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Shapen the industry from a global perspective
Nan-Dirk Mulder, 9 November 2016
EU Poultry Outlook 2020
Rabobank: The world’s leading global F&A bank
Rabobank group global presence
Animal protein is our sweet spot
Europe North America South America Asia & Oceania
14 out of top 20 meat companies are client of Rabobank
Exposure in Animal Protein: EUR 19 billion
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Headings, sub-headings, text and bullet points These buttons (located under ‘Start’ in the top bar) allow you to edit headings, sub-headings, text and bullet points:
1. Global poultry industry outlook
2. EU Poultry industry outlook
3. Key investment themes for EU poultry players
Content
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Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1f Q3f
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Feed Poultry Pork Beef
Index
Global market: Improving poultry fundamentals, but falling red meat prices
Rabobank global protein market monitor
AI leads to tight
Asian supply
Falling competing
meat prices
Global stable feed
price level
Supply reduction
Source: Rabobank analysis based on USDA, FAO and local statistics, 2016
Chicken is the global winning animal protein, China trends are very different
Global market excl. China China meat and egg market
Source: Rabobank analysis based on USDA, FAO and local statistics, 2016
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
Chicken Eggs Pork Beef
World ex China
2012 2013 2014 2015 2016f
1,000 tonnes
CAGR: +2.4%
CAGR:+2.1%
CAGR: +0.8% CAGR: -0.5%
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
Chicken Eggs Pork Beef
China
2012 2013 2014 2015 2016f
1,000 tonnes
CAGR: -1.7%
CAGR: +0.4%
CAGR: +0.2%
CAGR: +3.3%
Weaker global economic climate leads to more trading down to chicken
Canada
1.2% 1.4% 2.1%
United States
2.4% 2.2% 2.5%
Mexico
2.5% 2.5% 2.6%
Brazil
0.5%
-3.8% -3.3%
Argentina
1.2%
-1.0%
2.8%
Euro zone
1.7% 1.6% 1.4%
Sub Saharan Africa
3.3% 1.9%
3.3%
Russia
-1.2% -3.7%
1.0%
Japan
0.5% 0.3% 0.1%
China
6.9% 6.4% 6.3%
India
7.3% 7.4% 7.4%
Australia
2.5% 2.5% 3.0%
2016 (e) 3.1%
GDP Growth World
2015 3.1%
2017(f) 3.4%
IMF Economic outlook: GDP Growth 2015-2017f
Source: Rabobank, IMF Economic Outlook July 2016
1.3%
0.1%
1.0%
South Africa
ASEAN-5
4.8% 5.1% 4.8%
Exchange rate volatility has big impact on global trade
Exchange rate volatility versus USD 2007-2016
Source: Rabobank analysis based on Bloomberg, 2016
-
20
40
60
80
100
120
140
160
Jan
Mei
Sep
Jan
Mei
Sep
Jan
Mei
Sep
Jan
Mei
Sep
Jan
Mei
Sep
Jan
Mei
Sep
Jan
Mei
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
EUR/USD BRL/USD CNY/USD JPY/USD RUB/USD THB/USD ARS/USD
INDEX
2015 Avian influenza crisis has shaken up global markets
Global avian influenza outbreaks Jan 2014- Sept 2016
Source: OIE, 2016
US return after 2015 makes global trade highly competitive
Global chicken trade 2011-2016
-
500
1,000
1,500
2,000
2,500
3,000
3,500
-
200
400
600
800
1,000
1,200
1,400
Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2
2011 2012 2013 2014 2015 2016
Global Brazil US EU Thailand China
Regional trade volumes (x 1,000 tonnes)
Global trade volumes (x 1,000 tonnes)
Source: Rabobank analysis based on local statistics, 2016
China: The big swing factor for 2016 and 2017
China poultry supply: lower, more imports China Declining breeding stock imports
Source: Rabobank analysis based on local statistics, 2016
Brazil and US: Slower growth in the remainder of 2016
US Chicken placements 2014-2016
Million heads
Brazil chicken production 2014-2016
Source: Rabobank analysis based on USDA, GCMA, 2016
6
6.5
7
7.5
8
8.5
9
Jan
Feb
Mar
Ap
r
May Ju
n
Jul
Au
g
Sep Oct
No
v
Dec
2014 2015 2016 2016f
2016H1: +6.6% 2016H2: -4.5%
0
20
40
60
80
100
120
140
150
170
190
210
230
250
270
290
310
330
350
Ending stocks Production
Consumption
-
50
100
150
200
250
300
350
400
450
500
550
570
590
610
630
650
670
690
710
730
750
Ending stocks Production
Consumption
0
50
100
150
200
250
300
350
400
550
600
650
700
750
800
850
900
950
1,000
1,050
Ending stocks Production
Consumption
Feed grains: Ongoing high stock level on abundant supply
Corn Wheat Soybeans X 1 million tonnes X 1 million tonnes X 1 million tonnes
Source: Rabobank analysis based on USDA, 2016
Poultry growth everywhere, Eastern Europe and South (East) Asia in the lead
2015: +2.3%
Projected production Growth 2015 and 2016
2016f: +1.4%
Brazil
Canada
China EU-27
Australia
India
US
Japan
Mexico
Argentina
Russia +3.3%
+5.8% +2.6%
+1.0%
+3.4%
+2.1%
+1.8%
+5.7%
+8.9%
Source: Rabobank analysis based on USDA and regional data, 2016
Thailand
+7.6%
Indonesia
+4.5%
South Africa
+2.0%
Ukraine
+0.1%
Turkey
+0.3%
Colombia
+7.7%
+1.5%
+4.5
+2.2%
+2.3% +1.6%
+4.2%
+5.7%
+1.2%
+2.5%
-5.0%
+1.4%
+0.0%
+4.8%
+3.9%
+3.6%
Global poultry production growth in 2015 and 2016f
+3.3%
+3.5%
+4.7%
+0.7%
Global imports: where’s the growth?
