New perspectives
Outlook for the European meat market
8 January 2010
Albert Vernooij
Rabobank International
Rabobank International
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•
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Over 80 people
in 12 countries
Focus areas:
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Beijing
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New York
Shanghai
• Clean Tech
• Dairy
New Delhi
Hong Kong
Mumbai
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• Farm Inputs
Singapore
• Food Retail
• Fruits & Vegetables
Sao Paulo
• Grains & Oilseeds
• Sugar & Sweeteners
Sydney
Melbourne
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Chile
Christchurch
Buenos Aires
3
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Contents
Section 1
The global meat market
Section 2
Challenges for the European meat industry
Section 3
Implications for the European meat industry
IMF forecasts further recovery
world economy after 2010
IMF Long term outlook global economic growth
6%
Recession
5%
Recovery
4%
3%
2%
1%
0%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
-1%
-2%
Source: IMF, October 2009
In 2010 modest recovery in most countries
8.1%
5.6%
2.5%
0.4%
Canada
-2.5%
0.3%
Euro Area
-7.5%
13.0%
9.0%
9.0%
8.5%
-4.2%
1.5%
3.3%
US -2.7%
6.3%
5.2%
Mexico
-7.3%
GDP Growth
Russia
2.7%
0.7%
2.1%
0.4%
3.3%
1.3%
1.5%
2.1%
5.7%
5.1%
3.5%
5.2%
2008
3.0%
2009 (f)
-1.1%
2010 (f)
3.1%
7.3%
5.4%
1.7%
Japan
-5.4%
Africa
World
2007
4.0%
1.7%
9.3%
2.3%
-0.7%
China
Brazil
-0.7%
8.7%
6.8%
-2.5%
Source: Rabobank based on IMF Data, October 2009
4.0%
2.4%
+0.7%
Australia
1.5%
Argentina
India
2.0%
World meat market will grow by almost
40% in next 20 years
Global meat market 1980-2010-2030
450,000
400,000
+ 16%
+ 19%
350,000
+ 24%
300,000
39%
250,000
+ 33%
200,000
35%
+ 32%
150,000
36%
23%
100,000
37%
40%
50,000
21%
23%
32%
1980
1990
2000
Sheepmeat
Source: Rabobank based on FAPRI, USDA, OECD, 2009
Poultry
2010
Pork
2020
Beef
2030
With a fast consolidating global
meat industry
14,000
Global ranking: Meat companies
12,000
10,000
8,000
6,000
4,000
2,000
1,000 tonnes
Poultry
Beef
Pork
Where is Europe?
Differences in size and consolidation levels between
EU, US, Brazilian, Russian and Chinese companies
Poultry
thousand tonnes
Beef
Market
Share
Top 3
22%
26% 12%
Source: Public company information, 2009
5%
11% 77% 42% 20%
2%
13% 57% 26% 28%
6%
Contents
Section 1
The global meat market
Section 2
Changing industry landscapes
Section 3
Implications for the European meat industry
1. Sustainability: Rising cost prices mainly due
to policy measures but ‘Food miles’ might offer
opportunities
CO2 excretion per specie and in
selected countries for beef
Increase in pork cost price due to policy measures
in selected countries
30
EURO Cent
per kg cwe
CO2 per kg beef
25
Sweden
±16-20 kg
20
EU
±20-27 kg
Brazil
±38-40 kg
15
10
5
0
2013
Source: LEI/PVE, 2009
ES
2007
Production rights
Spatial planning
2013
DK
2007
2013
DE
2007
2013
2007
FR
Environment
Public health
11
2013
2007
2013
2007
NL
PL
Animal welfare
2. Politics: a WTO-agreement will result in fast
increasing margin pressure
Expected 2014 EU protein prices without (baseline) and with WTO agreement (2008 proposal)
2007
2014
Baseline
2014
WTO
2014 Baseline
/2007
2014 WTO
/2007
Beef & veal
308.4
293.8
238.01
-5%
-23%
Pork
135.2
147.4
120.89
9%
-11%
Poultry
148.3
140.6
108.27
-5%
-27%
Lamb (heavy)
399.0
440.6
385.00
10%
-4%
EU meat industry highly vulnerable to possible WTO agreement:
 With current high protection, already 21% of lamb and 6-7% of beef and poultry
