Q2 2014 www.businessmonitor.com VENEZUELA AGRIBUSINESS REPORT INCLUDES 5-YEAR FORECASTS TO 2018 ISSN 2040-0497 Published by:Business Monitor International Venezuela Agribusiness Report Q2 2014 INCLUDES 5-YEAR FORECASTS TO 2018 Part of BMI’s Industry Report & Forecasts Series Published by: Business Monitor International Copy deadline: March 2014 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 © 2014 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 2014 CONTENTS BMI Industry View SWOT 10 Agribusiness 10 Business Environment 12 Industry Forecast 13 Livestock Outlook 13 Table: Venezuela Beef & Veal Production & Consumption, 2013-2018 15 Table: Venezuela Pork Production & Consumption, 2013-2018 15 Table: Venezuela Poultry Production & Consumption, 2013-2018 15 Table: Venezuela Beef & Veal Production & Consumption, 2008-2013 17 Table: Venezuela Pork Production & Consumption, 2008-2013 17 Table: Venezuela Poultry Production & Consumption, 2008-2013 18 Grains Outlook 19 Table: Venezuela Corn Production & Consumption, 2013-2018 20 Table: Venezuela Wheat Consumption, 2013-2018 21 Table: Venezuela Corn Production & Consumption, 2008-2013 26 Table: Venezuela Wheat Production & Consumption, 2008-2013 26 Coffee Outlook 28 Table: Venezuela Coffee Production & Consumption, 2013-2018 29 Table: Venezuela Coffee Production & Consumption, 2008-2013 34 Commodity Strategy 35 Monthly Grains Update 35 Table: Select Commodities - Performance & Forecasts 43 Table: BMI Commodities Strategy 44 Monthly Softs Update 45 Table: Select Commodities - Performance & BMI Forecasts 52 Table: BMI Commodities Strategy 53 Upstream Analysis 54 Americas Machinery Outlook 54 Americas GM Outlook 60 Americas Fertiliser Outlook 65 Downstream Analysis 71 Food 71 Food Consumption 71 Table: Food Consumption Indicators - Historical Data & Forecasts, 2010-2017 72 Canned and Prepared Food 72 Table: Canned Food Volume/Value Sales - Historical Data & Forecasts, 2010-2017 73 Fish 73 © Business Monitor International Page Venezuela Agribusiness Report Q2 2014 Table: Fish Volume Sales, Production & Trade - Historical Data & Forecasts, 2010-2017 73 Oils & Fats 74 Table: Oils & Fats Volume Sales, Production & Trade - Historical Data & Forecasts, 2010-2017 75 Confectionery 76 Table: Confectionery Value/Volume Sales - Historical Data & Forecasts, 2010-2017 76 Mass Grocery Retail 78 Table: Mass Grocery Retail Sales By Format - Historical Data & Forecasts, 2010-2017 78 Table: Sales Breakdown By Retail Format Type 79 Drink 80 Alcoholic Drinks 80 Table: Alcoholic Drinks Volume/Value Sales - Historical Data & Forecasts, 2010-2017 80 Soft Drinks 81 Table: Soft Drinks Value Sales - Historical Data & Forecasts, 2010-2017 82 Hot Drinks 82 Table: Hot Drinks Value Sales - Historical Data & Forecasts, 2010-2017 83 Regional Overview 84 Competitive Landscape 90 Table: Venezuela Agribusiness Competitive Landscape 90 Demographic Forecast 91 Table: Venezuela's Population By Age Group, 1990-2020 ('000) 92 Table: Venezuela's Population By Age Group, 1990-2020 (% of total) 93 Table: Venezuela's Key Population Ratios, 1990-2020 94 Table: Venezuela's Rural And Urban Population, 1990-2020 94 Methodology 95 Industry Forecast Methodology 95 Sector-Specific Methodology 96 © Business Monitor International Page Venezuela Agribusiness Report Q2 2014 BMI Industry View BMI View: The victory of Nicolás Maduro of the ruling Partido Socialista Unido de Venezuela in April will most probably ensure the continuity of many of the interventionist policies of Chávez's era Price fixing in particular continues to be a source of woe for producers unable to meet input costs, which are soaring in line with some of the highest rates of inflation in the world Some respite has arrived in the form of a 20% rise in the government-fixed price of food items including beef, chicken and dairy products, but even this will fall short of the rate of inflation, which is expected to increase 30% year-on-year in 2013 Inflation is also contributing to the diminishing purchasing power of Venezuelan households, while foreign currency shortages after a pre-election spending boom are causing shortages of some imported goods Tough Years Ahead Venezuela - BMI Agribusiness Market Value By Commodity (As % of total) Source: BMI © Business Monitor International Page