Download - Global Poultry Perspectives
Global Poultry
Perspectives
Will Sawyer
Executive Director
Rabobank International
Rabobank is the financial link in the global animal protein chain
Clients around the globe
14 of the Top 20 global Animal Protein companies are Rabobank clients
in commitments to the global Animal Protein industry
EUR 12 billion
150
14/20
60Pork & Beef
47
43
Poultry
Seafood
Global animal protein coverage & research team
Pablo Sherwell
Senior Analyst
Don Close
Senior Analyst
Beef
Will Sawyer
Senior Analyst
Pork and Poultry
Adolfo Fontes
Senior Analyst
Justin Sherrard
Global SectorStrategist
Nan-Dirk Mulder
Senior Analyst
Gorjan Nikolik
Senior AnalystSeafood
Lian Heinhuis
Analyst
Seafood
Albert Vernoij
Analyst
Pawan KumarSenior Analyst
Chenjun PanSenior Analyst
Matthew Costello
Analyst
Angus Gidley-Baird
Senior Analyst
Atlanta
Mexico
Sao Paulo
Sydney
Utrecht
Hong Kong
Singapore
Bill Cordingley
Global Sector Head Animal protein
Luca PardolesiHead of Animal protein M&A
Europe
Emma HigginsAssociate Analyst
Christchurch
Sector coverage
Sector research
New York
St. Louis
Adriaan Weststrate
Vice Chairman
Animal protein
Anything Can Happen, Including Global Poultry
Source: New York Times
The day that set a new course for global poultry
December 1st, 2014
H5N2 is discovered on two poultry farms (broilers,
turkeys) in British Columbia, Canada
Global Poultry Perspectives
An Outlook Shaped by Disease, Trade, and War
Chapters
1: AI in North America
2: Trade flows interrupted
3: China’s poultry gap
4: Currency Wars
5: Brazil fills the void
6: Global outlook
In the first six months of 2015, AI spread to 22 US states and affected over 50 million birds
• Source: Watt Poultry
Egg and Turkey Margins Climbed to Historic Highs
• Source: Informa Economics• Source: Informa Economics
Turkey Margin (cents per pound)Egg Margin (cents per pound)
-20
0
20
40
60
80
100
120
2007200820092010201120122013201420152016-20
0
20
40
60
80
100
120
2007200820092010201120122013201420152016
The US’ Primary Broiler Region was Spared
• Source: USDA, Rabobank Estimates
US Migratory Bird Flyways and Broiler Slaughter by State
Primary Production States
Secondary Production States
No Major Production
(591.8)
(727.2)
(181.3)
(75.6)
(53.4)
(46.8)
(288.5)
(969.8)(205.3) (232.5)
(795.2)
(180.6)
(1,324.2)
(1,061.5)
(262)
(66.7)
DE (244.1)
MD (287.8)(95.3)
(308)
Mississippi Flyway
Atlantic Flyway
Banned States
Global Poultry Perspectives
An Outlook Shaped by Disease, Trade, and War
Chapters
1: AI in North America
2: Trade flows interrupted
3: China’s poultry gap
4: Currency Wars
5: Brazil fills the void
6: Global outlook
No Ban
State/County Ban
US Ban
US Poultry Exports Faced Many Bans and Some Are Still in Place
• Notes: The top 40 markets for US chicken exports including the EU• Source: USAPEEC, May 2015
0
10
20
30
40
50
60
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Leg Quarter Values Fell to Mutli-Year Lows
• Source: USDA, Rabobank Estimates
Estimated Render Value
Aug-2008Russia ban due to
war in Georgia
Sep-2005Decline due to fears
over bird flu
Jan-2010Russia ban due to
use of chlorine
Aug-2014Russia ban due to actions in Ukraine
Global Poultry Perspectives
An Outlook Shaped by Disease, Trade, and War
Chapters
1: AI in North America
2: Trade flows interrupted
3: China’s poultry gap
4: Currency Wars
5: Brazil fills the void
6: Global outlook
Meanwhile China is Facing HPAI issues of its Own, Plus Food SafetyHuman Cases of H7N9
YUM Same Store Sales China Division
-30%
-20%
-10%
0%
10%
20%
30%
Mar-10 Sep-10 Mar-11 Sep-11 Mar-12 Sep-12 Mar-13 Sep-13 Mar-14 Sep-14 Mar-15 Sep-15
(12)
(8)
(4)
