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Reshaping the industry in turbulent times
Nan-Dirk Mulder, 12 November 2014
What future food security means to the developing and developed worlds
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1. Long term global animal protein outlook
2. The changing world: Asia as driving force
3. Long term strategic outlook
Content
Rabobank: A leading global F&A bank
Rabobank group global presence
0
100
200
300
400
500
600
700
Wheat Corn Soybeans
USD/tonne
Grains and oilseed prices: A reflection of the new market reality
Grains and oilseed prices 2000-2014 (USD/tonne)
Source: Rabobank/Bloomberg, 2014
Commodity boom years
Why? Global food supply challenge: A bumpy road
Meat demand Fuel demand
Grains and oilseed supply
Meat supply Food supply Fuel supply
Land use
Livestock supply
Food demand
Livestock/poultry supply
+20% in 10 years
???????
Expansion Efficiency Yield
Efficiency Cultivation Yield
Source: Rabobank, 2014
Stocks dwindling as supply fails to keep up with demand
World grain stocks to use ratio
Source: Rabobank analysis/USDA, 2014
-
0.05
0.10
0.15
0.20
0.25
0.30
0.35
0.40
Grains S/U
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Biofuels at turning point Global demand for biofuels
Source: BP, Rabobank analysis, 2014
-
10,000
20,000
30,000
40,000
50,000
60,000
70,000
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Asia Pacific Africa Middle East Europe South & Central America North America
1,000 tonnes oil equivalent
Take off years Fast growthCAGR: 24%
Consolidation:CAGR: +3%
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Ethanol:
12% of global corn supply
(16% of sugar cane supply)
Biodiesel:
17% of global soy oil supply
10% of global palm oil supply
25% of global rapeseed oil supply
1% of global sunflower oil supply
Biofuels have a big footprint in global grains and oilseeds markets
Animal protein - Direct market impact - By-product DDGS
Animal protein - Indirect market impact - By-product Meals
Source: Rabobank analysis, 2014
Fast growth in animal protein: 45% more in 2030
Global demand for animal protein
-
100,000
200,000
300,000
400,000
500,000
600,000
700,000
800,000
1980 1990 2000 2010 2020 2030
Seafood Eggs Sheepmeat Poultry Pork Beef
+39%
+35%
+20%
+19%
+17%
Change:30/10 Seafood:+25% Eggs: +48% Poultry: +60% Pork: +42% Beef: +25%
Source: Rabobank, FAO, OECD, FAPRI
X 1,000 tonnes
Income growth leads to higher animal protein consumption
Per capita animal protein consumption in 2010
0
20
40
60
80
100
120
140
160
180
Eggs Fish Meat other Sheep Poultry Pork Beef
kg/head
Global average
Source: Rabobank/FAO/USDA
-5,000
-
5,000
10,000
15,000
20,000
25,000
30,000
Eggs Poultry Beef Pork
1,000 tonnes
First tier: 59% Second tier: 20% Rest::21%
4% 2%
65% of global meat and egg demand growth is in Asia
Market growth estimate for key meat markets 2013-2023
Source: Rabobank, FAO, FAPRI, OECD, 2014
Asia lacks adequate resources, Africa has plentiful
Brazil10%
Argentina7%
Other South America
11%
Russia9%
Other Eastern Europe/Central
Asia
3%
Sub Saharan Africa45%
Rest of the world15%
Global land quality assessment Available agricultural land
More global trade
0
5,000
10,000
15,000
20,000
25,000
30,000
Pork Beef Chicken
1,000 tonnes
Chicken: CAGR: +5.9%
Pork : CAGR: +2.5%
Beef: CAGR: +5.0%7%
14%
8%
16%
6%
13%
Exportas share of globalproductionin 1995:
Exportas share of globalproductionin 2014:
Global meat and poultry trade 1995-2014*
Source: Rabobank/USDA, 2014
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1. Long term global animal protein outlook
2. The changing world: Asia as driving force
3. Long term strategic outlook
Content
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Global change: growth in emerging markets, decline in the West
Global meat consumption 2005-2013: CAGR +2.1% Economic crisis years
20,000
30,000
40,000
50,000
60,000
70,000
80,000
2007 2008 2009 2010 2011 2012 2013
EU and US China Rest of Asia Rest of world
1,000 tonnes
Rest of world: CAGR 2.3%
China: CAGR: 3.4%
EU + US: CAGR -0.6%
Rest of Asia: CAGR +3.3%
2007: Asia 41% share
2013: Asia 45% share
Source: USDA/FAO/Rabobank, 2014
Different dynamics in industry in emerging and Western markets
ECONOMIC CONSOLIDATION Food as nutrition/well-being
ECONOMIC REINVENTION
Food as stimulation
ECONOMIC TAKE-OFF Food as a need
ECONOMIC DEVELOPMENT Food as a social occasion
Income: < $ 5,000
Income: $ 5,000 - $15,000 Income: $15,000 - $40,000
Income: > $40,000
Time free
Location Bound
Time bound
Location free
BRIC industry growth
EU plus Western countries
Source: Rabobank
Western markets: consumer concerns to change industries
Buy local
Animal welfare
Environment friendly
Food safety
Source: Rabobank, 2014
13