Venezuela Agribusiness Report Q2 2014 Key Forecasts ■ Corn consumption growth to 2018: 17.4% to 4.28mn tonnes Consumers hit by economic turmoil will turn to the cheapest staple food, more than compensating for reduced demand from the livestock sector ■ Coffee production growth to 2017/18: 35.6% to 990,000 60kg bags The hike in government prices and increased investment in small farms will see some recovery in supply ■ Beef production growth to 2017/18: 3.5% to 367,500 tonnes High input costs, cheaper Mercosur competitors and reduced domestic demand will stymie growth ■ BMI universe agribusiness market value: US$3.70bn in 2014 (up 0.3% from US$3.69bn in 2013; forecast to grow annually by 5.8% on average from 2014 to 2018) ■ 2014 real GDP growth: 1.2% (up from 0.8% in 2013; forecast to grow annually by 2.6% on average between 2014 and 2018) ■ 2014 consumer price index: 50.0% year-on-year (y-o-y) (up from 44.8% in 2013; forecast to grow annually by 31.3% on average between 2014 and 2018) Industry Developments While public unrest in Venezuela is on the rise, we not believe that the recent large-scale protests staged by student and political opposition groups present an existential threat to the administration of President Nicolás Maduro The protests are unlikely to damage to the PSUV government in the near term, given that the party's supporters, not to mention the military, have not lost faith in the Maduro administration However, over the longer term this is not guaranteed to remain the case, and we could see the political situation deteriorate if the government does not enough to address soaring inflation and worsening shortages which affect all segments of society Growth in Venezuela will continue to be constrained in 2014, as soaring inflation impacts household purchasing power, oil production stagnates, and private sector investment remains wary of a hostile operating environment We are forecasting real GDP growth of 1.5% in 2014, down from 2.0% estimated for 2013 Venezuela is experiencing declining export revenues, accelerating inflation and widespread shortages of basic consumer goods Empresas Polar, Venezuela's largest privately held company, said in January 2014 that food production is at risk from record delays in the release of foreign currency by the government, fuelling shortages of goods such as rice and milk The government stopped publishing scarcity statistics in November 2013, after the previous month's data showed about one in five basic goods was out of stock at any given time The agriculture sector is also being hit, as low availability of inputs and decreasing © Business Monitor International Page Venezuela Agribusiness Report Q2 2014 investment hurt crop production As a result, Venezuela is recording declining agricultural exports and is steadily increasing its imports Venezuela is likely to record another disappointing year for corn production in 2013/14 Low availability of foreign currency and therefore limited possibility to import agricultural inputs has impeded corn production growth As a result of stagnant production and steady food and feed demand, grains imports are likely to come in strong this year Corn and wheat imports continue to face severe delays and problems, mainly due to the long waiting time for the approval of foreign currency and import permits However, imports of grains should continue to receive preferential treatment to expedite the import of basic consumer goods and to maintain the livestock industry © Business Monitor International Page Venezuela Agribusiness Report Q2 2014 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 smallholders increase production ■ Falling oil revenue is bringing more attention to increasing agricultural production to reduce the cost of food imports © Business Monitor International Page 10 Venezuela Agribusiness Report Q2 2014 Regional Overview BMI View: In this quarter's regional overview for the Americas region, we discuss the increasing use of big data in agriculture; our initial thoughts regarding the Canada-EU free trade agreement; North American infrastructure challenges; regional rice trade flows; and the prospects for Latin American sugar consumption growth Big Potential For Big Data, But Questions Remain As part of a trend known as 'precision agriculture', mountains of