Venezuela agribusiness report q3 2013

Q3 2013
www.businessmonitor.com

VENEZUELA
AGRIBUSINESS REPORT
INCLUDES 5-YEAR FORECASTS TO 2017

ISSN 2040-0489
Published by:Business Monitor International


Venezuela Agribusiness Report Q3
2013
INCLUDES 5-YEAR FORECASTS TO 2017

Part of BMI’s Industry Report & Forecasts Series
Published by: Business Monitor International
Copy deadline: June 2013

Business Monitor International
Senator House
85 Queen Victoria Street
London
EC4V 4AB
United Kingdom
Tel: +44 (0) 20 7248 0468
Fax: +44 (0) 20 7248 0467
Email:
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© 2013 Business Monitor International

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DISCLAIMER
All information contained in this publication has been researched and compiled from sources believed to be accurate and reliable at the time of
publishing. However, in view of the natural scope for human and/or mechanical error, either at source or during production, Business Monitor
International accepts no liability whatsoever for any loss or damage resulting from errors, inaccuracies or omissions affecting any part of the
publication. All information is provided without warranty, and Business Monitor International makes no representation of warranty of any kind as
to the accuracy or completeness of any information hereto contained.


Venezuela Agribusiness Report Q3
2013
INCLUDES 5-YEAR FORECASTS TO 2017

Part of BMI’s Industry Report & Forecasts Series
Published by: Business Monitor International
Copy deadline: June 2013

Business Monitor International
Senator House

85 Queen Victoria Street
London
EC4V 4AB
United Kingdom
Tel: +44 (0) 20 7248 0468
Fax: +44 (0) 20 7248 0467
Email:
Web:

© 2013 Business Monitor International
All rights reserved.
All information contained in this publication is
copyrighted in the name of Business Monitor
International, and as such no part of this
publication may be reproduced, repackaged,
redistributed, resold in whole or in any part, or used
in any form or by any means graphic, electronic or
mechanical, including photocopying, recording,
taping, or by information storage or retrieval, or by
any other means, without the express written consent
of the publisher.

DISCLAIMER
All information contained in this publication has been researched and compiled from sources believed to be accurate and reliable at the time of
publishing. However, in view of the natural scope for human and/or mechanical error, either at source or during production, Business Monitor
International accepts no liability whatsoever for any loss or damage resulting from errors, inaccuracies or omissions affecting any part of the
publication. All information is provided without warranty, and Business Monitor International makes no representation of warranty of any kind as
to the accuracy or completeness of any information hereto contained.

Venezuela Agribusiness Report Q3 2013

CONTENTS
BMI Industry View ............................................................................................................... 7
SWOT .................................................................................................................................... 9
Agribusiness ............................................................................................................................................. 9
Business Environment .............................................................................................................................. 11

Industry Forecast .............................................................................................................. 12
Livestock Outlook .................................................................................................................................... 12
Table: Venezuela Beef & Veal Production, Consumption & Trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Table: Venezuela Pork Production, Consumption & Trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Table: Venezuela Poultry Production, Consumption & Trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Table: Venezuela Beef & Veal Production, Consumption & Trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Table: Venezuela Pork Production, Consumption & Trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Table: Venezuela Poultry Production, Consumption & Trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

Grains Outlook ....................................................................................................................................... 17
Table: Venezuela Corn Production, Consumption & Trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Table: Venezuela Wheat Production, Consumption & Trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Table: Venezuela Corn Production, Consumption & Trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Table: Venezuela Wheat Production, Consumption & Trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

Coffee Outlook ........................................................................................................................................ 24
Table: Venezuela Coffee Production, Consumption & Trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Table: Venezuela Coffee Production, Consumption & Trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

Commodity Strategy ......................................................................................................... 30
Monthly Grains Update ............................................................................................................................ 30

Monthly Softs Update ............................................................................................................................... 34
Table: Select Commodities - Performance & BMI Forecasts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Table: BMI Commodities Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44

Upstream Analysis ............................................................................................................ 45
Americas GM Outlook .............................................................................................................................. 45
Americas Fertiliser Outlook ....................................................................................................................... 49
Americas Machinery Outlook ..................................................................................................................... 55

Downstream Analysis ....................................................................................................... 62
Food ..................................................................................................................................................... 62
Food Consumption ................................................................................................................................. 62
Table: Food Consumption Indicators Historical Data and Forecasts 2010-2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63

Canned and Prepared Food ..................................................................................................................... 63
Table: Canned Food Volume/Value Sales Historical Data and Forecasts 2010-2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Table: Fish Volume Sales, Production and Trade Historical Data and Forecasts 2010-2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64

Oils and Fats ......................................................................................................................................... 66
Table: Oils and Fats Volume Sales, Production and Trade Historical Data and Forecasts 2010-2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67

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Venezuela Agribusiness Report Q3 2013
Confectionery ........................................................................................................................................ 69
Table: Confectionery Value/Volume Sales Historical Data and Forecasts 2010-2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69

