ANZ INFOCUS REPORT CATTLE CALL

Transcription

1 ANZ INFOCUS REPORT CATTLE CALL

2

3 FOREWORD The Australian beef industry has undergone a tumultuous time in recent years. From the surging new market demand of China to the long-lasting drought that has impacted many parts of Queensland and northern Australia. The industry is now faced with the dilemma of rebuilding the core herd to a point that sustains volumes into long-term markets. How can this be done while at the same time taking advantage of a high-price cycle that had outlasted expectations? While America is also rebuilding its herd from historic lows, global demand for high value Australian grinding beef continues to increase. While global competition for the China market has increased, Chinese consumers are also increasing their purchase of higher value cuts from Australia which provides producers with value, not just volume, as a boost to our supply chain. While producers agonise over buying or selling, and others still look for drought breaking rains, our global competitors are starting to find their feet post BSE and are gradually re-entering the markets which Australian producers have increased sales to in recent years. 12 months ago China signalled its intent to import significant numbers of live slaughter cattle from Australia - up to one million head per annum. Investments have been made in China and Australia to facilitate this trade, however live animal trade remains subject to many external pressures, very strict conditions of operation and regulatory uncertainty. The industry has also seen the recent announcement that Elders will exit its live cattle haulage business. The industry also has to ask where will the cattle come from to supply our export markets? Our modelling suggests it will take more than 1 years to rebuild a herd in order to sustainably satisfy the market at peak volumes achieved three years ago. ANZ modelling also shows that rebuilding the herd will pay off in both the medium and long-term. A high herd growth, low slaughter scenario could support A$16.4 billion of output by 225, compared to A$9 billion in the low herd growth, high slaughter scenario and A$11.8 billion in an average growth scenario. This compares to an output value of A$1.46 billion in 215. The low slaughter scenario in the short-term will also start to produce more output than the high slaughter scenario by as early as 219. Managing the need to satisfy key markets in terms of reliability of supply and value with the need to rebuild is challenging. Food safety remains the number one selling attribute of Australian beef and protecting this competitive advantage is the industry s number one objective. However, given the majority of our total beef production is destined for export and this is where our growth opportunity remains, we cannot avoid the need for productivity gains through the supply-chain in order to remain globally competitive. It would be fair to think that historically high commodity prices would make for plain sailing for our industry however a question remains as to whether it's delivering to everybody's best interest. Is it representative of a period in time where supply can't meet demand? Are we about to see a global resurgence in production that would impact prices? Is today's price environment reflecting a permanent step change driven by scarcity of land and water to produce the animal protein of new generational choice? Time will tell. But it would be optimal to focus on these issues in the short to medium-term without adverse seasonal conditions being a feature consideration. Mark Bennett Head of Agribusiness, Australia, PAGE 1

4 BEEF AND LIVE EXPORT CATTLE DEMAND The Australian beef industry has been experiencing challenging conditions in recent years. The drought in northern Australia combined with high export demand from the United States and China has pushed beef prices to record highs. However, not all producers have benefited as they were forced to destock before the high prices materialised and are now limiting sales in order to rebuild numbers. The question now turns to where domestic and export supply and demand is likely to move over the next few years and its impact on beef prices. In , Australia exported 84% of its total beef and veal production. Exports of beef and veal meat were valued at A$9.3 billion in 215. Additionally, Australian live cattle exports for slaughter were valued at A$1.5 billion with 1.3 million head exported. While live exports are not as significant for the Australian economy as packaged beef, it is a vitally important source of income for northern Australian cattle producers and creates competition for cattle. Live cattle exports for slaughter accounted for 14% of revenue for the beef industry in 215, however it also accounted for around 12.5% of cattle-turn offs. While Indonesia is Australia s largest live export market, it does present some challenges given its unpredictable nature. Demand from Indonesia will continue in the medium-term as the country seeks to build its herd towards its aim of self-sufficiency. Investment in feedlot facilities can also allow producers to finish cattle onshore and capture a greater portion of the supply-chain. The recent requirement from Indonesia that one in five live cattle exports must be breeder cattle may make exporting to Indonesia less attractive, particularly given the need to rebuild Australia s herd size. Since 211, Australian exports to the United States have increased significantly, and the US is now Australia s largest and most valuable export market worth over A$3 billion per annum in 215. While exports to China have increased rapidly since 211, exports are currently worth around A$1 billion per annum. However, volumes to China have recently fallen 33% from Jan-Sept 215 to Jan-Sept 216 period according to MLA data. Shipments to the US, Japan and the Middle East have also declined, and year-on-year to September 216, shipments have declined 21%, although chilled and higher value beef exports have declined less than frozen exports. Japan s share of Australian beef exports has declined from 39% to 22% since 211, but it remains Australia s second most valuable market. While a reduction in Japan s domestic beef production will continue to support Australian exports, increased competition from the United States is likely to temper any export growth. BEEF AND CATTLE EXPORTS BY VALUE AND VOLUME Tonnes/' head 1, 9, 8, 7, 6, 5, 4, 3, 2, 1, A$ million 1,6 1,4 1,2 1, Beef (tonnes) Beef and veal ($m) Slaughter cattle Slaughter and feeder cattle Source: ABARES, MLA PAGE 2