data can now be collected and processed from agriculture fields, and companies are working on technology so data can be analysed to maximise yields Precision agriculture, which includes 'smart' tractors, highly localised weather forecasts and advanced insurance policies, looks set to expand as a key feature for agricultural input companies Firms are looking to tap into so-called 'big data' as a means to improve revenues via the sale of higher value-added (and thus more expensive) goods and services, while shielding themselves from the effects of lower grain prices However, we expect challenges along the way, as some ventures will take a while to show progress, and falling farm incomes and tightening credit conditions in several markets threaten to reduce farmer incentives to purchase more expensive products, especially machinery (see: Big Potential For Big Data, But Questions Remain, November 7, 2013) © Business Monitor International Page 84 Venezuela Agribusiness Report Q2 2014 Key Players Resisting The Trend Share Prices Of Select Companies (US$) & S&P GSCI Grains Index Source: Bloomberg Transport Network Underinvestment Weighing On Export Prospects Although there have not been severe disruptions to grain transportation in North America as has been seen in South America, we caution that suboptimal infrastructure investment over the past decade will make the US and Canada less reliable grain exporters than they have traditionally been In both the US and Canada, investment in grain elevators has not kept up with increases in production capacity; this could create temporary bottlenecks in times when crop volumes outweigh capacity We believe the US has ramped up investment in its railway and port infrastructure, but its elevator and barge networks have lost efficiency and competitiveness in recent years For Canada, investment in grain transportation has been below infrastructure upkeep levels for decades, but the impending end of the monopoly of the Canadian Wheat Board is likely to increase competition and efficiency in the sector (see: Transport Network Underinvestment Looming Over Export Prospects, November 6, 2013) © Business Monitor International Page 85 Venezuela Agribusiness Report Q2 2014 Capacity Reached LHC: Canada Elevators & Delivery Points (units); RHC: US Grain Stocks, Production & Storage In Select States (bn bushels) Note: Dates on horizontal axis reflect average over the period; Source: Government Of Canada, Quorum Corporation, USDA Canada-EU FTA: Initial Thoughts We believe the Canadian beef and pork industries will gain the most from the signing of the EU-Canada Free Trade Agreement in October 2013 The EU dairy industry will also benefit from increased market access, though Canada will remain a marginal market over the medium term EU producers are likely to be only slightly negatively affected by the increase in beef imports from Canada, as we expect them to regain competitiveness in the near term In contrast, EU pork producers are expected to become less competitive (see: Canada-EU FTA: Initial Thoughts, October 25, 2013) © Business Monitor International Page 86 Venezuela Agribusiness Report Q2 2014 Little To Europe Canada - Beef Exports By Country In H113 (% of global) Source: USDA Latin American Sugar Consumption Growth To Stall We maintain our view for sugar consumption in Latin America to stagnate or moderate over the medium term, as the region already hosts the world's largest consumers of sugar per capita Countries in the region consumed on average 44.0kg of sugar per capita in 2012, compared with 31.7kg in the US and 10.6kg per capita in China We therefore forecast minimal consumption growth out to 2017 because of high base effects and increased health consciousness We forecast average sugar consumption growth in Latin America of 2.0% annually over the period, compared with 4.0% in emerging Asia (China, India, Indonesia and Bangladesh) For a broader discussion, see: Regional Consumption Growth Set To Stall, June 5, 2013 © Business Monitor International Page 87 Venezuela Agribusiness Report Q2 2014 Already On A Sugar High Select Countries - Sugar Consumption Growth (% y-o-y, LHS) & Sugar Consumption Per Capita In 2012 (kg) Source: BMI, USDA Regional Rice Trade Flow To Remain Stable We believe that rice trade in the American