Drink .................................................................................................................................................... 70
Alcoholic Drinks .................................................................................................................................... 70
Table: Alcoholic Drinks Volume/Value Sales Historical Data and Forecasts 2010-2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70

Soft Drinks ............................................................................................................................................ 72
Table: Soft Drinks Value Sales Historical Data and Forecasts 2010-2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73

Hot Drinks ............................................................................................................................................ 73
Table: Hot Drinks Value Sales Historical Data and Forecasts 2010-2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74

Mass Grocery Retail ................................................................................................................................ 74
Table: Mass Grocery Retail Sales by Format Historical Data and Forecasts 2010-2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
Table: Sales Breakdown by Retail Format Type . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75

Regional Overview ............................................................................................................ 76
Regional Overview - Americas ................................................................................................................... 76

Competitive Landscape .................................................................................................... 82
Table: Venezuela Agribusiness Competitive Landscape . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82

Demographic Forecast ..................................................................................................... 83
Table: Venezuela's Population By Age Group, 1990-2020 ('000) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
Table: Venezuela's Population By Age Group, 1990-2020 (% of total) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
Table: Venezuela's Key Population Ratios, 1990-2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
Table: Venezuela's Rural And Urban Population, 1990-2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86

Methodology ...................................................................................................................... 87

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Venezuela Agribusiness Report Q3 2013

BMI Industry View
BMI View: The victory of Nicolás Maduro of the
ruling Partido Socialista Unido de Venezuela in
April will most probably ensure the continuity of
many of the interventionist policies of Chávez's era.

Tough Years Ahead
Venezuela - BMI Agribusiness Market Value By
Commodity (As % of total)

Price fixing in particular continues to be a source of
woe for producers unable to meet input costs which
are soaring in line with some of the highest rates of
inflation in the world. Some respite has arrived in
the form of a 20% rise in the government-fixed price
of food items including beef, chicken and dairy
products, but even this will fall short of the rate of
inflation which is expected to increase 30% year-onyear in 2013. Inflation is also contributing to the
diminishing purchasing power of Venezuelan
households while foreign currency shortages after a
pre-election spending boom are causing shortages of

Source: BMI

some imported goods.

Key Forecasts
■

■

■

■

■

■

■

Corn consumption growth to 2017: 8.5% to 4.17mn tonnes. Consumers hit by economic turmoil will
turn to the cheapest staple food, more than compensating for reduced demand from the livestock sector.
Coffee production growth to 2016/17: 10.6% to 940,000 60kg bags. The hike in government prices
and increased investment in small farms will see some recovery in supply.
Beef production growth to 2017: down 1.9% to 358,000 tonnes. High input costs, cheaper Mercosur
competitors and reduced domestic demand will stymie growth.
BMI universe agribusiness market value: US$4.47bn in 2013 (down 5.0% from US$4.70bn in 2012;
forecast to grow annually by 2.2% on average from 2014 to 2017).
2013 real GDP growth: 2.6% (down from 5.6% in 2012; forecast to grow annually by 3.4% on average
between 2012 and 2017).
2013 consumer price index: 30.0% year-on-year (y-o-y) (up from 20.1% in 2012; forecast to grow
annually by 22.9% on average between 2012 and 2017).
2013 central bank policy rate: 15.5% (up from 15.0% in 2012; forecast to increase to 16.5% in 2014).

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Venezuela Agribusiness Report Q3 2013

Key Revisions To Forecasts
■

Beef consumption in 2013 to fall to 565,000 tonnes (revised down from a previous forecast of 581,000
tonnes). Consumption is expected to fall due to high costs and reduced supply.

Industry Developments

We expect consumer price inflation in Venezuela to remain elevated over the coming months fuelled by the
February 8 devaluation of the bolívar (see 'New Dual Exchange Rate, Same Old Problems For The Private
Sector', March 22). Inflation reached its highest level in three years in April, coming in at 29.4% year-onyear (y-o-y), a sharp uptick from 25.1% y-o-y in March. Venezuelan residents rely heavily on imports for
essential household goods, and we therefore forecast that a weaker currency will drive average inflation of
30.0% this year, up from 21.3% last year. Moreover, food prices have been particularly sensitive to a
weaker bolívar, which we expect will keep social tensions high and continue posing threats to political
stability through anti-government demonstrations.

Venezuela imported about US$8bn in food-related products in 2012, over 17.0% of total imports, meaning
that food prices are particularly susceptible to weaker currency. Just in April, food prices rose by 6.4%
month-on-month (m-o-m), well above the 4.3% m-o-m increase in the overall consumer price inflation
index.

The recent announcement of a 20% rise in the government-fixed price of important foodstuffs including

beef and chicken by the new government of President Maduro may give some encouragement to producers.
The shift in policy came in the wake of a meeting with business leaders which may signal a thaw in
relations with the private sector. However, prices for basic goods set artificially low by the government
were instrumental in allowing increasing consumption of meat and coffee among lower-income households;
increasing prices will make such commodities unaffordable for some Venezuelans.