5 BEEF EXPORTS BY VOLUME (SWT) Japan US Korea China Canada Taiwan Indonesia Philippines Singapore 211 Malaysia Thailand Hong Kong 215 EU Middle East BEEF AND LIVE CATTLE EXPORTS BY VALUE (AUD MILLION) United States Japan Korea, Rep. of China Indonesia European Union Taiwan Vietnam Others Source: ABARES PAGE 3

6 LIVE SLAUGHTER AND FEEDER CATTLE EXPORTS BY STATE (NUMBER OF HEAD) Number of head 1,4, 1,2, 1,, 8, 6, 4, 2, WA Victoria SA Queensland NT NSW Source: MLA Live export cattle are sourced almost solely from Queensland, Northern Territory and Western Australia. However South Australia, New South Wales and Victoria have supplied some cattle into the market, particularly as prices have increased in recent years. The value of slaughter cattle exported has increased by 133% since 21-11, compared to an increase in beef exports of 14%. The total value of the increase in that time has been A$4.4 billion for beef exports compared with A$4 million for slaughter cattle exports. In that same time the volume of beef exports has only increased 44% compared to a 78% increase for slaughter cattle. Given global population growth and rising incomes across the Asian region, it is difficult to see how demand for beef would significantly reduce, however this does not rule out the possibility of shocks and volatility in prices in the shortterm. There are numerous factors which could impact supply and demand including increased production in Uruguay and Argentina, BSE and other diseases, as well as the return of Russia to the global market. Recent experiences with the global dairy market have shown that high performing commodities are often vulnerable to political and regulatory uncertainty, including subsidy regimes or quotas. The beef industry is no different. As a result, Australian producers face a balancing act between restocking at high prices to ensure ongoing production and short-term uncertainty on the price cycle and whether global prices will remain elevated. Producers now have the challenge of buying into the most expensive market in history with the uncertainty of whether prices will hold relatively true through the period of animal weight gain or reproduction. This coupled with a significant investment in land, pasture, water and stock which must be utilised, however making a profit through the next two years is not assured. This presents a dilemma for both producers and financiers. Producers decision-making on stocking levels, sales and finance must all be considered in the context of an environment of heightened risk. This includes a historic view from some quarters that both producers and banks should not accept increased land prices as the key basis to determine debt capacity. Clearly, there are many variables involved, however there should not be an automatic expectation that land values driven by high stock prices, will necessarily equate to an increased capacity to borrow. DOMESTIC DEMAND Domestically, Australian beef consumption will continue to come under increased pressure from both chicken and pork meat which have maintained relatively low prices over recent decades. Beef meat is 26% more expensive per kilogram than chicken meat. The gap in retail prices between beef and lamb on the Australian market is also increasing with beef going from being just 58c/kg more expensive in 211, to currently sitting at 475c/kg more expensive in the second quarter of 216. However, according to the United Nations Food and Agriculture Organisation, Australians remain the world s sixth highest consumer of beef meat per capita and it remains the second most popular meat for Australian consumers behind chicken. All this suggests that while increasing prices will lead to lower domestic demand, consumption levels will be supported by a certain level of stable demand. PAGE 4

