Sceptre Group – Growth Foreseen in Mozambique’s Biofuel Sector

The Sceptre Group blog reports on the latest industry news.  For more information, visit Sceptre Group’s website at www.sceptreinternational.com.

MOZAMBIQUE – The government has approved a National Biofuel Policy and Strategy aimed at reducing the country’s dependence on imported fossil fuels, according to a new market report.

In the five years to 2014, strong production growth for sugar, poultry, maize and sorghum is forecast in Mozambique Agribusiness Report Q4 2010 from Business Monitor International. The growth of production in these key sectors will partly be due to the increased investment they are receiving from both public and private-sector agents.

Meanwhile, over the five-year forecast period, the report says that consumption growth will remain positive across all agricultural sectors; growth will be supported by rising incomes and by Mozambique’s expanding population. A growing commitment to the development of biofuels is expected to be a major growth driver for the production of both sugar and maize. Conversely, one of the biggest down-side risks to our grain production forecasts is the sector’s continued vulnerability to variable rainfall and associated problems such as drought and flooding. Disease and rising feed costs remain major downside risks for the poultry sector.

Key forecasts

The production of maize is expected to pick up, after falling only slightly in 2009/10. Maize will remain Mozambique’s most widely produced and consumed grain. Our newly adjusted forecast envisages production expanding by just over 24 per cent in the five years to 2013/14.

In contrast to maize production, the consumption of the grain is expected to grow at a faster rate of 28 per cent in the five years to 2013/14; 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.

Although it hampered maize production, the relatively dry weather in the first half of 2010 did not seriously affect sorghum. Sorghum production is estimated to to have grown by 2.7 per cent in the 2010/11 agricultural year to reach 388,000 tonnes; growth of 18.5 per cent is predicted for the five years to 2013/14.

Sugar will remain one of Mozambique’s key cash crops. It is expected that production of sugar will rise by 43 per cent to 2013/14, with growth largely reflecting an increase in export-driven demand along with the recent opening-up of EU markets; sugar production also has potential to benefit from investment in biofuels.

Domestic sugar consumption will rise by a more modest 12 per cent in the five years to 2014. Although sugar consumption growth will be driven by rising incomes and by an expanding population, sugar will nevertheless remain a luxury food for many people of Mozambique.

Poultry production will increase by 15 per cent to 2013/14, fuelled by rising domestic demand and ongoing investments in improved production techniques. However, consumption will increase by 29 per cent over the same period, reflecting improved living standards and an expanding population.

Consumer price inflation: 5.5 per cent year-on-year in June 2010 (up from 2.0 per cent in December 2009); on a cumulative basis, prices have risen by 10.2 per cent since the beginning of the year, eroding the real value of wages and thus squeezing consumer spending power.

2010 real GDP growth: 6.7 per cent (up from 6.3 per cent in 2009; predicted to average 6.5 per cent from now until 2014). The report’s authors expect growth in consumer spending to lag growth in real GDP in 2010; they have pencilled in a real growth rate for the former of 3.6 per cent.

Key views

According to the report, in September 2010, following the outbreak of riots which left 14 people dead and more than 400 injured, the Mozambique government announced that it would reverse the 30 per cent price increase in the price of bread which allegedly contributed to the unrest. Due to the depreciation of its currency, the metical, Mozambique has faced rapidly rising prices for several imported foods, including wheat and barley. Going forward, the continued weakness of the metical has implications for many of Mozambique’s food production industries. For example, CDM, the local subsidiary of South African Breweries, is reported to be considering the use of locally grown cassava in beer production, in order to reduce the financial burden arising from the import of raw materials. The production of beer not only uses barley and hops, but also starch powder that can be extracted from cassava.

Mozambique agribusiness has potential to benefit in the longer term from major public-private initiatives. Among them are the Beira Agricultural Growth Corridor (BAGC) initiative, launched in 2009 and which 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 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.

Business Monitor International reports that the government has approved a National Biofuel Policy and Strategy aimed at reducing 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.

Source: thebioenergysite.com

Sceptre Group Limited is a specialist investment firm focused in low carbon financial investments such as sustainable biofuel plantations, agricultural farmland and green technologies.  For more information on Biofuel Investments, please Sceptre Group’s website at www.sceptreinternational.com.

Advertisements
This entry was posted in Sceptre International Group Limited, Sceptre International Group News and tagged , , , , , , , , , , , . Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s