Investments in the global meat sector

New perspectives
Competition for land use between
different production alternatives
Nan-Dirk Mulder, Rabobank International
IEC London 2011 Conference
Rabobank
Rabobank: A leading Food & Agribank
Presence in 41 countries
2
Battle for food: What’s next?
Grain and oilseed prices 2000-11
700
600
500
400
300
200
100
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Wheat (US)
3
Corn (US)
Soybeans (US)
Rabobank
What is driving commodity prices?
Policies
•
•
•
•
•
Trade policy
Agricultural policy
Biofuel/energy policy
Food safety regulations (e.g., GMO)
Sustainability criteria
Supply factors
•
•
•
•
•
•
Demand factors
Agricultural land
Yield (output/ha)
Farm management
Farm-input prices
Weather
Diseases
Commodity price
•
•
•
•
Feed
Food
Biofuels
Industrial
Other price determining factors
Source: Rabobank, 2009
•
•
•
•
•
•
•
Fund activity
Exchange rates
Freight rates
Crude oil prices
Technical specifications
Market sentiment and speculation
New non-agri market entrants
Rabobank
Key challenge: Global food supply
Meat demand
Food demand
Fuel
demand
Meat supply
Food supply
Fuel supply
Livestock/poultry supply
Livestock supply
Grain and oilseed supply
Land use
5
+20% in
10 years
Expansion
efficiency
yield
Efficiency
cultivation
yield
???????
Rabobank
Great challenge for sector: Fast-growing
demand for agricultural products
Global demand for agriculture (change 2010-20)
Crops
220%
Livestock and dairy
Biofuel
Additional demand: 500 mln tonnes
De
:
500
m.
tonnes
Grains and oilseeds markets 2008-2018
Share
De
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%
200%
180%
160%
140%
120%
Demand for agriculture 2010-20
De
100%
80%
Fuel, 130 m illion
t onnes
60%
Food, 180 million
tonnes
40%
20%
0%
Feed/ Animal
protein, 190
million t onnes
Source: OECD, FAO, Rabobank estimate, 2011
6
Rabobank
How to produce 500 million tonnes more
of grains and oilseeds?
The supply challenge: hectares or yield?
Unused arable land:
180 million hectares
So uth A frica
3%
HECTARES
US
11%
FSU
22%
B razil
53%
food, feed, fuel
demand 2020
Additional
140 million
hectares
EU-27
11%
Yield improvement
food, feed, fuel
demand 2010
LOW
HIGH
YIELD
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
7
Rabobank
Eggs: Asia 75% of global growth
Egg market
growthgrowth
estimate
2010-20
Global market
2010-2020
7,000,000
40%
First tier countries:
78% of global market growth
Second tier countries:
10% of global market growth
6,000,000
5,000,000
4,000,000
3,000,000
2,000,000
13%
11%
1,000,000
6%
4% 4% 4%
2% 2% 2% 2% 2% 2% 2%
1% 1% 1%
-1,000,000
8
Source; Rabobank estimate
Rabobank
Meat demand: Developing countries
70% of global growth
Market-growth estimate for key meat markets 2010-20
25,000
20,000
15,000
10,000
5,000
-5,000
Source: Rabobank, FAO, FAPRI, OECD
9
Poultry
Beef
Pork
Rabobank
Who’s going to supply?
Egg cost of production (EUR ct/kg)
Broiler cost of production EUR/kg cwe
90
1.2
80
1
70
0.8
60
0.6
50
40
0.4
30
0.2
20
0
US
10
BRA
ARG
EU
RUS
CHI
THA
IND
EU
US
Brazil
Ukraine
India
Source: Rabobank estimate
10
Rabobank
Differences in ‘trade-ability’ between
proteins
Importance of global trade in animal proteins
18.0%
Shell egg and egg products trade
2,500,000
16.0%
2,000,000
14.0%
12.0%
1,500,000
10.0%
8.0%
1,000,000
Egg products: CAGR: +6.6%
6.0%
500,000
4.0%
2.0%
Shell eggs: CAGR +5.5%
-
0.0%
Eggs
Beef
1980
11
Pork
1990
Poultry
2000
Source: Rabobank based on FAO/USDA
2007
Seafood
Egg products
Shell eggs
Rabobank
Future egg-production growth
Global egg production 2010-20 (1,000 tonnes and CAGR 2010-20)
Top 15 Egg producing countries in 2020
and CAGR 2010-2020
40,000
35,000
+2.0%
30,000
25,000
20,000
15,000
10,000
+2.7%
-0.2%
+0.5%
5,000
+4.5%
+2.5% +1.5% +2.5% -0.2%
+5.0% +5.5%+2.5% +3.0% +5.0% +0.5% +5.0%
-
12
2000
Source: Rabobank based on FAO/USDA/FAPRI/OECD
2010
2020
Rabobank
Future meat-production growth
Global meat production 2010-20 (1,000 tonnes and CAGR 2010-20)
120,000
100,000
+2.3%
80,000
+2.5%
60,000
+1.3%
+0.2%
40,000
20,000
+2.4%
+3.4%
+4.5%
+3.8%
+1.8%
+1.2%
+0.8%
+0.8%
+3.8%
-
13
Source: Rabobank/OECD, 2010
Sheep
Poultry
Pork
Beef
Rabobank
Water issues will start to bite
14
Rabobank
Looking ahead (I): ‘Ring of fire’ region as
future spearhead in global trade
Rabobank
Looking ahead (II): The commodity-price
roller coaster
Grain and oilseed prices (USD/tonne)
700
600
500
400
300
200
100
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Wheat (US)
Corn (US)
Soybeans (US)
Source: Bloomberg
16
Rabobank
Looking ahead (III).