7 THE CHALLENGES - THE AUSTRALIAN HERD The Australian beef cattle herd has suffered from a significant decline from 26.5 million head in 213 to an estimated 23.3 million head at the end of June 216. This is the lowest level since 1995 and has been caused by a combination of drought conditions and high prices leading to high cattle turn-off rates. These factors have led to an increase in the adult cattle slaughter rate from a 1 year average of 38% of the herd to a peak of 45% in 214. The most significant decline in herd numbers has been felt in western New South Wales, Queensland and the Northern Territory, while herd numbers have actually increased in Western Australia since 213. It is notable the herd numbers also dropped in the states unaffected by drought as producers took advantage of historically high export prices due to the record low United States beef herd and declining Australian dollar in 214. The number of cows and heifers in the national herd has fallen from 13.7 million head in 212 to an estimated 11.7 million head at the end of 216, which is the lowest level since This appears to have been driven in the main by northern drought-impacted producers who, without grass and water, could not maintain numbers. The low level of females is likely to restrict restocking and growth in natural additions in the short-term, however reductions in the turn-off of females is likely to mitigate that impact. The largest herd build in a single year since 199 was the addition of 1.9 million to the herd in 211, however this was based on a population of almost 13 million females. NATIONAL BEEF HERD In 214, slaughter rates increased by 18% on the prior year in Victoria, by 11.6% in New South Wales, by 8.3% in Queensland and by 7.7% in South Australia. In addition, the northern Australian herd was further reduced by a large increase in live exports of almost 2, out of both Queensland and the Northern Territory. Live exports also increased by almost 18, and 9, head out of South Australia and Victoria respectively. ANNUAL NATIONAL SLAUGHTER Million head Percentage of National Herd % 45% 4% 35% 3% 25% 2% 15% 1% 5% % Million head 3 Percentage of National Herd 6% Calves Cows & Heifers Bulls Bullock & Steer Slaughter a % National Herd 1 year average 25 55% Source: MLA % 1 45% (f) 4% National Beef Herd Cows and Heifers Cows as a % of herd Source: MLA PAGE 5

8 Since the spike in production of beef in 214 and 215, large reductions in slaughter numbers have been felt across the nation between 215 and 216. While reductions of 35% in Queensland/Northern Territory and 36% in New South Wales are to be expected as attention turns to restocking after the drought, there have also been reductions in South Australia of 4.5%, Victoria of 34% and Western Australia of 2%. New South Wales and Queensland cow and heifer slaughter rates fell by the largest amount due to producers shift to rebuilding the herd. MONTHLY NATIONAL SALEYARD CATTLE PRICES c/kg cwt Heavy Steer Medium Steer Medium Cow Trade Steer Source: MLA Prices for Australian steers have increased by more than cows since June 216, suggesting that demand for Australian beef is still being driven by an underlying market demand and limited supply rather than a demand for breeding stock from re-stockers. FEEDLOT CAPACITY ' head kg 1,4 1,2 1, WA SA VIC NSW QLD Average adult carcase weight Source: MLA PAGE 6