Consumer concerns to drive global change in business models
California Jan 2015 cage ban
EU: 2012 Cage ban 2013 sow house ban
D: Germany Initiative tierzucht
ACT, WA: Bans on
cage houses and sow
stalls
China: Antibiotics,
melanine scandals
Canada: ban on pig gestation
Alberta: Phase out of
battery cages
NL: Chicken of tomorrow
Source: Rabobank, 2014
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Asia drives global growth: 67% of growth is in China
Consumption growth by BRIC country 2007-2013
-2,000
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
Poultry Pork Beef
1,000 tonnes
67%
8% 4% 3% 2% 2% 1%2% 2% 1%
Share in global growth: Asia: 76% -China 50% - Rest Asia 26%
Source: USDA/FAO/Rabobank
China as emerging market example of increasing consumer concerns
8,000
9,000
10,000
11,000
12,000
13,000
14,000
15,0001,000 tonnes
-3%
-5%
Lost demand3 million tonnes
20,000
22,000
24,000
26,000
28,000
30,000
32,000 1,000 tonnes
-7%
Lost demand2.6 million tonnes
China chicken consumption China egg consumption Antibiotics scandal
H7N9 outbreaks
QSR food scandal
Source: Rabobank/USDA, 2014 Source: Rabobank/USDA, 2014
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Will China recover? Yes, and growth will be fast
0
10
20
30
40
50
60
70
80
China Hong Kong Taiwan Macao
kg/capita
Chicken consumption China versus HK, Taiwan and Macao
Source: Rabobank, FAO, 2014
Only one solution: Modernization of the industry
High feed prices
Food safety
Higher incomes
Modern distribution
Modern value chain Larger companies Vertical integration Efficiency Yield Value chain management Sustainability
Animal disease threat
Source: Rabobank
Setting up global supply chains
Globalization in the meat industry
Source: Rabobank
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Strategic global food security will change industries
USD 2.6 billion investment
USD 7.1 billion investment
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1. Long term global animal protein outlook
2. The changing world: Asia and Africa as drivers
3. Long term strategic outlook
Content
Companies from emerging markets drive industry globalisation
Global ranking of top 20 meat companies by volume
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2,000
4,000
6,000
8,000
10,000
12,000
Poultry Pork Beef
1,000 tonnes
Source: Rabobank
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Towards the Asian and African decades in poultry development
Global investments
1980 1990 2000 2010 2020 2030
Global investments in the poultry industry
Source: Rabobank, 2014
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
Chicken Beef Pork
Importance of trade will grow fast
28
Global trade as share of production projections
Projections 2014-2024
Source: Rabobank, USDA, 2014
Optimal efficiency more important as ever before
• Source: Raboabnk analysis based on LEI data
Compound feed price (EUR/100 kg)
DOC Price (EUR/100 kg)
FCR Live weight
Wages EUR/hr
Processing costs
Total cost whole chicken
Poland 34.5 31.1 1.76 2.3 5 25 154
Germany 34.5 31.1 1.68 2.2 15 31 164
France 32.8 32.8 1.75 1.9 20 35 170
Italy 40.1 35.5 1.85 2.5 13 30 182
US 25.7 19.6 1.93 2.5 17 32 133
Brazil 26.5 27.0 1.80 2.1 3 22 119
Russia 33.9 32.3 1.81 2.5 2 22 153
Thailand 32.9 28.0 1.75 2.3 2 22 128
Grains & Oilseed
Feed Breeding Farming Processing Customer
Horizontal efficiency
- Efficient feed production - Access to cheap grains
- Efficient hatching egg production
-Modernisation level farms - Size farms - Skills farmers - Contract pricing model
-Modernisation level plant - Line speed - Labor use plant
Vertical efficiency
Value chain supply management Pricing
Communication
Chicken and eggs perfectly positioned as cheapest and most flexible proteins
Production cycle length “Flexibility”
Cost of production “Efficiency”
0 1 2 3
Salmon
Beef
Pork
Chicken
Eggs
EUR/KG 0 10 20 30 40 50
Salmon
Beef
Pork
Chicken
Eggs
Breeding FinishingMonths
Source: Rabobank analysis,. 2009
Meeting future supply: A multi disciplinary challenge
Knowledge
and skills
Animal nutrition
Genetics Plants
Animal health
More efficiency
Better yields
Diseases
Food safety
Management skills
Labor costs
Environment
Added value
Houses
Source: Rabobank, 2014
Ongoing high and volatile feed costs. Efficiency and yield as KSFs
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Ongoing high and volatile feed costs
Increasing pressure on resources:
sustainability
Need for higher efficiency and yield
Volatility in feed formulations and new ingredients
Enzymes can play key role for
digestibility and raise efficiency and
yield
Digestibility:
Carbohydrates, lipids/energy/proteins
Mineral components
Global food supply challenge: more
food with less resources
Source: Rabobank, 2014
