BMI View: Malaysia's agribusiness sector is experiencing challenging times, as its most emblematic sector, the palm oil industry, is undermined by low prices and growing structural challenges. The cocoa sector is in an even worse position, suffering a severe decline after the stellar performance of the 1990s . The cocoa processing sector is facing increasing competition from Indonesia and is losing market share at a fast pace. The medium - term outlook is brighter, amidst strong growth prospects in the poultry sector and opportunities for value added palm based oleochemical exports. Malaysia will have to remain ahead of its biggest competitor, Indonesia, if it s agribusiness sector is to stay afloat. As such, the next challenge for the country resides in the economic integration of ASEAN. The ASEAN Economic Community will present so me opportunities, for example for poultry exports. However, it also poses risks to the future of the sugar refining sector.
Palm oil production growth to 2019/20 : 12.4% to 22.3mn tonnes. Production growth will reaccelerate towards the end of our forecast period, after the slower growth recorded in recent years. The ongoing replanting and yield improvement programmes will bear fruit and support output.
Poultry production growth to 2019/20 : 18.8% to 1.7mn tonnes. After a decade of strong growth, we forecast poultry meat production to grow at a moderate pace in the coming years, as rising production costs is undermining the development of the sector. Malaysia will maintain a fragile self-sufficiency in poultry.
Sugar consumption growth to 2020 : 13.7% to 1.9mn tonnes. Consumption growth will be slower than in the previous decade as it already comes from a high base, Malaysians being among the largest consumers of sugar on a per capita basis. Future sugar demand will be driven mainly by rising incomes and population growth.
2016 BMI universe agribusiness market value : USD29.61bn, up 8.7% y-o-y, forecast to grow by 5.2% annually from 2016 to 2020.
2016 real GDP growth : 4.6% (down from 5.0% in 2015, forecast to average 4.6% from 2016 to 2020).
2016 consumer price inflation : 2.7% (up from 2.1% in 2015, forecast to average 2.3% from 2016 to 2020).
|Second Consecutive Decrease In 2016|
|Malaysia - Palm Oil Production|
The 2015-2016 El Nino episode, which emerged in May 2015 and ended in May 2016 according to the Australian Bureau Of Meteorology will have a strong impact on Malaysia's palm oil production in 2015/16. The phenomenon led to two waves of drier than usual weather, in August-September 2015 and in January-April 2016, as well as to forest fires in Indonesia which created a thick haze over Malaysia. As such, we forecast palm oil output to decrease by 1.9% in 2015/16 (October 2015-September 2016). Production will pick up in towards the end of 2016 and output in 2016/17 will rebound strongly.
The Malaysian government's decision to impose a hiring freeze on foreign labour from March 2016 pending a review of the levy and rehiring programme will exacerbate the ongoing cost inflation for palm oil and rubber companies. Indeed, as many as 76% of all workers at the plantation level in Malaysia are foreigners, according to Malaysian Palm Oil Board data, and labour costs account for around 40 to 50% of total costs at the plantation level.
After a very challenging year in 2015, palm oil companies will record a pickup in earnings in 2016, as palm oil prices will average higher this year, boosted by El Nino. However, the improvement will be limited as higher prices will be partially offset by lower palm output and rising costs. Challenges will come back to the fore in 2017, with lower prices and the deterioration of the debt position, which may hamper investment in the longer term. In light of the downturn in the sector, palm oil companies are adjusting their strategies towards much-needed efficiency gains.
In November 2015, Barry Callebaut decided to cut cocoa processing capacity in Malaysia with immediate effect. This is the latest sign that Malaysia's cocoa sector is slowly losing its shine. We have revised down our cocoa consumption forecasts and expect grinding to remain on the decline as chocolate demand in Asia slows and Malaysia's cocoa processing sector continues to lose market share to Indonesia.
The Malaysia Agribusiness Report features BMI Research's market assessment and independent forecasts for production, consumption and trade across core agricultural commodities.
BMI's Malaysia Agribusiness Report includes independent commodity price forecasting and analysis for key agricultural outputs, an overview of the agribusiness competitive landscape and a discussion of the downstream context of agricultural production in relation to country food consumption forecasts and composite food and beverage trade forecasts.
- Use BMI's independent industry forecasts to test other views - a key input for successful planning in dynamic agribusiness markets.
- Apply BMI's medium-term commodity price analysis to assist with budgetary planning and the identification of investment opportunities and potential risks.
- Assess the activities and market position of your competitors, partners and clients.
BMI Industry View
Summary of BMI’s key industry forecasts and views, highlighting recent changes and key risks to the industry outlook.
Industry SWOT Analysis
Analysis of the major strengths, weaknesses, opportunities and threats within the wider agricultural industry.
BMI Supply & Demand Forecasts
Divided into sections based on various diverse sectors in the agriculture market, the chapter provides insight into each market’s agricultural industry, centred on sector forecasts to end-2019 for the consumption, production and trade of key commodities.
- Consumption Forecasts: Accompanied by a discussion of the main drivers of consumption growth: macroeconomic factors, food processing trends, price movements and increasingly, demand from the non-food sector.
- Production Forecasts: Examine the trends influencing BMI’s production outlook: global demand, price increases, public and private sector investment and agricultural efficiency improvements.
- Trade Forecasts: Accompanied by a discussion of the factors influencing a country’s trade in agricultural goods, including domestic demand, global prices and government trade policies.
- BMI’s Forecasts: Accompanied by a risks-to-outlook assessment, which examines potential factors that could affect our existing forecast picture and the likelihood of their occurrence.
BMI’s Commodity Price Analysis
Fundamental and technical analysis of the short- and medium-term price outlook for eight agricultural commodities based on globally recognised benchmarks.
Analysis of headline food and drink forecasts, including total food consumption, per capita food consumption and total sector trade, which provide important downstream intelligence for primary agricultural producers.
Includes relevant articles from BMI’s daily analysis service. These can include: long-term projections on agricultural imports and exports; our perceptions of the impacts of economic slowdown on key companies and subsectors within the Agribusiness industry in a given country; our analysis of fertilizer production; as well as other relevant analysis of recent news and events.
The reports contain information on prominent companies operating in each market.
Key Commodities Covered By The Agribusiness Market
Reports Include: Grains, Dairy, Livestock, Rice, Sugar, Palm Oil, Edible Oils, Coffee, Cocoa, Cotton, Soybean
Please note – not all reports cover all commodities.
The Agribusiness reports draw on an extensive network of primary sources, such as multilateral organisations, government departments, industry associations, chambers and company reports.