9 Due to drought and the gap between store and finished cattle prices, the number of cattle on feed recovered strongly from the lows of 213/214 through to early 216. Queensland and New South Wales are the key States for feedlot activity, making up 83% of Australia s feedlot capacity. Feedlots are also supporting increases in carcase weights, particularly in the Northern Region. Average carcase weights show a correlation with feedlot capacity, meaning that investment in feedlots are likely to play significant role in maintaining production in periods of drought or pasture shortage, as well as increasing production through quicker weight gain. With good winter rains across much of Queensland and New South Wales, and with the expectation of above average summer rainfall, pasture reserves should improve which may impact feedlot utilisation in 217. FORECAST HERD SIZE HIGH, AVERAGE AND LOW SCENARIO Millions head (f) 217(f) 218(f) 219(f) 22(f) 221(f) 222(f) 223(f) 224(f) 225(f) Source: ANZ Low Growth Average Growth High Growth ANZ has undertaken analysis on the potential growth scenarios for the Australian beef herd. Under a best case scenario, the Australian herd would increase to 33.6 million by 225. Analysis of the average, high and low outliers for branding rates, slaughter rates shows that, on the worst case scenario, the herd will decline to 15.2 million. If the current trend of characteristics continues, the herd will drop to 21.6 million. What is uncertain, is what scenario will occur given the variability of climatic conditions, global beef prices and political environments? The short-term reduction in slaughter rates and increase in female population required to rebuild the herd will pay off quickly as well as into the future. Analysis shows when compared to cattle industry production of A$1.46 billion in , under the high growth scenario the Australian industry output could be A$16.4 billion (at current prices) by 225. Under the average growth case output would be A$11.8 billion by 225 and A$9 billion under the low growth scenario. The high growth scenario will also see industry production overtake production in the low-growth, high slaughter scenario by 219, showing the importance of rebuilding the herd in the short-term. The rebuilding of the Australian herd will be a slow process and will necessitate producers taking a long-term approach to building sustainability of production and herd numbers. The analysis also highlights the path to rebuilding the national herd and maintaining profits will be increasingly difficult if prices remain at current high levels and slaughter rates remain high without a focus on improving factors such as branding rates. Australia s historic herd suggests that the nation can sustainably manage a herd of around 3 million. Attempts to therefore increase the herd above that point to maintain export share is likely to be reliant on improving genetics, investing in feedlot facilities and improvements in pastoral intensification through developments in water usage and grazing methods. One of the potential benefits of the drought across northern Australia in recent years has been the investment in improving water infrastructure to utilise previously untapped pasture, which will have a longer term benefit in terms of increased carrying capacity. The willingness of feedlot operators to invest in additional capacity may be restricted due to the current operating environment where high feeder cattle prices due to competition from re-stockers cannot be fully transmitted along the supply chain due to consumers price resistance at a retail level. This plays out in both domestic and export markets. Lower grain prices have mitigated this slightly and, as always, profitability will depend on the efficiency of an operation from feed to protein conversion and the ability to manage inputs against offtake arrangements. Producers in different States also face different challenges. The northern Australian market faces difficulties in purchasing stock to help rebuild the herd in the face of demand for both slaughter and breeder cattle in Indonesia, as well as competition from other re-stockers inflating cattle prices. Producers in the south have been taking advantage of high beef prices in recent years, selling stock as prices have increased. Rebuilding the herd will therefore require producers to forego revenue. Southern producers also face trade offs between pasture and grain finished beef, alternative uses for land used for pasture finishing and consumer demand for grain versus pasture fed beef. Productivity growth at a farm level is critical for a profitable pathway whether beef prices are high or low. It could be argued that prices actually need to decline to make restocking more palatable and to allow feedlotters and processors to maintain and grow investment to support output and productivity growth. PAGE 7

10 GLOBAL COMPETITION Global production of beef has increased significantly since the early 199s, particularly in emerging economies such as China, India and Brazil. Currently, China has the largest annual slaughter of cattle with the world s third largest herd and it is also the world s second largest importer of beef after the United States. While China s domestic production has increased markedly since the mid-199s, an increase in slaughter rates has also impacted the size of the local herd which has declined from a peak of 127 million in 1999 to 1 million in 216. This serves to highlight China s growing reliance on both imported frozen and chilled beef, but also the need to rebuild their domestic herd with live breeder, feeder and slaughter cattle imports. GLOBAL CATTLE HERD (AS AT JUNE) (MILLIONS HEAD) Millions head TOTAL SLAUGHTER (MILLIONS HEAD) Millions head Australia Brazil China India United States Uruguay 4 Source: USDA 3 Share of global exports % 3% 25% Australia Brazil China India United States Uruguay 2% 15% 1% Source: USDA 5% Brazil has increased its herd markedly as a result of land clearing for new pasture, with some environmental groups estimating that cattle ranches now occupy 8% of deforested land. India maintains the world s largest herd which is primarily made up of water-buffalos, which have a very low cost of production. However, Indian water-buffalo is sourced from milk-producing animals and is also low-quality meat. % Australia Brazil Source: USDA India United States While India is now the world s largest exporter of beef, the increase in both India s and Brazil s share has come about primarily as a result of the United States reduction in exports following the discovery of BSE in 23. PAGE 8

