Investment outlook for the global animal protein industry · 2016/3/2 · Column containing text...
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Global Political/Economic playing field and influences Nan-Dirk Mulder, 1 March 2016 Investment outlook for the global animal protein industry
Transcript of Investment outlook for the global animal protein industry · 2016/3/2 · Column containing text...
Global Political/Economic playing field and influences
Nan-Dirk Mulder, 1 March 2016
Investment outlook for the global animal protein industry
Column containing text
1. Short term economic outlook for the industry
2. Investing in global animal protein: a long term view
3. Outlook for the African feed to meat industry
Content
Rabobank: The world’s leading global F&A bank
Rabobank group global presence
Animal protein is our sweet spot
EuropeNorth America South America Asia & Oceania
14 out of top 20 meat companies are client of Rabobank
Exposure in Animal Protein: EUR 19 billion
Worsening of economic conditions has impact on world meat market
Canada
2.4%
1.2%1.7%
United States
2.5% 2.6% 2.6%
Mexico
2.1% 2.5% 2.6%
Brazil
0.1%
-3.8% -3.5%
Argentina
0.5% 0.4%
-0.7%
Euro zone
0.9% 1.5% 1.7%
Sub Saharan Africa
5.0%3.5%
4.0%
Russia
0.6%
-3.7%-1.0%
Japan
0.0%0.6% 1.0%
China
7.3%6.6% 6.3%
India
7.3% 7.3% 7.5%
Australia
2.7% 2.4%2.9%
2015 (e) 3.1%
GDP Growth World
2014 3.4%
2016(f) 3.6%
IMF Economic outlook: GDP Growth 2014-2016f
Source: Rabobank, IMF Economic Outlook, January 2016
1.3% 0.7% 0.6%
South Africa
-
20
40
60
80
100
120
140
160
Jan
Apr
Jul
Okt
Jan
Apr
Jul
Okt
Jan
Apr
Jul
Okt
Jan
Apr
Jul
Okt
Jan
Apr
Jul
Okt
Jan
Apr
Jul
Okt
Jan
Apr
Jul
Okt
Jan
Apr
Jul
Okt
Jan
Apr
Jul
Oct
Jan
2007 2008 2009 2010 2011 2012 2013 2014 2015 201
6
EUR/USD BRL/USD CNY/USD JPY/USD
RUB/USD THB/USD ARS/USD ZAR/USD
INDEX
Economic volatility: Strong impact on global exchange rates
6
Source: Rabobank analysis,2016
Exchange rate volatility 2007-2016
Oil versus grain prices: towards structural lower levels?
7
Oil prices versus corn and soybean prices
Source: Rabobank analysis 2016
0
20
40
60
80
100
120
140
160
-
100
200
300
400
500
600
700
Brent spot price Corn Soybeans
USD/tonne USD/barrel
Global grain and oilseed prices: A roller coaster
8
Grains and oilseed price monitor 2000-2016Slowdown
demand
Biofuels
Supply expansion
Exchange rates
Oil prices
0
100
200
300
400
500
600
700
Wheat Corn Soybeans
USD/tonne
Commodity boom years
Source: Rabobank analysis 2016
High grains and oilseed prices has triggered more investments in new agricultural land
9
Global grains and oilseed area for 2015
0
100
200
300
400
500
600
Mil
lion
HA
The oversupply years:+10 million hectares
The boomingyears: +70million hectares
The 1960s and 1970s+115 million hectares
New record515 million
hectare
Source: Rabobank, USDA 2016
Slowdown in biofuel demand
10Source: Rabobank analysis, BP, 2016
Global demand for biofuels
Biodiesel:17% of global soy oil supply10% of global palm oil supply25% of global rapeseed oil supply
1% of global sunflower oil supply
Ethanol:12% of global corn supply16% of sugar cane supply
Biofuel impact on agriculture
-
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015fAsia Pacific Africa Middle East
Europe South & Central America North America
1,000 tonnes oil equivalent
Take off years Fast growthCAGR: 24%
Consolidation:CAGR: +3%
Ample stocks in the world grains markets
11
Stock to use ratio G&O
Source: Rabobank analysis 2016
0.000.050.100.150.200.250.300.350.40
Corn Wheat Soybean
Stock/use ratio
0
200
400
600
800
1,000
1,200
1,400
1,600
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
2014 2015 2016 2017
Wheat (Usc/bu) Corn (USc/bu) Soybeans (Usc/bu)
USD/tonne
Rabobank price outlook G&O
Global animal protein industry has benefited from lower feed prices until recent oversupply
Rabobank global meat market monitor
Source: Rabobank analysis based on Bloomberg, FAO, USDA, local statistics, 2016
Asian supply
isssues in pork
and poultry
Improving pork
prices
Global stable
feed price
Supply
reduction
50.00
70.00
90.00
110.00
130.00
150.00
170.00
190.00
210.00
230.00
250.00
Q1
Q3
Q1
Q3
Q1
Q3
Q1
Q3
Q1
Q3
Q1
Q3
Q1
Q3
Q1
Q3
Q1
Q3
Q1
f
Q3
f
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Feed price Chicken Pork Beef
Index, 2007 Q1 =100
