AUSTRALIA GRAINS INDUSTRY CONFERENCE SINGAPORE MICHAEL WHITEHEAD ANZ CLIENT INSIGHTS MARCH 2014

Transcription

1 AUSTRALIA GRAINS INDUSTRY CONFERENCE SINGAPORE MICHAEL WHITEHEAD ANZ CLIENT INSIGHTS MARCH 2014

2 AGENDA > 2 SECTION TOPIC 1. GRAIN & OIL SEED INDUSTRY OUTLOOK 2. GRAIN & OIL SEED FORECAST 3. GRAIN & OILSEED SUPPLY CHAIN INVESTMENT REQUIREMENT

3 INCREASING COMPETITION TO GAIN ASIA FOOD BOWL SHARE INCREASING SHARE OF GLOBAL MIDDLE CLASS 2030:66% 2013:28% TO DRIVE GRAIN CONSUMPTION IN LONG TERM KEY GLOBAL GRAIN EXPORTERS TO COMPETE FOR THE ASIAN MARKET SHARE US & CANADA BLACK SEA AUSTRALIA

4 GLOBAL GRAINS & OILSEEDS RECORD PRODUCTION FORECAST > 4 GLOBAL GRAIN & OIL SEED PRODUCTION AND CONSUMPTION (In MT) 3, , , , / / / / / / / / / / / / / /2014 Stock (RHS) Production (LHS) Consumption Source: USDA & ANZ Analysis Note 1: Production forecast is based on 25 year Long term growth rate

5 GLOBAL GRAINS & OILSEEDS S/U REMAINS STEADY > 5 GLOBAL GRAIN & OIL SEED PRODUCTION vs. STOCKTOUSE (In MT) 3,500 35% 2,800 28% 2,100 21% 1,400 14% 700 7% 1961/ / / / / / / / / / / / / /2014 Production (LHS) StockToUse (RHS) Source: USDA & ANZ Analysis Note 1: Production forecast is based on 25 year Long term growth rate

6 GLOBAL GRAINS & OILSEEDS CONSUMPTION GAP LOOMING > 6 GLOBAL GRAIN & OIL SEED PRODUCTION AND CONSUMPTION FORECAST (In MT) 5,000 4,000 3,000 2,000 1, / / / / /2030 China United States European Union India Former Soviet Union 12 Brazil Argentina Canada Australia ROTW Rapid convergence consumption ABARES consumption FAO consumption Source: USDA & ANZ Analysis Note 1: Production forecast is based on 25 year Long term growth rate

7 AUSTRALIAN WHEAT FORECAST HIGHLIGHTS THE NEED FOR 40% INCREASE IN HARVEST AREA > 7 AUSTRALIA WHEAT FORECAST (In mt) WHEAT YIELD FORECAST (T/Ha) Opening Stock Production Export Domestic Consumption HARVEST AREA REQUIRED TO SUPPORT FORECASTED PRODUCTION (Indexed to 2013) Kazakhstan Russia Ukraine Australia Kazakhstan Russia Ukraine Australia Source: USDA Foreign Agricultural Services, ABARES and ANZ Analysis Note 1: Production forecast is based on 25 year average growth, ending stock is based on stock to consumption median for 25 years Note 2: OECD forecast till 2022 is extrapolated for 2030 based on 2013 to 2022 data Note 3: Harvest area calculation is based on production forecast divided by yield per hectare

8 AUSTRALIA SUPERIOR WHEAT QUALITY & EXPORT > 8 AUSTRALIAN WHEAT EXPORT Percentage of exports 45% 36% 27% 18% 9% Wheat Variety Competition Region (Quality) AU (APH/AH) AU (APW) AU (ASW) USA (HRW) USA (DNS) CAN (CWHWS) CAN (CPSW) CAN (CWRS) IND WHEAT PAK WHEAT Noodles Bread Biscuits Steamed Bread RUS WHEAT HIGH PROTEIN WHEAT PRICE (USD/T ) APH AH APW ASW AGP Milling Noodle Durum Feed BULK EXPORT Q1 Q2 Q3 Q4 Blacksea 14.5 DNS 14 CWRS 13.5 APH13 AH12 UKR WHEAT Preferred CONTAINER EXPORT Acceptable Q1 Q2 Q3 Q4 Blacksea 14.5 DNS 14 CWRS 13.5 APH13 AH12 Source: Trade sources, ABARES and ANZ Analysis Note 1: Based on CNF Malaysia for 2013