11 As the United States has re-established a number of markets, including resuming exports to China earlier this year, Australia s share of global exports is likely to be impacted. This is, in large part, due to the relative price advantage of Australian beef which has traditionally been cheaper than both the United States and Brazil. Australian beef prices overtook Brazilian beef in 215 and there appears to be a significant convergence between the cost of United States and Australia s production which is being driven by a number of factors including Australia s low herd, depreciating Australian dollar, high demand for both beef and stock, and the low cost of feed grain in the United States. GLOBAL PRICES OF BEEF (USC/KG) October October October October October October October October Source: MLA Australia Brazil US Concerns have also been raised that the decision by the United States to allow Brazilian imports into the country will erode Australia s share in our most important export market. However, under the United States-Australia Free Trade Agreement, Australia will maintain a quota of 418,214 tonnes in 216 of beef. Brazilian beef will compete with exporters designated as other countries, such as Nicaragua and Ireland, with access to a far smaller quota. As a result, it s unlikely that Australian and Brazilian beef producers in the medium term will be directly competing for market share in the United States. COMPETITION FOR THE CHINA MARKET The Chinese market makes up a key part of global consumer demand. ANZ s 214 report, The Bull Rush, estimated that China s beef consumption could rise more than 7 per cent by 23 from 5.9 to 1.1 million tonnes per annum. While Australia s market share in China has reduced since 214, the report found that if Australia s market share remained at the previous levels of 57%, which would require significant productivity increases the China market could be worth A$1 billion annually to Australia. While opportunity has yet to be realised, the Chinese consumer market remains critically important to Australian exporters. CHINA DOMESTIC BEEF PRODUCTION AND IMPORT PROJECTIONS tonnes cwt 12, 4 9, 3 6, 2 3, Official beef Imported live cattle beef Estimated Grey Beef from Chinese Imports as % of consumption Source: ANZ PAGE 9

12 While Brazil is unlikely to challenge Australia for the United States market in the medium-term, it is likely to become a competitor in the China market. The re-emergence of the United States as an exporter to China may also result in a reduction in Australian exports to China. Recent figures for the first half of 216 show that while the total weight of Australian exports to China have reduced, it has been offset slightly by an increase in export of manufacturing beef, or higher quality beef, and a reduction in exports of secondary cuts. Concern over the re-admission of exports from Brazil and the United States are tempered by the Chinese Government s recent restriction on beef coming through grey channels from Vietnam and Cambodia which are often originally sourced from Brazil and the United States. While official statistics may show some reductions in market share, the overall impact on Australian producers is likely to be less marked. MONTHLY BEEF EXPORTS (NETWEIGHT TONNES) Tonnes 25, 2, 15, 1, 5, Jan-14 Mar-14 May-14 Jul-14 Sep-14 Nov-14 Jan-15 Mar-15 May-15 Jul-15 Sep-15 Nov-15 Jan-16 Mar-16 May-16 The increase in chilled beef exports through online sales channels, whilst currently very small, is also likely to support Australia as a nearby, high-quality exporter. Argentina Australia Source: Comtrade Brazil New Zealand Uruguay SIX MONTHLY BEEF EXPORTS TO CHINA (NETWEIGHT TONNES) Tonnes 1, 9, 8, 7, 6, 5, 4, 3, 2, 1, Argentina Australia Brazil New Zealand Uruguay The rise of imports into China from the United States and increased competition from Brazil for Australia s major export markets may at first appear to be a threat to local cattle producers, there are significant differences in quality and production systems between these countries. Australian producers are at a distinct advantage and should consider opportunities to differentiate their produce and seek greater value. Australian beef can be finished on either pasture or grain, however the time spent on grain averages only 95 days compared to US cattle which spend an average of 15 days on grain, which means that US beef has higher marbling, but greater fat content than Australian beef. Brazilian beef is pasture fed, but is generally considered lower quality given the limited advances in genetics, but this is changing. Australian beef also provides greater traceability than Brazilian beef, and is produced in more conducive environments which means it clean, green and safe image is likely to be a key differentiator for the industry going forward. Jan - Jun 214 Jan - Jun 215 Jan - Jun 216 Source: Comtrade PAGE 1

