New perspectives Predicting future factors in meat supply and demand Nan-Dirk Mulder, Rabobank International
Contents Section 1: Section 2: Short term outlook Long term outlook Rabobank International
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How to reach sustainable growth in a much more dynamic industry? 2006- Globalisation of industry 2006- Commodityprice volatility 2008- Exchange-rate volatility 2008- Economic crisis Next: -Sustainability -Animal welfare - Volatility -Trade liberalisation vs protectionism Market dynamics and animal diseases
Different speed of recovery in 2010 and 2011 3.1% 2.7% -2.5% Canada US 2,6% 2.3% -2.6% Russia 4.0% 4.3% EU -7.9% 1.7% 1.5% -4.1% China 9.1% 10.5% 9.6% -5.2% 2.8% 1.4% 5.0% 3.9% -6.5% Mexico Sub-Saharan Africa 5.5% 5.0% 2.6% India 9.7% 8.4% 5.7% Japan 7.5% 4.1% -0.2% Brazil GDP Growth World 6 Source: Rabobank based on IMF data, October 2010 2009-0.6% 2010 (f) 4.8% 2011 (f) 4.2%
Competition for food: what s next? Grains and oilseed price development 2000-2010 (USD/ton) 600.0 500.0 400.0 300.0 200.0 100.0 0.0 Wheat Corn Soybean Meal
Change in stocks to use in 2010 driving bullish tone for 2011 Change in world ending stocks & stocks/use of key grains and oilseeds Source: Rabobank
Bull commodity markets clouded by macro uncertainty Wheat price outlook Corn price outlook Soybean price outlook
1,000 tonnes 1,000 tonnes Recovery in global meat market, but trade restrictions effect global market Global meat demand outlook Global trade outlook 1,000 tonnes 80,000 70,000 60,000 50,000-2.3% -0.5% -0.1% +2.6% +2.8% +0.7% +3.1% +2.5% +4.6% +0.1% +0.9% -0.9% 25,000 20,000 15,000 22.1 million 21.9 million tonnes 21.4 million tonnes tonnes -2.2% -0.9% +2.1% 22.4 million tonnes 40,000 +0.4% +2.6% +3.3% 30,000 10,000 20,000 10,000 5,000-2.2% -0.9% +2.1% - Beef Broiler Pork China Pork Other 2005 2006 2007 2008 2009 2010 2011-2005 2006 2007 2008 2009 2010 2011 Pork Broiler Beef Source: USDA, December 2010
Poultry industry will outperform pork and beef industry in 2010 Global meat production forecast 2010 11.7% +2.4% 0.9% -2.2% 1.9% 0.4% +2.9% Canada -0.4% Euro Area +0.8% -0.2% -0.4% -1.4% 2.6% Russia Japan -3.7%-0.5% 3.7% +1.0% +1.8% 2.2% -0.1% -3.7% Mexico US China +3.9% +3.6% 3.6% 1.3% 10.0% Brazil 2.2% -23.0% Argentina 2.4% India Production Growth Broiler: +3.3% 1.8% 5.8% Australia -2.3% Pork: +1.0% Beef: -1.2% 11 Source: USDA, October 2010
Global trend will continue in 2011 Global meat production forecast 2011 1.5% 6.7% 2.0% -1.7% -0.8% 0.9% +1.8% -0.6% -2.3% 0.7% Canada -2.8% -0.8% -1.4% EU-27 1.8% Japan 2.5% 1.5% Russia 2.0% -2.8% 3.0% 3.0% Mexico US 1.9% 2.5% China -1.8% 2.9% 2.5% 9.1% Brazil 2.2% -1.9% Argentina 2.9% India Production Growth Broiler: +2.4% 1.9% 5.8% Australia -1.4% Pork: +1.9% Beef: -0.2% 12 Source: USDA, October 2011
Contents Section 1: Section 2: Short term outlook Long term outlook Rabobank International
Key challenge: Global food supply Meat demand Food demand Fuel demand +20% in 10 years Meat supply Food supply Fuel supply Livestock/poultry supply Livestock supply Grains and oilseed supply Land use Expansion Efficiency Yield Efficiency Cultivation Yield???????
