Algeria Agribusiness Report Q4 2011

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Algeria Agribusiness Report Q4 2011 Published on August 2011

Report Summary BMI View: We have revised our production forecasts for wheat, barley, milk and cheese. In the case of wheat and barley, 2011/12 production levels are expected to remain in line with the previous year. However, over the remainder of our forecast to 2014/15, positive production growth is predicted. Over our forecast period from 2009/10 to 2014/15, we expect growth in the consumption of wheat, barley, corn and dairy produce to benefit from rising living standards, falling unemployment and an expanding population. Demand for barley and corn in particular will be driven by the need for animal feed within a rapidly expanding livestock sector. Although rising demand will have a positive impact on domestic production, Algeria will remain a net importer of most major foods for the foreseeable future. Over the long term, the government aims to expand production through improved irrigation and plant genetics. Meanwhile, Algeria's dairy sector will continue to expand and develop as it benefits from the presence of large international players and development agencies as well as continuing government subsidies. Key Forecasts * Wheat production growth to 2014/15: 0.7% to 3.58mn tonnes. Although production growth will remain positive, base effects will contribute to relatively weak growth over the five-year period. We expect wheat imports to exhibit strong growth. * Barley production growth to 2014/15: -20.5% to 1.91mn tonnes. Negative production growth reflects the influence of base effects. However, barley will benefit from general government support for grains as well as demand for poultry feed. * Milk consumption growth to 2015: 24.5% to 2mn tonnes. This will be due to enhanced consumer purchasing power and the growing prevalence of savvy marketing initiatives from firms such as French dairy giant Danone and Scandinavian company Arla. * Corn consumption growth to 2015: 26% to 3mn tonnes. Barley and corn are mainly used for animal feed, although corn is consumed as food in some rural areas. The expansion of local poultry production is likely to drive an increase in corn consumption. * 2011 real GDP growth: 2.7% (up from 2.5% in 2010; predicted to average 4.0% from now until 2015). * Unemployment: 9.8% (down from 10% in 2010; predicted to fall to 9.3% by 2015). * Consumer price inflation: averaged at 3.9% for the first five months of 2011; expected to average at 4.0% in 2011 as a whole before falling to 3.0% in 2012. Industry Developments On April 25, the Algerian government lifted the drought warnings which it had previously issued for several grain-growing regions in the west and centre of the country. Although we feared that we may have to lower our 2011/12 forecast expectations for Algeria's grain crops to reflect the impact of excessively dry weather, we maintain our view that wheat production will be in line with the previous crop year. Final figures for the 2011/12 crop year will become available in September, following the harvest. However, we now predict that wheat output will remain flat at 3.1mn tonnes in the 2011/12 crop year. Similarly, we believe that barley production will remain flat in 2011/12 at 1.5mn tonnes. We maintain our view that both wheat and barley will experience positive production growth over our forecast period. Positive output will, among other things, reflect increased investment in irrigation and improved plant genetics. Specific forms of government support include the provision of certified seeds and fertilizer to encourage grain cultivation. The government also provides technical and economic assistance which facilities access to credit for acquisition of inputs to help improve yields and quality. Despite our robust long-term predictions for the production of wheat and barley, growing demand for these grains will continue to result in a supply shortfall. Indeed, we expect wheat imports to continue their strong growth trajectory for the duration of our forecast. In order to cope with rising food prices, Algeria's government early this year announced several new measures to control the consumer price of staple foods. For wheat, the ongoing subsidy supplied to mills remained unchanged. However, in January, the government increased the quota of bread wheat which is supplied to mills, from 50% to 60% of milling capacity. Although consumer

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>> Get this Report Now by email! price inflation is expected to average at 4.0% in 2011, we expect it to fall to 3.0% in 2012. Over the longer-term, increased grain production should help to mitigate food price inflation. The acceleration of dairy purchases by Algeria (beginning in February) demonstrates the growth of Algerian dairy demand as well as the government's desire to minimise domestic food price inflation concerns. Increased dairy purchases, together with subdued dairy production growth due to high input costs, underpins our expectation that dairy prices will remain elevated over the short term. Algeria is a well-known dairy importer, having one of the highest per capita consumption rates in the region. However, by regional standards, Algeria is also a fairly large milk producer.

Table of Content Executive Summary 5 Key Forecasts ....... 5 SWOT Analysis 7 Algeria Agricultural SWOT .. 7 Algeria Political SWOT 8 Algeria Economic SWOT ...... 8 Algeria Business Environment SWOT ... 9 Industry Forecast Scenario ... 10 Algeria Grains Outlook .... 10 Table: Algeria Barley Production, Consumption & Trade, 2010-2015 ....... 11 Table: Algeria Corn Production, Consumption & Trade, 2010-2015 .. 11 Table: Algeria Wheat Production, Consumption & Trade, 2010-2015 12 Agribusiness Ties with Morocco Set to Grow ..... 12 Wheat Imports to Remain High ... 12 Initiatives to Expand Grain Production ...... 13 Table: Algeria Barley Production, Consumption & Trade, 2006-2011 ....... 14 Table: Algeria Corn Production, Consumption & Trade, 2006-2011 .. 14 Table: Algeria Wheat Production, Consumption & Trade, 2006-2011 15 Risk to Outlook ... 15 Commodity Price Analysis .... 16 Monthly Grain Update ..... 16 Corn .... 16 Rice ..... 17 Soybean ...... 18 Wheat .. 19 Monthly Softs Update ....... 20 Cocoa.. 20 Coffee.. 21 Palm Oil ..... 22 Sugar .. 23 Downstream Supply Chain Analysis .... 24 Ties with Morocco to Deepen, But Risks Remain 24 ALGERIA .... 27 The Arab Spring Six Months On: Where We Stand ..... 29 MENA - Evolution of 2011 Real GDP Growth Forecasts ... 31

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>> Get this Report Now by email! MENA: Political and Economic Measures Announced Since the Start of 2011 ... 33 Global Food & Drink View ..... 36 Food & Drink Roundup Q211: Core Views 36 Macroeconomic Forecast ...... 44 Table: Algeria - Economic Activity. 2008-2015 .. 46 BMI Forecast Modelling 47 How We Generate Our Industry Forecasts ...... 47

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