demand is imported
 Feed availability (including meat & bone meal), natural conditions and
higher regulation implementing costs result in higher cost prices in the EU
Source: European Parliament – The impact of increasing operating costs on meat livestocks in the EU, 2009
3. Position in the value chain
Be prepared for high volatility in the value chain
Grains & oilseeds
Feed
Farming
Processing
Customer
Volatility in
exchange rates
Volatility in grains
and oilseeds
Volatility in meat
markets
Retail & Foodservice: Request for stable sales prices
Position in the value chain (2)
Feed industry able to forward raw material
price increase
Indexed price development Soy meal, wheat, barley and feed
2005 = 100
250
200
150
100
50
2005
Source: Rabobank, 2009
2006
2007
Soja
Barley
2008
2009
Wheat
Feed
Position in the value chain (3)
The primary industry has not been able to forward
the price increase
Indexed price development feed, piglets, pigs
2005 = 100
180
160
140
120
100
80
60
40
2005
2006
2007
Piglet price
Source: Rabobank, 2009
2008
Pig price
2009
Feed
Position in the value chain (4)
Retail prices follow price changes with a
time lag
160
140
120
100
80
60
2005
Pig price
Source: Rabobank, 2009
2006
Bellies
2007
Shoulder
2008
Ham
2009
Retail prices NL
4. Competition:
Cost price leading factor; exchange rate deciding
factor
Cost price beef 2006, in USD/kg cwe
Cost price pork 2007, in EUR/kg cwe
Development exchange rate €  $, €  £
1,60
1,40
1,20
1,00
0,80
0,60
0,40
2005
Source: Agri Benchmark, LEI, Oanda.com, 2009
2006
2007
EUR-->USD
2008
2009*
EUR-->BP
Competition (2)
Pork: exchange rate key for price development
Beef: import key for industry shape
Development EU pork price, export and exchange rate
(export in million tonnes; reference price in EUR/kg,
EURUSD in euro)
Development EU beef price, import and exchange rate
(import in 1,000 tonnes; reference price in EUR/kg,
EURUSD in EURO)
3,0
4,00
1000
2,5
3,00
750
2,0
2,00
500
1,5
1,00
250
1,0
2005
2006
Export EU
2007
2008
EU reference price
Source: Agri Benchmark, LEI, Oanda.com, 2009
2009*
EUR-->USD
0,00
2005
0
2006
Import (right axis)
2007
2008
2009*
EU reference price
EUR-->USD
Competition (3)
What will be the next steps taken by the
Brazilian consolidators in the EU?
Competition (4)
The European industry is shifting from
national to regional to European
Northwestern Europe:
173 million consumers
Southern Europe:
171 million consumers
Northern Europe:
20 million consumers
Southeastern Europe:
35 million consumers
Eastern Europe:
85 million consumers
Changing industry landscapes
Rising cost prices
1. Sustainability
Growing
imports
4. Competition
European
meat
industry
2. Politics
Growing
competition
3. Position in
value chain
21
Attention moving
upstream
Contents
Section 1
The global meat market
Section 2
Changing industry landscapes
Section 3
Implications for the European meat industry
Companies with ‘winning edge’ will
improve position in times of recovery
Demand-driven supply
Flexible business
model
Right product
portfolio
Cost-price leadership
Low leverage
Access to credit/capital market
Where will you be in the industry
landscape in 2020?
Number of
companies
Future
Old
Niche
- Differences
- Specialisation
- Probably smaller volumes
Source: Rabobank
24
Commodity
- Basic products
- Large volumes
- International
Strategic direction driven by relative
positioning in local value chain
Relative
bargaining
position
Risk &
Reward
Capacity
utilization
Securing
supply
25
Thank you for your attention
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