Abstract
The Spain Agribusiness Report Q309 looks at the domestic farming industry
during a global recession
that shows little sign of abating. For a country
boasting nearly a third arable land, agriculture in Spain is,
according to
sources, diminishing both in terms of GDP (3.5%) and labour force
participation (4%). The
services-based industry is by far the country' s
top employment sector; yet in a response to the slowdown,
it has been
among the worst affected, particularly in the tourism subsector as
belt-tightening consumers
curtail their holidays in the sun. As such,
efforts to promote agricultural development have stepped up in
the hope
that Spain can capitalise on strong export promise.
The pork industry is
one of the sectors where growth has taken off considerably and it has
shown
considerable strength over the last 20 years, attributable to such
factors as EU-entry, closer ties between
feed sellers and livestock
producers, and changing consumption habits. In addition to feeding locals,
BMI
sees the export market becoming progressively pertinent to the
considerations of Spanish pork producers.
Exports almost doubled in the
two-year period to 2008, to 1.255mn tonnes, while notable pork consuming
nations, including China, will provide ample opportunities for strong revenue
growth, as its own industry
takes the weight of rapid population expansion
and increased urbanisation.
While raw pork exports will comprise the bulk
of foreign trade, there exists considerable potential for
value-added
sales via increased marketing and exposure of regionally processed pork;
chorizo and a
variety of cured and seasoned hams - including Serrano or
Iberico varieties - are presently consumed
mainly in Spain, although these
niche products are becoming increasingly popular across a progressively
cosmopolitan continent. Processed pork currently represents a paltry 5% of
entire Spanish pork exports,
underpinning our view that such goods will
play a larger role in future pork production decisions- and
help drive
pork output growth of 7.1% in the four year period ending in 2013.
Spain' s
pig traders' association, Ancoporc, believes that rising feed costs will
contribute towards a further
year-on-year (y-o-y) reduction of the
country' s already shrinking pig herd by a couple of percentage
points in
2009, which, while it is likely, is not deemed to stunt overall industry
growth and productivity
gains.
Despite a positive outlook for the
consumption of sugar-based products, overall sugar consumption is set
to
continue on a downward trajectory, which has been the trend witnessed in the
preceding outlook
window. The prevalence of public health consciousness is
likely to lead an increasingly conscious public
to look for sugar
substitutes. Additionally, consumers could well forego the consumption of
refined white
sugar on breakfast cereals or in hot beverages, as a means
of lowering intake. We forecast consumption to
diminish by 0.6% to 1.34mn
tonnes by the end of the projection period. Production is set to fall by
almost
50% as support measures are removed and a host of players leave the
industry.
The grains industry looks particularly promising through to
2013, with all three categories covered in our
outlook forecast
significant double digit production growth. Barley in particular is predicted
a staggering
five year growth rate of 81.72% as the less moisture
dependent plant is seen to exhibit greater yield
consistency than corn or
wheat. However, the latter mentioned crops will also benefit as producers look
to
raise export revenues to pick up the slack from reduced output from
other EU countries suffering from
reduced subsidies.
At a time when
domestic producers are likely to face increasing competition from foreign
entities, we
believe that the diversity of Spanish agriculture may provide
the industry with the chance to gain valuable
revenues through the
marketing of regionally branded value-added produce, which are sure to be
popular
in foreign countries. As well as the produce covered in our
outlook, the nation is a top producer of olives,
grapes (Spain has a
flourishing wine industry) and tomatoes, while the country is the top organic
producer
in the EU and will be sure to earn favourable revenues when
ethical consumers regain the financial ability
to support their moral
convictions.
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