New perspectives
Predicting future factors in meat
supply and demand
Nan-Dirk Mulder, Rabobank International
Contents
• Section 1: Short term outlook
• Section 2: Long term outlook
Rabobank International
Rabobank: A leading Food & Agribank
Presence in 41 countries
Rabobank in Ireland
 Established in August 1994
 Subsidiary of Rabobank Nederland
 Full banking licence and IFSC licence
Rabobank Nederland
Rabobank Ireland plc
 Ireland‟s 5th largest bank balance sheet
 Ireland's 2nd largest non-domestic bank
 Food & Agri Focus
 Corporate Banking and Treasury:





Corporate and Syndicated Lending
Receivables Financing/Leasing
Global Financial Markets
M&A
Structured Commodity Finance
Rabobank Ireland
Corporate Banking &
treasury
ACC Bank
SME Market
De Lage Landen
Leasing
Eureko
Reinsurance
How to reach sustainable growth in a
much more dynamic industry?
2006Globalisation of
industry
2006Commodityprice volatility
2008Exchange-rate
volatility
2008Economic crisis
Market dynamics and animal diseases
Next:
-Sustainability
-Animal welfare
- Volatility
-Trade
liberalisation vs
protectionism
Different speed of recovery in 2010 and
2011
-2.5%
3.1% 2.7%
Canada
US
2,6% 2.3%
-2.6%
5.0%
3.9%
-6.5%
-4.1%
EU
1.7%
Russia
4.0% 4.3%
-7.9%
1.5%
China
9.1%10.5% 9.6%
-5.2%
Japan
Sub-Saharan Africa
5.5%
5.0%
2.6%
Mexico
India
9.7%
8.4%
5.7%
7.5%
4.1%
-0.2%
Brazil
GDP Growth
Source: Rabobank based on IMF data, October 2010
6
2.8%
World
2009
-0.6%
2010 (f)
4.8%
2011 (f) 4.2%
1.4%
Competition for food: what‟s next?
Grains and oilseed price development 2000-2010 (USD/ton)
600.0
500.0
400.0
300.0
200.0
100.0
0.0
Wheat
Corn
Soybean Meal
Change in stocks to use in 2010
driving bullish tone for 2011
Change in world ending stocks & stocks/use of
key grains and oilseeds
Source: Rabobank
Bull commodity markets clouded by
macro uncertainty
Wheat price outlook
Corn price outlook
Soybean price outlook
Recovery in global meat market, but
trade restrictions effect global market
Global meat demand outlook
Global trade outlook
1,000 tonnes
25,000
80,000
22.1 million
21.9 million 22.4 million
tonnes
tonnes 21.4 million tonnes
tonnes
+2.6%
+2.8%
+0.7%
70,000
20,000
1,000 tonnes
60,000
+3.1%
+2.5%
+4.6%
50,000
-2.2% -0.9% +2.1%
+0.9%
+0.1%
-0.9%
1,000 tonnes
-2.3%
-0.5%
-0.1%
40,000
15,000
+0.4% +2.6% +3.3%
10,000
30,000
20,000
5,000
-2.2% -0.9% +2.1%
10,000
Beef
2005
Broiler
2006
2007
Pork China
2008
Source: USDA, December 2010
2009
Pork Other
2010
2011
2005 2006
Pork
2007 2008
Broiler
2009
2010
Beef
2011
Poultry industry will outperform pork
and beef industry in 2010
Global meat production forecast 2010
11.7%
+2.4%
0.9%
-2.2%
1.9%
0.4%
+1.8%
-0.1%
+0.8%
-0.4%
Euro Area
Canada
+1.0%
+2.9%
2.6%
-3.7%-0.5%
Russia
-0.2%
3.7%
-0.4% -1.4%
Japan
2.2%
-3.7%
Mexico
US
+3.9%
3.6%
1.3%
China
+3.6%
India
2.4%
5.8%
1.8%
10.0%
Brazil
Australia
2.2%
-23.0%
Argentina
11
Source: USDA, October 2010
Production Growth
Broiler: +3.3%
Pork:
+1.0%
Beef:
-1.2%
-2.3%
Global trend will continue in 2011
Global meat production forecast 2011
6.7%
2.0%
-1.7% -0.8%
0.9%
+1.8%
-0.6%
Canada
EU-27
1.5% 2.0%
2.5%
1.8%
1.5%-2.8%
Russia
Japan
3.0% 3.0%
-1.8%
US
Mexico
0.7%
-0.8% -1.4%
-2.3%
-2.8%
1.9%
2.9%
China
2.5%
India
2.5% 2.9%
5.8%
1.9%
9.1%
Brazil
Australia
2.2%
-1.9%
Argentina
12
Source: USDA, October 2011
Production Growth
Broiler: +2.4%
Pork:
+1.9%
Beef:
-0.2%
-1.4%
Contents
• Section 1: Short term outlook
• Section 2: Long term outlook
Rabobank International
Key challenge: Global food supply
Meat demand
Food demand
Fuel
demand
Meat supply
Food supply
Fuel supply
+20% in
10 years
Expansion
Efficiency
Yield
Livestock/poultry supply
Livestock supply
Grains and oilseed supply
Land use
Efficiency
Cultivation
Yield
???????