Meat market keeps growing but at slower pace, China remains 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: +2.2%
CAGR:+2.1%
CAGR: +0.7% CAGR: -0.4%
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: -1.6%
CAGR: +0.4%
CAGR: +1.5%
CAGR: +2.8%
-35.0%
-30.0%
-25.0%
-20.0%
-15.0%
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
Fastest growing poultry markets are in Middle East and Africa
Global poultry consumption growth in 2015
Global 1.8%
Source: Rabobank analysis based on USDA, FAO and local statistics, 2016
Slowdown in expansion global meat trade
15
Economic
slowdown
Animal
diseases: AI
and ASF
Russia
sanctions
Global meat trade by major exporters
Exchange rate
volatility
-
5,000
10,000
15,000
20,000
25,000
30,000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Brazil United States EU India Canada Australia Other
+5%
-6%
+3%+15%+1%
--11%
-0.1%
Poultry growth everywhere, pork growth mainly in America and Russia
Pork: +0.4%
Projected production Growth 2015
Chicken: +1.1%
16Source: Rabobank analysis based on USDA and regional data, 2016
Beef: -1.1%
Global meat and poultry production growth in 2015
Brazil
Canada
ChinaEU-27
Australia
India
US
Japan
Mexico
Argentina
Russia+0.2%
+2.4% +0.0%
+2.5%
+1.4%
-3.0%+9.1%
+1.3%
+3.9%
+4.2%
Thailand
+1.0%
Indonesia
+6.0%
South Africa
+0.2%
Ukraine
-4.9%
Turkey
+1.7%
Colombia
+9.1%
+4.1%
-0.6%
+2.0%
+3.8%+2.0% +4.1%
+8.9%
+0.5%
+0.7%
+12.3%
+0.0%
+0.2%
+0.2%
+4.5%
+3.4%
+6.1%
+0.6%
-5.6%
-0.2%
+1.2%-1.0%
+3.7%
+1.0%
+0.0%
+0.3%-7.0%
-1.0%
-2.6%
-0.9%
+3.3%
+0.4%
+0.0%
+4.6%
Column containing text
1. Short term economic outlook for the industry
2. Investing in global animal protein: a long term view
3. Outlook for the African feed to meat industry
Content
Fast growth in animal protein: 35% more in next 20 years
Global demand for animal protein
Source: Rabobank analysis, FAO, OECD, FAPRI, 2016
-
100,000
200,000
300,000
400,000
500,000
600,000
700,000
800,000
900,000
1985 1995 2005 2015 2025 2035
Seafood Eggs Sheep Poultry Pork Beef
x 1,000 tonnes
+40%
+25%
+24%
+20%
+18%
Change:15/35Seafood:+30%
Eggs: +50%
Poultry: +65%
Pork: +35%
Beef: +20%
-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%
70% of global meat and egg demand growthis in Asia
Global market volume change 2014-2024
Source: Rabobank forecast based on FAO, FAPRI, OECD. 2016
Asia lacks adequate resources
Brazil10%
Argentina7%
Other South America
11%
Russia9%
Other Eastern Europe/Central
Asia
3%
Sub Saharan Africa45%
Rest of the world15%
Available new agricultural landGlobal land and water availability per capita
Source: FAO/Rabobank analysis 2015Source: Rabobank, FAO 2015
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
100,000
0
2
4
6
8
10
12
14
16
18
20
Acre per capita Water availability per capita
Need for a fast modernizing of Asian animal protein industry
High feed prices/limited resources
Food safety
Higher incomes and welfare
Modern distribution
Modern value chain
Larger companies
Vertical integration
Efficiency
Yield
Value chain management
Sustainability
Animal disease threat
More modern compound feed demand
Column containing text
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
China Rest of the world
x 1,000 tonnes
The rising importance of Asia for global soybean and meat tradeChina’s rising share in global soybean trade
Source: Rabobank analysis, Bloomberg, USDA, 2016
Asia’s rising share in global meat trade
-
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
1990 1995 2000 2005 2010
Beef Pork Broiler
1,000 tonnes
43%
46%
48%
Securing supply: Japan, China and Middle East to invest overseas
Globalization in the animal protein industry
Africa
Middle East
SE Asia
Australia
Russia
EU
United States
Mexico
Brazil
Argentina
ChinaJapan
India
Japan
China
Source: Rabobank, 2016
Column containing text
Globalisation of the industry: Companies from emerging markets take the lead
Top 20 Global meat companies 2016
Global feed industry landscape already dominated by Asian players
25
Top 20 Global compound feed companies
Source: Rabobank analysis 2016
Column containing text
1. Short term animal protein market outlook
2. Investing in global animal protein: a long term view
3. Outlook for the African feed to meat industry
Content
-5
0
5
10
15
20
25
30
35
40
0.0% 2.0% 4.0% 6.0% 8.0% 10.0%
Sub Saharan Africa: The new frontier in global poultry investments
