key investment trends shaping the ... - watt global media · 2/1/2019 · securing gm free feed...

Key investment trends shaping theindustry in 2019

Nan-Dirk Mulder, 13 February 2019

Global poultry and feed outlook

1.Global poultry and feed outlook

2.Regional perspectives on global poultry and feed markets

3.Key investment trends shaping the industry in 2019

Content

Rabobank: Leading global Food & Agri bank

EMEA

Latin America

Latin America

North America

Asia / Australia

Rabobank global presence and selected clients by regions

Worldwide 35% more demand for animal protein in next 20 years

Global animal protein demand projections 2017-2037f

Seafood: CAGR +1.2%

Poultry: CAGR +2.0%

Pork: CAGR +1.0%

Beef: CAGR +1.1%

Eggs: CAGR +1.6%

CAGR: 2017-2037f

Consumer demand is changing when economies develop further

Source: Rabobank analysis, 2019

Big global differences in preferenceand level of meat consumption

Global per capita consumption meat

Source: Rabobank analysis based on USDA, FAO and local statistics, 2019

0

20

40

60

80

100

120

140

Pork Poultry Beef Sheep Other

Kg/capita

Global average

-

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

Asia Pacific North America Europe Middle East andAfrica

Latin America

2010 2011 2012 2013 2014 2015 2016 2017 2018

Social changes can impact the outlook for animal protein markets

Source: Rabobank analysis based on Euromonitor, 2019Source: Rabobank analysis based on WUR, 2019

Carbon footprint of food productsMeat substitutes retail sales

Meat substitutes share <0.5%

in global protein markets

Global CAGR: +4.4%

X 1,000 USDCAGR: +3.5%

CAGR: +10.2% CAGR: +10.1%

CAGR: +3.2% CAGR: +10.2%

90% of global growth is in emergingmarkets; 60% in Asia

Projected change in meat consumption 2017-2027fX 1,000 tonnes


-2,000

0

2,000

4,000

6,000

8,000

10,000

12,000

poultry Pork Beef

Global agricultural land use is declining; while especially Asia has limited resources

Available land and water per capita

Source: FAO/Rabobank analysis 2019Source: Rabobank, FAO 2019

Worldwide land use 1961-2015Million hectares

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

3.5

4.0

4.5

5.0

5.5

6.0

1961 1967 1973 1979 1985 1991 1997 2003 2009 2015

1961-1997Ongoing global land expansion

+11%

1997- nowGradual decline?

-2%

Significant differences in cost of production

Live broiler cost of production, 2017EUR/kg

Source: Rabobank estimate based on WUR and local statistics, 2019

Global average-22% -20%

+50%

-17%

+24%+11%

-10% -8%+8%

-7% -3% -3% 0% 0%

-

0.20

0.40

0.60

0.80

1.00

1.20

1.40

Global food supply challenge: more focus on yield and efficiency

Animal protendemand

Biofueldemand

Grains and oilseed supply

Meat supply Food supply Fuel supply

Land use

Food demand

Livestock/poultry supply

+50% in 35 years

Further decline

ExpansionEfficiencyYield

EfficiencyCultivationYield

Source: Rabobank, 2019

Global trade of poultry will rise: but depends also on food security strategies

Global supply strategies

ImportersFood security

Locals

Exporters

High costs

Low costs

Openmarket

Closedmarket

World poultry trade flows in 2017




Content

Global industry performance:Global price pressure, but 2019 recovery?

Global meat protein margin monitor

Source: Rabobank analysis based on Bloomberg, CBOT and USDA, 2019

Outlook: Gradual improved but volatile conditions_ African swine flu-- China tight supply- Oversupply US and EU- Brazil trade restrictions- Economic volatility- US-China turmoil

Poultry and eggs the winning protein; China growth is slowing down

Global market excl. China 2007-2019f China market 2007-2019f


CAGR: +3.1%

CAGR: +2.3%

CAGR: +1.4%CAGR: +0.4%

Meat consumption: CAGR: +1.8%

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

Chicken Eggs Pork Beef

World ex China

2012 2013 2014 2015 2016 2017 2018 2019f

X 1,000 tonnes

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

Chicken Eggs Pork Beef

China

2012 2013 2014 2015 2016 2017 2018 2019f

X 1,000 tonnes

CAGR: -1.8%

CAGR: +3.9%

CAGR: -0.2%

CAGR: +3.8%

Meat consumption: CAGR: -0.1%

A new poultry trade reality; slow, volatilegrowth to push internationalisation

Source: Rabobank analysis based on Bloomberg, OIE, 2019

Global chicken trade 2011 Q1- 2018 Q3 Global pork trade 2010-2018X 1,000 tonnes

AI

AI

AI

AI

Brazil’s meat and poultry industry challenging market conditions

Brazil exports in volume by destination

Source: Rabobank analysis based on USDA and local statistics, 2019

Brazil meat production and exports

X 1,000 tonnes

+3.7%

+10%

-8% -1.5%

-10%

SA:Changingstandards

EU: Banned BR export plants

China safeguard

RSA traderestrictions

UAE changingstandards

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

Production Exports Production Exports Production Exports

Beef Chicken Pork

2012 2013 2014 2015 2016 2017 2018

-2.8%

Lots of volatility is coming fromEurope and the Middle EastEU chicken imports: Brazil 2011-2018f: -50% Saudi Arabia: Poultry imports: -25%