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Venezuela Agribusiness Report Q3 2013

SWOT
Agribusiness
SWOT Analysis

Strengths

■

Venezuela's tropical climate enables production of a diverse range of agricultural
products.

■

Venezuelan cocoa and coffee are known for their high quality. Cocoa especially is
sought after by producers of premium chocolate.

Weaknesses

■

Despite having large areas of fertile arable land, lack of investment in agriculture has
left Venezuela a major food importer.

■

High food price inflation and frequent supply shortages have dampened growth in
food consumption.

■

Price controls in place since 2003 squeeze the profits of producers and are a
disincentive to investing in increasing production.

Opportunities

■

The government has shown interest in revitalising coffee and cocoa production after
years of decline.

■

The government has introduced a number of programmes, including financing and
subsidies, to help smallholders increase production.

■

Falling oil revenue is bringing more attention to increasing agricultural production to
reduce the cost of food imports.

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Venezuela Agribusiness Report Q3 2013

SWOT Analysis - Continued

Threats

■

The threat of land seizures and nationalisation inhibits investment in agriculture in
Venezuela.

■

Falls in oil prices will severely limit the amount of money the government will be able
to spend.

■

Uncertainty over the country's political and economic landscape has increased
following the death of President Hugo Chávez.

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Venezuela Agribusiness Report Q3 2013

Business Environment
SWOT Analysis

Strengths

■

Venezuela is an important supplier of oil to the US and is a member of OPEC.

■

Home to some of the largest oil reserves in the world, the Orinoco region will provide
opportunities for large-scale investment.

Weaknesses

■

A lack of domestic and international investment, largely as a result of the uncertain
political environment, could undermine the long-term growth outlook.

■

Privatisation ground to a halt under the administration of former President Hugo

Chávez, with the government instead preferring production-sharing agreements to
encourage foreign direct investment.

Opportunities

■

Government support for businesses, through a range of low interest rate loans, is
available. The government fund for industrial credit provides large sums of money for
small- and medium-sized businesses.

Threats

■

The implementation of stringent foreign currency controls has hit the business
community hard. This has restricted import growth, as businesses lack the currency
to purchase raw materials.

■

State expropriation of 'idle' plants and proposals for land reform will act as a
disincentive for prospective investment (domestic and foreign).

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Venezuela Agribusiness Report Q3 2013

Industry Forecast
Livestock Outlook
BMI Supply View: After strong growth in the 1990s and the first few years of the 21st century, Venezuelan
beef production has gone into reverse in the past few years. Venezuela was self-sufficient in beef in 2003,
but in recent years the country has become increasingly reliant on imports to meet domestic demand. A
complex system of price controls imposed by the government in 2003 has restricted the profitability of
livestock production in the country. The government has aimed to boost production by turning over land
judged as unproductive to landless farmers. The project, however, has had mixed results: some formerly
productive ranches have seen production evaporate under the direction of inexperienced new managers.

The sector is held back by a lack of profitability due to high input costs, inflation and government price
controls, along with increased competition from imports from Brazil, Colombia and Nicaragua. Including
live animal imports for slaughtering, Venezuela depends on imports for more than half of beef consumed,
according to Instituto Nacional de Estadística. The lack of profitability is leading producers to leave the
sector, and the national cattle herd is estimated to have shrunk by 4.7% year-on-year (y-o-y) in 2012 to
12.1mn head. As a result, we expect that production will fall by 5.5% in 2013 to 345,000 tonnes.

The recent increase by 20% of the state-controlled price for key items of food including livestock products
such as beef and chicken should help to stall any further declines. Indeed, towards the end of our forecast
period, we expect production to increase as the government makes efforts to lessen the reliance on imports.
However, the recovery will be slow, and we forecast production to reach just 358,000 tonnes in 2017, still
1.9% down on the 2012 level.

Poultry production has weathered the storm of the government's reforms better than the cattle-rearing
sector. It accounts for an estimated 30% of total agricultural GDP and almost 50% of animal production.
Poultry is the most significant component of Venezuela's agricultural output, accounting for 24% in value
terms. The poultry industry is organised, vertically integrated and efficient, and producers are constantly
working to modernise and improve their production methods. Despite these strengths, the sector has been
hit by the poor economic climate, high input costs and increasing competition from imports from Brazil and

Argentina. Producers continue to be affected by the state-controlled price regime, which is squeezing
profitability. The state-regulated price for a whole chicken was increased in July 2011 to VEF15.61/kg. This
provided some relief for producers. However, we believe that high input costs and squeezed profitability
will see output fall back by 0.8% y-o-y in 2013 to 650,000 tonnes. Through to 2017, we see production
expanding by 6.4% on the 2012 level to 697,000 tonnes.

