Bangladesh Agribusiness Analysis Q1 2011

Bird flu has been a main danger to Bangladesh's poultry industry ever since it was first reported in the nation in March 2007. These outbreaks have put a great damage on producers, particularly the thousands of small-scale poultry rearers, and work as a discouragement to investment in production. Meat consumption in the country's rural areas comes mainly from the subsistence rearing of livestock. In urban centers, most poultry is still sold as live birds in wet markets with only a small proportion sold as packaged meat, adding to the likelihood of more outbreaks. The most recent outbreak was reported in April 2010, with 12 reported outbreaks across the country, mostly in commercial farms, involving a total of 141,726 birds. Of these, 10,605 died and 131,121 were destroyed. In May, Bangladesh imposed a ban on poultry from India due to a bird flu outbreak in the country.

Key Views

With GDP per capita of only US$618 in 2009, meat consumption is little in Bangladesh. Nevertheless, the nation’s poverty rate has fallen significantly over the past decade, while meat consumption has been on the rise. Poultry consumption is forecast to rise by 17.7% between 2010 and 2015.

The population of Bangladesh is estimate to grow by 8.2% from 2009 to 2014 to reach 156.6mn; this will be a key driver behind our forecast growth across key commodities such as wheat, rice and sugar.

Following a March 2010 tender, in April it was announced that the government will introduce 50,000 tones of parboiled rice, as a part of its plans to import 300,000 tones of rice in the current fiscal year in another push to keep down prices. ?? With wheat prices rising rapidly in 2008, local consumption was hit hard as consumers substituted wheat products with cheaper foods, reflecting the elasticity of demand for this staple. Consumption is forecast to increase by 12.2% to 2015.

Key Developments

In 2009/10 we now predict that rice production will fall a little, by 1.96% year-on-year (y-o-y) to 32.39mn tones, though we have revised up this eforecast as the country has had adequate monsoon rainfall over the summer months, which will boost production of the aman variety of rice. The release of flood and drought resistant varieties of rice will also see production maintain growth over the forecast period. Over our forecast period to 2014/15, we expect production to increase by 24.4% from the 2009/10 level to 40.29mn tonnes. This will be slightly over forecast domestic demand for that year.

Wheat production in Bangladesh has fallen quickly in recent years, with output plummeting by 44.0% from 2002/03 to 2007/08 to 844,000 tones, while demand continues to rise. The main factor behind this extreme decline in output has been the trend of farmers switching to other crops, such as corn and potatoes, that offer better returns. In the 2008/09 production year, output is estimated to have bounced back, growing 17.8% y-o-y to 994,000 tonnes, with further growth of 4.2% expected in 2009/10.

Record droughts in Russia have led to export bans causing Bangladesh to scramble for other sources of grain, particularly wheat. It is predictable that the government will be unable to procure enough wheat to satisfy demand, leading to further domestic price increases. Additional strain has been added by the cancellation by India of tenders to export about 200mn tonnes of wheat to Bangladesh due to 'logistical' problems.

With Bangladesh's already high population density of around 1,050 people per square kilometer and annual population growth running at over 2%, agricultural land is going to come under increasing pressure for other uses such as habitation and industry. This could see falls in acreage given to grain cultivation, potentially putting downside risks on our forecasts unless yields can be improved significantly.

On the positive, large-scale investment in the poultry industry by Indian giant Venkateshwara Hatcheries Group looks set to improve production; at the same time a board of government agencies and traders have formed to create a halal certification authority in an effort to tap into growing demand for Bangladeshi halal exports. The only thing preventing an increase in processed poultry production is the lack of an authorized halal certification body in Bangladesh. BMI is closely monitoring development