Steven Retzlaff President Global Sourcing & Cocoa. Barry Callebaut Investors & Analysts days

Transcription

1 Barry Callebaut Improving sustainable Cocoa Supply Steven Retzlaff President Global Sourcing & Cocoa Oct 2011 Barry Callebaut Investors & Analysts days

2 Ivory Coast A lost decade

3 Cocoa vs. Rubber : IC farmgate prices Ivory Coast Rubber vs. Cocoa farmgate prices, CFA/kg Wet rubber Cocoa CFA / Kg

4 Rubber s returns have largely exceeded those for cocoa for the past 7 years in IC, thanks to the crop s high yielding property Profitability for mature plantations in Ivory Coast : rubber vs. Cocoa ( /ha, no external Labour) 3'000 Rubber Cocoa 2'500 2'000 1'500 1' Farmers profit in per Ha

5 Rubber is more profitable than cocoa in Ivory Coast Excess return of Rubber vs. Cocoa farming in Ivory Coast per Ha /ha 2'400 2'200 2'000 1'800 1'600 1'400 1'200 1' Rubber more profitable -600 Cocoa more profitable '000-1'200-1'400-1'600-1'800-2'000-2'200-2' Oct Barry Callebaut Investors & Analysts days

6 Ivory Coast: cocoa vs. rubber Following 40 years of dominance, cocoa is now under severe threat from other crops in Ivory Coast, particularly rubber For most of the past 10 years, farmers in IC had a much larger share of the world price for rubber than for cocoa, due to much lower taxation Rubber is also providing higher yields, while requiring less inputs (1/2 bags fertilizers per ha vs. 6 for cocoa, no pesticide/fungicide needed in the majority of cases) Finally, cash management at farm level is improved in the case of rubber, where farmers have a monthly income, vs. a concentrated harvest in the case of cocoa

7 Indonesia: cocoa vs. palm prices Comparative Palm/Cocoa farmers price Indonesia Palm Fresh Fruit Bunch Cocoa US$/MT NB: palm fruit prices est. based on Malaysian Board FFB benchmark

8 Indonesia: cocoa vs. palm net profitability 3500 Comparative Palm/Cocoa average profitability in Indonesia (US$/ha, with external labour) 3000 Palm net return/ha Indonesia Cocoa net return/ha Indonesia US$/Ha NB: palm fruit prices est. based on Malaysian Board FFB benchmark

9 Until 2007, cocoa was more profitable than palm for Indonesian farmers 2500 Comparative Palm/Cocoa average profitability in Indonesia (US$/ha, with external labour) Palm more profitable Cocoa more profitable NB: palm fruit prices est. based on Malaysian Board FFB benchmark US$/Ha

10 Cocoa vs. Palm: conclusions The high yielding profile of cocoa farms in Asia makes it relatively well profitable relative to its main competing crop However, rising palm oil prices remain an important threat Farmers in SE Asia are far more driven by price incentives in the short term than their African peers, thus any wide price advantage rapidly triggers acreage shifts This was obvious during the period, when vast acreages of cocoa farms in Sulawesi were replanted with palm trees, soon after palm farming became more profitable

11 World Cocoa Supply Struggles to Satisfy Demand: Is there a sustainable solution? 4'200 4'000 World net crop (surplus, balance, deficit) deficits) World Cocoa Supply-Demand 3'800 World cocoa bean grindings Productio on - Grinding gs (thds MT) The industry needs 1 Mio ton cocoa beans in addition by '600 3'400 3'200 3'000 2'800 2'600 2'400 2'200 2'000 1' '600 1'400 1'200 90/91 91/92 92/93 93/94 94/95 95/96 96/97 97/98 98/99 99/00 00/01 01/02 02/03 03/04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 Oct 2011 Barry Callebaut Investors & Analysts days

12 How Are Our Customers Tackling Sustainability? Our customers increasingly turn to certification as a proxy for sustainability. Oct 2011 Barry Callebaut Investors & Analysts days

13 BC certifies farmers via its QPP & Biolands direct sourcing models Quality Partner Program 53 cooperatives = Four 000 supply farmers routes Local Collectors Local Traders Biolands Farmers Union = registered farmers Direct sourcing Farmers Coops / QPP* Barry Callebaut Biolands**

14 But is Certification Sustainable? BC believes that cocoa production is sustainable when farmers earn equitable income; engage in responsible labor practices that do not exploit or harm children or adults; safeguard the environment through sound agricultural practices and responsible use of resources; and can provide for the basic health and education needs and general well-being of their families Does certification address this? In part. But it does not focus on improving i productivity and yield per hectare Which is a problem for the industry Oct 2011 Barry Callebaut Investors & Analysts days

15 In Summary: We have a problem and a platform for a solution Today: Certification will not increase the crop Our customers want certification BC will use QPP & Biolands as sourcing models Tomorrow: BC will use QPP and Biolands to improve yield per hectare Oct 2011 Barry Callebaut Investors & Analysts days

16 Increase via IC: Possible or not?

17 Asian cocoa farms have greater input costs than in Africa, where most farmers apply little to no fertilizers 1200 Cocoa farming cost per Hectare (, Average 2009/10 season) 1000 External Labor (if any) Other chemicals & machinery Fertilizers Ivory Coast Ghana Cameroun Sulawesi Malaysia

18 Thank You Oct 2011 Barry Callebaut Investors & Analysts days 18