continent, characterised by strong intra-region trade flows, will remain stable over the coming years Interdependence will increase, pushed by regional trade agreements Meanwhile, we are cautious about the ability of countries in the Americas, with the exception of the US and Brazil, to become significant players in the growing African market Indeed, intra-regional trade relies mainly on trade agreements and the advantages of geographical proximity rather than on price competitiveness (see: Rice Trade Flows To Remain Stable, June 25, 2013) © Business Monitor International Page 88 Venezuela Agribusiness Report Q2 2014 Unspectacular Growth Ahead Rice Production In Select Countries ('000 tonnes) 5,000 10,000 4,000 8,000 3,000 6,000 2,000 4,000 1,000 2,000 0 2012 2013e 2014f Argentina (LHS) United States (RHS) 2015f 2016f 2017f 2018f Brazil (RHS) Colombia (LHS) Uruguay (LHS) Sources: BMI, USDA © Business Monitor International Page 89 Venezuela Agribusiness Report Q2 2014 Competitive Landscape Table: Venezuela Agribusiness Competitive Landscape Revenue (US$mn) Fiscal Y/E Market Capitalisation (US$mn) Employees Company Sub-Sector Proagro ca Feed & Livestock 672.2 08/2011 69.8 na Productos efe sa Dairy 120.4 09/2011 24.5 na Empresas la polar sa Dairy 785.7 12/2012 121.5 na Sources: BMI, Bloomberg © Business Monitor International Page 90 Venezuela Agribusiness Report Q2 2014 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 2013, the change in the structure of the population between 2013 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 Population Pyramid 2013 (LHS) And 2013 Versus 2050 (RHS) Source: World Bank, UN, BMI © Business Monitor International Page 91 Venezuela Agribusiness Report Q2 2014 Population Indicators Population (mn, LHS) And Life Expectancy (years, RHS), 1990-2050 Source: World Bank, UN, BMI Table: Venezuela's Population By Age Group, 1990-2020 ('000) 1990 1995 2000 2005 2010 2013e 2015f 2020f 19,741 22,092 24,408 26,726 29,043 30,405 31,293 33,417 0-4 years 2,726 2,747 2,782 2,863 2,934 2,954 2,957 2,931 5-9 years 2,497 2,716 2,737 2,773 2,855 2,903 2,927 2,951 10-14 years 2,282 2,494 2,713 2,735 2,771 2,818 2,853 2,925 15-19 years 1,972 2,276 2,487 2,705 2,728 2,744 2,766 2,848 20-24 years 1,875 1,965 2,264 2,472 2,691 2,715 2,714 2,753 25-29 years 1,729 1,867 1,953 2,249 2,458 2,603 2,674 2,699 30-34 years 1,429 1,719 1,855 1,940 2,234 2,363 2,442 2,659 35-39 years 1,234 1,417 1,704 1,838 1,924 2,094 2,217 2,424 40-44 years 1,006 1,218 1,400 1,684 1,818 1,853 1,904 2,195 45-49 years 764 987 1,197 1,376 1,657 1,754 1,791 1,877 50-54 years 589 742 961 1,167 1,343 1,514 1,620 1,753 55-59 years 493 563 712 924 1,124 1,219 1,297 1,567 60-64 years 409 460 528 671 873 993 1,066 1,234 65-69 years 292 368 418 482 615 726 804 987 70-74 years 204 250 318 363 423 487 543 714 Total © Business Monitor International Page 92 Venezuela Agribusiness Report Q2 2014 Venezuela's Population By Age Group, 1990-2020 ('000) - Continued 1990 1995 2000 2005 2010 2013e 2015f 2020f 75-79 years 131 161 200 258 298 325 350 453 80-84 years 73 89 112 141 185 204 216 257 85-89 years 27 39 48 62 80 96 107 127 90-94 years 11 16 20 26 31 35 48 95-99 years 11 100+ years 0 1 1 e/f = BMI estimate/forecast Source: World Bank, UN, BMI Table: Venezuela's Population By Age Group, 1990-2020 (% of total) 1990 1995 2000 2005 2010 2013e 2015f 2020f 0-4 years 13.81 12.43 11.40 10.71 10.10 9.72 9.45 8.77 5-9 years 12.65 12.29 11.22 10.38 9.83 9.55 9.35 8.83 10-14 years 11.56 11.29 11.11 10.23 9.54 9.27 9.12 8.75 15-19 years 9.99 10.30 10.19 10.12 9.39 9.02 8.84 8.52 20-24 years 9.50 8.89 9.27 9.25 9.26 8.93 8.67 8.24 25-29 years 8.76 8.45 8.00 8.41 8.46 8.56 8.55 8.08 30-34 years 7.24 7.78 7.60 7.26 7.69 7.77 7.81 7.96 35-39 years 6.25 6.41 6.98 6.88 6.63 6.89 7.08 7.25 40-44 years 5.10 5.52 5.74 6.30 6.26 6.10 6.08 6.57 45-49 years 3.87 4.47 4.90 5.15 5.71 5.77 5.72 5.62 50-54 years 2.98 3.36 3.94 4.36 4.63 4.98 5.18 5.25 55-59 years 2.50 2.55 2.92 3.46 3.87 4.01 4.14 4.69 60-64 years 2.07 2.08 2.17 2.51 3.01 3.27 3.41 3.69 65-69 years 1.48 1.67 1.71 1.80 2.12 2.39 2.57 2.95 70-74 years 1.03 1.13 1.30 1.36 1.46 1.60 1.73 2.14 75-79 years 0.66 0.73 0.82 0.96 1.03 1.07 1.12 1.36 80-84 years 0.37 0.40 0.46 0.53 0.64 0.67 0.69 0.77 85-89 years 0.14 0.17 0.20 0.23 0.28 0.32 0.34 0.38 