9 AUSTRALIAN COARSE GRAIN FORECAST BARLEY FALL LOOMING > 9 AUSTRALIA COARSE GRAIN FORECAST (In mt) BARLEY & SORGHUM EXPORT TARGET MARKET (In mt) Opening Stock Production Export Domestic Consumption HARVEST AREA REQUIRED TO SUPPORT FORECASTED PRODUCTION (Indexed to 2013) 200% 4 170% 3 140% 2 110% 1 80% Harvest Area (Max Yield:2.4 T/ha) Harvest Area (Average Yield:1.61 T/ha) China Japan Korea Thailand Vietnam Other Harvest Area (Median Yield: 1.58 T/ha) Source: USDA Foreign Agricultural Services, ABARES and ANZ Analysis Note 1: Production forecast is based on 25 year average growth, ending stock is based on stock to consumption median for 25 years Note 2: Harvest area calculation is based on production forecast divided by yield per hectare

10 AUSTRALIAN COARSE GRAIN BEER CONSUMPTION HOPES > 10 AUSTRALIA COARSE GRAIN PRODUCTION (In mt) 16 AUSTRALIA COARSE GRAIN USAGE (In mt) Barley Oat Sorghum Corn (maize) Triticale ` Domestic Consumption Export COARSE GRAIN EXPORT (In mt) BARLEY & SORGHUM EXPORT MARKET (In mt) Barley Oat Sorghum Corn (maize) China Japan Koprea Thailand Vietnam Other Source: USDA Foreign Agricultural Services, ABARES and ANZ Analysis

11 AUSTRALIAN OILSEED FORECAST SHORT TERM FALLS > 11 AUSTRALIA OILSEED FORECAST (In mt) Opening Stock Production Export Domestic Consumption CANOLA EXPORT TARGET MARKET (In mt) HARVEST AREA REQUIRED TO SUPPORT FORECASTED PRODUCTION (Indexed to 2013) 4 140% 3 120% 2 100% Belgium Netherlands Pakistan China Japan Other 80% 60% Harvest Area (Max Yield: 1.78 T/ha) Harvest Area (Average Yield: 1.25 T/ha) Harvest Area (Median Yield: 1.28 T/ha) Source: USDA Foreign Agricultural Services, ABARES and ANZ Analysis Note 1: Production forecast is based on 25 year average growth, ending stock is based on stock to consumption median for 25 years Note 2: Harvest area calculation is based on production forecast divided by yield per hectare

12 AUSTRALIAN OILSEED OVERVIEW STRONG CHINA POTENTIAL > 12 AUSTRALIA OILSEED PRODUCTION (In mt) AUSTRALIA OILSEED USAGE (In mt) Canola Cotton Seed Other Domestic Consumption Export AUSTRALIA OILSEED EXPORT (In mt) 5 CANOLA EXPORT TARGET MARKET (In mt) Oilseeds Canola Cottonseed Other Belgium Netherlands Pakistan China Japan Other Source: USDA Foreign Agricultural Services, ABARES and ANZ Analysis

13 INCREASING FOCUS ON ASIA TO PROVIDE NEW EXPORT OPPORTUNITIES FOR AUSTRALIA AUSTRALIAN EXPORTS BY REGION (In mt) ASIA IMPORT MIX CONSUMPTION (In mt) PRODUCTION (In mt) INDONESIA 11% 3% 15% 71% : 2013: KOREA 11% 42% 41% 6% : 2013: Africa Asia Middle East Oceania AUSTRALIA EXPORT (In mt) 25 VIETNAM 4% 1% 95% : 2013: CHINA 6% 16% 9% 69% : 2013: Indonesia Korea Vietnam China Japan Others Asia Other Global JAPAN 54% 22% 24% : 2013: Australia Canada Source: USDA Foreign Agricultural Services, ABARES and ANZ Analysis Note 1: As of 2012 US Other Note 2: OECD forecast till 2022 is extrapolated for 2030 based on 2013 to 2022 data

