Overview presentation of Global sheepmeat markets, with implications for Wales

Transcription

1 Overview presentation of Global sheepmeat markets, with implications for Wales for HCC conference November 12 th 2015 Richard Brown sourced from the annual Gira Meat Club

2 Global meat demand overview Global sheepmeat production & trade overview Conclusions for the Welsh sheep sector

3 2015: overall global meat market characteristics 2013: year of production caution: high feed cost (2012 US heatwave) 2014: year of contradiction: disease & political disruptions very profitable for many especially US (and CA) with record prices and falling costs also AU, BR but not for EU, nor CN 2015: year of consolidation: Economic growth should be better: but much more risk than prior years Political instability and weaker commodity markets RU economic crisis: threat to import volumes and origins and global prices. Signals of CN slowdown. Modest 1.3% global meat production & consumption growth Continued tight supply situation of BF and SH: but growing PK and PY supply still at lower rate than historical average Continued low feed costs December 2014 GMC forecast for profit consolidation in a year of low feed costs for most, but not all! 3

4 World meat consumption, f Modest 2014/15 growth: less than expected due to disease and disruptions Chicken continues to grow most followed by pork Gira s mid-year view is that growth may be slightly higher than this Dec14 GMC forecast 4

5 Slightly weaker economic growth than expected 2015 mid-year update on global meat market Low oil prices: negative impact on the oil exporters economy and currency (RU), but more positive for consumer disposable income in many other parts of the world Chinese slowdown Greek financial crisis: risk of banking contagion in other vulnerable EU countries Brazilian economic downturn and currency devaluation: Weaker meat import demand than forecast Slightly higher supply and less positive demand growth are leading to lower prices than forecast but feed cost still low Russian imports below forecast: mainly due to the RUB devaluation Chinese imports tempered by low domestic pork prices: Stronger USD than expected: leading to US import pull, export squeeze Global meat production & consumption growth: slightly higher than +1.3% forecast US Pork and chicken growth: more like +5%, than the +3.3% forecast Lower meat prices than expected: except US cattle and beef, RU prices (in RUB) Continued low feed costs: in spite of lower 2015 Northern Hemisphere harvest outlook Sector profitability lower: but JBS M&A stream continues again Diseases continue to disrupt: ASF spreading further in Europe, HPAI in US, CN, W.Africa etc. but at least PEDv of lower impact than expected 5

6 Currency per USD indexed on Jan 2011 Jan-11 May-11 Sep-11 Jan-12 May-12 Sep-12 Jan-13 May-13 Sep-13 Jan-14 May-14 Sep-14 Jan-15 Currency: indexed on USD Crashing oil prices and politics create an unstable world illustrated by currency Currency per USD, indexed 220% 200% 180% 160% 140% 120% 100% 80% RUB/USD BRL/USD JPY/USD EUR/USD CAD/USD AUD/USD GBP/USD CNY/USD Source: Gira based on Pacific Exchange Immediate impact on the meat sector especially trade competitiveness unhelpful for UK producers & processors, with GBP being relatively strong 6

7 (USD/tonne) 2015/2016 Main Assumptions: Feed costs Feed grain costs continue to be weak in spite of smaller 2015 crop 650 CBOT SPOT PRICES & FUTURES Wheat Maize Soybean Meal Source: GIRA from HGCA 2014 exceptional harvests across the northern hemisphere: significant price fall to 2012 level 2015/16 prices continue low: in spite of lower European harvest prospects. US looks positive Relief for livestock farmers 7

8 Producer/wholesale price indices (excl CN): LC Strong recent producer price rises but falling 2015 PK prices Gira s mid-year view is that prices will be slightly lower than this Dec14 GMC forecast 8

9 US update: after a fantastic 2014 Strong currency and higher production of PK and PY has downward price impact USD stronger than expected Downward pressure on export prices and volumes Attractive USD prices for imports Higher pork and broiler supply than expected PEDv less impact than expected In spite of H5N2 (mainly effecting turkeys & layer production, and export access Producer prices decline more than expected Less profitable for integrators than hoped after 2014 More caution in production planning but still profitable for JBS (and other major integrators), after an exceptional (and well timed 2014 year) Domestic beef supply still tight Motivating USD prices for imports Encouraging herd rebuilding in the US But price limited by higher supply of competing meats so not such a good 2015 for the meat chain but feed costs still relatively low mitivating higher carcass weights 9

