Brazilian Perspective on Global Agricultural/Trade Issues

Transcription

1 Brazilian Perspective on Global Agricultural/Trade Issues Milton Suzuki Business Development Latin America Bayer CropScience - Brazil

2 Our Regional Structure Bayer CropScience worldwide Headquarter: Monheim, Germany North America Headquarter: RTP, USA Latin America Headquarter: Sao Paulo, Brazil Europe / TAMECIS* Headquarter: Lyon, France Asia Pacific Headquarter: Singapore * TAMECIS: Turkey, Africa, Middle East, Commonwealth of Independent States

3 Agenda Challenges of the New Ag Economy and Consequences for the Crop Science Industry Brazilian agriculture Logistical issues Agricultural Facts and Figures: Soybean Corn Sugar cane (sugar and ethanol) Cotton Coffee

4 Challenges in the New Ag Economy Growing world population increasing food & energy demand decreasing farmland per capita Need for alternative energy feedstocks increasing demand for renewable energy and biofuel Growing wealth Climate change increasing meat consumption and need for feed decreasing stocks to use Acreage competition between food, feed, bio-energy crops and fiber Price increase of crop commodities yield losses through adverse weather conditions need to reduce greenhouse gas emissions, such as CO 2

5 Food Supply: A Global Challenge Year World population (billion) Arable land & permanent crops (billion hectares) Farmland per person (hectares) With limited arable land and a continuously growing world population, the available farmland per capita is expected to further decrease dramatically Source: United Nations

6 Impact of economic Growth and Prosperity on Consumer Behavior 3, , Increase in calorie consumption (in calories per person and day) Industrialized countries Growing production of animal feed (Example oilmeals/-cakes for feedstuffs annual production in million tons) Increase Factor 3, Emerging economies Avg. worldwide 2.8 3, , Developing countries US 1.7 2, E 2050E EU 1.6 Processing losses (feed required in kg to produce 1 kg of meat) 8 China India 1982/84 Brazil 2006/07 Poultry Hogs Cattle Source: United Nations, USDA, Toepfer international, own calculations

7 Declining Stocks of Key Agricultural Commodities Wheat Corn Rice Supply and demand balance of key Agricultural commodities (in million tons) Production / Consumption Production Consumption Ending stocks 2004/ / / /08E 2008/09E 2004/ / / /08E 2008/09E 2004/ / / /08E 2008/09E Stocks Production of key crops wheat, corn and rice falls significantly short of consumption in the 2006/07 growing period As a result, global grain stock levels continue to decline Global wheat stocks are down to the lowest level for the past 25 years Forecasts indicate that stocks of wheat and rice may reach critical levels in 2007/08 Source: The Economist Intelligence Unit, Barclays; USDA, August 2007

8 Commodity Prices expected to further increase by 2009 Commodity price development of key crops (in US-$/ton) ( in %*) Rice +20 % Soybean +36 % Wheat +41 % Corn +89 % E 2008 E 2009 E Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 * betw. Q Q E Source: The Economist Intelligence Unit, August 2007

9 Increasing Demand for Biofuel 1-2 Folien BioFuel Input Market Biofuel world market Sugarcane Corn Wheat Other Biodiesel Bioethanol 3.6 bn liters 37 bn liters 2005 Oilseed Rape Soybeans Other Political targets for biofuel (in % of total fuel consumption) 30 % 25 % 20 % 15 % 10 % 5 % 0 % * Actual 2005 Political target 2015 USA Brazil China EU Germany * Target: Blending mandate for petrol (bioethanol) Source: REN21, Renewable global status report, Update 2006; Fortschrittsbericht Biokraftstoffe, Jan. 2007; US Dept. of Energy / USDA

10 Challenges for the Crop Science Industry Limited arable land coupled with rising demand Safeguard and increase yields from constant land area better resource management (targeted use of crop protection, irrigation technology and fertilizers) increase yields through innovative technologies (hybridization, plant biotechnology) Expand agricultural production in marginal areas new crops with greater tolerance of drought and extreme temperatures Climate change Increase tolerance of plants to climatic variability develop new varieties using state-of-the-art technologies improve plant health and nutrient uptake Research and innovation are the key to mastering the challenges of the New Ag Economy

