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Opportunities for Australian grain in South East Asia and implications of the
ASEAN Free Trade Area
James Campbell Head of Agribusiness, China
March 2015
2
CONTENTS
AUSTRALIA GRAIN INDUSTRY OVERVIEW 3 WHAT IS DRIVING ASIAN DEMAND? 8
ASEAN-AUSTRALIA-NEW ZEALAND FREE TRADE AREA (AANZFTA) 17
OPPORTUNITY FOR AUSTRALIAN AGRICULTURE SECTOR: ASEAN 19 CHINA–AUSTRALIA FREE TRADE AGREEMENT (ChAFTA): IMPACT OF GRAIN INDUSTRY 23 INDIRECT FACTORS AFFECTING AUSTRALIAN GRAIN 25 APPROACH TO ASIAN MARKET: CHANGING MARKET DYNAMICS 24
AUSTRALIA GRAIN INDUSTRY OVERVIEW
Page 4
8.3 5.8 4.6
7.5 6.9 5.1 8.4 7.8 9.0 9.5 9.0
2.4
1.5 1.4
1.8 2.7 5.6
5.6 3.7
4.4 3.5 3.6 4.9
1.1 1.1
5.3 4.9
7.8
10.6
7.1 5.4 4.2 5.7
-
5.0
10.0
15.0
20.0
25.0
30.0
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
WA SA East Coast Ending Stock - Total
9.1 5.1 5.8
8.3 8.2 5.4
11.2 6.7
10.8 8.8 8.6
3.9
1.4 2.3
2.4 4.2 6.2
4.8
4.1
5.1 4.0 3.9
12.2
4.2 5.4
10.4 9.8
16.9
13.8
11.4
11.7
10.2 11.6
-
5.0
10.0
15.0
20.0
25.0
30.0
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
WA SA East Coast
>4 >4
HIGH VOLATILITY IN WHEAT PRODUCTION ATTRIBUTABLE TO CHANGING WEATHER CONDITIONS
AUSTRALIA WHEAT PRODUCTION BY REGION (In mt)
AUSTRALIA WHEAT EXPORT BY REGION (In mt)
Source: ANZ Analysis
Page 5
>5
-
4.0
8.0
12.0
16.0
20.0
2006–07 2007–08 2008–09 2009–10 2010–11 2011–12 2012–13 2013–14
Indonesia China Vietnam Yemen Iraq Malaysia Korea,Rep.of Japan Iran Thailand Philippines
AUSTRALIA EXPORT BY COUNTRY: WHEAT (In mt)
WHEAT
Source: ABARES
Page 6
>6
-
1.3
2.6
3.9
5.2
6.5
2006–07 2007–08 2008–09 2009–10 2010–11 2011–12 2012–13 2013–14
China SaudiArabia Japan Korea,Rep.of Thailand Vietnam Kuwait UnitedArabEmirates Taiwan Philippines
AUSTRALIA EXPORT BY COUNTRY: BARLEY (In mt)
BARLEY
Source: ABARES
Page 7
>7
-
0.3
0.6
0.9
1.2
1.5
2006–07 2007–08 2008–09 2009–10 2010–11 2011–12 2012–13 2013–14
China Japan Taiwan New Zealand Papua New Guinea
AUSTRALIA EXPORT BY COUNTRY: SORGHUM (In mt)
SORGHUM
Source: ABARES
WHAT IS DRIVING ASIAN DEMAND?
Page 9
6.8
8.1
>9
CONSUMPTION (In mt) IMPORTS (In mt)
DRIVERS
Noodles
Instant Noodles
Bread
Sponge Cake
AH, APW
APW,AH & ASW
DNS & CWRS
SWW,APW & ASW
INDONESIA
7.1
8.2
2013 2023Source: FAOSTAT, USDA, AEGIC & ANZ Analysis
60% 20% 10%
7.1
8.2 71%
11%
15%
CONSUMPTION MIX (2012-13) IMPORT MIX (2013-14)
Page 10
>10
CONSUMPTION (In mt) IMPORTS (In mt)
Source: FAOSTAT, USDA, AEGIC & ANZ Analysis
DRIVERS
7.1
8.2
2013 2023
CHINA
121.4
123.0 6.0
2.8 Noodles
Steam Buns
Bread
Sponge Cake
AH, CWHWS & CPSW
APW & ASFT
DNS & CWRS
SWW,APW & ASW
25% 54% 10%
IMPORT MIX (2013-14)
Page 11
>11
CONSUMPTION (In mt) IMPORTS (In mt)
Source: FAOSTAT, USDA, AEGIC & ANZ Analysis
DRIVERS
7.1
8.2
2013 2023
VIETNAM
2.4
2.9
1.9
2.9
Dried Noodle
Instant Noodles
Bakery
APW
APW,AH & ASW
APH, AH and APW & high Protein wheat from America
CONSUMPTION MIX (2012-13) IMPORT MIX (2013-14)
66% 8% 7% 40%-50% 35%-40% 10% Other
Page 12
>12
CONSUMPTION (In mt) IMPORTS (In mt)
Source: FAOSTAT, USDA, AEGIC & ANZ Analysis
DRIVERS
7.1
8.2
2013 2023
MALAYSIA
IMPORT MIX (2013-14)
60% 15% 8%
Noodles
Instant Noodles
Bread
AH, APW
APW,AH & ASW
DNS & CWRS
1.2
1.4
1.4
1.6
Page 13
>13
CONSUMPTION (In mt) IMPORTS (In mt)
Source: FAOSTAT, USDA, AEGIC & ANZ Analysis
DRIVERS