14 INCREASING COMPETITION FROM BLACK SEA TO POSE CHALLENGE IN LONG TERM > 14 INCREASING BLACK SEA WHEAT PRODUCTION (In mt) COUPLED WITH SEA FREIGHT ADVANTAGE TO MIDDLE EAST 1,2 (In USD/T) Kazakhstan Russia Ukraine RESULTING IN THE REGION BECOMING A KEY EXPORT MARKET FOR BLACK SEA 100% 45 Ukraine North Russia Western Australia South Australia Eastern Australia INCREASING SHARE OF BLACK SEA WHEAT EXPORT IS DRIVEN BY YIELD GROWTH (In mt) 30% 80% 60% 40% 20% Indonesia Korea Vietnam China Japan Australia Canada US Other 36 24% 27 18% 18 12% 9 6% Ukraine Russia Kazakhstan Australia % (Global Export) (RHS) Black Sea % ( Global Export) (RHS) Source: USDA Foreign Agricultural Services, ABARES and ANZ Analysis Note 1: As of 2012 Note 3: Freight charges for Iran from respective countries Note 3:OECD forecast till 2022 is extrapolated for 2030 based on 2013 to 2022 data

15 KEY CHALLENGES TO AUSTRALIAN FARMING > 15 24% AGEING AUSTRALIAN FARMERS 18% 12% 6% Farmers and Farm Managers Employed Total SMALL FARM SIZES , NSW Vic Qld SA WA Tas NT No. of farms ('000) Avg. Farm Size (ha) LOW TURNOVERS 40% 30% (USD '000) 20% 10% <$50 $50$99 $100$199 $200$499 $500$999 $1,000+ Source: Agricultural Commodities, Australia and ANZ Analysis Note 1: Data include all farming activities and sourced from Agricultural Census for

16 KEY CHALLENGES TO AUSTRALIAN FARMING > 16 24% 18% ALONG WITH LESS GOVT. SUPPORT 12% 6% AU BRZ UKR US CAN CHN EU OECD RUS Producer Support (% of sector revenue) 160 LEADING TO LOW RETURNS Index of Prices received Index of Prices paid Impacting competitiveness of Australian Farming Industry Source: Agricultural Commodities, Australia and ANZ Analysis Note 1: Data include all farming activities and sourced from Agricultural Census for

17 INFRASTRUCTURE CHALLENGES ACROSS THE SUPPLY CHAIN 17 Farm Production Australian Grain Supply Chain Southern Oscillation Index USA & Canada Grain Supply Chain Cost of Grain Production USD/T (10) (20) Ukraine Argentina USA Canada France Australia Receival & Storage 1 16% 29% % of supply chain cost Throughpu t 0.6x Receival Sites: 623 Avg. Dist 2 20km > Australia currently has scattered receival sites with total bulk handling capacity of over 55mt, in addition it has ~15mt onfarm storage capacity Throughput : 67x Receival Sites : 271 Canada Avg. Dist 2 80km Canada > Majority of the storage capacities in US & Canada are onfarm storage units providing farmers the option to store grains in unfavourable marketing conditions Sources: USDA, ABARES, AGEIC * Median cost of wheat supply chain for all states Note 1: Receival and Storage costs based on 3months storage Note 2: Average Farm to Bin distance NOTE: The above table represents the best practices across USA and Canada

18 LEADING TO HIGH SUPPLY CHAIN COST ~70 USD/TON 18 Australian Grain Supply Chain USA & Canada Grain Supply Chain Transportation 6 27% 39% Axle Load: 1619 ton LPI Index 1 : 3.7 Tracking 2 : 3.8 > Grain transport facility in Australia is deteriorating, with large maintenance investments required, specially into rail infrastructure Axle Load: 23 ton LPI Index 1 : 3.9 Tracking 2 : 4.1 > In USA, train lines can move grain 1,000 km at a cost of USD 10/ton compared to USD 25/ton in Australia for less than 500 km Port Facilities 30% 34% International Shipment 3 : 3.4 Costs 5 : USD 1,020 International Shipments 3 : 3.6 Costs 5 : USD 680 Others 4 8%9% Sea Freight Transit Time: 6 days Western Australia To Indonesia Shipping USD 9/ton > Australia s proximity to Asia, provides it with significant cost advantage in terms of sea freight specially for SouthEast Asia Transit Time Shipping 26 days USD 31/ton USA To Indonesia > Western exports into Asian countries are challenged to a greater extent due the freight disadvantages it has to Australia Note 1: Logistics Performance Index Note 2: Ease of tracking cargo score Note 3: Ease of arranging competitively priced shipments score Note 4: Other charges include GRDC Levy and other levy NOTE: The above table represents the best practices across USA and Canada Note 5: Charge for a 40foot dry container or a semitrailer (total freight including agent fees, port, airport, and other charges). Note 6: Transportation costs based on Rail charges for 200km distance between receival site and port