Africa meat and egg market 2025f Africa Poultry Growth by MarketKg/head
CAGR2015-2020
Source: Rabobank projections based on USDA, FAO and local statistics, 2016
-
5,000
10,000
15,000
20,000
25,000
30,000
1995 2005 2015 2025Sheep Pork Beef Eggs Poultry
1,000 tonnes
Meat and eggsCAGR +3.8%
Meat and eggsCAGR +4.1%
Meat and egsCAGR +4.1%
BeefCAGR +2.0%
PoultryCAGR +5.5%
EggsCAGR +5.1%
32%
14%
7%
28%
20%
17%6%
39%
19%
19%
SSA economy keeps growing especially in Eastern Africa with an increasing middle class
Source: IMF Economic Outlook, 2016
Real GDP change 2014, 2015 and 2016f Africa’s Rising Middle Class
Economic development drives food market change
ECONOMIC CONSOLIDATION Food as nutrition/well-being
ECONOMIC REINVENTION
Food as stimulation
ECONOMIC TAKE-OFFFood as a need
ECONOMIC DEVELOPMENTFood 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
Source: Rabobank analysis, 2015
Source: Rabobank Analysis
Larger middle class leads to fast expansion of modern distribution
Supermarket chains in South Africa KFC Expansion in Africa
Source: Rabobank analysis, 2016
Column containing text
Capturing the African investment opportunity
Investment climate and stability
Resources and infrastructure
Marketpotential
Availability of inputs: Competitivepower
Assessment model for successful investments in Africa
Source: Rabobank analysis, 2016
The high potential markets for investments in poultry and eggs
Ethiopia: - Small but fast growing
poultry industry- Population 94 million,
GDP/capita USD 505- Resources
Uganda: - Fast growing poultry
industry- Population: 38 million,
GDP/capita USD 656- Hub potential
Kenya: - Sizeable and growing
poultry industry- Population: 44 million,
GDP/capita USD 1,246- Resources
Tanzania:- Poultry industry is taking
off- Population 49 million, GDP/capita USD 903
Zambia: - Most modern poultry
industry in SSA except South Africa with hub potential
- Population 16 million, GDP/capita USD 1,900
- Infrastructure issues and FX devaluation
Nigeria: - Large and growing
poultry industry- Population 174
million, GDP/Capita USD 3,006
- Import restrictions- Oil dependency
Angola: - Undeveloped poultry
industry and resources- Import substitution- Population 19 million,
USD GDP Capita 5,900- High opportunity, high
risk
Nigeria
+7.3%
+3.5%
Ethiopia
+8.4%
+4.1%
Angola
+9.0%
+6.2%
Zambia
+4.5% +4.4%
Tanzania
+7.7%+4.0%
Uganda
+6.2% +8.0%
Kenya
+6.5% +5.1%
Broilers Eggs
LEGEND
Forecast market growth 2015-2020
Identifying the high potential markets in Sub Saharan Africa
Source: Rabobank projections based on USDA, FAO and local statistics, 2016
Lessons for successful investors in Africa
33
Secure your inputs: vertical
integration
Invest in meat processing if
market allows
Mitigate your risks
Invest in management and training
JVs with local player to deal
with bureaucracy
Feed and hatchery are
base for investments
Source: Rabobank analysis 2016
Feed and breeding as base for value chain investments
Source: Rabobank analysis 2016
Grain and
oilseedsFeed Breeding Farming Processing Customer
Limited available and low quality
resources
Fastgrowing demand
Bigger middle
class
Expanding retailers
and QSRs
Wet market sales
Governmental ambitions for food security and self sufficiencyWeak infrastructureAccess to finance
South African investors
International investors
Local investorsEnter high quality meat market
Secure quality
Improve efficiency
Early adapter margin potential
Secure high quality, low priced feed
ingredients
inputs
Investing in Africa is a bumpy road, but with significant early adaptor benefits
35
Exchange rate volatilityRisks involved as international investor
-
20
40
60
80
100
120
1/13/2013 1/13/2014 1/13/2015 1/13/2016
USD/ZAR USD/KES USD/ZMW USD/UGX USD/NGN
Index Jan 2013=100
Trade disruptions
Exchange rates
Animal disease
Economic stability
Local business climate
Source: Rabobank analysis 2016
Column containing text
Towards the Asian and African decades in animal protein development
Global investments
1980 1990 2000 2010 2020 2030
Global investments in the animal protein industry
Source: Rabobank, 2016
More interest from international investors in Africa, South Africa has the lead
Cultural advantage
Trade: feed ingredients and
genetics
Supermarket/
Food service linkages
Risk mitigation advantage
Why South Africaas leading investor?
Geographical advantage
Source: Rabobank analysis 2016