11 Brazilian overall situation updated 2006/2007 Population: 194,000, States and 5,564 cities Overall arable area: 249,030,397 ha: Agriculture 76,697,324 ha and 172,333,073 ha Livestock pasture Irrigated area: 3,630,000 ha -> 4.7% of agriculture area. Arable area (ha) / people: 1.28 # Farms: 5,204,130 -> average surface: 48 ha/farm Source: IBGE

12 Brazilian Economic Development Gross Domestic Product In 2007, agribusiness GDP had a share of 23,3% of the overall GDP of Brazil 4,7% Agribusiness GDP: US$ Bi Brazilian GDP: US$ 1, Bi

13 Brazilian imbalanced distribution of GDP per person

14 Land Utilization Brazil Area (Ha) Agriculture Forest Pasturage Source: IBGE 2007

15 Localization Cotton Soybean & Corn Sugar cane Beef cattle Coffee Chicken Citrus

16 Logistical Issues

17 LOGISTICS 2006 by Transportation Genre (%) Roadway Railway Waterway Airway Source: Brazilian Infrastructure Yearbook Exame Magazine (2006/07).

18 State control roadway conditions BR 163 Between Nova Mutum and Lucas do Rio Verde - Mato Grosso State Road between Campo Novo do Parecis and Sapezal-MT

19 Privatized roadway conditions Under toll charging

20 Railway Density (Brazil vs. USA) Railway Density Km / 1,000 Km² Brazil 3.4 USA 29.8

21 LOGISTICS Trend to 2025 by Transportation Genre (%) Roadway Railway Waterway Airway Source: Brazilian Infrastructure Yearbook Exame Magazine (2006/07).

22 Soybean

23 Facts on Brazilian Soybean Logistic issues: High transportation costs from farm to harbor due to precarious roads. Part of the production profit is lost by transportation. Bio fuel: From Jan on, adding 2% of vegetable oil in diesel has become obligatory. This requirement, will raise to 5% by 2012, which consequently, will lead to higher demand for soybean oil. Asian countries are demanding more soybean (by 5% / year), due to population growth and purchasing power (cheaper protein source) World wide industrial consumption is increasing by 20% / year demanding more production and keeping the commodity price high Exchange rate is not favorable for the Brazilian Real (R$) x Dollar (US$), but the commodity price is historically excellent (12.90 US$/bushel)

24 Brazilian Soybean area (Ha), yield and exportation (Ton) 1999/ / Ha 000 Ton / / / / / / / /07 0 Source: Agrianual 2007 Area (Ha) Yield (Ton) Export. (Ton)

25 Soybean BRAZIL / Area and Yield Actual Forecast Million ha milhões ha ,4 14,0 Área Area Produção Yield 52,0 42,2 18,5 16,3 50,0 21,4 51,5 23,3 55,0 22,1 58,6 20,7 62,4 22,0 67,6 23,5 73,5 24,7 78,8 25,5 83,3 26,2 87,6 26, Million Ton milhões t Source: Agroconsult. Organização e Projeções : Agroconsult

26 Bio-diesel National Program Regulatory Milestone Law nº /2005 Lays down a minimum percentage of bio-diesel within diesel 2005 to % (facultative) Potential of 840 million L / year 2008 to % (obligatory) 5% (facultative) Market = 840 million L / year Potential = 2,5 billion L / year 2013 on 5% (obligatory) Market = 2,5 billion L / year Source: Petrobras

27 Corn

28 Facts on Brazilian Corn 13 Million ton or (24%) is designated for animal feed In average, Brazilian productivity is Kg/ha The entire yield grew from 51 to 54 Million Ton within last two years. Corn production is designated majority to supply internal market, instead of exportation. However, the exportation has increased on last two years, achieving 7 Million Ton. Two harvests are done: Main harvest from September until January and the second harvest from February until May/June Input and technology are being adopted in latest seasons.

