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Mozambique food and drink market

Strong production growth is predicted for Mozambique's sugar industry and poultry meat sectors, both of which are benefiting from new investments and rising consumption demand. In the five years to 2015, we also envisage a steady expansion in output for Mozambique's two leading grain crops, maize and sorghum. These and other agribusiness subsectors are currently benefitting from increased investment by both the government and private companies. One development which is expected to help drive production growth in the sugar and maize sectors is a growing commitment by the Mozambican government to developing biofuels. Meanwhile, the main downside risks to our grain production forecasts include the subsector's continued vulnerability to variable rainfall and associated problems such as drought and flooding. With regard to poultry, the greatest downside risks for production include rising feed costs and disease. Our five-year forecasts also envisage positive demand growth for the consumption of all agribusiness produce; growth will be underpinned by rising incomes and by population expansion.

Key Forecasts:

- We have upwardly revised our forecast for the consumption of maize and now expect it to grow by almost 34% in the five years to 2015; strong consumption growth will occur on the back of a rapidly expanding population, as well as a steady increase in the use of maize as a feed for livestock and poultry.
- We maintain our expectation that maize production will retrench by 2.7% in 2010/11 to 1.88mn tonnes. The fall in output reflects the impact of excessive rains and floods - especially in central and southern regions adjacent to the Limpopo and Zambezi rivers. Despite this, maize will remain Mozambique's most widely produced and consumed grain. Our production forecast for the grain envisages growth of 12.7% in the five years to 2014/15.
- Although excessive rains and flooding in central and southern Mozambique had a negative impact on corn production, they did not seriously affected sorghum output. We maintain our view that sorghum production will grow by 1.6% in the 2010/11 agricultural year to reach 384,000 tonnes; growth of 22.5% is anticipated for the five years to 2014/15.
- Although we have lowered our output estimate for Mozambique's sugar crop in 2009/10 and 2010/11, we predict that long-term production growth will be stronger. We now predict that sugar production will grow by almost 57% in the five years to 2014/15 to reach 396,000 tonnes. As one of Mozambique's key cash crops, production growth will reflect an increase in exportdriven demand and the opening-up of new markets; sugar production is also expected to benefit from investment in biofuels.
- We have made some slight revisions to our demand forecast for sugar and now predict that domestic consumption will grow by 14% in the five years to 2015. Although rising demand for sugar will be driven by rising incomes and by an expanding population, sugar will nevertheless remain a luxury food for many Mozambicans.
- We maintain our prediction that poultry production will increase by a modest 0.4% in 2010/11 to 42,700 tonnes. Despite this, strong growth of 23% is envisaged for the five years to 2014/15. Production growth will be fuelled by rising domestic demand and ongoing investments in improved production techniques. However, consumption will increase by 32% over the same period, reflecting improved living standards and an expanding population.

Key Macroeconomic Forecasts:

- 2011 Real GDP Growth: 7.5% (down from 8.0% in 2010; predicted to average 7.6% in the five years to 2015). GDP per capita expected to rise to US$1,649 in 2020 (from an estimated US$353 at the end of 2010.
- Consumer Price Inflation: 12.0% y-o-y (average for 2011), down from an average of 17.5% in 2010; CPI is expected to fall to around 9.0% in 2012. As an importer of significant quantities of wheat, sugar, milk and rice, Mozambique is vulnerable to rising international commodity prices. High prices for these staples inevitably feed inflation, sapping consumer purchasing powered

Key Views

Mozambique's agricultural sector is relatively underdeveloped with some of the lowest cereal yields in southern Africa. As global food security becomes increasingly pertinent over the coming years, Mozambique's natural endowment of underutilised fertile land will become a much more attractive investment proposition. According to the Mozambican government, the country has 36mn hectares of arable land. Only 5mn of these are currently under cultivation, with the majority by small-scale subsistence farmers. On the one hand, higher food prices create opportunities for increased investment in Mozambican agricultures. In addition to higher world food prices, efforts to bring new land under cultivation will be driven by rising domestic demand.

Like elsewhere in Africa, we believe that Mozambique's domestic consumer will offer real potential over the coming years. The country boasts a young, growing, increasingly wealthy population that will demand ever more goods and services. Indeed, of the 29mn Mozambicans expected to be alive in 2020, 82% will be under the age of 40. With young people typically consuming more and saving less than their older counterparts, this will bode well for consumption.

by S. C.
29 july 2011, World News > Africa