Great challenge for sector: Fast-growing demand for agricultural products 220% 200% 180% 160% 140% Global demand for agriculture (change 2008-18) Additional demand: 500 m. tonnes De Grains and oilseeds Livestock and dairy Sugar Biofuel Grains and oilseeds markets 2008-2018 Share developing Market volume growth Growth % markets Wheat + 70 million tonnes 10% 72% Coarse grains + 190 million tonnes 17% 50% Rice + 46 million tonnes 10% 98% Oilseeds + 133 million tonnes 20% 78% 120% 100% 80% 60% 40% Demand for agriculture 2008-18 De Fuel, 130 million tonnes Food, 180 million tonnes 20% 0% Wheat Coarse grains Rice Oilseeds Beef Pigmeat Poultry Milk Sugar Ethanol Biodiesel Feed/Animal protein, 190 million tonnes Source: OECD, FAO, Rabobank estimate, 2009/10
How to produce? HECTARES How to produce 500 million tonnes? Unused arable land: 180 million hectares South Africa 3% U.S. 11% FSU 21% Brazil 54% Additional 140 million Hectares Food, feed, fuel demand 2020 EU-27 11% Yield improvement LOW YIELD Food, feed, fuel demand 2010 HIGH 30% yield increase Grains yield (tonnes/ha) in 2007/2008 Wheat Corn Brazil 2,100 3,800 EU-15/27 4,830 6,480 Russia 2,020 3,790 Ukraine 2,340 4,210 U.S. 2,720 9,660 Source: OECD, 2009
70% of global growth in demand for meat will be in Asia Market growth estimate for key meat markets 2010-2020 25,000 20,000 15,000 10,000 5,000 - -5,000 Source: Rabobank, FAO, FAPRI, OECD Poultry Beef Pork
Who s going to produce world meat demand? Broiler cost of production (USD/kg) Pigs cost of production EUR/kg cwe 1.2 1 1,80 1,60 1,40 1,40 1,57 1,40 1,62 1,61 0.8 0.6 1,20 1,00 0,80 1,04 0,91 0.4 0,60 0,40 0.2 0,20 0 US BRA ARG EU RUS CHI THA IND - NL DE DK ES PL US BR Source: Rabobank estimate 10% of global production is traded internationally
Future meat production growth Global meat production 2009 2018 (1,000 tonnes and CAGR 2009-2018) 100,000 90,000 +2.3% 80,000 70,000 60,000 50,000 +1.0% +0.5% 40,000 +3.5% 30,000 20,000 10,000 +4.0% +2.6% +1.0% +1.8% +0.3% - Source: Rabobank/OECD, 2010 Poultry Pork Beef
Water issues will start to bite
Ring of fire region as future spearhead in global trade Rabobank International
A fast-changing global meat industry landscape 1,000 tonnes 14,000 Global ranking: Meat companies 12,000 10,000 8,000 6,000 4,000 2,000 - * Including Bertin, Pilgrim's Pride ** Merger Perdigão, Sadia Source: Rabobank estimate based on public sources Poultry Beef Pork
The beef industry most consolidated industry on global level Consolidation in the global meat industry 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 7% 20% +2% +1% +2% 9% 7% 7% 20% 9% 7% 7% Pork Beef Poultry Meat Feed Other Pipeline Top 3 market share Source: Rabobank estimate
Brazilian and US companies drive global consolidation process in meat industry
Bounce back: dealing with volatility as key successfactor for whole value chain Grains and oilseeds Feed Farming Processing Customer Market intelligence + = Information exchange Market power Volatility in grains and oilseeds Volatility in exchange rates Volatility in livestock and poultry markets Request for stable sales prices Hedging/price management Risk management
Corporate social responsibility: Example global warming Tonnes CO2-e per tonne of production Lobbying: Sweden Swedish Beef Approx. 16-20 kg CO 2e per kg meat Europ eanbeef Approx. 20-27 kg CO 2e per kg meat Governments policy Brazilian Beef Approx. 38-40 kg CO 2e per kg meat = Always buy Meat from Europe Retail
Price competitiveness and flexibility of poultry fitting well with future market needs Cost Animal of production protein cost comparison efficiency Production Duration of farming cycle, cycle Flexibility pangasius +39% Pangasius shrimp +13% Shrimp salmon +12% Salmon poultry +27% Poultry pork +41% Pork 27 Beef Euro/kg +16% 0 2 4 6 2006 2007 2008E Beef (finishing system) Months 0 10 20 30 40 juveniles stage finishing stage
A future picture? LOCAL TRADE GLOBAL TRADE Fresh perishable products -Fresh meat -Speciality products Not perishable products - Frozen products - Further processed products
or this?
Or is this the future?
And beef? Does beef deserve its premium price position? Do we deliver on: - taste - tenderness - juiciness - consistency of the above - consumer friendliness in preparation - social attributes (associated with production, processing) such as animal welfare, environment - product STORY?
European sector should better utilise large European market Scandinavia: High incomes EU-27: Almost 500 million consumers UK: Added-value market; strong retail NW Europe: One market; consumer concerns Southern Europe: Traditional demand, growing market Poland: 40 million consumers; costprice advantages Romania: 22 million consumers; labour costs EUR 200/month Large differences in competitive advantages Poultry industry still a domestic ihdustry
The European industry moves from national to regional and from regional to pan-european Northwest - 173 million consumers North- 20 million consumers East - 79 million consumers South- 171 million consumers South East - 41 million consumers
Export/Import Irish food & agrisector: livestock sector drives industry growth Sheep Production growth (00/07)
How to compete in the current competitive industry landscape? VOLUME VALUE Efficiency Branding Ireland Scale Internationalisation Future Irish food industry Pasture based Free range/organic Value Chain Sustainability Sustainability Risk management Premium products
Conclusions Great long-term meat demand potential for global industry with growing emphasis on yield throughout the value chain Dealing with volatility in feed ingredients and exchange rates will be a key challenge for the industry in the coming years Waves of protectionism and diseases put significant impact on markets and industries Growing importance of consumer concerns in industry. Industry should participate in global discussions and come with innovative ideas Consolidation in the global industry is driven by Brazilian and US companies; Europe is fragmented and does not utilise opportunities in large EU market Global feed to meat industry landscape will change significantly in the next 10 years Companies from emerging markets (China, Brazil) will play a leading role Irish industry needs to restructure to meet fast changing industry dynamics
New perspectives Thanks for your attention Nan-Dirk Mulder Rabobank International Nan-Dirk.Mulder@rabobank.com