29 Corn / Brazil Yield and Consumption Actual 2000 to 2007 Forecast 2008 to Yield - Year growth rate: + 5,2% Consumption Year growth rate: + 4,3% 63,0 66,0 69, ,3 47,4 42,1 42,1 51,2 54,2 46,9 57,6 49,2 60,2 51,0 53,2 55,5 57, ,1 35,3 36,4 37,3 38,2 38,9 40,0 40,6 43, Million Ton milhões t Produção Yield Consumo Consumption Source: USDA. Projeção : Agroconsult

30 Million Milhões ha ha ,3 13,0 Area +2,5% Área Yield +5,1% Produção Corn / Brazil Planted area and Yield Actual 2000 to 2007 Forecast 2008 to ,5 66,0 63,0 60,2 16,0 57,6 15,7 54,2 15,3 51,2 14,9 47,4 14,5 14,2 42,1 42,1 14,0 38,9 13,2 35,3 12,8 12,7 12,3 11, Milhões t. Million Ton Source: IBGE; Projeção : Agroconsult

31 Corn demand in Brazil Chicken Aves Swine Suínos Million milhões Ton t ,3% 15 Million milhões Ton t. 4,5 4,0 3,5 3,0 2,5 2,0 1,5 1,0 2,9 34,0% 3,9 2 0, / / / /13 Annual growth rate: + 7,0% Source: USDA. Projeções: Agroconsult Annual growth rate: + 5,0%

32 Sugar cane Ethanol and Sugar Production

33 Facts on Brazilian Ethanol production / trade 25% of ethanol (anhydrous alcohol) is added within regular gasoline Within the current season 7,1 million ha are being harvested. The forecast is to reach 10,4 million ha in 2012/13 In average the sugar production provides 30% of profitability, whereas ethanol provides 26% 2007 the Brazilian automotive industry produced 1,8 million cars. Of this amount, 1,4 million was flex fuel, in other words, 78%. Billion Liters Year Production Consumption Exportation 2006/07 (actual) 17,5 11,8 3,5 2012/13 (forecast)

34 Sugar cane growth regions 2007/08 Legal Amazon 359 sugar mill plants currently operating + 67 being built/enlarged until sugar mills within North/Northwest region 274 sugar mill plants within center-south region Ethanol exportation main ports Source: MMA.gov.br, Unicamp, Unica

35 Domestic vehicle sales milhões unidades Million units 3,0 2,5 2,0 1,5 1,0 Growth rate from 2007/08 to 2012/13: 4,0% per year. Growth rate from 2000/01 to 2006/07: 4,5% per year. 2,1 2,2 1,8 1,9 1,8 1,7 1,4 1,5 1,5 1,4 1,3 1,4 0,9 2,3 2,0 2,4 2,1 2,5 2,2 2,6 2,3 0,5 0,4-0,0 0,0 0,1 0,1 2000/ / / / / / / /08* 2008/09* 2009/10* 2010/11* 2011/12* 2012/13* Vendas Internal Internas sell (total) Totais Veículos Flex fuel FlexFuel vehicle Source: Anfavea Agroconsult

36 Facts on Brazilian sugar production / trade Sugar production reached a record last year with 28,3 million Ton. 64% (18 M Ton) of overall production was exported From 2008/2009 on the forecasted production rate tends to grow around 1,6 % per year and the exportations trends to follow the same rate Almost 65% is designated to soft drink industries (Coca Cola, PepsiCo, Antarctica ) Historically the sugar/ethanol production ratio was 55/45, but it changed to 50/50 in 2007/2008 and trend to reach 36/64 in 2012/2013

37 Brazil: Sugar production Production Growth Rate 2007/08 to 2012/13: 1,7% per year Production Growth Rate 2001/02 to 2007/08: 6,8% per year 35,0 30,0 28,0 28,3 28,5 28,8 29,4 29,9 30,4 30,9 25,7 Milhões de toneladas Million Ton 25,0 20,0 15,0 10,0 23,4 22,5 19,2 16,2 9,1 9,5 9,8 9,7 9,6 9,5 9,3 9,1 9,2 9,3 9,4 9,6 9,7 5,0-2000/ / / / / / / /08* 2008/09* 2009/10* 2010/11* 2011/12* 2012/13* Consumo Consumption Produção Production Source: UNICA, Agroconsult

38 Brazilian Sugar cane growing area: actual and forecast 1000 ha Actual Forecast / / / / / / / /08* 2008/09* 2009/10* 2010/11* 2011/12* 2012/13* Source: Conab. Agroconsult