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Venezuela Agribusiness Report Q3 2013

Venezuela produces only small quantities of pork. Output has remained stable at around 125,000 tonnes in
recent years. We see production dipping by 4.0% y-o-y to 120,000 tonnes in 2013, owing to high input
costs. Over our forecast period, we see production increasing by 4.8% on the 2012 level to reach 131,000
tonnes in 2017.
BMI Demand View: Meat consumption soared in Venezuela's boom years from 2004 to 2008. The rise in
demand was driven by a combination of strong, oil-fuelled economic growth and government price controls
making staple foodstuffs more affordable. After falling sharply in 2003, poultry consumption grew by more
than 50% by 2008. Beef consumption grew by almost 40% between 2004 and 2008. In 2011, annual per
capita consumption stood at an estimated 28.7kg for poultry, 19.2kg for beef and 5.1kg for pork. While
price controls have increased demand, they have worked against investment in production and led to an
increasing reliance on imports. In 2012, imports reached an estimated 196,000 tonnes for poultry and
220,000 tonnes for beef.

High import prices, rising inflation and a drop in domestic production are likely to constrain beef
consumption through our forecast period. We see demand falling by 4.2% y-o-y in 2013 to 565,000 tonnes.
Out to 2017, we forecast that demand for beef will grow by 3.4% on the 2012 level to 609,800 tonnes.

We see poultry consumption dipping slightly by 0.1% y-o-y in 2013 to 850,000 tonnes owing to higher
costs and reduced supply. By 2017, we forecast demand for poultry will grow by 9.6% on the 2012 level to
932,800 tonnes. Although moderate, the pace of consumption growth for poultry is still faster than for pork
or beef owing to the comparatively lower cost.

Pork consumption is much lower than that of poultry and beef. Consumption grew by 9.8% over 2007-2012
to 141,000 tonnes. We see consumption falling by 2.0% y-o-y in 2013 to 138,200 tonnes owing to a dip in
domestic production and high input costs. Out to 2017, we see consumption increasing by 1.3% on the 2012
level to reach 142,800 tonnes, fuelled primarily by population increases.

Table: Venezuela Beef & Veal Production, Consumption & Trade

2012

2013f

2014f

2015f

2016f

2017f

Beef & Veal Production, '000 tonnes 1

365.0

345.0

347.0

350.0

353.0

358.0

Beef & Veal Consumption, '000 tonnes 1

590.0

565.0

576.3

587.3

598.4

609.8

Notes: f BMI forecasts. Sources: 1 USDA.

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Venezuela Agribusiness Report Q3 2013

Table: Venezuela Pork Production, Consumption & Trade

2012

2013f

2014f

2015f

2016f

2017f

Pork Production, '000 tonnes 1

125.0

120.0

127.0

129.0

130.0

131.0

Pork Consumption, '000 tonnes 1

141.0

138.2

139.4

140.5

141.7

142.8

Table: Venezuela Poultry Production, Consumption & Trade

2012

2013f

2014f

2015f

2016f

2017f

Poultry Production, '000 tonnes 1

655.0

650.0

665.0

674.0

685.0

697.0

Poultry Consumption, '000 tonnes 1

851.0

850.0

868.7

889.5

910.9

932.8

Beef Cattle Imports Arrive

Another shipment of heifers has arrived from Nicaragua in the latest allocation of livestock in a bilateral
agreement between the two countries as part of the national policy AgroVenezuela.

It is hoped that this will help to reinvigorate beef production after recent declines in the national herd. In
total 781 high quality, dual purpose heifers arrived in the sea port of Puerto Cabello in May 2013 building
upon previous deliveries and a further 1000 head are expected in the coming months to reach the agreement
target of 6000. The cattle were picked out through a four-month selection process.

This new impetus to the industry in the Unare river basin has been made with a view to meeting rising food
demand from the Orinoco Oil Belt.

Price Rises Bring Some Relief For Producers, None For Consumers

The Venezuelan livestock sector continues to be held back by the government-controlled price regime,
which is squeezing profitability and holding back production. However, the recent announcement of a 20%
rise in the government-fixed price of important foodstuffs including beef and chicken by the new

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Venezuela Agribusiness Report Q3 2013

government of President Maduro may give some encouragement to producers. The shift in policy came in
the wake of a meeting with business leaders which may signal a thaw in relations with the private sector.

The move may also serve to push inflation higher: a 6.4% jump in food prices not government-controlled
pushed Venezuela's inflation up 4.3% last month, the largest rise in three years, bringing the annual rate to
nearly 30%. The bolivar has also been devalued, further weakening the purchasing power of consumers. As
a result we expect declines in consumer demand across the board for livestock products in 2013.
Improved Relations With Colombia Ease Beef Supply Restrictions

The long-running trade dispute between Chávez and the previous Colombian president, Álvaro Uribe, posed
difficulties for Venezuela's beef supply for much of 2009/10. In 2008, Venezuela imported about 200,000
tonnes of beef from Colombia, in addition to live cattle. However, at the end of July 2009, Chávez froze
diplomatic relations with Colombia in response to the country allowing US troops to operate out of its bases
in their fight against drug production. While we do not believe exports completely ground to a halt (even if
official trade is completely stopped, a lucrative smuggling industry remains) the fall in trade placed strain
on Venezuela's meat supply. The value of imports of meat and offal from Colombia fell by a whopping
97.6% y-o-y in October 2009, according to Colombia's statistics agency DANE, with total imports from
Colombia for the month falling by 70.4%. Venezuela was forced to seek imports from other countries in the
region, including Brazil, Argentina, Paraguay and Nicaragua.

