Peru's agricultural exports grew by 16.6% year-on-year (y-o-y) in value terms over the first quarter of 2012 to reach US$915.mn, according to Ministry of Agriculture data. Higher export prices for a number of key products, including coffee, mangoes, avocado, asparagus and evaporated milk, helped to push up revenues alongside increased export volumes for coffee, grapes, animal feed, evaporated milk and bananas. The Peruvian government continues to work hard to build agricultural exports through PromPeru (the Commission for the Promotion of Peru through Exports and Tourism) and ADEX, the Peruvian exporters association. The Netherlands, the US, the UK, Spain, Hong Kong and Russia are all significant export markets for Peruvian agricultural products.
- BMI believes that Peruvian growth will be among the strongest in Latin America over the medium term on the back of a growing consumer base and robust mining and infrastructure projects in the pipeline. Domestic demand will be a larger driver of growth. We see GDP coming in at 4.8% y-o-y in 2012 and 2013 and at 4.9% in 2014.
- We forecast that sugar production will pick up by 6.0% y-o-y to reach 1.10mn tonnes in 2011/12. Continued investment in renewing fields, new plantations and improving processing efficiency, along with good weather and plentiful rains, look set to see production increase by a further 5.5% y-o-y in 2012/13 to take production to 1.16mn tonnes. Over our forecast period to 2015/16, we expect sugar production to rise 28.9% from its 2011 level to 1.34mn tonnes.
- We believe that coffee production grew by 16.6% y-o-y in 2011/12 to a record 5.15mn bags, boosted by good weather conditions and high prices encouraging investment in plantations. We see production falling by 7.8% y-o-y in 2012/13 to 4.75mn bags, due to the off year in arabica production, which occurs every three to four years. Over our forecast period, we expect growth to return and forecast coffee production to increase by 20.2% on the 2011 level to reach 5.31mn bags.
- We forecast an increase of 4.2% y-o-y in poultry production in 2011/12 to take output to 1.12mn tonnes. Over our forecast period, we expect continued strong growth in poultry production and forecast output to reach 1.30mn tonnes in 2016, up 21.5% on the 2011 level.
- Demand for beef has slowed in recent years owing to high prices and the increasing popularity of poultry. We forecast an increase in beef consumption of 1.2% y-o-y in 2012 to take demand to 174,100 tonnes. Out to 2016, we see beef consumption growing by 7.3% on the 2011 level to reach 184,600 tonnes.
Key Trends And Developments
- On June 14, it was announced that the free trade agreement (FTA) between Peru, Colombia and the EU would be signed on June 26 in Brussels. The announcement came despite the approval by the European Parliament on June 12 of a resolution stating that Colombia must improve its human rights record before the FTA could be approved. The pact will widen market access, eliminate the majority of tariffs and reduce technical obstacles to trade. Following the signing of the agreement, it will be sent for internal procedures before being ratified by the EU and the two Andean nations.
- Peru continues to build its network of free trade agreements. In Q212, the country reopened negotiations with Thailand and began studying the feasibility of an FTA with India and Israel. A Peru-Norway FTA is set to come into effect on July 1. The agreement is part of Peru's pact with the European Free Trade Association (EFTA), of which Norway is a member. Peru's trade deals with other EFTA members Iceland, Liechtenstein and Switzerland came into force in 2011. In 2011, trade between Peru and the EFTA countries reached US$6.1bn.
- Cocoa exports are forecast to post strong growth once again in 2012. Cocoa exports grew by 9% y-o-y in value terms in Q112 to reach US$7mn, and in April the agriculture ministry announced that it expected y-o-y growth of 15-16% in shipments over the course of the year. Exporters hope that the third Salón del Cacao y Chocolate, which is set to take place July 4-8 in Lima, will further boost trade. The Salón aims to showcase the diversity and quality of Peruvian cocoa and cocoa products and to promote exports. Organisers aim to attract 25,000 visitors to the event to showcase speciality produce. There are, however, concerns that a fall in prices will hit Peruvian exporters in 2012 amid falling demand and global economic uncertainty. Improved harvests in major producers in West Africa in 2012/13 look set to lead to lower average prices through 2012 and 2013. Economic instability in Europe represents a further risk, as 66.3% of exports were destined for the European market in 2011.
- Coffee exports reached an estimated US$1.6bn in 2011, up by 79% y-o-y. Exports grew by 29% y-o-y in volume terms, to reach 296,000 tonnes. As these figures suggest, the increase in export revenue has been driven primarily by rocketing coffee prices. However, record-breaking exports are not expected to continue into 2012. Given strong production in Brazil, BMI believes that greater supply in the market will see coffee prices fall to an average of US$2.00/lb in 2012 and US$1.85/lb in 2013.The price of this market report covers 4 quarterly reports on this sector. This quarterly report will be downloadable instantly as a PDF document, with the 3 remaining reports delivered at regular intervals throughout the year.
Click for Report details:Peru Agribusiness Report Q3 2012