Global chicken imports 2016 vs 2015
Source: Rabobank analysis based on USDA, 2016
EU chicken exports Jan-Sept 2015-2016
- 50,000 100,000 150,000 200,000
Other
Russia
Switzerland
Vietnam
Malaysia
Ghana
Ukraine
Saudi Arabia
Hong Kong
Philippines
Benin
South Africa
2015 2016
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Headings, sub-headings, text and bullet points These buttons (located under ‘Start’ in the top bar) allow you to edit headings, sub-headings, text and bullet points:
1. Global poultry industry outlook
2. EU Poultry industry outlook
3. Key investment themes for EU poultry players
Content
EU poultry industry to gain further market share in flat EU meat market
EU animal protein market 2007-2015 and forecast 2020
Source: Rabobank analysis based on Eurostat historic data, 2016
0
10,000
20,000
30,000
40,000
50,000
60,000
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
x 1,000 tonnes
Pork: CAGR: +0.1%
Beef: CAGR: -0.1%
Poultry: CAGR: +1.0%
Meat and eggs: CAGR: +0.3%
Pork: CAGR: -1.2%
Beef: CAGR: -2.2%
Poultry: CAGR: +1.4%
Eggs: CAGR: +0.7%
Meat and eggs: CAGR: -0.6%
CAGR: +1.5%
CAGR: +3.0%
CAGR: +1.1%
CAGR: +2.4%
Economic crisis years Recovery Outlook
CAGR: +2.9%
Eggs: CAGR: +0.7%
How high can EU poultry consumption fly?
Global per capita consumption poultry in 2015
Source: Rabobank analysis based on USDA, FAO and local statistics, 2016
0.00
10.00
20.00
30.00
40.00
50.00
60.00kg/head
Global average
EU average
North, Central and East Europe drive growth in poultry market
Source: Rabobank projections based on Eurostat, 2016
EU Poultry market growth 2015-2025
Slow growth Moderate growth Fast growth
10
15
20
25
30
35
40
45
0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5%
Per capita
consumption
CAGR Poultry demand 2015-2025
Finland
SwedenRomania
Czech Republic
Germany
Italy
Poland
Belgium
Netherlands
Denmark
France
UK
Spain
Greece
Portugal
Ireland
The EU market is changing: More concepts leads to differentiation
EU Standard
poultry
Concepts
NGOs
Industry
Retail
Consumer
Concepts Drivers
Source: Rabobank analysis, 2016
Will the poultry industry follow the egg industry example?
EU cage ban
EU egg production by different concepts
Source: Rabobank analysis based on Eurostat data, 2016
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2000 2003 2007 2010 2012 2015
Cage Enriched cage Barn Free range Organic
Towards a new EU equilibrium: Slow growing versus standard chicken
Expansion of the concept
markets
Difficult production
capacity expansion
More scarce poultry farm
supply
Growing domestic
demand
Cost price leadership in
standard chicken
Cost price leadership in
standard chicken
“Less volume, more value” “Volume growth”
Northwest Europe Central and Eastern Europe
Source: Rabobank analysis, 2016
Fast production growth in CEECs will continue in next years
EU Big 6 Poultry production 2010-2015
Source: Rabobank analysis based on MEG, AVEC, 2016
Whole chicken cost of production in 2013 EUR/100kg
Source: Rabobank analysis based on LEI, 2016
-
500
1,000
1,500
2,000
2,500
3,000
2010 2011 2012 2013 2014 2015
CAGR: +8.9%
CAGR: +0.5%
CAGR: +1.9%
CAGR: +1.9%CAGR: +1.4%
CAGR: +1.1%
CAGR: +4.6%
CAGR: +5.7%
CAGR: -0.5%
0
40
80
120
160
200
Broiler cost Processing cost
CEECs will further gain market share in EU standard chicken export market
EU poultry exports by country 2013
Source: Rabobank analysis based on local statistics, 2016
Grains exports by country
Ukraine and Russia can become sizeable fresh chicken exporters
910,000 t. 1,200,000 t.
