Abstract
Italy has a strong agricultural tradition and is the number one producer in
the EU for a variety of fruit,
including tomatoes, pears, apricots and
peaches. In BMI' s new Italy Agribusiness Report for Q309, we
examine how
the industry fared through the turbulent times of rapidly rising agricultural
prices and input
costs in 2007 and 2008 and the challenges it now faces
during global recession.
Poultry and pork production will grow by 37.64%
and 8.88%, respectively 2009-2013, although beef
production will fall by
1.24%. The growth in poultry and pork production will be partly driven by
domestic demand and should also lead to improved balances of trade. Poultry' s
relative price advantage
should give it a competitive edge during
recession.
We forecast milk production to increase by 11.90% to 2013 in
response to Italy' s increased EU milk
quota, upped by 5%, effective from
April 2009. However, dairy prices are falling and greater output
would
exacerbate this dynamic. The recession could also lead to reduced
manufacturing of dairy
products. Also, higher quotas and lower prices will
be to the detriment of smaller producers, as bigger,
more efficient
players grab a larger slice of the market. As quotas gradually disappear
across the EU by
2015, more efficient producers in other countries will
mean further competition.
We expect Italy' s cheese production to fluctuate
between 2008 and 2013, averaging 1.2mn tonnes, but this
will be higher
than in the preceding six years when average annual production was 1.1mn
tonnes. In the
first half of 2008, demand for one of Italy' s most famous
cheeses, buffalo mozzarella, was hit hard after it
emerged that Naples'
chaotic and corrupt waste disposal industry had allowed carcinogenic dioxins
to get
into buffalo feed and from there into their milk and cheese.
Figures from dairy consultancy firm CLAL
suggest that exports of a number
of important Italian cheeses fell in 2008 and are continuing to fall in
2009, in part a reflection of the current recession.
Rice will be an
important export crop throughout our forecast period, with production growing
32% to
2013 to 2.01mn tonnes. With the forecast volume of rice set to be
over five times the level of domestic
consumption by 2013 Italy will
continue to supply a large portion of the EU' s rice needs. Work is under
way to produce new hardier varieties that will be more resistant to the
changes in temperatures in northern
Italy where the majority of the
country' s rice is grown.
Italy' s producers have faced a couple of court
cases recently. In February 2009 Italy' s anti-trust authority
fined twenty
six pasta producers and the Italian Union of Pasta Makers (Unipi) for
allegedly operating a
cartel between October 2006 and March 2008. The
implicated companies account for 90% of the Italian
pasta market. Unipi
suggested it would appeal and several producers have denied the allegations
and said
they would also appeal. In April 2009 the European Commission
(EC) issued a press release confirming
the decision of Italy' s Supreme
Court to uphold a lower court' s decision which had found some milk
producers guilty of setting up a network of fake companies to avoid paying
fines for exceeding quota. A
spokesperson from the EU' s anti-fraud body
told the BBC that real criminal proceedings leading to
punishment could
now be pursued.
Italy' s agriculture sector is still very fragmented by
Western European standards -in 2005, according to
data from Eurostat,
small farms (from 5 hectares (ha) to 20ha) in Italy occupied more than three
times as
much land as in neighbouring France and almost six times as much
land as in the UK. As quotas and
subsidies from the EU are gradually
withdrawn, many of these smaller operators may find it difficult to
compete, driving consolidation in the sector.
Another option for smaller
farms is organic farming. Demand for organically produced food has been
increasing in Europe in recent years and in many cases has outpaced supply. In
2007, according to
Eurostat, 8.4% of Italian agricultural land was classed
as organic, the second highest proportion in the
EU25 behind only Austria
with 11.0%. As higher profit margins can be charged on organic produce,
organic farming could be an option for smaller Italian farms to stay afloat in
the face of competition from
larger operators. However, the recession
could be having an efffect. In February 2009 a survey conducted
by ISMEA
and Nielsen showed that purchases of packaged organic food by Italian
consumers increased
by 5.4% in 2008 compared to growth of 10.2% in
2007.
The importance of agriculture to GDP has gradually fallen from 6% in
1980 to just over 2% today.
According to the National Institute of
Statistics the percentage of the workforce engaged in agriculture
has also
fallen from 6% in 1995 to 4% in 2007. Also, the amount of utilised
agricultural area in the
country fell from 13.06mn ha in 2000 to 12.7mn ha
in 2005. Hardly surprising then that while exports in
Italy' s agricultural
and food and drink sectors have been increasing in recent years (Italy is the
fifth
largest exporter of agri-food products in the world), imports have
been rising too, partly to help supply the
dynamic food processing
sector.
Economic growth in Italy has been sluggish in recent years and the
country has a large debt. On top of
this the global recession is hitting
Italy hard. BMI forecasts real GDP growth to contract - 4.5% in 2009.
Inflation is coming down but credit is tight. Household consumption is likely
to decline and food exports
are contracting as other EU countries (Italy' s
main trading partners) also go through difficult times.
Despite Italy' s
successes in the agriculture and food processing sectors it looks like a bumpy
time ahead
for farmers and producers. The domestic and global economic
situation is forecast to start improving in
2010.
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