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. We believe a law prohibiting kosher beef production, the horsemeat scandal and recent quality concerns in the beef industry will limit growth potential in the beef sector, but poultry and pork are likely to continue to perform strongly. For grains, we are turning more positive on corn production prospects in the long term as the country is investing in area expansion for the crop. For sugar, we see growth potential limited by the recent U-turn in the EU's biofuels policy, which restricts the amount of food crops to be used in the production of ethanol.
- Corn production growth to 2016/17: 71.8% to 4.1mn tonnes. This extremely high number is due to base effects but also to recent investment in expansion in the crop on the back of high global prices and tight regional markets. Now that global prices have moderated, we expect production growth to be more limited and come mainly from yield rather than area, but we believe 4.1mn tonnes by the end of the forecast period is achievable.
- Beef consumption growth to 2017: 8.2% to 183,600 tonnes. Over the past decade, beef consumption has declined rapidly in the wake of bovine spongiform encephalopathy and with consumers believing that poultry is a healthier choice. The horsemeat scandal, as well as recent quality concerns, could affect consumption growth over the long term, and we have revised down our forecasts out to 2016/17.
- 2014 real GDP growth: 2.3% (up slightly from an estimated 1.2% in 2013; predicted to average 2.7% over the period 2012-2017).
- Consumer price inflation: 1.9% year-on-year (y-o-y) on average for 2014 (up from the 1.0% y-o-y estimated for 2013).
- BMI universe agribusiness market value: 3.4% y-o-y decrease to US$26.1bn in 2013/14, forecast to increase on average by 0.3% annually between 2011/12 and 2016/17.
Revisions To Forecasts:Barley production revised down from 4.0mn tonnes to 3.3mn tonnes on lower plantings and yields.Corn 2013/14 production revised down from 3.9mn tonnes to 3.1mn tonnes on the back of recent official estimates.Corn2014/15 production revised up from 3.2mn tonnes to 3.9mn tonnes as we expect yields to recover from their current subdued level and area planted to remain at current highs.
We have revised down our forecast for corn production in 2013/14 in Poland but continue to see strong growth potential for the crop in the coming years on the back of steady expansion in area planted. We forecast corn production to decrease by 22.4% year-on-year (y-o-y) to 3.1mn tonnes in 2013/14. This will be a result of lower yields following adverse weather conditions, though area planted in 2013/14 has increased by 12.7% y-o-y. We are confident the area planted with corn in the country will remain high, and yields could improve over the medium term. We see limited upside in area planted in the short term, however, as we believe global corn prices have reached a low. We forecast corn production to recover to 3.9mn tonnes in 2014/15 and to reach 4.1mn tonnes in 2016/17.
A recent vote from the country's constitutional court to ban kosher beef production, followed by a rejection by parliament of an amendment to restore the practice, is dealing a significant blow to the country's kosher beef industry. Kosher beef production and exports have been booming in Poland in the past five years as the country looked for new markets to sell its beef in a context of falling consumption in the rest of Europe and increasing competition with South American producers for major markets. The country, because of its large Jewish community and its cultural and historical ties to Israel, had been particularly well placed to sell its kosher beef in the country and the rest of the Middle East.
The past year or so has been a challenge for the Polish consumer. Following a sustained boom that lasted even through the 2008-2009 period when nearly all of Europe grinded to a halt, real GDP growth has since slowed significantly. Indeed, Poland was the only European country to escape recession in 2009, and the strength of its private consumption-oriented economy was a key factor. Despite the recent challenges, we have often highlighted the opportunities in Poland's retail sector, paying particular attention to hard discounter Biedronka - owned by the Portuguese retailer Jeronimo Martins. In addition to retail, the country's confectionery industry has caught our eye. Confectionery has been doing well and looks well placed to keep growing nicely in line with our Europe team's expectations for a rebound in private consumption over the next few years.