The sheep and sheep meat trade market Second EU Sheep Meat Forum Brussels, February 25, 2016
Partnering your agribusiness development Market research 45 years Focused on agribusiness Worldwide coverage Experts in the 5 continents Market due diligence Consulting 2
GMC: Comprehensive Global Coverage REGIONAL MARKET INSIGHTS, DATA & FORECASTS BY SPECIES Socio-economic assumptions Pig Poultry Beef Sheepmeat North America South America EU Middle East / North Africa Sub-Saharan Africa Asia Oceania USA Canada Brazil Argentina All 28 Members Saudi Arabia Turkey South Africa Nigeria China Japan Australia NZ Mexico Uruguay Chile Columbia CIS Russia Egypt UAE +16 others Angola Kenya +42 others India South Korea Philippines Paraguay Ukraine Vietnam Venezuela Belarus Thailand Peru + other CIS Malaysia Indonesia GLOBAL SYNTHESIS Socio-economics Production Consumption Trade Prices Industrial developments Total Meat Global Pigmeat Global Poultry Global Beef Global Sheepmeat 5
Agenda International trade in sheep & goat meat Production issues The profitability problem 6
1961 1963 1965 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 Millions tonnes Meat international trade developments Very small expansion of sheep and goat meat trade compared to other meats World meat trade volumes, 1961-2013 18 16 14 12 10 Beef Pork Poultry meat Sheep & goat meat 8 6 4 2 0 Source: Gira, based on FAO Sheep & goat meat trade rose from c. 0.5 mio t in 1961 to 1.2 mio in 2013 (CAGR +1.8%) 7
Meat international trade developments The share of meat production which is traded increased, except for sheep and goat meat World meat trade as a % of production, 1961,2013 16% 14% 1961 2013 12% 10% 8% 6% 4% 2% 0% Beef Pork Poultry meat Sheep & goat meat Source: Gira, based on FAO 8
Supply: sheep & goat meat exporters AU & NZ accounting for >90% of world exports Major sheep & goat meat exporters, 1990-2015, '000 t cwe 1200 S.Am AU NZ Others 1000 800 600 400 200 0 Source: Gira compilations CAGRs: AU +2.1% - NZ -0.2% No other significant exporter has emerged (yet?) 9
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Mio head '000 t cwe 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Mio head '000 t cwe Basically 2 exporters Facing profitability and climatic issues Declining flocks AU: -3.7%/year NZ: -2.8%/year Sheepmeat production AU: slightly rising: +0.3%/year Changing orientation from wool to meat NZ: -0.4%/year Better alternative productions Exports AU: +2.1%/year % of production: from 40% to 64% NZ: +0.5%/year % of production: >90% (stocks?) AU flock, production & exports, 1990-2015 200 800 180 700 160 600 140 120 500 100 400 80 300 60 200 40 20 100 Flock Production Exports 0 0 Source: Gira compilations NZ flock, production & exports, 1990-2015 70 700 60 600 50 500 Sharp flock productivity improvements Impact of droughts on production + exports 40 30 20 400 300 200 10 100 0 Flock Production Exports Source: Gira compilations 0 10
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Lamb/mutton split More lamb and less mutton as AU flock switches from wool to meat focus Shares of lamb vs. mutton in sheep meat trade, 1990-2015, '000 t cwe 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Mutton Lamb Source: Gira compilations 11
Expenditure index, constant prices Sheepmeat demand Quite flat, except in China and Russia 300 Sheep Sheepmeat expenditure expenditure* index, index, 2004-2016f 2004-2016(f) (2004 local (2004 currencies) L.C.) Based on 2004 producer prices 250 200 CHINA RUSSIA 150 USA SOUTH AFRICA E.U. 100 OCEANIA URUGUAY 50 Source: GIRA GMC 2015 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 * Expenditure = producer prices x total consumption Weighted (consumption) averages 12
Demand: sheep & goat meat importers Not a very dynamic demand market: sheepmeat trade is more supply-driven than demand-driven Major sheep & goat meat importers, 1990-2015, '000 t cwe 1200 EU SU/RU N.Am ME/NA CN F.East Others 1000 800 600 400 200 0 Source: Gira compilations CAGRs: EU: -1.3% - US/CA: +6.3% - MENA: +0.5% - CN: +11.5% CN developments: opportunities for other world exporters? Volatility dependency risks 13
MENA Competition of live trade Live imports often exceeded sheep & goat meat imports in the mid 1990s Sharply declined since Less supplies AW restrictions in exporting countries But demand remained buoyant in MENA Still accounting for 25-35% of total shoat and shoat meat imports in the area AU major supplier Others Horn of Africa (Sudan, Somalia) EU 14
Sheepmeat trade flows, 2015 Flows in '000 t cwe 10 50 100 > 200 Net importer Net exporter 15
Sheep & goat flocks Most of world flock in developing countries Generally hardy multipurpose breeds: wool, dairy and meat Hard data is frequently lacking Sheep and goat flocks, 2014 (mio head, FAO data) 16
Mostly for subsistence and/or local trade Sheep & goat flocks With few exceptions, highest numbers/capita in developing countries Sheep and goat flock to population ratio, 2010/14 (sheep & goat head/capita, FAO data) 17
Sheep & goat flock growth Concentrated in developing countries Long term flock growth mainly in Africa and Asia But falling in the traditional meat market oriented countries Sheep and goat flock CAGR from 1990/94 to 2010/14 (FAO data) 18
Sheep & goat meat production Few countries producing more than 0.1 mio tonnes Data issues Productivity issues in many countries In many countries, shoat meat is not part of a structured market economy Mostly informal slaughterings Sheep and goat meat production, 2013 (FAO data) 19
AU & NZ, EU, US, RU CN (& IN) major exceptions Sheep & goat meat production Little growth in the traditional meat industry countries Sheep and goat meat production CAGR from 1990/93 to 2010/13 (FAO data) 20
A serious profitability issue
Price index, constant prices Sheepmeat producer price trend Flat in AU/NZ and EU Sheepmeat Sheepmeat producer prices producer indices, prices 2004-2016f indices, 2004-2016(f) (2004 = 100 (2004 in local L.C.) currencies) 250 Based on 2004 producer prices 200 150 100 CHINA SOUTH AFRICA RUSSIA OCEANIA E.U. URUGUAY 50 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Source: GIRA GMC 2015 Weighted (consumption) averages 22
1961 1963 1965 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 Trade of other sheep & goat products Volatility is the rule Indices of world trade in various sheep and goat products, 1961-2013 (1961 = 100) 600 500 Sheep & goat skins Wool Cheese, sheep milk 400 300 200 100 0 Source: Gira, based on FAO Sharp decline in wool trade competition from synthetic fibres. Poor wool prices Rising trade in sheep skins But (very) high volatility and declining prices 23
Index:2006 = 100 Sheep meat vs dairy industry Same situation of no price/unit gains over time 200 Deflated milk prices in Local Currency, 2006-15 Indices of deflated milk prices in local currencies, 2006-2015 (2006 = Indexed on base 100) year 2006 = 100 Volatility 21% 150 Volatility 14% 100 Volatility 9% Volatility 15% 50 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Source: Gira compilations EU US CN NZ Economic gains to be made through efficiency