Great challenge for sector: Fast-growing
demand for agricultural products
Global demand for agriculture (change 2008-18)
220%
Grains and oilseeds
Sugar
Livestock and dairy
Biofuel
Additional demand: 500 m. tonnes
De
Grains and oilseeds markets 2008-2018
200%
Wheat
Coarse grains
Rice
Oilseeds
180%
160%
Market volume growth Growth %
+ 70 million tonnes
10%
+ 190 million tonnes
17%
+ 46 million tonnes
10%
+ 133 million tonnes
20%
Share
developing
markets
72%
50%
98%
78%
140%
120%
Demand for agriculture 2008-18
De
100%
80%
Fuel, 130 million
tonnes
60%
Food, 180 million
tonnes
40%
20%
0%
Wheat
Coarse
grains
Rice
Oilseeds
Beef
Pigmeat
Source: OECD, FAO, Rabobank estimate, 2009/10
Poultry
Milk
Sugar
Ethanol Biodiesel
Feed/Animal
protein, 190
million tonnes
How to produce?
How to produce 500 million tonnes?
Unused arable land:
180 million hectares
South Africa
3%
HECTARES
U.S.
11%
FSU
21%
Brazil
54%
Food, feed, fuel
demand 2020
Additional
140 million
EU-27
11%
Hectares
Yield improvement
Food, feed,
fuel demand
2010
LOW
HIGH
YIELD
30% yield increase
Grains yield (tonnes/ha) in 2007/2008
Wheat
Corn
Brazil
2,100
3,800
EU-15/27
4,830
6,480
Russia
2,020
3,790
Ukraine
2,340
4,210
U.S.
2,720
9,660
Source: OECD, 2009
70% of global growth in demand for
meat will be in Asia
Market growth estimate for key meat markets 2010-2020
25,000
20,000
15,000
10,000
5,000
-5,000
Source: Rabobank, FAO, FAPRI, OECD
Poultry
Beef
Pork
Who‟s going to produce world meat
demand?