10 Russian meat imports Political bans plus the weak currency have cut imports Russia Meat Imports e Revised 2015f import decrease to 1.33 MT which is 40% lower than Gira forecast in December

11 Global meat demand overview Global sheepmeat production & trade overview Conclusions for the Welsh sheep sector

12 ('000 t cwe) Sheepmeat Net Production by Country CN, MENA and IN growing. EU gently falling Oceania impacted by drought Figure SYN-SH 2: Sheepmeat Production, CN ME/NA AU NZ IN RU ZA AR UY EU UA JP 12

13 Lamb Exporters Totally dominated by NZ and AU: both drought impacted Fig SYN-SH 7: Lamb exporters, (excl. live, '000 t cwe) AU 400 NZ Others 350 Others ME/NA 300 O Asia 500 Others NZ AU CN ME/NA O Asia CN IN ME/NA CN E.U E.U. 100 US/CA US/CA

14 Sheep Producer Prices (USD/t cwe), Declining 2015f prices, in USD... not sustaining the 2011 peak Sheep Producer Prices, (current USD/t cwe) 10,000 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 EU (light lamb) EU (heavy lamb) NZ (lamb) UY (lamb) AU (lamb) RU (lamb) Source: Gira compilations 14

15 Retail prices for meat (Jan 2004 June 2015) Prices rose sharply but weaker in 2014/15 Beef and mutton prices decreased slightly since dramatic peak of Feb 2014 due weaker demand Pork price is reaching the bottom of the 3 year cycle, Chicken price has slightly fallen since March 2015 from a record level in spite of HPAI etc 15

16 Chinese demand growth is the key driver Increased disposable incomes and increasing availability Sheepmeat remains a relatively new product to most Chinese consumers Still eaten in small volumes 3.3Kg/hd/yr Sheepmeat consumption increasing: 1) Increased disposable incomes 2) Alternative to pigmeat 3) Spread of Mongolian and Islamic cuisine Key demand centres in major urban centres where consumers have higher disposable incomes Supply is tight and has led to high prices, which: Dampen consumption growth Encourage cheating danger for consumer confidence High prices stimulate supply: Imports: mainly direct (AU and NZ access) Domestic production, both commercial and backyard Lamb Ribs - 21/Kg 16

17 e 2016 f '000 tonnes cwe Chinese SH balance Continued growth driven by strong domestic demand Chinese Sheepmeat balance f (000 t cwe) 5,000 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1, Consumption Production Imports Exports 0 Demand is very strong, but coming from low consumption level: price is becoming a limiting factor Growth in domestic production was limited by poor infrastructure and competition for pasture But recent resurgence driven by high prices + GOC encouragement (incl. feedlots) Level of future import demand is a key global question: Gira still confident Gira compilations, estimates & forecasts GMC15

18 Direct Chinese Sheepmeat Imports: main channel Current suppliers are running out of product limiting imports Direct Chinese Sheepmeat imports, f but 1Q15 import decreased by 21% (NZ -19%, AU -17%, UY -71%) Volumes picked up in March & April 2015 but with a sharp decrease in the import price Chinese import demand reverting back to cheaper cuts (at least in short term) EU countries keen for direct access but need approval: meantime via HK

19 2015 AU drought persists and El Nino threatens: Delaying the desire to re-stock Volume ('000 t cwe) e 2016f Drought persists in Australian cattle country Australian Sheepmeat balance f (000 t cwe) Production Consumption Imports Exports 0 GIRA compilations, estimates and forecasts Drastic historic decline in the AU SH flock due to the demise in wool markets Shift to meat production focus, (away from wool) Desire for flock re-building (encouraged by meat export demand), thwarted by pastoral conditions from , and El Nino threatens again now 2016f Australian sheepmeat production and exports will decline again 19

20 Volume ('000 t cwe) NZ sheepmeat balance Lower production & exports of lamb and mutton in 2015 and e 2016f Production 400 Consumption Imports Exports 0 GIRA compilations, estimates and forecasts Historic trend of land competition forcing decline in sheep flock Dairy competition for the best land: continues (albeit at slower rate) Forestry competition on the marginal land Droughts in eastern NZ forcing production lower Production and exports trend lower again but: Disappointingly, producer prices fell sharply from 2011 peak: rising in NZD but not in USD 20

