Market Report, "Malaysia Agribusiness Report Q2 2014", published

From: Fast Market Research, Inc.
Published: Fri Mar 28 2014

Strong growth prospects, opportunities for increased exports and government support will be the key factors driving growth in the Malaysian agribusiness sector. We see conditions being particularly favourable for sugar, poultry and cocoa production on the back of strong investment. However, we highlight that changing consumption patterns, disease outbreaks, sudden changes in policy and resources shortages resources could dent growth potential in the sector in the medium and longer term.

Key Forecasts

* Palm oil production growth to 2017/18: 9.2% to 21.1mn tonnes. Growth will be supported as companies replant mature estates and yields improve on the back of better technology.
* Sugar consumption growth to 2018: 15.8% to 1.8mn tonnes. The dominance and continued expansionary activities of market players F&N, Permanis and Yeo Hiap Seng have fuelled considerable growth in the Malaysian soft drinks sector, a significant factor fuelling demand for sugar.
* Poultry production growth to 2017/18: 13.4% to 1.5mn tonnes. More investment in the sector - as outlined in the 10th Malaysia Economic Plan - is expected to drive growth.
* 2014 BMI universe agribusiness market value: 11.8% year-on-year (y-o-y) increase, to US$22.1bn (contributes to 8% of GDP)
* 2014 real GDP growth: 4.4% (down from 4.6% expected in 2013, forecast to average 4.2% from 2014 to 2018).
* 2014 consumer price inflation: 2.9% (up from 2.1% in 2013, forecast to average 2.4% from 2014 to 2018).
* 2014 Central Bank policy rate: 3.0% end of period (same as 2013, forecast to average 3.35% from 2013 to 2018).

Full Report Details at

Key Developments

We maintain our view for palm oil production in Malaysia to decline slightly in the 2013/14 season. We forecast output to come in at 19.2mn tonnes, down 0.6% y-o-y. Looking at the 2014/15 season, we see palm oil production recovering by 2.5% y-o-y to 19.7mn tonnes. Overall, production growth will remain weak compared with historical standards, as constraints over plantation expansion are growing. The recent decision by Wilmar International, the world's largest palm oil trading company, to reduce deforestation and make its products more sustainable is the latest sign that environmental concerns will have an increasing impact on palm oil production. The company announced in December 2013 it will ensure its plantations and suppliers protect some forests and abstain from using fire to clear land. It also bans development on highcarbon- stock landscapes, including peatlands, as part of a larger conservation effort. Wilmar also signed an agreement with Unilever, the second largest global manufacturer of consumer goods, to accelerate the integration of sustainable palm oil into products.

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