However, in August 2010, Colombian President Juan Manuel Santos met with Chávez and agreed to restore
diplomatic relations between the two countries. The two presidents agreed to reinforce security along their
shared border to clamp down on terrorist groups and drug trafficking. Venezuela also agreed to pay debts
amounting to some US$800mn to Colombian exporters. The agreement paves the way for the restoration of
trade relations between the two countries, which promises to ease supply shortages of beef on Venezuelan
shelves.

In April 2011, the two governments reached an agreement to restore trade relations following a meeting in
Cartagena. The deal opens the way for Colombia to export 6,500 head of cattle in addition to 3,000 live
cattle and 3,500 pregnant cows to increase Venezuela's breeding stock. The deal also included the offer to
export 60,000 day-old chicks and 100,000 hatching eggs.

Then in April 2012, the Venezuelan Minister of Foreign Affairs Nicolás Maduro and his Colombian
counterpart María Holguín signed a partial bilateral trade agreement, at the sixth Summit of the Americas in
Cartagena, Colombia. The agreement establishes a new model for trade relations between the nations,

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covering preferential trade agreements, sanitary norms, technical norms, rules of origin, trade protection and
the mechanism for the settlement of disputes. The agreement also includes plans to increase joint
infrastructure and agricultural production. The pact, which came into force in October 2012, signals the
continued improvement of diplomatic relations between the two countries. The pact is expected to provide
much-needed relief for the food shortages and spiralling prices that have gripped Venezuela.

In February 2013, data from Colombia's National Administrative Department of Statistics and Office of
Taxes and Customs demonstrated that trade between Colombia and Venezuela increased by 40% y-o-y to
US$3.28bn.

Table: Venezuela Beef & Veal Production, Consumption & Trade

2007

2008

2009

2010

2011

2012

Beef & Veal Production, '000 tonnes 1

365.0

305.0

290.0

348.0

345.0

365.0

Beef & Veal Consumption, '000 tonnes 1

547.0

615.0

508.0

523.0

560.0

590.0

Sources: 1 USDA

Table: Venezuela Pork Production, Consumption & Trade

2007

2008

2009

2010

2011

2012

Pork Production, '000 tonnes 1

125.0

125.0

125.0

125.0

125.0

125.0

Pork Consumption, '000 tonnes 1

129.0

133.0

129.0

134.0

141.0

141.0

Sources: 1 USDA.

Table: Venezuela Poultry Production, Consumption & Trade

2007

2008

2009

2010

2011

2012

Poultry Production, '000 tonnes 1

740.0

695.0

680.0

650.0

625.0

655.0

Poultry Consumption, '000 tonnes 1

903.0

1,047.0

861.0

887.0

859.0

851.0

Sources: 1 USDA.

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Risks To Outlook

Chávez's death creates an uncertain political and economic landscape regardless of the victory of his chosen
successor, Maduro, in the snap elections. Our current forecast is that the government's interventionist stance
towards food production and supply will continue; thus, meat production will be highly dependent on
government policy. If prices are subject to further controls as Venezuela's economy contracts, production
could fall further as more operators leave the sector. Another factor that will have a great influence over
demand for livestock is the price of oil. With Venezuela so reliant on its hydrocarbons exports, funds for
government schemes to increase production and provide affordable meat to the masses will be dependent on
oil revenues being sufficient. If the price of oil falls again, demand for meat would likely be hit.

Grains Outlook
BMI Supply View: Venezuela is a major net importer of grain. Though production rose rapidly through the
first decade of the 21st century, consumption has also risen, fuelled by oil-driven economic growth. Corn is
Venezuela's major grain crop, with the vast majority grown in the central states of Barinas, Portuguesa and
Guárico. While the area planted to corn has risen by around 50% since the end of the 1990s, Venezuela's
agricultural sector remains relatively undeveloped, and there is still plenty of room for further expansion.
About 65% of the area planted is white corn for human consumption; the remainder is yellow corn for both
human consumption and for feed. The viability of corn production in Venezuela is heavily dependent on
government policy. In the 1980s, the country's agricultural sector was heavily regulated, and high tariffs
were imposed on grain imports. This saw corn production more than double in the second half of the 1980s.
With little competition from imports, however, productivity remained low. When the market was opened up
in the 1990s, domestic farmers found it hard to compete with imports, and production fell. Since then, the
introduction of regulated farmgate prices and retail prices has hit profitability and seen output decrease
further. Poor weather conditions, land expropriations and the seizure in October 2010 of Agroisleña, the
main private sector distributor of agricultural inputs, agricultural services and financing, have added to the
difficulties facing producers.

In 2011/12, we estimate that corn production stagnated at 1.30mn tonnes as poor weather, poor agricultural
policies, a lack of fertiliser and low profitability hit output. Production continued to be held back by
shortages of technical staff and equipment, delays in financing to farmers, inefficient production techniques
and unreliable supplies of materials and agrochemicals.