13 LIVE CATTLE EXPORT INTO CHINA Under a new Live Cattle Import Protocol, China has opened up the market for live imports of Australian feeder and slaughter cattle. Australia has been the only country given such access and coupled with the China-Australia Free Trade Agreement (which will eliminate the current 1% tariff on live exports over the next four years), Australian live cattle exports will be given unmatched access to the China market. Food safety remains the primary consideration for the Chinese government and consumers. The Protocol includes a number of requirements which limit where Australian cattle may be sourced from before export, including: cattle must have been born and reared on a farm of origin (which must meet certain requirements), or have been resident on a farm of origin, for at least 3 months prior to export; slaughter cattle being exported from the Bluetongue virus ( BTV ) affected zone in Australia (located in northeastern Australia) to the Culicoides seasonal active zone in China (located in southern China) must have been quarantined for at least 6 days in an approved quarantine facility located in the BTV free zone in Australia. While in quarantine the cattle must pass certain health tests; feeder cattle exported from the BTV free zone in Australia to the Culicoides seasonal active zone in China must be quarantined for at least 3 days in an approved quarantine facility located in the BTV free zone. While in quarantine the cattle must pass certain health tests. As a result, the supply of live cattle exports is limited to southern Australia (Victoria, South Australia, Tasmania and southern Western Australia), or at least have been in 3 day s of quarantine in southern Australia prior to export. In 215, BTV-free areas exported approximately 326, head of live cattle (however this includes all exports from Western Australia, including the small northern area designated as a BTV zone). China has indicated that it will require between 5, and 1 million live slaughter and feeder cattle each year from the Australian market, indicating Chinese demand could be met from the Australian market by existing southern Australian exports and diversion of some northern production through a southern quarantine system. China has been making significant domestic investments over the last 12 months to facilitate this trade. The Australian export market remains subject to the overriding requirement to rebuild the national herd, and live exports would need to be seen as an alternative to slaughter for export, rather than an addition to. Given the expected increase in competition for the China frozen beef market from the United States and Brazil, it is possible that live exports may fill the gap left by a reduction in beef exports. However, it is unclear at this stage how viable the Chinese live export market is in the longer-term, particularly given the recent withdrawal of Elders from the live export haulage business. It should also be noted that live animal trade comes with its own unique challenges and therefore instability and unpredictability. Gains in value from the live export industry must be balanced with the associated risks from regulatory change and public sentiment. Live exports are one component of the Australian cattle market the long-term value in the Chinese slaughter and feeder cattle market must be considered in context of how our annual output should be balanced across multiple domestic and export channels for the greatest profitability and sustainability of the Australian beef industry. PAGE 11

14 REGIONAL BUSINESS BANKING CONTACTS INSTITUTIONAL CONTACTS MARK BENNETT Head of Agribusiness, Australia T: E: mark.bennett2@anz.com JAMES MCKEEFRY State Agribusiness Manager Victoria and Tasmania T: E: james.mckeefry@anz.com STEPHEN RADESKI State Agribusiness Manager South Australia and Northern Territory T: E: stephen.radeski@anz.com JAMES MACPHERSON State Head, Regional Business Banking Queensland and Northern Territory T: E: james.macpherson@anz.com LUCINDA HAWKINS State Agribusiness Manager New South Wales T: E: lucinda.hawkins@anz.com ANDREW ROSEBY Regional Executive Western Australia T: E: andrew.roseby@anz.com ANDREW HECTOR Head of Consumer and Agribusiness, Australia, Institutional Banking T: E: andrew.hector@anz.com IAN HANRAHAN Executive Director, Consumer and Agribusiness New South Wales T: E: ian.hanrahan@anz.com CASEY MORECROFT Director, Consumer and Agribusiness Victoria T: E: casey.morecroft@anz.com MARK HAMPSON Director, Consumer and Agribusiness Queensland T: E: mark.hampson@anz.com CONTRIBUTORS MICHAEL WHITEHEAD Head of Agribusiness Insights, Institutional T: E: michael.whitehead@anz.com MADELEINE SWAN Associate Director Agribusiness Research, Regional Business Banking T: E: madeleine.swan@anz.com PAGE 12

