Australian Agriculture in the Global Context · Australian Agriculture in the global context Why the World requires Australia to be Responsible and Productive with its Agricultural

Australian Agricultural Company Limited

Australian Agriculture in the Global Context

Why the world requires Australia to be responsible and productive with its Agriculture assets

1


Who is AAco?

Cairns

Townsville

Mackay

Rockhampton

Brisbane

Darwin

Locality AAco property Feedlots Agistment

Australia’s largest producer of beef

AAco portfolio More than 600,000 head of cattle

19 cattle stations, two feedlots and three farms

Owns and manages 7.2 million ha of land across Queensland and the Northern Territory

The world’s largest Wagyu beef producer

Exports to more than 20 countries globally

2


Australian Agriculture in the global context

Why the World requires Australia to be Responsible and Productive with its Agricultural Assets

Australia’s importance to global trade

Global macro drivers for agriculture and implications for Australia

Impact of global supply shocks in agriculture

AAco’s role in the global context

3


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Source: Bloomberg and USDA

Australia is one of the major global exporters of agricultural production…

Wheat (000’ MT) Sugar (000’ MT)

Cotton (000’ 480lb bales) Beef (000’ MT)

#2 #3

#2 #3

4


China

17.2%

Japan

12.3%

Indonesia

6.7%

US

6.2%

Other

Asia

20.1%

NZ

4.0%

Republic

of Korea

6.3%

Wheat

17.7%

Beef

13.7%

Wool

8.3%Cotton

7.4%

Wine

5.6%

Other

25.1%

Lamb and

Mutton

4.8%

Barley

4.0%


Source: ABARES

Australia exports c.60% of its total farm production, the majority of which goes to Asia

Major Australian agriculture export markets

Major Australian agriculture export products

(2011, by value)

5








6


Global macro drivers for agriculture

Source: United Nations (2011a), ABARES model output

40%

77%

211%

Population and income growth in developing economies to drive food demand…

Real growth World agrifood demand, population and income (2050)

50

100

150

200

250

300

2007 2014 2021 2028 2035 2042 2049

World income

World agrifood demand

World population

Index (2007 = 100)

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Source: ABARES model output

World agrifood demand by region

Demand for food in Asia expected to double by 2050—accounting for 70% of the global increase

480

225

798

1,350

1,503

815

511

1,745

1,993

3,071

0 1,000 2,000 3,000 4,000

Rest of Asia

India

China

Rest of world

Asia

2007 2050

Breakdown of Asia

demand

Billion (2007 US$)

8




World agriculture imports in Asia

Multiplied impact on demand for imports in Asia given widening regional food production deficits

79

5

39

123

123

108

360

591

0 200 400 600

Rest of Asia

India

China

Asia

2007 2050Billion (2007 US$)

9

Australian Agricultural Company Limited Source: Food and Agricultural Policy Research Institute

7.5%

29%

32.2%

70.2%

41.4% 47.7%

23.7%

48.7%

Substantial increases in protein consumption over past 10 years …


23.3%

10


Global trade for meat (inc. beef) is forecast to grow substantially…


World agrifood imports by commodity group

Beef import demand expected to be 3x higher by 2050

Global import demand (beef)


29

27

38

10

46

71

36

53

67

83

86

98

136

209

0 50 100 150 200 250

Other food

Fish

Vegetable oils

Dairy products

Cereals

Vegetables / fruit

Meat

2007 2050

0

1

5

2

1

5

5

10

18

39

0 25 50

India

ASEAN

Rest of Asia

Africa

China

2007 2050Billion (2007 US$)

11

Australian Agricultural Company Limited Source: USDA

Global cattle herd numbers decreasing, exacerbated in the US…


US cattle herd (000’ head) Australian cattle herd (000’ head)

80,000

100,000

120,000

1982 1992 2002 20120

10,000

20,000

30,000

1982 1992 2002 2012

(22%)

34%

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Implications for Australian Agriculture


Australian production Australian exports

Increased global demand will lead to a dramatic shift in production and exports of key Australian agricultural commodities …

0.9

2.3

3.4

3.8

7.8

2.2

3.3

6.6

7.0

14.3

0 4 8 12 16

Sheep meat

Fruit

Dairy

products

Wheat

Beef

2007 2050

0.8

0.5

1.3

2.7

4.5

1.3

1.8

3.5

5.8

10.4

0 4 8 12 16

Sugar

Sheep

meat

Dairy

products

Wheat

Beef

2007 2050Billion (2007 US$)

2007 US$10 billion

2050 US$25 billion

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14


0

50

100

150

200

250

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010

Food Price Index Meat Price Index

World food inventories run down in 2007–08, resulting in price spike

Source: FAO Food Price index


15


10.00

20.00

30.00

40.00

Year

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

Wo

rld

sto

cks/

use

%

200

300

400

500

600

700

800

900

1,000

1,100

1,200

Wh

eat p

rices (U

S¢/BSH

)

Stocks to Use Wheat

Case study: wheat example

Source: USDA and CBOT Wheat Futures

2007: World

Stocks/Use 20%

2008: Prices peak at $10.73


World wheat inventories vs. wheat prices (US/BH)

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Potential global flow on effects of a significant supply shock event


External shock to Australian exports

Inventories run down

Global prices increase

Wheat importers increase spend as a % of GPD

Additional spend impacts on the domestic economy?