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In 2012/13, we forecast that corn output will fall slightly by 1.9% y-o-y to 1.28mn tonnes. Output will be hit
by the poor macroeconomic climate and shortage of foreign currency with farmers unable to invest in the
fertilisers and machinery which would allow them to recover lost production.

Out to the end of our forecast period, the level of production will be highly reliant on the government's
ability to support the agricultural sector. In 2012, the government set ambitious targets to boost domestic
grain production by 70% by 2018. However, without continued support, improved production techniques
and improved profitability, much of the newly opened farmland will very likely return to fallow. In the
current climate of economic and political uncertainty we are sceptical of the government's ability to invest
scarce foreign currency in the sector to prevent further falls in output. We therefore expect forecast
production to fall 6.9% on the low 2012 level to reach 1.21mn tonnes in 2017.

Wheat production in Venezuela is negligible, as the country does not have a suitable climate for growing
wheat. Venezuela is therefore reliant on imports to meet domestic demand, with the majority coming from
the US (42%) and Canada (52%). In March 2011, wheat was added to the list of goods classified by the
government as essential or staple, which helps to expedite import procedures. Venezuelan wheat imports
totalled an estimated 1.69mn tonnes in 2011/12 and are forecast to remain at a similar level in 2012/13.

However, importers have faced problems related to rising international prices, limitations on accessing
foreign currency and delays in obtaining import approval.

BMI Demand View: Demand for feed corn has risen rapidly since the economic recovery began in 2004.
Through the end of the 1990s and the first couple of years of the 21st century, demand for corn shot up,
driven by the expansion of the poultry sector. As the economy went into meltdown in 2002, however,
demand for corn collapsed as poultry output fell almost 25% in the space of a year. Since then, feed
consumption has climbed back up.

However, as purchasing power is expected to decline in 2013 and 2014, human consumption will increase
faster than that of the animal feed industry as Venezuelans turn to their cheaper staple food. Corn is a staple
food in Venezuela, and corn flour is used to make arepa, a flat, unleavened bread. Total corn consumption
rose by an estimated 63.3% from 2007 to 2012, outstripping growth in production and leading to a surge in
imports from the US. Import controls for feed corn have been relaxed, and imports grew from just 152,000
tonnes in 2006 to an estimated 2.3mn tonnes in 2012.

We estimate that demand grew by 12.0% y-o-y in 2012 to reach 3.85mn tonnes, due primarily to increased
demand from the livestock sector. Yellow corn for feed is estimated to account for around 2.3mn tonnes,

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with the remainder for human consumption. We see consumption dropping back to 3.75mn tonnes in 2013,
as demand for feed falls back. Out to 2017, we believe consumption will increase, as corn is one of the
cheapest foods available and the price is kept down by government price controls. Growth will, however, be
more moderate than during the previous five-year period; out to 2017 we forecast demand rising by 8.5% on

the 2012 level to take consumption to 4.17mn tonnes.

Wheat has gained in popularity since the beginning of the 21st century, as Venezuelan consumers have had
more money to spend on food. Consumption of both baked goods and pasta has been rising. Price controls
mean pasta has become far more affordable and per capita consumption has now risen to around 14kg. The
majority of pasta produced is lower grade and must be sold at a government-set price. Some high-grade
pasta is also produced that can be sold at market prices. Pasta imports increased to an estimated 8,600
tonnes in 2011, up from an average of 3,490 tonnes in 2007-2010. As a result of rising wheat prices on the
international market, we believe that consumption remained stable in 2011/12 at 1.50mn tonnes. However,
the expansion in production of two major millers and pasta manufacturers is likely to lead to increased
availability and higher consumption. We see demand growing by 3.0% to 1.55mn tonnes in 2012/13; out to
2017, we believe consumption will grow by 15.4% on in 2012 level to 1.73mn tonnes.

Table: Venezuela Corn Production, Consumption & Trade

2012

2013f

2014f

2015f

2016f

2017f

Corn Production, '000 tonnes 1

1,300.0

1,275.0

1,250.0

1,225.0

1,210.0

1,210.0

Corn Consumption, '000 tonnes 1

3,850.0

3,750.7

3,851.9

3,959.8

4,066.7

4,176.5

Notes: f BMI forecasts. Sources: 1 USDA.

Table: Venezuela Wheat Production, Consumption & Trade

2012

Wheat Consumption, '000 tonnes 1

1,500.0

2013f
1,545.0

2014f
1,591.3

2015f
1,637.5

2016f
1,683.3

2017f
1,730.5

Notes: f BMI forecasts. Sources: 1 USDA.

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Further Corn Price Increase Authorised

On August 1 2012, the Venezuelan government raised the farmgate prices of corn and rice. The price of
yellow corn increased by 42.9% from VEF1.33 to VEF1.90 per kilo, while white corn rose by 46.6% from
VEF1.50 to VEF2.20. However, the increase has not been sufficient to satisfy producers, who argued that
even with the price rise they cannot cover production costs, which have risen dramatically. Antonio Pestana,
the vice president of Fedeagro, argued that the cost of producing a kilo of white corn stands at VEF2.40,
VEF0.20 higher than the new government mandated price. He also warned that a failure to invest in
improving crop irrigation and drainage poses threatens the recovery of domestic grain production, leaving
the crops vulnerable to drought and flooding.