15 PAGE 13

16 Australia and New Zealand Banking Group Limited (ANZ) ABN Item No W IMPORTANT NOTICE: The document may be restricted by law in certain jurisdictions. Persons who receive this document must inform themselves about and observe all relevant restrictions. 1. Disclaimer for all jurisdictions Except if otherwise specified in section 2 below, this document is issued and distributed in your country/region by Australia and New Zealand Banking Group Limited (ABN ) ( ANZ ), on the basis that it is only for the information of the specified recipient or permitted user of the relevant website (collectively, recipient ). This document is confidential and may not be reproduced, distributed or published by any recipient for any purpose. It is general information and has been prepared without taking into account the objectives, financial situation or needs of any person. Nothing in this document is intended to be an offer to sell, or a solicitation of an offer to buy, any product, security, instrument or investment, to effect any transaction or to conclude any legal act of any kind. If, despite the foregoing, any services or products referred to in this document are deemed to be offered in the jurisdiction in which this document is received or accessed, no such service or product is intended for nor available to persons resident in that jurisdiction if it would be contradictory to local law or regulation. Such local laws, regulations and other limitations always apply with non-exclusive jurisdiction of local courts. Certain financial products may be subject to mandatory clearing, regulatory reporting and/or other related obligations. These obligations may vary by jurisdiction and be subject to frequent amendment. Before making an investment decision, recipients should seek independent financial, legal, tax and other relevant advice having regard to their particular circumstances. The views and recommendations expressed in this document are the author s. They are based on information known by the author and on sources which the author believes to be reliable, but may involve material elements of subjective judgement and analysis. Unless specifically stated otherwise: they are current on the date of this document and are subject to change without notice; and, all price information is indicative only. Any of the views and recommendations which comprise estimates, forecasts or other projections, are subject to significant uncertainties and contingencies that cannot reasonably be anticipated. On this basis, such views and recommendations may not always be achieved or prove to be correct. Indications of past performance in this document will not necessarily be repeated in the future. No representation is being made that any investment will or is likely to achieve profits or losses similar to those achieved in the past, or that significant losses will be avoided. Additionally, this document may contain forward looking statements. Actual events or results or actual performance may differ materially from those reflected or contemplated in such forward looking statements. All investments entail a risk and may result in both profits and losses. Foreign currency rates of exchange may adversely affect the value, price or income of any products or services described in this document. The products and services described in this document are not suitable for all investors, and transacting in these products or services may be considered risky. ANZ and its related bodies corporate and affiliates, and the officers, employees, contractors and agents of each of them (including the author) ( Affiliates ), do not make any representation as to the accuracy, completeness or currency of the views or recommendations expressed in this document. Neither ANZ nor its Affiliates accept any responsibility to inform you of any matter that subsequently comes to their notice, which may affect the accuracy, completeness or currency of the information in this document. Except as required by law, and only to the extent so required: neither ANZ nor its Affiliates warrant or guarantee the performance of any of the products or services described in this document or any return on any associated investment; and, ANZ and its Affiliates expressly disclaim any responsibility and shall not be liable for any loss, damage, claim, liability, proceedings, cost or expense ( Liability ) arising directly or indirectly and whether in tort (including negligence), contract, equity or otherwise out of or in connection with this document. If this document has been distributed by electronic transmission, such as , then such transmission cannot be guaranteed to be secure or error-free as information could be intercepted, corrupted, lost, destroyed, arrive late or incomplete, or contain viruses. ANZ and its Affiliates do not accept any Liability as a result of electronic transmission of this document. ANZ and its Affiliates may have an interest in the subject matter of this document as follows: They may receive fees from customers for dealing in the products or services described in this document, and their staff and introducers of business may share in such fees or receive a bonus that may be influenced by total sales. They or their customers may have or have had interests or long or short positions in the products or services described in this document, and may at any time make purchases and/or sales in them as principal or agent. They may act or have acted as market-maker in products described in this document. ANZ and its Affiliates may rely on information barriers and other arrangements to control the flow of information contained in one or more business areas within ANZ or within its Affiliates into other business areas of ANZ or of its Affiliates. This document is published in accordance with ANZ s policies on Conflicts of Interest and Information Barriers. Please contact your ANZ point of contact with any questions about this document including for further information on these disclosures of interest. 2. Country/region specific information: Australia. This document is distributed in Australia by ANZ.. ANZ holds an Australian Financial Services licence no A copy of ANZ's Financial Services Guide is available at and is available upon request from your ANZ point of contact. If trading strategies or recommendations are included in this document, they are solely for the information of wholesale clients (as defined in section 761G of the Corporations Act 21 Cth). Persons who receive this document must inform themselves about and observe all relevant restrictions. anz.com