Feeding Asia, from Downunder

Transcription

1 Rabobank Agri Commodity Markets Research Feeding Asia, from Downunder Crawford Fund Luke Chandler General Manager- Food and Agri Research 27 August 2014 Rabobank International

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5 1 Feeding the world in Australia s role in feeding Asia 3 Importance of supply chains 4 Challenges for Australian agriculture which need addressing 5

6 1 Feeding the world in Australia s role in feeding Asia 3 Importance of supply chains 4 Challenges for Australian agriculture which need addressing 6

7 Food and Farming are in the spotlights Avoiding the next GFC... 7

8 1 Feeding the world in Australia s role in feeding Asia 3 Importance of supply chains 4 Challenges for Australian agriculture which need addressing 8

9 1980 A world dominated by the US and Europe 4% 59% 19% 9

10 2000 Asia begins to emerge 8% 39% 36% 10

11 2013 Income growth throughout Asian region brings drastic change 19% 35% 13% 14% 11

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14 AUD millions (fob) Asia already dominates our export returns North Asia South Asia Americas Europe Middle East Oceania Source: ABARES, Rabobank

15 Annual growth BUT - Australia s agricultural export growth rates are lagging competitors into the region 50% 40% % 20% 10% 0% -10% Australia New Zealand Canada USA Brazil Thailand ROW (RHS axis) Source: Comtrade, Rabobank 15

16 However, we are only a drop in the ocean Should we be chasing volume or value? AU 6% NZ 3% ROW 91% 16

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18 1 Feeding the world in Australia s role in feeding Asia 3 Importance of supply chains 4 Challenges for Australian agriculture which need addressing 18

19 F&A supply chains are under more pressure and becoming more complex Four drivers are responsible for the pressure the first three are well known, the fourth, the great cross-over, is new Supply chain pressure leads to change with multiple dimensions Shifting market power and margins Feeding 9 billion people Supply chain failures Commodity pricing dynamics F&A supply chains The great cross-over Re-organisation of suppliers Alignment of supply chains with growth ambitions Increased strategic priority given to supply chains Source: Rabobank,

20 When the supply chain breaks... 20

21 Consumer Reaction is is Clear Clear Q12008 Q32008 Q12009 Q32009 Q12010 Q32010 Q12011 Q32011 Q12012 Q32012 Q12013 Q32013 YUM China Same-store-Sales, YoY percent 21

22 Australia s opportunity to supply quality food Australian agricultural exports are highly prized for their attributes Quality Functionality Traceability Disease free status Sustainable production 22

23 Its one thing to have a story, but its how you communicate it ALMOST 10% OF ALL PHOTOS IN EXISTENCE WERE TAKEN IN THE LAST 45 DAYS By 2017 two-thirds of all mobile data traffic will be video 23

24 And farmers are already part of the digital revolution 24

25 What will our competition look like...? OR 25

26 1 Feeding the world in Australia s role in feeding Asia 3 Importance of supply chains 4 Challenges for Australian agriculture which need addressing 26

27 Australian farmers terms of trade prices paid prices recieved terms of trade Ratio of index of prices received by farmers and index of prices paid by farmers. Source: ABARES, Rabobank

28 USD/tonne Cost of production is high for Australian growers relative to other major wheat producers Variable farmgate cost of wheat production Australia USA Canada Ukraine France Argentina 28

29 Logistics infrastructure (in)efficiencies 29

30 Regulatory Pressures 30

31 Rural Debt ($ billion) Capital Constraints: Financing the future Rural debt; Total Source: RBA, Rabobank

32 Wrapping up Australian agriculture does have a role to play in helping to meet Asian food demand BUT we should not overstate this role or try and be all things to all consumers Our focus should be on quality markets Supply chain partnerships will be critical Farmers need INCENTIVE Challenges need addressing o Cost of inputs o Red Tape o Market Access o Supply chain efficiency 32

33 Thank you Luke Chandler General Manager Food & Agribusiness Research and Advisory Australia and New Zealand t e. luke.chandler@rabobank.com Meet the FAR Australia & New Zealand research team Luke Chandler, General Manager Hayley Moynihan, Senior Analyst (Dairy) Michael Harvey, Senior Analyst (Dairy/Farm Inputs) Marc Soccio, Senior Analyst (Wine, Horticulture & Rural Economics Graydon Chong, Senior Analyst (Grains & Oilseeds) Matt Costello, Analyst (Animal Proteins) Lloyd Setter, Analyst (Animal Proteins) A global team of 80 analysts dedicated to delivering insights into the world s major F&A regions 33

34 Asian investment into Australian Agriculture 65% of Australian sugar milling assets are now owned by Asian investors Investor Company Sector Shanghai Zhongfu Group Beidahuang Bright Foods CK Life Sciences Ord River farmland WA cropping land and port facilities Manassen Foods Chellenger Wine Trust Sugar, Sorghum and processing Dairy and olives Wine Northern Territory Queensland Investor Company Sector COFCO Tully Sugar Sugar Mitr Phol MSF Sugar Sugar Sucrogen Wilmar (CSR) Proserpine Cooperative Wilmar Sugar Milling Association Cubby Shandong RuYi Station Sugar Sugar Cotton Western Australia South Australia New South Wales Investor Company Sector Chinese investors Mt Falcon station Beef Cattle Victoria CK Life Sciences Cheetham Salt Salt Tasmania Chevalier Group Moraitis 34

35 Global exporters relying on Chinese demand 2003/ /14 (f) 2018/19 (f) 2003/ /14 (f) 2018/19 (f) Wheat 6 th =1 st * Wheat 4% 6% 4% Corn 83 rd 5 th Corn 0% 7% 11% Soybeans 1 st 1 st Soybeans 31% 66% 73% Palm oil 1 st 2 nd Palm oil 16% 16% 15% Pork 7 th 4 th Pork 3% 10% 13% Beef 23 rd 13 th (6 th ) Beef 0% 3% 5% Sugar 18 th 3 rd Sugar 3% 4% 6% * Equal first with Egypt 35

36 US cents/litre USD/tonne On-farm competitiveness is under pressure Farm gate milk production costs in selected countries Variable farm gate cost of wheat production, Netherlands California Ireland Upper Midwest New Zealand Australia (Vic.) Source: OnFarm Consulting, DairyNZ, LEI, Teagasc, FADN, Genske Mulder & Rabobank, Source: Global Insight International Agricultural Insights, USDA, AGRIC, DPI & Rabobank,

37 Australia s freight advantage into Indonesia $8-$24 Australia still holds freight advantage over major suppliers, however the advantage is shrinking Difference vs. vs EC EC Ukraine + $20 $24 + $16 US US + $50 $54 + $24 Canada + $11 $15 + $8 West EastCoast - + $4 $4 - $4 $43$86 $35 $56 $47 $27 $15 $32 $19 $36 37

38 Fundamental changes in supply chain relationships are needed Chain partner engagement: From negotiation To collaboration Significance of relationships: From transactional To transformational Source: Rabobank,

39 AUD Billion Australian agricultural exports by sector Grains and Oilseeds Horticulture Animal Proteins Wool Dairy Raw cotton Sugar Source: ABARES, Rabobank

40 Australia is the main supplier of wheat to the region due to proximity Indonesia Malaysia Source: UN Comtrade Source: UN Comtrade 40

41 Value (AUD billion, FOB) Australia s agricultural trade with Asia Other China Japan Rep. Of Korea Indonesia India Source: DFAT, Rabobank 41

42 Market Access a Rapidly Changing Dynamic 42

43 Disease and safety now priority #1 in China 44