Broiler cost of production (USD/kg)
Pigs cost of production EUR/kg cwe
1.2
1,80
1,60
1
1,40
0.8
1,62
1,57
1,40
1,61
1,40
1,20
1,04
1,00
0.6
0,91
0,80
0,60
0.4
0,40
0.2
0,20
-
0
US
BRA
ARG
EU
RUS
CHI
THA
IND
NL
DE
Source: Rabobank estimate
10% of global production is traded internationally
DK
ES
PL
US
BR
Future meat production growth
Global meat production 2009 – 2018 (1,000 tonnes and CAGR 2009-2018)
100,000
90,000
+2.3%
80,000
70,000
60,000
50,000
+1.0%
40,000
+0.5%
+3.5%
30,000
20,000
+4.0%
10,000
+2.6%
-
Source: Rabobank/OECD, 2010
Poultry
Pork
Beef
+1.0%
+1.8%
+0.3%
Water issues will start to bite
„Ring of fire‟ region as future spearhead in
global trade
Rabobank International
A fast-changing global meat industry
landscape
1,000 tonnes
14,000
Global ranking: Meat companies
12,000
10,000
8,000
6,000
4,000
2,000
-
* Including Bertin, Pilgrim's Pride
** Merger Perdigão, Sadia
Source: Rabobank estimate based on public sources
Poultry
Beef
Pork
The beef industry most consolidated
industry on global level
Consolidation in the global meat industry
100%
90%
80%
70%
60%
50%
40%
30%
20%
+2%
10%
0%
7%
20%
20%
7%
Pork
Beef
Other
Source: Rabobank estimate
+1%
9%
Poultry
Pipeline
9%
7%
+2%
Meat
Top 3 market share
7%
7%
Feed
Brazilian and US companies drive global
consolidation process in meat industry
Bounce back: dealing with volatility as
key successfactor for whole value chain
Grains and
oilseeds
Feed
Farming
Processing
Customer
Market
intelligence
Information
exchange
=
+
Volatility in
grains and oilseeds
Volatility in livestock and
poultry markets
Market power
Request for
stable sales
prices
Hedging/price
management
Volatility in
exchange rates
Risk
management
Corporate social responsibility: Example
global warming
Tonnes CO2-e per tonne of production
Lobbying: Sweden
Governments policy
•
Swedish Beef
Approx. 16 - 20 kg CO2e per kg meat
•
Europ eanBeef
Approx. 20 - 27 kg CO2e per kg meat
•
Brazilian Beef
Approx. 38 - 40 kg CO2e per kg meat
= Always buy Meat from Europe
Retail
Price competitiveness and flexibility of poultry
fitting well with future market needs
CostAnimal
of production
– comparison
“efficiency”
protein cost
Production
cycle, cycle
“Flexibility”
Duration of farming
pangasius
+39%
Pangasius
shrimp
+13%
Shrimp
salmon
+12%
Salmon
poultry
+27%
pork
+41%
Beef
Euro/kg
Pork
+16%
0
2
2006
27
Poultry
4
2007
Beef (finishing system)
6
2008E
Months
0
juveniles stage
10
20
30
finishing stage
40
A future picture?
LOCAL TRADE
Fresh perishable products
-Fresh meat
-Speciality products
GLOBAL TRADE
Not perishable products
- Frozen products
- Further processed products
… or this?
Or is this the future?
And beef?
Does beef deserve its premium price
position?
Do we deliver on:
- taste
- tenderness
- juiciness
- consistency of the above
- consumer friendliness in preparation
- social attributes (associated with
production, processing) such as animal
welfare, environment
- product STORY?
European sector should better utilise large
European market
Scandinavia:
High incomes
EU-27: Almost 500
million consumers
Large differences in
competitive advantages
UK: Added-value
market; strong retail
NW Europe:
One market;
consumer
concerns
Southern Europe:
Traditional demand,
growing market
Poland: 40 million
consumers; costprice advantages
Romania:
22 million
consumers;
labour costs
EUR 200/month
Poultry industry still a
domestic ihdustry
The European industry moves from national to
regional and from regional to pan-European
Northwest - 173 million consumers
North- 20 million consumers
South- 171 million consumers
South East - 41 million
consumers
East - 79 million consumers
Export/Import
Irish food & agrisector: livestock
sector drives industry growth
Sheep
Production growth (00/07)
How to compete in the current
competitive industry landscape?
VOLUME
VALUE
Efficiency
Branding”Ireland”
Scale
Internationalisation
Pasture based
Future
Irish food
industry
Free range/organic
Sustainability
Value Chain
Premium products
Sustainability
Risk management
Conclusions
Great long-term meat demand potential for global industry with growing emphasis on yield
throughout the value chain
Dealing with volatility in feed ingredients and exchange rates will be a key challenge for
the industry in the coming years
Waves of protectionism and diseases put significant impact on markets and industries
Growing importance of consumer concerns in industry. Industry should participate in
global discussions and come with innovative ideas
Consolidation in the global industry is driven by Brazilian and US companies; Europe is
fragmented and does not utilise opportunities in large EU market
Global feed to meat industry landscape will change significantly in the next 10 years –
Companies from emerging markets (China, Brazil) will play a leading role
Irish industry needs to restructure to meet fast changing industry dynamics
New perspectives
Thanks for your attention
Nan-Dirk Mulder
Rabobank International
Nan-Dirk.Mulder@rabobank.com