New Market Research Report: Turkey Agribusiness Report Q2 2016

We favour the sugar sector in Turkey because of the strong growth potential of the country's confectionery industry and our belief that large changes to the country's sugar production quotas are likely to occur in the coming years. W e continue to see resilient growth in the livestock sector on the back of continued government support. G rain s and rice production will recover in the 2016 seaso n following the drought seen in 2014.

Key Forecasts

Wheat production growth 2015/16 to 2019/20: 6.9 % to 19. 3 mn tonnes. We expect the country to remain an importer of wheat (except for in 2016/17, when it will post a small surplus), despite reasonably strong domestic production growth following the drought-hit harvest of 2014/15.

Sugar consumption growth 2015/16 to 2019/20: 2.0% to 2.4 mn tonnes. This growth outlook will improve on the effective implementation of sugar reforms and efficiency gains, but for now we expect sugar consumption to remain relatively flat.

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2016 real GDP growth: 2.9% (revised down from 3.5% previously), down from 3.3% in 2015.

Consumer price inflation: 8.0 % average in 2016 (revised up from 6.5% previously), down from 7.7% average in 2015.

BMI universe agribusiness market value: 10.7% increase to USD70.3bn in 2015/16, forecast to increase by an annual average of 5.0% between 2015/16 and 2019/20.

Key Developments

Turkish sugar production will recover from last year's drought due to higher yields owing to favourable weather over recent months. Sugar consumption will remain subdued as most sugar beets are processed to make ethanol, a trend that will remain in place. Out to 2020, we see strong growth in the sugar sector provided the pending reforms are effectively implemented.

Increased acreage and sufficient rainfall will help the Turkish rice production recover from last year's drought. Consumption growth will be determined by population increases while Turkey remains dependent on the US and Russia for rice imports.

In our last quarterly update we significantly revised our forecasts and now see grains recovering most of last year's losses. However, ample rainfall before and during harvest deteriorated the quality of most grains production. Out to 2019/20, we forecast sustained growth in grains production as strong demand for human consumption and from the livestock sector will maintain production incentives.

Turkish poultry production will continue to outperform beef in the coming years, as the sector benefits from sustained government support and export opportunities. On the other hand, beef consumption will grow stronger due to base effects. Turkey will see greater imports of live cattle, as well as genetically modified feed, in order to support growth in the domestic livestock sector.

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