Subsequently, in November 2012, Venezuelan Agriculture Minister Juan Carlos Loyo announced a 46%
increase in the price of pre-cooked corn flour from VEF4.06/kg to VEF5.93 (US$1.38)/kg. However, the
Venezuelan corn processing industry had argued that an increase of 66% would be necessary to cover
production costs and ensure a small profit. In addition to the 47% increase in farmgate corn prices, freight
rates have also risen by 20%. Industry representatives argued that the lack of profitability could undermine
companies' viability and potentially threaten food production. Nonetheless, we expect the increase in the
farmgate prices and the consumer price gaps to go some way towards encouraging an increase in the area
planted to grains in the coming year.

Government Enters Gruma Partnership

In early December 2011, the government announced that it would enter into partnership with Mexican firm
Gruma, the world's largest producer of corn flour for tortillas. The government had previously stated its
intention to nationalise the assets of Gruma subsidiary Monaca. The announcement will see the
establishment of two joint ventures, one focusing on the production of corn flour and rice, and the second
producing pasta, wheat flour and oatmeal.

The relationship between the Venezuelan government and Gruma was a turbulent one throughout 2010. In
January of that year, Hugo Chávez announced that his government would temporarily take control of
Gruma's unit, following the arrest of one its major shareholders under charges of financial irregularities.
Subsequently, in May 2010, the government announced the expropriation of Monaca following accusations

that Gruma had refused to sell flour during a national shortage the previous month. The move came as the
government tightened its control on the supply chain in the face of national shortages and rocketing

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inflation. However, in July 2010, the government retracted and announced that rather than seizing Gruma's
assets, it was considering forming a joint venture with the Mexican company.

Gran Misión Agro Venezuela Fails To Deliver

In January 2011, the government launched Gran Misión Agro Venezuela, a new programme designed to
support the country's agricultural production as part of a two-year plan for the sector. The programme aims
to boost domestic production and lessen reliance on imports, thus improving Venezuela's food security.
Misión Agro Venezuela was designed to provide low-interest loans, machinery and technical assistance to
the country's agricultural producers, from small to large-scale landowners, with VEF9.9bn (US$2.3bn)
committed to the programme.

Data from the Ministry of Agriculture and Land indicate that during 2011, 75,000 producers received
VEF2.7bn (US$627.9mn) in order to boost production. However, data also showed that the Gran Misión
had failed to reach its objectives for its first year of operation with regards to grain production. Yellow corn
production reached only 62.1% of the target of 1.39mn tonnes for 2011, and white corn production hit only
50.0% of official targets.

Agricultural production in 2011 was hard-hit by heavy rains, which caused significant damage to both crops
and infrastructure. However, in addition to extreme weather conditions, Gran Misión Agro Venezuela has

also been held back by shortages of technical staff and equipment, delays in financing to farmers and
inefficient production techniques.

Despite the plan's failure to reach its first-year targets, in late January 2012 Chávez relaunched the Gran
Misión Agro Venezuela on his radio and television show Aló Presidente. Chávez called for the cooperation
of local government to bring disused agricultural land back into production. He also promised a further
VEF114mn (US$26.5mn) in investment to improve the agricultural transport network.

There are signs that the government is becoming more responsive to the needs and views of producers
associations when developing agricultural policies. In Q312, Fedeagro, the National Confederation of
Associations of Agricultural Producers, announced that agricultural production during H112 was more
positive than the same period in previous years, with increased area planted to cereals and rice.

In January 2013, Vice President Nicolás Maduro relaunched Gran Misión AgroVenezuela for 2013-2019.
Shortly afterwards, he announced that funding had been approved to support the programme's objectives for

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2013. In total, VEF7.81bn will be available for 2013, of which VEF3.0bn will be dedicated to improving
farm roads.

Coca Growing Hits Corn Production

The diversion of fertiliser from legal crops to coca growing is damaging Venezuelan corn production. Urea,
the nitrogen-rich fertiliser used to grow corn and other agricultural produce, is being sold through the black

market to coca growers. As a result, farmers say, they do not have sufficient fertiliser, particularly during
the main planting season that begins in May.

On paper, Venezuela produces at least twice as much fertiliser it needs, with the government subsidising its
use to the tune of US$100mn per year, according to a Miami Herald report. However, farmers in the main
growing regions of Portuguesa and Guárico say that a lack of access to fertiliser is damaging their harvest.
The negative impact of the drugs trade upon grains production is a further obstacle to Venezuela's corn
producers, who have also been hampered by land expropriations, farmgate prices and extreme weather
conditions in recent years.