19 REQUIRES INVESTMENT INTO UPGRADING THE FACILITIES Total Grain Exports 30mt Exports by OAE s 15mt 2030 Total Grain Exports 40mt Exports by OAE s 20mt Assuming OAE s account for ~50% of total grain exports from Australia, capex requirements have been derived till 2030 considering a new supply chain is setup to support the OAE s STORAGE RAIL TRACK UPGRADE PORT Capacity mt Capacity ,325 km Capacity mt Total Capex 2030 $2.0bn Total Capex 2030 $2.0bn Total Capex 2030 $7.6bn Initial Capex $1.6bn Initial Capex $1.6bn Initial Capex $6.0bn Note 1: Assuming OAE s export 50% of total grain exports from Australia Note 2: OAE s Other Accredited Exporters

20 WHICH COULD LEAD TO POTENTIAL COST REDUCTION ACROSS SUPPLY CHAIN 20 CAPEX TIMELINE (In USD bn) Total Capex Required till 2030: USD 11.6 bn 2014 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $0.2 BENEFITS OF PARALLEL SUPPLY CHAIN COST ANALYSIS Current Scenario AUSTRALIA WHEAT SUPPLY CHAIN USD/TON Parallel Supply Chain OAE s Wheat Supply Chain USD/ton COST BREAKUP Total Cost: USD 70/ton COST BREAKUP 28% 33% 31% 8% 27% 37% 25% 11% Receival & Storage Transportation Port Facilities Others Benefit > USD 20/ton benefit arising from the OAE s moving to a parallel supply chain > OAE s can save ~29% of their current supply chain costs driven by operational efficiencies and reduced charges Note 1: Assuming storage time of 3 months and rail network being used to transport to port at a distance of 200km Note 2: Other charges include GRDC Levy, End Point Royalties, and other levy

21 UPGRADING CURRENT INFRASTRUCTURE 21 > Australia s current supply chain infrastructure requires substantial upgrading and maintenance in order to compete with other grain exporters supplying into Asia (USA, Canada, etc.) > Investments are required into developing efficient storage capacities, upgrading existing grain rail lines and capacities at port level (storage and loading) in order to make the system more efficient IMPROVING THE EXISTING GRAIN SUPPLY CHAIN GRAIN STORAGE > Grain storage facilities/receival bins are currently scattered across Australia (~623 receival bins) with average distance between a grain farm and bin in Australia is ~20km compared to ~80km in Canada. In WA ~40% of the sites handle ~80% of grain, thereby leading to inefficiency for other sites due to under utilisation GRAIN RAIL NETWORK > Axle loads (currently ~17 ton) and low siding, limits the rail length and load carrying capacity. Upgradation of axle loads to 2023 ton and increasing siding could further increase load capacity per train from ~2,000 to 10,000 ton GRAIN ROAD INFRASTRUCTURE > Truck capacities also require investments, as ageing of current fleet along with limited capacities compared to new models restrict the movement of grains and increase costs GRAIN PORT FACILITY > Loading capacities for port terminals can vary from ~600 ton/hr to 5,000 ton/hr in Australia, leading to congestion in ports with low capacities as trucks/trains have to wait for longer time

22 AUSTRALIA WELL REPRESENTED BY SCALE COMPARISON > 22 Total AUM by Target Geography (Percent) Total AUM by Target Geography (USD) Global 19% North America 35% Global, $5,200 North America, $9,450 Asia 3% Asia, $900 Africa 9% Africa, $2,295 Eastern EU/Black Sea 10% Australia 12% South America 12% Eastern EU/Black Sea, $2,815 Australia, $3,245 South America, $3,360

23 ROW CROPS REMAIN THE MAJOR FOCUS > 23 Total AUM by Crop Type Total AUM by Crop Type Infrastruct ure 11% Permanent 10% Pastoral $5,455 Infrastruct ure $3,060 Permanent $2,790 Pastoral 20% Row 59% Row $15,960

24 ACCESSIBILITY OF MEDIUM SIZED FUNDS > Size of Major Agri Funds % of Total Assets by Fund Size 25 $1000m+ 42% Up to $50m 2% $51 $199m 9% Up to $50m $51 $199m $200 $499m $ $1000m+ $ % $200 $499m 29%

25 THANK YOU