CSR key success factor
Tonnes CO2-e per tonne of production Government policy
Beef Brazil
Beef Ireland
Beef NL
Pork
Poultry
Salmon
Cheese
Eggs
Milk
Retail
Cashew nuts
Walnuts
Beans
0
17
10
20
30
40
50
60
70
Rabobank
Price competitiveness, flexibility of eggs
fits future market needs
Cost of production – efficiency
Production cycle - flexibility
Egg
Egg
Chicken
Chicken
Pangasius
Pangasius
Pork
Pork
Shrimp
Shrimp
Beef (finishing)
Beef (finishing)
Salmon
Salmon
0
18
Source: Rabobank estimate
1
2
3
0
10
20
30
40
Rabobank
How to pass on higher feed prices?
Bargaining
power/
consolidation
rate
Supply/deman
d
Market
intelligence
Purchasing power
19
Very low consolidation in egg industry
Consolidation in the global animal-protein industry
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
22%
2%
7%
Eggs
7%
10%
20%
Pork
Other
Beef
9%
Poultry
7%
7%
Feed
Top 3 market share
Source: Rabobank estimate
20
Rabobank
Will the egg industry follow the meat
consolidation trend?
1,000 tonnes
14,000
Global ranking: Meat companies
12,000
10,000
8,000
6,000
4,000
2,000
-
21
* Including Bertin, Pilgrim's Pride
** Merger Perdigão, Sadia Source: Rabobank estimate
Poultry
Beef
Pork
Rabobank
Consolidation in the global meat industry
22
Rabobank
n
si
gie
les
sa
sk
Ri
iti
m
ga
Gl
o
Ac bal
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s
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pr s to e p
od lo lat
uc w- fo
tio co rm
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ne
Sy
Ac
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ow s t
th o n
m ew
ar
ke
ts
Winners think across borders
n
tio
Will egg processing follow the
internationalisation process in meat?
Value;
but what is impact
of traditional cage ban?
1,600
1,600
110
5%
LEGEND
(x 1,000 mt,
eggs, 2010)
Access to low cost
production
100
xx%
5%
24
500
5-10%
market growth
50
50
10%
20%
45
150
0.5%
25%
1.5%
12
Production
Importance
egg products
in total production
2%
Access to
low cost
production
25%
30%
Value
Access to distribution
35
3%
12
10%
Economic growth leads to new
opportunities for the industry
ECONOMIC TAKEOFF
Food as a need
ECONOMIC
REINVENTION
Food as stimulation
Time free
Income: > $40,000
Income: < $ 5,000
2010
Location Bound
Location free
Income: $15,000 - $40,000
Income: $ 5,000 - $15,000
ECONOMIC DEVELOPMENT
Food as a social occasion
2020
Time bound
ECONOMIC
CONSOLIDATION Food as
nutrition/well-being
Golden rules for industry winners
Customer focus
• Right client portfolio
• Preferred suppliership
• Branded products
Risk mitigation
• Price volatility control
• Multispecies
• Product differentiation
• Internationalisation
Value-chain captain
• Manage supply and
demand
• Keep certain level of
flexibility
Supply
competitiveness
• Efficiency
• Scale
• Traceability
• Food safety
26
Rabobank
Dealing with volatility key success factor
for whole value chain
Grains and
oilseeds
Feed
Farming
Processing
Customer
Market
intelligence
Information
exchange
=
+
Volatility in
grains and oilseeds
Volatility in eggs markets
Market power
Request for
stable sales
prices
Hedging/price
management
Volatility in
exchange rates
Risk
management
27
Rabobank
Picture of the future?
Local trade
Fresh perishable products
-Fresh eggs and egg products
-Speciality products
28
Global trade
Non perishable products
- Frozen and dried products
Rabobank
… or this?
29
Source: Prof dr David Hughes
Rabobank
Or is this the future?
30
Rabobank
Future for eggs
- Cheapest animal protein source
- Very efficient feed-conversion rate
- Industry’s early move to
alternative systems and low CO2
footprint to become a competitive
advantage
- Product and market
development needs to speed up
-Egg products industry will benefit
from globalisation of market
-CSR will become a KSF
31
Rabobank
Conclusions
Great long-term egg 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 impact 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 egg industry is going to continue; more internationalisation in
the egg-processing industry driven by US and EU companies
Global animal protein ndustry landscape will change significantly in the next 20 years –
Companies from emerging markets (e.g., China, India, Latin America) will play a more
leading role
32
Rabobank
New perspectives
Thanks for your attention
Nan-Dirk Mulder
Rabobank International
[email protected]
Rabobank