Mixed Results For Chávez's Production Drive

Agricultural production in Venezuela increased during Hugo Chávez's time as president. After rising
gradually in the first half of last decade, production rose rapidly from 2005 as the oil wealth pouring into the
country allowed more investment in agriculture. From 2004 to 2008, corn production grew 56.5% to
2.00mn tonnes. This was driven by a large increase in the area planted under the government's National
Sowing Plan. Chávez's stated aim was to not only end Venezuela's reliance on imported corn, but to build
up a surplus for export. Since coming to office, Chávez redistributed millions of hectares of land to the poor
and invested billions of dollars in agriculture. While the rise in production shows that the policy has enjoyed
some success for grains, there are still problems. Many of the people granted rights to farmland have little
experience in agriculture. There have also been complaints that promised training and inputs such as seed
and equipment has been slow to materialise, leaving land fallow.

Another brake on the expansion of grain production is controlled farmgate prices, which have been in force
since 2003 on around 100 products considered to be basic necessities. Producers are also given direct
subsidy payments and access to cheap fertiliser. Despite this, farmers have long complained that the
farmgate price is too low, threatening future production.

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The aim of achieving self-sufficiency is a long way from being realised, and Venezuela is still heavily
reliant on grain imports to fuel domestic demand, both for human consumption and for the livestock
industry. Indeed, in 2010 the government relaxed import permit procedures in order to reinforce its 'food
security' policy and avoid domestic food shortages. In 2012/13, corn imports are forecast to reach 2.0mn
tonnes, compared to 1.16mn tonnes in 1997/98. In addition, Venezuela is expected to import around 1.7mn
tonnes of wheat.

Table: Venezuela Corn Production, Consumption & Trade

2007

2008

2009

2010

2011

2012

Corn Production, '000 tonnes 1

2,000.0

1,800.0

1,800.0

1,634.0

1,300.0

1,300.0

Corn Consumption, '000 tonnes 1

2,400.0

2,700.0

3,200.0

3,400.0

3,100.0

3,850.0

Sources: 1 USDA.

Table: Venezuela Wheat Production, Consumption & Trade

2007
Wheat Consumption, '000 tonnes 1

1,750.0

2008
1,500.0

2009
1,550.0

2010
1,550.0

2011
1,500.0

2012
1,500.0

Sources: 1 USDA.

Risks To Outlook

As mentioned above, growth in Venezuela's grain production will be reliant on the continued support of the
government. With government revenues severely reduced by the fall in oil prices, funds to the agricultural
sector could dry up. This would see corn production undershoot our forecasts. On the demand side,
consumption will be reliant on the continued subsidisation of the price of staple foods and the ability of the
government to source sufficient grain supplies on the export market. If the government allowed grain prices
to rise, consumption would be hit. On the other hand, if oil prices rise faster than we expect, a recovery in
government revenues could see increased investment in agriculture and stronger-than-expected growth in
the production and consumption of grain.

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Coffee Outlook
BMI Supply View: The highest quality Venezuelan coffee comes from the Maracaibo region, in the far
west of the country, along the border with Colombia. However, as with other agricultural sectors, the failure
of government-mandated prices to keep pace with increasing costs amid rocketing inflation has hurt the
profitability of production in Venezuela, leading farmers to turn towards more profitable crops. In addition,
lack of producer unity and the government's expropriation of two main coffee processors have made the sale
of coffee more complicated for producers, providing a disincentive to continue production. Producers have
also faced competition from imported coffee, leading many to abandon the sector in favour of more
lucrative activities such as cattle ranching. In recent years, the number of coffee-growing families has fallen
from an estimated 80,000 to fewer than 50,000 and since 2009 Venezuela has become a net importer of
coffee.

We expect production growth of 3.5% in 2012/13 to reach 880,000 60kg bags, building on the recovery of
36.0% year-on-year in 2011/12. In September 2012, the government announced an average 33% increase in
farmgate prices. However, producers have argued that this is insufficient to counter rocketing inflation and
input costs.

Nevertheless, government support for smallholder coffee growers, which make up the majority of farms,
could see production grow further over the later years of our forecast period. We forecast production to
reach 940,000 bags in 2017, 10.6% higher than the 2012 level. This, however, will be dependent on
government policy, particularly price controls. If the government relaxes price controls further, interest in
investing in production of Venezuela's high quality coffee would most likely increase, leading to greater

production than we are currently expecting. Conversely, if price controls continue to squeeze profits,
farmers may switch to other less tightly controlled crops.
BMI Demand View: Coffee consumption has shown strong growth in recent years, rising by an estimated
66.5% over 2007-2012. The vast majority of coffee consumed is roasted ground coffee, with soluble instant
coffee accounting for only about 1% of total consumption. Coffee is included in the government's basic
food basket and is available in government food stores at subsidised prices. This has allowed more lowincome Venezuelans to afford it, leading to a strong increase in demand.

However, demand growth has led to severe supply shortages at times and a booming black market.
Wealthier consumers are able to buy their coffee at cafes or street stalls, but poorer consumers are often
unable to afford the high prices. The government has blamed the shortages on unscrupulous suppliers
hoarding their stock rather than selling it at the mandated prices. The Venezuelan Coffee Industry

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