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

2011 2012 2013 2014 2015 2016 2017 2018f

Tonnes

0

100

200

300

400

500

600

700

800

Brazil France UAE US Other

2015 2016 2017 2018f

X 1,000 tonnes

China – US import tariff will further shake up trade – and Brazil

Impact of China –US Soybean import levies

High soybean

prices

Relative low

soybean

prices

Relative low

soybean

prices

Rising

soybean

prices

Rising

soybean

prices

Relative low

soybean

prices

Global soybean imports


X 1,000 tonnes

China imports62% of global

Soybeans trade

China-US Import tax

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

100,000

199

0/1

99

1

1992

/19

93

1994

/19

95

1996

/19

97

199

8/1

99

9

20

00

/20

01

200

2/2

003

200

4/2

005

20

06

/20

07

200

8/2

009

2010

/201

1

20

12

/20

13

20

14

/20

15

20

16

/20

17

20

18

/20

19

Feed grains fundamentals: falling stocks in corn and wheat; soybean volatilityCorn: Lower stocks Wheat: More pressured Soybeans: Rising US stocks

Source: Rabobank analysis based on USDA, 2019

China ASF outbreaks will impact marketsand industry structure in coming years

ASF cases in China since 3 August 2018 China pig farming: forced changes

0

500

1,000

1,500

2,000

Potential Gap Potential Buildup

Th

d t

on

nes

Lower BoundUpper BoundExtra exports from BrazilExtra exports from Canada

Production -5%

Production -10%

PotentialAdditional

imports

2019: The return of Chinese poultry?