90-94 years 0.03 0.05 0.06 0.07 0.09 0.10 0.11 0.14 95-99 years 0.01 0.01 0.01 0.02 0.02 0.02 0.03 0.03 © Business Monitor International Page 93 Venezuela Agribusiness Report Q2 2014 Venezuela's Population By Age Group, 1990-2020 (% of total) - Continued 100+ years 1990 1995 2000 2005 2010 2013e 2015f 2020f 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.01 e/f = BMI estimate/forecast Source: World Bank, UN, BMI Table: Venezuela's Key Population Ratios, 1990-2020 1990 1995 2000 2005 2010 2013e 71.7 67.2 62.1 57.0 54.1 8,241 8,876 9,347 58.3 59.8 61.7 Dependent ratio, % of total working age Dependent population, total, '000 Active population, % of total Active population, total, '000 53.2 2015f 2020f 52.7 51.8 9,702 10,194 10,553 10,802 11,407 63.7 64.9 65.3 65.5 65.9 11,500 13,216 15,061 17,024 18,849 19,853 20,491 22,010 Youth population, % of total working age 65.3 60.2 54.7 49.2 45.4 43.7 42.6 40.0 7,505 7,956 8,232 8,371 8,560 8,674 8,737 8,808 Pensionable population, % of total working age 6.4 7.0 7.4 7.8 8.7 9.5 10.1 11.8 Pensionable population, total, '000 736 920 1,115 1,330 1,634 1,878 2,065 2,600 Youth population, total, '000 e/f = BMI estimate/forecast Source: World Bank, UN, BMI Table: Venezuela's Rural And Urban Population, 1990-2020 1990 1995 2000 2005 2010 2013e 2015f 2020f Urban population, % of total 84.3 87.3 89.9 91.9 93.3 93.9 94.3 94.9 Rural population, % of total 15.7 12.7 10.1 8.1 6.7 6.1 5.7 5.1 Urban population, total, '000 16,638 19,291 21,940 24,564 27,101 28,546 29,499 31,711 Rural population, total, '000 3,102 2,801 2,468 2,162 1,942 1,859 1,794 1,706 e/f = BMI estimate/forecast Source: World Bank, UN, BMI © Business Monitor International Page 94 Venezuela Agribusiness Report Q2 2014 Methodology Industry Forecast 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 Common to our analysis of every industry is the use of vector autoregressions Vector autoregressions allow us to forecast a variable using more than the variable's own history as explanatory information For example, when forecasting oil prices, we can include information about oil consumption, supply and capacity When forecasting for some of our industry sub-component variables, however, using a variable's own history is often the most desirable method of analysis Such single-variable analysis is called univariate modelling We use the most common and versatile form of univariate models: the autoregressive moving average model (ARMA) In some cases, ARMA techniques are inappropriate because there is insufficient historic data or data quality is poor In such cases, we use either traditional decomposition methods or smoothing methods as a basis for analysis and forecasting BMI mainly uses ordinary least squares estimators; 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, if poor weather conditions impede 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 multicollinearity © Business Monitor International Page 95 Venezuela Agribusiness Report Q2 2014 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 ensure that analysts spot structural breaks, anomalous data, turning points and seasonal features where a purely mechanical forecasting process would not Sector-Specific Methodology Within the Agribusiness industry, issues that might result in human intervention could include but are 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 that the explanatory variables for both are quite similar, but the underlying economic theory is different 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 © Business Monitor International Page 96 Venezuela Agribusiness Report Q2 2014 ■ 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 (eg 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, ie agricultural machinery Higher real lending rates discourage investment, which in turn reduce production ■ 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 97 Reproduced with permission of the copyright owner Further reproduction prohibited without permission [...]