CATTLEMAN’S CONFERENCE
March 2010
Ferdi Meyer
1
Overview of Presentation
• Feed and beef market fundamentals
– World market
– Domestic market
• Profitability indicators of SA beef sector
3
World Market – Fuel
World Ethanol and Oil prices
100
8.0
90
7.0
80
5.0
50
4.0
40
3.0
30
2.0
20
2014
2013
2012
2011
2010
2009
2008
0.0
2007
0
2006
1.0
2005
10
2004
US $ / bbl
60
US $ / gallon
6.0
70
US $/barrel Persian Gulf: F.O.B. Imported Crude Oil
US$/gallon World ethanol price (BRA anhydrous)
World biodiesel price Central Europe)
4
World Cereal Price Projections
400
350
US $ /ton
300
250
200
150
100
50
0
2000
2002
2004
2006
Maize Gulf, FOB
2008
2010
2012
2014
Wheat HRW, FOB
Source: BFAP projections
5
World Oilseed Price Projections
800
700
US $/ton
600
500
400
300
200
100
0
2000
2002
2004
2006
Sunflower seed, CIF Rhine
2008
2010
2012
2014
Soye bean seed, CIF Rott
Source: BFAP projections
6
US Production
0.7% decrease from 2009
7
World Production
…continues to decline
8
US Consumption
0.3% decrease from 2009
9
World Production
Production decreases:
• Argentina (13 percent)
• China (4 percent)
• United States (2 percent).
Production increases (but will not offset
decreases):
• Brazil (4 percent)
• India (5 percent)
………will continue declining, but at a slower rate of
less than one percent
10
Forecasts (decreases):
Argentina:
• production decrease 13 percent (tighter cattle
inventories)
• begin 2010 with a herd 10 percent lower than just
two years ago
• drought, persisting = primary driver of herd reduction
– fewer weaned calves, a smaller herd and a
reduction of cows for slaughter = limit supplies
United States:
• production to decline nearly 2 percent
• cattle herd has been contracting since 2007
11
Forecasts (decreases):
China:
• continuing contraction of the cattle herd
• beef production will fall to just over 5.5 million
tons
• backyard producers discouraged by a marketing
system disadvantageous to small producers
• despite high cattle prices, production costs have
risen at a faster rate, squeezing profit margins
• uncertainty - outbreaks of foot and mouth
disease (FMD)
12
Forecasts (increases):
Brazil:
• production is forecast to rise 4 percent
• herd continues to expand and is forecast to
reach 185.2 million head by 2010
• increased availability of slaughter cattle will not
meet strong demand for exports, which
accounts for the bulk of the increase, but also
satisfy solid domestic demand
13
Forecasts (increases):
India:
• production to rise 5 percent
• primarily driven by strong domestic demand
• firm demand for exports will also bolster
production
14
Dollars per cwt
US Cattle Prices will improve…
NE Direct
Fed Steer
OK City
Feeder
Steer
15
Returns
US Pork Price Trends
16
SA OUTLOOK
Real Per Capita GDP Growth
7.0
6.0
% Change
5.0
4.0
3.0
2.0
1.0
0.0
2000
2002
2004
Baseline 2008
2006
2008
Baseline 2009
18
2010
2012
Update 2010
2014
Exchange Rate
1200
SA cents /USD
1000
800
600
400
200
0
2000
2002
2004
2006
2008
2010
2012
2014
19
SA White Maize Record Harvest
Thousand tons
8000
7781
7500
7190
7000
6745
6500
6000
1981
2008
2010
20
SA Maize Market
2500
Thousand ha
2000
1500
1000
500
0
2002
2004
2006
2008
WMZ area
WMZ Safex
2010
2012
2014
YMZ area
YMZ Safex
21
SA Oilseed Market
5000
4500
4000
R/ton
3500
3000
2500
2000
1500
1000
500
0
2002
2004
2006
Sunfl SAFEX
2008
2010
2012
2014
Soya SAFEX
22
23
SA Beef Market
800
700
Thousand tons
600
500
400
300
200
100
0
2002
2004
2006
Beef production
2008
2010
2012
2014
Beef consumption
Ave Auction Price
24
Meat Consumptions Growth
8%
20%
7% 1%
25
Chicken as a substitute
26
2100
16
1800
14
12
1500
10
1200
8
900
Ratio
Thousand tons
Chicken Production
6
600
4
300
2
0
0
2002
2004
Chicken production
2006
2008
2010
Chicken consumption
2012
2014
Chicken:maize ratio
27
27
SA Calf and Beef Prices
3500
3000
Price c/kg
2500
2000
1500
1000
500
0
2002
2004
2006
2008
Beef average auction price
2010
2012
2014
Calf average auction price
Ratio
28
Industry Profitability
25
Ratio
20
15
10
5
0
2002
2004
2006
2008
2010
2012
Beef: maize price ratio
Calf: maize price ratio
2014
29
1000
900
800
750
600
600
450
400
300
200
Maize R/ton
Beef c/kg
Real Beef and Maize Prices
150
0
0
1997 1999 2001 2003 2005 2007 2009 2011 2013 2015
Real Beef price
Real maize price
30
31
BASELINE IN AUGUST 2010
32