Grand parent stock imports in China1,000 sets

China poultry per capita consumption: big upside

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

1.8





Content

Key investment trends shaping theindustry in 2019

More focus on value added

concepts

Efficiency improvement tokeep a key driver for investments

Social concerns are changing

industries

On-line growthto change

business models

New technologyto drive industry

change

More focus on emerging

market growthand food security

1 2

3

45

6

Access toglobal growth

Increase valueof poultry

Social responsibility andsocial driven change

Stay competitive

Adapt new technologyand become future proof

Source: Rabobank analysis 2019

0

5,000

10,000

15,000

20,000

25,000

Production Exports Production Exports Production Exports

Beef Chicken Pork

2012 2013 2014 2015 2016 2017 2018

X 1,000 tonnes

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

2012 2013 2014 2015 2016 2017 2018

Chicken Beef Pork

CAGR: +2.4%

US meat industry’s rising oversupply with ongoing trade challenges

Source: USDA, Rabobank Estimates, 2019

US meat production and trade 2012-2018US meat market 2012-2018

X 1,000 tonnes Domestic market keydriver for growth

CAGR: + 1.0%

CAGR: + 3.1%

CAGR: +2.3%

+2.3%

+2.2%

+3.1%

China: Short term market recovery, but long term market growth slowdown

Source: Rabobank projections based on USDA, FAO and Local Statistics, 2019

China meat and egg market outlook in tonnes and YOY growth

Focus for investment to shift awayfrom China to other Asian markets

Asia (ex. China) meat and egg market outlook in tonnes and YOY growth

Source: Rabobank projections based on USDA, FAO and Local Statistics, 2019

South and South East Asia will bekey global growth market

Poultry market growth 2017-2027f

Source: Rabobank projections, 2019

EU Pork and poultry production; Relocation to CEECs and Spain

EU chicken production 2010-2017

• Source: Rabobank analysis based on Eurostat, local statistics, 2019

Latin American’s industry growthalternative for slower Brazil growth

Latin America Poultry production by country excluding Brazil

Source: Rabobank analysis based on FAO, USDA, 2019

The rise of African poultry: Accelerating annual 5% growth in next decade

The big 2: 65% The other Sub Saharan African countries: 35% of production

Countries with expected growthof 6-10% year-on-year

between 2015 and 2025

Nigeria Ivory Coast

Ghana Ethiopia

Uganda Kenya

Senegal Malawi

Angola Rwanda

Source: Rabobank projections based on FAO, OECD, USDA and local data, 2019

X 1,000 tonnes X 1,000 tonnes

Further internationalization of the feed to meat industry

Globalization in the meat industry

Africa

Middle East

SE Asia

Australia

Russia

EU

United States

MexicoBrazil

Argentina

ChinaJapan

India


China more sustainable if European efficiency is adopted

Chinese pork production with Dutch efficiency Advantage in efficiency

Saving 54 million

tonnes grains

Production 13

million tonnes

(20%) more pork

with same

resources


http://www.flags.net/CHIN.htm

Consumer demand is changing when economies develop further


From volume to value: The journey to higher margins

Brand

Value added food

Value added chicken

Premium chicken

Standard chicken

Examples of

nvestors who

follow this strategy

The poultry value added pyramid

Low

High

Margin

level


Speciality focus: social concerns are opportunities to differentiate markets

Animal welfare friendly

Environmentfriendly

Consumer health

Buy local

Standard meat and chicken

Standardproduct

Differentiatedproduct

Social concern

Market differentiation opportunities


Food safety

Market demand is changing; more concepts and higher standards

Source: Company Announcements, Rabobank Estimates, 2019

US: Customer driven shift to conceptsEurope: animal welfare driven change; NL example

0%

20%

40%

60%

80%

100%

2013 2014 2015 2016 2017

Better life Organic

Chicken of tomorrow Regular

Slow Growing

Organic

Antibiotic Free

No antibiotics for human health

Traditional

Sp

ecia

lised

pro

du

ctio

n p

ract

ice

Pri

ce p

rem

ium

Producers End Users

Production Practice

Securing GM free feed grains supply: a rising challenge

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

NAFTA Latin America Europe Asia MEA

Conventional Seed GM seed

Million USD

Global GM/GM free seed market by region

16% 27%99% 85% 60%

45% of global seed market is GM free

Global seed crop areas by region

0

20

40

60

80

100

120

140

160

180

200

2009 2015

Million acre

Source: Rabobank analysis, Philip McDougall, 2019

Startup Funding Protein industry investor

2011 $387 m

2011 $220 m

2012 $ 85 m

2009 $ 72 m

2015 $ 20 m

2015 $ 4 m

Rising investment opportunities in alternative protein segment

Altenerative proteins market segmentation Alternative protein investments


Traditional meatreplacers

Start up meatreplacers

Meat ingredientreplacements

Feed ingredientreplacers

Online to change industries; Emerging markets in the lead

On-line food sales in China (CNY million)On-line food sales in United States

USD 40 billionCAGR: +40%

On-line food sales in India (Bln INR)

USD 16 billionCAGR: +21% USD 2 billion

CAGR: +45%


0

50

100

150

200

250

300

2013 2014 2015 2016 2017 2018

Animal protein supply chains willchange fundamentally in next decade

Food distribution: a future revolution Value chain models need to change

Grains and

oilseedsFeed Breeding Farming Processing Customer

Grains and


Grains and


Grain and


Horizontal specialisation model

Semi-Vertically integrated value chain

Full vertically integrated value chain: feed to poultry

Multisector –Fully vertically integrated value chain: grains to poultry

New distribution models

Technologic innovationSource: Rabobank analysis, 2019

New technology will help to solve key supply and social challenges

Online, internet of

things

Genomics and gen typing

Novel feed additives

and ingredients

Robotics

Artificial intelligence

Blockchaintechnology

Smart farming and big

data

Upcoming new technology


• Tracking & tracing

• Value chain ` co-ordination

• Benchmarking

• Foot print

• Efficiency

• Energy

• Water usage

• Mortality rates

• Density

• Diseases

• Stress

• Growth rates

• FCR

• Yields

Financial and technical

performance

Animal health and welfare

Quality management, horizontal and

vertical communication

Environmental impact

From intuitive tofact baseddecisions

Upcoming new technology

Global feed industry in 2019: positionyourself in a fast changing landscape


Top 20 global feed manufacturers

-

5,000

10,000

15,000

20,000

25,000

30,000x 1,000 tonnes

Key investment themes in 2019

Conclusions

Markets• 35% global growth; 90% in emerging markets• More poultry and aquaculture• On-line will change industries• Alternative protein market to take off

Supply• Feeding the world requires efficient supply• Social concerns to drive concept poultry growth• Global reduction of antibiotics use• Solutions need for disease pressure

Technology• New technology to support industry challenges especially for

social issues• Big data and smart farming could support the industry to

further optimize efficiency and focus

Clients• More consolidation and internationalisation• More value added and concept focused• More vertically integrated

Changing global animal protein markets offer great opportunities for investors in the feed to meat industry

Timing is an important factor for consideration: early investors are set to benefit

4545

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key investment trends shaping the ... - watt global media · 2/1/2019 · securing gm free feed...

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