous years, with increased area planted to cereals and rice In January 2013, Vice President Nicolás Maduro relaunched Gran Misión AgroVenezuela for 2013- 2019 Shortly afterwards, he announced... estimates Sources: 1 USDA Table: Venezuela Pork Production & Consumption, 2007-2012 2007 2008 2009 2010 2011 2012e Pork Production, '000 tonnes 1 125.0 125.0 125.0 125.0 125.0 125.0 Pork Consumption, '000 tonnes 1 129.0 133.0 129.0 134.0 141.0 141.7 Notes: e BMI estimates Sources: 1 USDA © Business Monitor International Page 17 Venezuela Agribusiness Report Q2 2013 Table: Venezuela Poultry Production &... few years as Venezuela' s economy has grown Corn is a staple food in Venezuela, and corn flour is used to make arepa, a flat, unleavened bread Total corn consumption rose by an estimated 63.3% from 2007 to 2012, outstripping growth in production and leading to a surge in imports from the US Import controls for feed © Business Monitor International Page 19 Venezuela Agribusiness Report Q2 2013 corn have... prospective investment (domestic and foreign) © Business Monitor International Page 11 Venezuela Agribusiness Report Q2 2013 Industry Forecast Livestock Outlook BMI Supply View: After strong growth in the 1990s and the first few years of the 21st century, Venezuelan beef production has gone into reverse in the past few years Venezuela was self-sufficient in beef in 2003, but in recent years the country has... 6,500 head of cattle in addition to 3,000 live cattle and 3,500 pregnant cows to increase Venezuela' s breeding stock The deal also included the offer to export 60,000 day-old chicks and 100,000 hatching eggs © Business Monitor International Page 16 Venezuela Agribusiness Report Q2 2013 Then in April 2012, the Venezuelan Minister of Foreign Affairs Nicolás Maduro and his Colombian counterpart María... down year in 2013/ 14, the harvest for which begins in April Although we forecast Brazilian production to approach record highs for a downyear, and expect the global market to remain in a surplus of 5mn bags in 2013/ 14, we believe the disease problems in Latin America will keep coffee prices supported over the short term © Business Monitor International Page 34 Venezuela Agribusiness Report Q2 2013 Hanging... Ultimately, we are forecasting lower average coffee prices in 2013 at USc170/lb and 2014 at USc150/lb © Business Monitor International Page 35 Venezuela Agribusiness Report Q2 2013 Coffee Glut Brazil - Coffee Production ('000 60 kg bags) & Growth (%) 75,000 100 50,000 50 25,000 0 -50 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013f 2014f 2015f 2016f 2017f 0 Production (LHS) Growth (RHS)... joint ventures, one focusing on the production of corn flour and rice, and the second producing pasta, wheat flour and oatmeal © Business Monitor International Page 21 Venezuela Agribusiness Report Q2 2013 The relationship between the Venezuelan government and Gruma was a turbulent one throughout 2010 In January of that year, Hugo Chávez announced that his government would temporarily take control of ... Business Monitor International Page 18 Venezuela Agribusiness Report Q2 2013 In 2011/12, we estimate that corn production fell by 18.1% year-on-year (y-o-y) to 1.40mn tonnes as poor weather, poor... region's mid-crop will become increasingly important over the next few months © Business Monitor International Page 32 Venezuela Agribusiness Report Q2 2013 Weakest In A Decade Europe - Year-On-Year... 39 Venezuela Agribusiness Report Q2 2013 Increasing Supply Global - Cotton Production Balance ('000 bales) & Stocks-to-use ratio (%) f = BMI forecast Source: USDA, BMI Palm Oil: Turning Short-Term