We see the most growth potential for the livestock sector in Poland owing to increased export potential to the EU and Asia. The livestock industry in the country is relatively price-competitive compared with industry majors such as Brazil and the US, but it does not necessarily have the right export networks and infrastructure to rival these countries. That said, we see potential for the development of the Polish meat export market, particularly to high-growth markets as well as price sensitive ones in Asia. For grains and sugar, we see growth potential limited by the recent U-turn in the EU biofuel policy restricting the amount of food crops to be used in the production of ethanol.
Key Forecasts
- Corn production growth to 2016/17: 80.9% to 4.3mn tonnes. This will mainly come from base effects, as the country's reluctance to adopt genetically modified corn seeds will limit growth in yields. At the same time, growth in livestock production will continue to encourage corn production at the expense of less profitable crops, such as barley.
- Pork consumption growth to 2016/17: 3.1% to 1.7mn tonnes. We expect the pork market to be extremely tight in the coming years because of subdued margins and vulnerability of producers to changes in EU regulations. As a result, growth in production is likely to remain limited in the medium term.
- Sugar production growth to 2016/17: 5.2% to 12.1mn tonnes. Polish sugar producers will most likely be encouraged to increase output as EU reforms of the sugar sector gradually come online until full abolition of sugar production quotas in 2015. That said, restrictions put on the EU's subsidies budget are expected to weigh on growth.
- 2013 real GDP growth: 1.9% (down slightly from an estimated 2.0% in 2012; predicted to average 3.3% over the period 2012-2017).
- Consumer price inflation: 2.5% year-on-year (y-o-y) on average for 2013 (slightly down from the 4.1% y-o-y estimated for 2012).
- BMI universe agribusiness market value: 0.7% y-o-y decline to US$16.2bn in 2012/13, forecast to increase on average by 1.1% annually between 2011/12 and 2016/17.
Industry Developments
The 2012/13 Polish grains harvest has surprised to the upside, with spring wheat and barley helping to compensate for subdued output for winter crops. Spring wheat production was up 149.0% y-o-y in 2012/13, while spring barley production increased by 45.9% y-o-y. This pushed us to revise up our forecasts for 2012/13 wheat and barley to 8.6mn tonnes and 4.2mn tonnes respectively. The wheat crop is still expected to decline in y-o-y terms, but by less than we had envisaged previously. The barley crop is set to increase by 24.0% y-o-y, which is the largest instance of one-time growth observed in the past five years.
We believe the prominence of Northern and South American beef producers among global meat exports will continue over the long term, even if their pace of relative expansion is declining. Until the 1990s, Europe was the world's pre-eminent meat exporter, particularly for beef and pork, while the contribution from the Americas largely predicated on US and occasionally Argentine exports. However, between the 1980s and 2000s, the Americas (largely driven by the emergence of Brazil as a world-leading meat exporter) established a position as a leading exporter. We expect this to continue as European meat producers struggle under increasing costs and high feed prices.
Over our forecast period to 2017, we expect volume growth in carbonated drinks and bottled water, the two main components of Poland's soft drinks industry, to continue growing strongly. Compound annual growth rates (CAGRs) in both segments, which together are expected to account for about 130 litres of per capita soft drinks consumption in 2013, are forecast to remain strong over our five-year forecast period compared with the 2006-2011 period. Between 2012 and 2017, carbonates and bottled water volume sales are forecast to grow at CAGRs of 4.4% and 6.7% respectively.