Severe dislocation to local industries

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Critical initiatives required to improve Australia’s productivity in agriculture …

Accelerate R&D

Create revolving food banking

program

Create taxation incentives

Establish effective natural disaster

insurance

Implement education programs

Australia’s key

productivity initiatives

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Europe

6%UK

9%

Asia

24%

North

America

42%ANZ

19%

Foreign investment supporting Australian agriculture

Foreign investment assists Australian agricultural producers access new and higher value markets….

AAco register breakdown by geography Select recent foreign investments in Australian agriculture assets

Source: Public filings

Foreign investor Australian asset

Glencore Viterra (ABB Grain)

Agrium / Cargill AWB

Kirin Nat. Foods / Dairy farmers

Hassad Foods Various rural aggregations

Olam Timbercorp

Cargill Teys Brothers

JBS Rockdale / others

Sumitomo Nufarm

Wilmar CSR Sugar

19








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Source: ABARES

AAco is a low cost / high quality producer with close proximity to the world’s highest growth markets in Asia

Low cost production

Predominantly grass fed primary production

Significant investment in productivity improvements

High quality Superior beef quality in terms of size of cuts produced from

an animal and the marbling of the beef

Highly attractive in export markets (i.e. Wagyu)

Assurance of clean, safe food

Disease free, clean image

– National Livestock Identification System

Proximity to Asia Significant freight advantage vs. Brazil

Fastest growing beef markets globally

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Transforming itself into a globally focussed, vertically integrated producer …

2010

• Rebuild herd

• Achieve positive profit result

2011

• Adjust land holdings (Tipperary, Meteor Downs)

• Increase feedlotting

• Capital raised to fund growth

2012

• Vertical integration (proposed NT abattoir)

• Further adjustment of land holdings

• Divestment of underperforming assets

2013

• Achieve scale and relevance

• Reward shareholders

• Dividends and capital growth

Work in progress

Progress on strategic initiatives over time

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6%

28%

53%

13%

Feedlot

Trading

Breeders

Calf accrual

39%

24%

10%

9%

18%

Brahman

Barkly

Angus

Wagyu

Gulf

37

1

38

5

37

4

39

5

52

4

50

3 55

6 58

8

59

0

50

8 57

7

66

6

0

100

200

300

400

500

600

700

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

Herd restocked to record levels and well positioned to take advantage of global supply constraints

AAco herd levels over time Herd composition

Cattle by breed


23



Translating to superior financial performance over the last 2 years

Cattle sold (000’ head) EBITDA ($m)

Kg’s produced (m)

100

150

200

250

2009 2010 2011

0

50

100

2009 2010 2011

(80)

(40)

0

40

80

2009 2010 2011

81 64

51

240

166 176

(49)

42 58

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Pursuing vertical integration via proposed processing facility in Darwin…. decision to acquire land for the proposed site announced 30 May


Townsville

Mackay

Rockhampton

Brisbane

Proposed AAco Darwin Meat Processing facility

Existing abattoirs

Proposed NT abattoir vs. others in region

Proposed AACo facility

Compelling fundamentals for processing plant in Northern Territory

Substantial benefits for Northern Australian pastoralists

Proximity to growing Asian markets

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AAco is a recognised industry leader in developing innovative management programs to improve the productivity and security of its asset base


Individual Animal Recognition

Unprecedented management control and selection over breeding and trading herds

180,000 head of AAco cattle already inducted into the system

Improved data and better visibility on attrition, valuation and performance on an individual animal basis

26


AAco’s is utilising its superior genetics and breeding programs to maximise profitability as well as deliver cattle to suit end markets


Barkly composite Wagyu program Gulf composite

27


Significant opportunity exists for AAco to increase contributions from cropping to improve returns across its portfolio


Cropping at Goonoo

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Other key management initiatives


Land use & water management Energy management Technology and innovation

Animal welfare Indigenous engagement Youth engagement

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In summary

Population and income growth in developing economies is driving food demand

Need for more productivity in Australian Agriculture

AAco transforming itself into globally focused vertically integrated producer

Latest initiative – acquisition of land for Darwin processing facility. Substantial benefits for Northern Australia and Australia’s trading partners

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Documents

Australian Agriculture in the Global Context · Australian Agriculture in the global context Why the World requires Australia to be Responsible and Productive with its Agricultural