0
4
8
12
16
20
Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16
China’s Poultry Producers Have Lost Money Off-and-On for 4 Years
• Source: Rabobank Estimates
Gross Margin Rmb/bird
China Bans All US Poultry
Imports
With AI in the US and France, China’s Genetic Supply is Drying Up
• Source: MOA, Boyar, Rabobank, 2015
0.75
0.92 0.94
1.21
1.32
1.54
1.19
0.70
0.40
0
0.5
1
1.5
2
2008 2009 2010 2011 2012 2013 2014 2015 2016f
China’s annual imports of grand parent stock
(in millions)
China is Developing a Massive Poultry Supply Gap
• Source: USDA, Rabobank Estimates• Source: USDA, Rabobank Estimates
China Chicken Imports (000s tons)China Chicken Production (000s tons)
7,000
8,000
9,000
10,000
11,000
12,000
13,000
14,000
15,000
0
100
200
300
400
500
600
Global Poultry Perspectives
An Outlook Shaped by Disease, Trade, and War
Chapters
1: AI in North America
2: Trade flows interrupted
3: China’s poultry gap
4: Currency Wars
5: Brazil fills the void
6: Global outlook
Currency Wars Are Shaping Meat Trade Flows
• Source: USDA PSD• Source: USDA PSD
USD / Japan YenChina RMB / USD
5.6
5.8
6.0
6.2
6.4
6.6
6.8
7.0
60
70
80
90
100
110
120
130
The US is at the Center of a Global “Flight to Safety”
90
100
110
120
130
140
150
160
170
180
Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16
USD Index Brazilian real Euro Mexican peso Canadian dollar
Currency is Also Reshaping Production Costs
$2
$3
$4
$5
$6
$7
$8
$9
$10
$11
2008 2009 2010 2011 2012 2013 2014 2015 2016
(US
Do
llar
pe
r B
ush
el)
US - Gulf Region Japan China - Jilin Brazil - Parana
Global Poultry Perspectives
An Outlook Shaped by Disease, Trade, and War
Chapters
1: AI in North America
2: Trade flows interrupted
3: China’s poultry gap
4: Currency Wars
5: Brazil fills the void
6: Global outlook
Despite Expanding Consumption and Exports, Producers Have Struggled
Brazil Poultry Consumption and Exports (million tons)Brazil Production Margin (real per kilo)
• Source: Rabobank Estimates, USDA
-5
0
5
10
15
20
25
30
35
40
Jan
-09
Jul-
09
Jan
-10
Jul-
10
Jan
-11
Jul-
11
Jan
-12
Jul-
12
Jan
-13
Jul-
13
Jan
-14
Jul-
14
Jan
-15
Jul-
15
Jan
-16
Jul-
16
2.52.9 3.2 3.2 3.3 3.4 3.5 3.5 3.6 3.8 4.2 4.4
6.9
7.4
7.8 7.8
9.09.4 9.1 8.8
9.19.3
9.59.7
0
2
4
6
8
10
12
14
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016E 2017F
Exports Domestic Consumption
The Domestic Economy Looks to Rebound in 2017, But Unemployment Remains an Issue
The Incentive to Expand Exports is Clear
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
4.00
4.50
5.00
2009 2010 2011 2012 2013 2014 2015 2016
BR
L/kg
Brazil Gross Broiler Margin Comparison
Domestic Export
With the US Facing AI and FX Headwinds, Brazil is Winning
691 760
265380
187215360
380144
160113
122112
123
H1 2015 H1 2016
Brazil Chicken Exports in First-Half 2016 versus 2015
SouthAfricaEU
UAE
SaudiArabia
1.87 million tons2.14 million tons
As China’s Poultry Imports Rise, Brazil is the Only Real Option
0
10000
20000
30000
40000
50000
60000
70000
80000
90000
United States Argentina Chile France Brazil Others
Poultry imports by countries 2009-Jul 2016Tonnes
Global Poultry Perspectives
An Outlook Shaped by Disease, Trade, and War
Chapters
1: AI in North America
2: Trade flows interrupted
3: China’s poultry gap
4: Currency Wars
5: Brazil fills the void
6: Global outlook
Poultry Consumption in Developed Markets Shouldn’t Be Ignored
0
10,000
20,000
30,000
40,000
50,000
60,000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Developed World
Rest of World
4.2%
2.6%
5.7%
1.3%2.6%
2.3%
Profit Margins In Global Poultry is a Mixed Bag
• Source: Public company filings for relevant operating segment.