39 Cotton

40 Facts on Brazilian cotton yield Brazil stands out with one of the highest productivities worldwide By using a high rate of technology, yield and quality are being improved Financial difficulty deprivation of capital remains an issue Climate adversity within last two years (e.g. due to global warming) Market perspectives further drive area growth GMOs are no reality so far

41 Yield (Kg/ha) Actual and Forecast drought Annual growth rate (% per year) Austrália 0,7% kg/ha Brazil 2,5% China 1,5% USA 3,0 % Índia 12,4% Source: USDA : Agroconsult

42 Cotton Global Growing Area Actual and Forecast Annual Growth Rate 12,0 10,0 Índia 0,7% milhões ha 8,0 6,0 4,0 2,0 China 0,4% USA- EUA (-1,3%) Paquistão 0,5% Brasil 9,3% 0, Austrália 22,9% Source: USDA; Projeção : Agroconsult

43 BRAZIL - Area and Yield Actual and Forecast ,0 2,6 2,8 1,8 1,6 Area Tx. Cresc. Growth Área = Rate 9,3% = 9.3%/year Tx. Cresc. Produção = 12,0% Yield Growth Rate = 12%/year 1,9 2,2 2,4 1,60 1,72 2,6 2,4 2,2 2,0 milhões ha Million ha 1,4 1,2 1,0 0,8 0,9 0,85 0,8 0,8 0,75 0,74 1,3 1,5 1,5 1,3 1,17 1,10 1,0 1,09 1,10 0,85 1,7 1,25 1,37 1,50 1,8 1,6 1,4 1,2 1,0 0,8 0,6 milhões t Million Ton 0,6 0,4 0,2 0, ,0 Source: USDA Agroconsult

44 Coffee

45 Facts on Brazilian coffee yield Manual harvest is getting more and more difficult due to high costs and labor laws requirements. Otherwise, mechanic harvest is taking place in medium and large farms Domestic consumers are willing for coffee quality improvement (e.g. Global Coffee Shop chains like Starbucks) Strong requirements to produce Certified coffee in order to attend the European and Asian market (traceability by certification agencies) Number of organic coffee producers are increasing as a structured niche market serving the needs of selected consumers, with high value added coffee

46 Coffee value chain Processing Tasting classification Pack Harvest Toasted bean Dry Coffee shops Exportation Commercialization Harvest

47 Brazilian Coffee area (Ha), yield and exportation / Ha 000 Bags* / / / / / / / /07 0 Area (ha) Cons. (Bags) Yield (Bags) Export. (Bags) Source: Agrianual 2007 * 1 bag = 60 Kg

48 Facts on Brazilian Livestock Brazilian livestock exportation is increasing due to meat quality improvement Internal purchasing power has been increased within Brazilian population conducting to more meat consumption Swine and chicken are mainly produced in cooperation with slaughterhouse by small farmers and became a profitable alternative of income Milk production in 2007 was 8,77 million litters. 4,4 million litters was for crude consumption and 4,37 million litters for industry (butter, yogurt, powder )

49 Beef cattle production (Million ton) Growth rate per year 2007/ /18: 2,5% Actual Forecast Lower border Upper border Source: Brazilian Agriculture, Livestock and Supply Ministry

50 Swine production (Million ton) Growth rate per year 2007/ /18: 1,9% Actual Forecast Lower border Upper border Source: Brazilian Agriculture, Livestock and Supply Ministry

51 Chicken production (Million ton) Growth rate per year 2007/ /18: 3,3% Actual Forecast Lower border Upper border Source: Brazilian Agriculture, Livestock and Supply Ministry

52 Outlooks According to Food and Agriculture Organization (FAO), the Brazilian current land utilization takes 78 million ha and still have 300 million ha arable area as potential Apart from the natural resources (favorable weather, water, soil and land to be explored), there is an auspicious scenario in agribusiness deals to next coming years In short-term, Brazil should get benefits due to commodities prices elevation within the international trade market, specially coffee, sugar and soybean. Within last two decades, technology evolution drove to yield improvement, representing one of the successful agriculture entrepreneur history After Gov. credit subsidies ceased, farmers had to invest in professional management, improve crop technology and be open to the international market

53 Muito obrigado / Thank you very much! milton.suzuki@bayercropscience.com