Mozambique Agribusiness Report Q3 2010

We predict that consumption growth will remain positive across all agricultural sectors over our five-year forecast period; growth will be supported by rising incomes and by an expanding population. Strong production growth is also anticipated for sugar, poultry, maize and sorghum; this is partly a reflection of the increased investment the industry is receiving from both public and privatesector agents. One of the biggest downside risks to our grain forecasts is the sector's continued vulnerability to variable rainfall and associated problems such as drought and flooding. Disease and a potential rise in feed costs are the main downside risks for the poultry sector. Meanwhile, a commitment to the development of biofuels is expected to be a major growth driver for the production of both sugar and maize.

Key Forecasts ; Maize is Mozambique's most widely produced and consumed grain. Production will expand by almost 24% in the five years to 2013/14; however, consumption will grow at a faster rate of 28%, reflecting a rapidly expanding population and the use of maize as a feed for livestock and poultry.

Sugar is a major cash crop in Mozambique. Production will increase by 43% to 2013/14, largely in response to export-driven demand and the recent opening-up of EU markets; domestic consumption will grow by a more modest 12% to 2014. Although rising incomes and population growth will underpin consumption growth, sugar will remain a luxury food for many.

Poultry production will increase by 15% to 2013/14, fuelled by rising domestic demand and ongoing investments in improved production techniques. However, consumption will increase by 29% over the same period, reflecting improved living standards and an expanding population. 2010 Real GDP Growth: 6.2% (down only slightly from 6.3% in 2009; predicted to average 6.6% from now until 2014).

Consumer Price Inflation: 7.7% year-on-year in March 2010 (up from 2.0% in December 2009). Key Views
The launch of the Beira Agricultural Growth Corridor (BAGC) initiative in 2009 has potential to boost agricultural productivity in Mozambique and the wider region. BAGC aims to bring governments, private investors, donor agencies and regional organisations together with a view to increasing the amount of land devoted to irrigated commercial agriculture in central Mozambique from 20,000 hectares in 2010 to 210,000 hectares by 2030.

Mozambique has potential to become a major sugar exporter. In October 2009, Mozambique was one of several countries which were granted duty free access to the EU market for a range of agricultural exports, including sugar. The introduction of new terms of access to the EU market provided Mozambique's sugar producers with an important incentive to expand their productive capacity. The sector currently plays host to international sugar producers such as Tongaat- Hulett and Illovo Sugar; these companies have recently announced significant expansion plans.

The government has approved a National Biofuel Policy and Strategy, which aims to reduce Mozambique's dependence on imported fossil fuels. A number of biofuel development projects have already been approved and these have opened the door to new foreign investment in the agricultural sector. Although sugarcane looks set to be one of the main crops used to produce biofuels in Mozambique, other key crops are likely to include jatropha, coconut, sorghum, maize and sunflowers.