21 e 2015f '000 t cwe '000 t cwe EU sheep sector is stabilising, after recent fall Helped by recent prices but sill little profitability EU SH Balance f (excl.live trade) EU meat consumption f EU 15 EU 25 EU 27 EU Production Consumption Imports Exports Sheep Poultry Pigmeat Beef & veal GIRA compilations, estimates and forecasts Demand problem for a niche, relatively high priced meat in a troubled EU economy Especially for light lambs in S. EU signs of consumption stability. but with 2015 price decline (GBP) Production stabilising after 5 year recovery in UK producer confidence (with better prices) and good lambing weather. But confidence now shaken by 2015 prices Exports small, but encouraging: of meat, offals (CN, MENA, SSA ) and live lambs (ME) Import competition diluted by alternate markets 21

22 Beneath the mill-pond calm of the macro-demand numbers, the EU retail meat market is changing, sometimes dramatically EU meat consumption has declined slightly since 2008 GFC Slight volume decline and downtrading and so the price pressure continues Consumers are clearly changing priorities Time poor and feeling poor as well Domestic origin preference, plus citizen demands most of which consumers won t pay for Technology, household structure, work patterns changing the way we eat and therefore the way we shop to find solutions for smaller portions, convenience, simplicity, and speed so that there is more time for work, sport and social media Hard discounters are smashing through glass ceilings with major implications Some very high profile retail trend changes Tesco s phenomenal 30year year-on-year growth (in everything) has stalled spectacularly and so has Carrefour s Some hypermarkets (and possibly superstores) are suddenly looking like liabilities and processor casualties Vion once the largest EU meat company, in deep retreat Tesco suppliers not having fun: knock-on effect Tough time for marketing a speciality meat but that is what we need to do! Meat in Retail 2015 Synthesis 22

23 Global meat demand overview Global sheepmeat production & trade overview Conclusions for the Welsh sheep sector

24 Growing global meat demand Global meat market implications for the Welsh sheep sector Most growth in the developing world but current year wobble Chicken and pigmeat growing fastest beef and sheepmeat limited by relative price, and supply but with scope for growth Reasonable red meat demand growth pulling some production growth More through intensification, than through herd/flock growth Export opportunities for AU, NZ. EU (UK): requiring reliable development China: not just for cheap cuts and offals but even these are worthwhile MENA: high local prices create (volatile) scope for meat and live trade Sub-Saharan Africa: cheaper cuts & offals EU: niche markets Local markets needing sustained generic marketing Niche & mainstream EC priority THANK YOU FOR YOUR ATTENTION 24

25 Gira is a specialist food advisor Specialist in food especially in meat, dairy, bakery, fish, etc. full supply-chain analysis covering dynamics and key success factors of each stage in the chain, and their inter-relationships from Inputs to producer to processor and on to retailer and end users Global coverage Global meat market coverage Head office close to Geneva Staff and associates located throughout the world Cost effective Multi-format; detailed, published research reports (cost syndicated) strategic consultancy: markets, customers, competitors, etc. Strong record with most blue chip food companies >40 years of quality research, neutrality & client-service 25

26 GMC 2015: Comprehensive Global Coverage (for , 2015e, 2016f) REGIONAL MARKET INSIGHTS, DATA & FORECASTS BY SPECIES Socio-economic assumptions Pig Poultry Beef Sheepmeat NAFTA South America EU Middle East / North Africa Sub-Saharan Africa Asia Oceania USA Canada Brazil Argentina All 28 Members Saudi Arabia Turkey South Africa Nigeria China Japan Australia NZ Mexico Uruguay Chile Columbia CIS Russia Egypt UAE +16 others Angola Kenya +42 others India South Korea Philippines Paraguay Ukraine Vietnam Venezuela Belarus Thailand Peru + other CIS Malaysia Indonesia GLOBAL SYNTHESIS Socio-economics Production Consumption Trade Prices Industrial developments Total Meat Global Pigmeat Global Poultry Global Beef Global Sheepmeat 26