Abstract
In BMI' s Venezuela Agribusiness Report for Q3 2009 we introduce the new
Livestock Outlook. As with
most industrial sectors in Venezuela, livestock
production has been profoundly affected by President
Hugo Chavez'
Bolivarian Revolution. Strong growth in meat production in the early years of
the decade
was brought to a swift halt by the sharp recession in 2002 and
2003. Hopes of a quick recovery for the
sector were dashed by the
imposition of government price controls on food staples, including meat, in
an
effort to improve the living standards of the country' s poor.
The
price controls and a return to strong economic growth saw demand for meat
quickly recover to prerecession
levels. Meat production, however, has
lagged far behind. Producers forced to sell at the
government-mandated
level have struggled to turn a profit. This has been a major disincentive
to
investment in the livestock sector. Investment has been further
discouraged by the threat of seizure and
nationalisation by the
government.
Livestock farmers' difficulties were compounded by the rapid
rise in feed costs through 2007 and 2008. In
2007 alone, beef production
fell by 23.3% year-on-year (y-o-y) as established farmers left the
business
and new government-backed collectives struggled to get started.
While production has been falling,
demand for beef rose ever higher as
oil-fuelled growth saw incomes rise. This has made Venezuela ever
more
reliant on beef imports, whcih rose from 2,000 tonnes in 2000 to 320,000
tonnes in 2008. While the
recession in Venezuela will see imports fall
this year and next, the move from self-sufficiency to a major
net importer
in only a few years shows the crisis beef production is in. Unless Chavez can
work a miracle
with the new collective farms or farmers are allowed to
make a profit without the fear of land seizures,
the outlook for beef
production over the next few years looks bleak.
Venezuela' s modern poultry
production sector has fared better than beef over the last few years.
Growth,
however, has also been held back by the price controls. In 2008,
production was still well below the level
seen in 2002 before the
recession and price controls took their toll. In 2009, with feed costs still
high, we
expect to see a slight decline in production.
Things are also
looking fairly bleak for Venezuela' s coffee growers this year. Coffee
production has also
been hit by price controls and rising input costs. In
2009, heavy rains have exacerbated an already poor
outlook for the year' s
harvest. We now forecast production to fall 14.9% y-o-y to 851,000 bags. The
low
outturn could see Venezuela, once one of the world' s leading coffee
producers, being forced to import
coffee to meet domestic demand.
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