580,000 t. 210,000 t.
230,000 t.
480,000 t. 760,000 t.
45,000 t.
Factors which could affect future market balance in EU
BREXIT
Ukraine
TTIP Mercosur
South Africa
Source: Rabobank analysis, 2016
Brexit can highly affect EU and Irish poultry industry
-1000
-500
0
500
1000
1500
Exports Imports
X 1,000 tonnes
EU poultry trade by country in 2014
Netherlands 39%
Ireland 18%
Other EU 21%
Third countries 22%
Netherlands
29%
Poland 11%
Belgium 6% Ireland
6% France
6%
Other EU 11%
Third countries
31%
UK poultry imports 720,000 tonnes
UK poultry exports 320,000 tonnes
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Headings, sub-headings, text and bullet points These buttons (located under ‘Start’ in the top bar) allow you to edit headings, sub-headings, text and bullet points:
1. Global poultry industry outlook
2. EU Poultry industry outlook
3. Key investment themes for EU poultry players
Content
The key investment themes in the EU poultry industry for 2016-2017
From volume to value
Expanding EU concept market
Changing supply chain
models
Standard chicken
production to move further
to CEECs
Industry to move from
regional to pan-European
Non-EU internationalizing to take off
Search for higher margins
Ongoing social pressure on production
Changing industry structures
More internationalisation
Source: Rabobank analysis, 2016
From volume to value: The journey to higher margins
Brand
Value added food
Value added chicken
Premium chicken
Standard chicken
Investors who follow
this strategy
The poultry value added pyramid
Low
High
Margin
level
Source: Rabobank analysis, 2016
Move out the standard segment: Poultry concepts offer opportunities
Animal welfare friendly
Environment friendly
Consumer health
Buy local
Standard chicken Standard product
Differentiated product
Consumer
concern
EU poultry market differentiation opportunities
Source: Rabobank analysis, 2016
Same sort of movement in US poultry market
• Source: Company Announcements, Rabobank Estimates, 2016
Slow Growing
Organic
Antibiotic Free
No antibiotics for human health
Traditional
*2017
*2024
Sp
ecia
lised
pro
du
ctio
n p
ract
ice
Pri
ce p
rem
ium
Producers End Users
Production Practice
Capture the growth: Invest in Central and Eastern Europe
Central Europe’s market growth Central Europe’s export potential
Source: Rabobank analysis based MEG, AVEC and local statistics, 2016
0
200
400
600
800
1000
1200
1400
Poland Romania Hungary Czech R
2015 2020F
CAGR: +2.0%
CAGR: +3.1%
CAGR: +1.6% CAGR:
+1.8%
EU poultry industry to move from national to regional to pan-European
• Source: Rabobank analysis, 2015
Nordic region- 20 million consumers
Northwest - 173 million consumers
South- 171 million consumers
East- 120 million consumers
2014-2025 From national to regional to pan-European
Need to rethink supply chain models
Grains and
oilseeds Feed Breeding Farming Processing Customer
Grains and
oilseeds Feed Breeding Farming Processing Customer
Grains and
oilseeds Feed Breeding Farming Processing Customer
Grain and
oilseeds Feed Breeding Farming Processing Customer
Horizontal specialisation model
Semi-Vertically integrated value chain
Full vertically integrated value chain: feed to poultry
Multisector –Fully vertically integrated value chain: grains to poultry
Source: Rabobank analysis, 2016
Western
Europe
CEECs
Capture the emerging market growth: Invest outside the EU
Investments by EU animal protein companies outside the EU
Source: Rabobank analysis, 2016
The EU poultry landscape will keep changing
Top 20 EU poultry companies by production volume
Source: Rabobank analysis based on public available data, 2016
-
100,000
200,000
300,000
400,000
500,000
600,000
700,000
800,000
900,000
2010 2015
Conclusions
Short term global outlook is bullish driven by:
- Low Chinese supply
- Supply reductions in US and Brazil
- Ongoing “low” feed price
Falling red meat prices is major threat
EU poultry market will keep growing in the next years (CAGR +1.0%):
- More differentiated market
- Bullish CEECs industry
- North(west) Europe more concept focussed
Investment direction to change in next years:
- From volume to value
- More concept chicken
- More focus on CEEC investments
- Changing value chain models
- More non-EU investments
- Changing ownership models