13.4%
14.1%
3.0%
0.1%
6.1%
20.4%
7.2%
11%4.7%
Global Animal Protein Consumption Growth:Poultry to Overtake Pork by 2021
Global Animal Protein Consumption (million tons) and CAGR
+0.8%
+3.8%
+0.7%+1.3%
+2.1%
+4.2%
+1.9%
+1.6%
+2.1%
Source: OECD-FAO
+1.1%
+2.2%
+1.1%
+1.2%
+1.8%
+0.7%
50.0
60.0
70.0
80.0
90.0
100.0
110.0
120.0
130.0
140.0
2015: +1.8%
Projected global production growth2015 and 2016
2016f: +1.6%
Brazil
Canada
ChinaEU-27
Australia
India
US
Japan
Mexico
Argentina
Russia+2.6%
+0.7%
+2.6%
+3.5%
+3.4%
+0.2%+9.1%
+0.7%
+2.5%
+8.9%
Source: Rabobank analysis based on USDA and regional data, 2016
Thailand
+5.1%
Indonesia
+6.0%
South Africa
+2.0%
Ukraine
+1.1%
Turkey
+1.2%
Colombia
+7.7%
+1.2%
+1.8%
+3.1%
+2.3%
+1.2%
+3.5%
+0.7%
+1.2%
+4.5%
-2.5%
+0.5%
+0.0%
+6.7%
+3.9%
+3.5%
Global poultry production growth in 2015 and 2016f: Where is the current industry growth?
+1.9%
+3.5%
+4.7%
+0.7%
AI
AIAI
AIAI
AI
AI
AI
AI
AI
+6.4%+6.1%
Sub Saharan Africa
The Global Presence of AI in Important Production and Consumption Regions
Source: Company filings, Annual Reports and Investor Presentations
2011 figures represent the latest available data reported,McDonald’s figures estimated based on historical performance and guidance from available press releases
YUM!®
6,853
2,300
500 350
10,000
4,150
3,000
1,000
-
2,000
4,000
6,000
8,000
10,000
12,000
2015 2020F 2015 2020F 2015 2020F 2015 2018F
Western QSR outlets in China
2,300
700 664 346
10,000
2,000
1,000 1,000
-
2,000
4,000
6,000
8,000
10,000
12,000
2015 2020F 2015 2020F 2015 2020F 2015 2020F
Local QSR outlets in China
QSR remains the major driver for the
global poultry market
ConclusionsDisease
•The possible spread of avian influenza remains a key risk to global poultry production and trade flows.
China•As China enters a period of diminished genetic stock and limited options for imports, Brazil will
enjoy sharply higher exports through 2017.
Brazil•With a questionable macro outlook and a weak domestic economy poultry should enjoy improved
consumption and exports. This will likely also lead to consolidation of the 2nd and 3rd tier players
Global•As feed costs remain low in most regions of the world, global production and demand for poultry
will be strong benefitting producers and margins