... input costs, and that it will recover in 2014 with the small increase in production Out to 2018, we see consumption increasing by 3.8% on the 2013 level to 138,000 tonnes, fuelled primarily by population increases © Business Monitor International Page 14 Venezuela Agribusiness Report Q2 2014 Table: Venezuela Beef & Veal Production & Consumption, 2013-2018 2013 2014f 2015f 2016f 2017f 2018f Beef & Veal... BMI forecasts Sources: USDA © Business Monitor International Page 20 Venezuela Agribusiness Report Q2 2014 Table: Venezuela Wheat Consumption, 2013-2018 Wheat Consumption, '000 tonnes 2013 2014f 2015f 2016f 2017f 2018f 1,545.0 1,577.4 1,621.6 1,667.0 1,717.0 1,768.5 f = BMI forecasts Sources: USDA Another Year Of Production Stagnation Venezuela is likely to record another disappointing year for corn production... the country © Business Monitor International Page 30 Venezuela Agribusiness Report Q2 2014 Seismic Shift Venezuela - Coffee Imports & Exports ('000 60kg bags) Source: BMI, USDA Factors Impacting Coffee Crisis Venezuela was once among the world's largest producers of coffee At the beginning of the 20th century, coffee production was the mainstay of the Venezuelan economy, accounting for more than 80% of... on terrorist groups and drug trafficking Venezuela also agreed to pay debts amounting to some US$800mn to Colombian exporters The agreement paves the way for the restoration of trade relations between the two countries, which promises to ease supply shortages of beef on Venezuelan shelves © Business Monitor International Page 16 Venezuela Agribusiness Report Q2 2014 In April 2011, the two governments... 523.0 560.0 580.0 580.0 Sources: USDA Table: Venezuela Pork Production & Consumption, 2008-2013 2008 2009 2010 2011 2012 2013 Pork Production, '000 tonnes 125.0 125.0 125.0 125.0 125.0 120.0 Pork Consumption, '000 tonnes 133.0 129.0 134.0 141.0 141.0 133.0 Sources: USDA © Business Monitor International Page 17 Venezuela Agribusiness Report Q2 2014 Table: Venezuela Poultry Production & Consumption, 2008-2013... for meat would likely be hit © Business Monitor International Page 18 Venezuela Agribusiness Report Q2 2014 Grains Outlook BMI Supply View: Venezuela is a major net importer of grain Though production rose rapidly through the first decade of the 21st century, consumption has also risen, fuelled by oil-driven economic growth Corn is Venezuela' s major grain crop, with the vast majority grown in the central... International Page 13 Venezuela Agribusiness Report Q2 2014 Venezuela produces only small quantities of pork Output has remained stable at around 125,000 tonnes in recent years We see production growing slowly in 2013/14 Over our forecast period, we see production increasing by 7.5% on the 2012/13 level to reach 129,000 tonnes in 2017/18 BMI Demand View: Meat consumption soared in Venezuela' s boom years... grains in the coming year © Business Monitor International Page 22 Venezuela Agribusiness Report Q2 2014 Increasing Dependence Venezuela - Corn, Wheat & Rice Imports ('000 tonnes) Source: BMI, USDA Nationalisation Threats The three-year long dispute between Mexican firm Gruma - the world's largest producer of corn flour for tortillas - and Venezuela' s government and the constant threat of the latter to... Page 27 Venezuela Agribusiness Report Q2 2014 Coffee Outlook BMI Supply View: The highest quality Venezuelan coffee comes from the Maracaibo region, in the far west of the country, along the border with Colombia As with other agricultural sectors, the failure of government-mandated prices to keep pace with increasing costs amid rocketing inflation has hurt the profitability of production in Venezuela, ... disincentive for prospective investment (domestic and foreign) © Business Monitor International Page 12 Venezuela Agribusiness Report Q2 2014 Industry Forecast Livestock Outlook BMI Supply View: After strong growth in the 1990s and the early 2000s, 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 become increasingly ... International Page 25 Venezuela Agribusiness Report Q2 2014 Stagnating In Venezuela Selected Countries - Corn Yields (tonne/ha) Source: USDA Table: Venezuela Corn Production & Consumption, 200 8-2 013 2008... slightly in 2014, by 0.5% y-o-y Through to 2018, we forecast demand growing by 4.6% on 2013 to 1.4mn bags © Business Monitor International Page 28 Venezuela Agribusiness Report Q2 2014 Table: Venezuela. .. 36 Venezuela Agribusiness Report Q2 2014 the corn market and forecast prices to average slightly below current levels at USc425/bushel in 2014 and 2015 Optimistic Estimates United States - Y-o-Y