7.1
8.2
2013 2023
KOREA
CONSUMPTION MIX (2012-13) IMPORT MIX (2013-14)
Noodles WSN
Ramyon
Bread
Biscuits
ASWN
AH & ASWN
DNS
SWW
5.1
4.8 5.0
4.8
35-40% 35-40% 44% 14% 42% Other
Page 14
>14
CONSUMPTION (In mt) IMPORTS (In mt)
Source: FAOSTAT, USDA, AEGIC & ANZ Analysis
DRIVERS
7.1
8.2
2013 2023
JAPAN
IMPORT MIX (2013-14)
Udon
Ramen
Bread
Sponge Cake
ASWN & Domestic
APH,DNS & CWRS
DNS & CWRS
SWW,APW & ASW
6.5 6.7 5.8 5.8
20-25% 57-60%
Page 15
>15
CONSUMPTION (In mt) IMPORTS (In mt)
Source: FAOSTAT, USDA, AEGIC & ANZ Analysis
DRIVERS
7.1
8.2
2013 2023
1.8
1.9 2.0
2.1
Noodles
Bread
AH, APW
DNS & CWRS
IMPORT MIX (2013-14)
71% 15% 11%
THAILAND
Page 16
>16
CONSUMPTION (In mt) IMPORTS (In mt)
Source: FAOSTAT, USDA, AEGIC & ANZ Analysis
DRIVERS
7.1
8.2
2013 2023
Noodles
Bread
AH, APW
DNS & CWRS
3.3
3.9
3.4
3.9
44% 50% 2% 55%
PHILIPPINES
CONSUMPTION MIX (2012-13) IMPORT MIX (2013-14)
ASEAN-AUSTRALIA-NEW ZEALAND FREE
TRADE AREA (AANZFTA)
Page 18
>18 >18
TARIFF POST AANZFTA
INDONESIA
Wheat
2005 2015 2025+
Meslin
Barley
Oat
0%
5%
0%
5%
0%
0%
0%
0%
0%
0%
0%
0%
VIETNAM
Wheat
2005 2015 2025+
Meslin
Barley
Oat
5%
0%
3%
3%
5%
0%
3%
3%
0%
0%
0%
0%
MALAYSIA
Wheat
2005 2015 2025+
Meslin
Barley
Oat
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
PHILIPPINES
Wheat
2005 2015 2025+
Meslin
Barley
Oat
3%
3%
7%
7%
0%
0%
0%
0%
0%
0%
0%
0%
THAILAND (In THB/kg)
Wheat
2005 2015 2025+
Meslin
Barley
Oat
0.1
0.1
2.75
2.75
0%
0%
0%
0%
0%
0%
0%
0%
MYANMAR
Wheat
2005 2015 2025+
Meslin
Barley
Oat
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
CAMBODIA1
Wheat
2005 2015 2025+
Meslin
Barley
Oat
7%
7%
7%
7%
U
7%
U
7%
U
0%
U
0%
LAOS
Wheat
2005 2015 2025+
Meslin
Barley
Oat
5%
5%
5%
5%
5%
5%
5%
5%
0%
0%
0%
0%
BRUNEI / SINGAPORE
Wheat
2005 2015 2025+
Meslin
Barley
Oat
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
Source: ASEAN Database & ANZ Analysis
Note 1: ‘U’ stands for Undisclosed
OPPORTUNITY FOR AUSTRALIAN
AGRICULTURE SECTOR:
ASEAN
Page 20
0.9
1.0
1.5
1.9
2.7
3.5
3.8
5.7
10.4
39.7
55.2
Myanmar
Cambodia
Lao PDR
Viet Nam
Philippines
Indonesia
ASEAN
Thailand
Malaysia
Brunei
Singapore
0.4
5.4
6.8
15.1
29.7
53.3
67.0
89.7
98.4
249.9
Brunei
Singapore
Laos
Cambodia
Malaysia
Myanmar
Thailand
Vietnam
Philippines
Indonesia
-
500
1,000
1,500
2,000
2,500
2009 2010 2011 2012 2013Indonesia Thailand Malaysia Singapore Philippines
Viet Nam Myanmar Cambodia Lao PDR
>20 >20
ASEAN HOME FOR 617 MILLION PEOPLE TO DRIVE AGRI DEMAND IN LONG RUN
ASSOCIATION OF SOUTHEAST ASIA NATIONS (ASEAN): KEY STATS
Indonesia
Singapore
Malaysia
Vietnam Cambodia
Myanmar
Thailand
Laos
Philippines
Brunei
GDP (Current Price USD Billion)
POPULATION (In Million) GDP PER CAPITA (Current Price USD 000’)
Source: World Bank & ANZ Analysis
Page 21
44
13
26
34
28
41
40
156
274
249
8
40
33
26
33
40
40
138
220
277
Iron and
Steel
Rubber
Organic
Chemicals
Precious
Metal
Optical
Instruments
Plastics
Vehicles
Nuclear
Reactors
Mineral fuels
Electrical
Machinery
Exports Imports
26
23
13
66
82
92
118
122
198
278
42
46
82
35
53
115
123
124
153
330
India
Australia
Hong
Kong
Taiwan
Korea
USA
Japan
EU-28
China
ASEAN
Exports Imports
3
4
9
12
65
132
187
206
250
373
3
11
9
11
54
133
183
228
229
410
Laos
Brunei
Cambodia
Myanmar
Philippines
Viet Nam
Indonesia
Malaysia
Thailand
Singapore
Exports Imports
>21 >21
ASEAN: TRADE OVERVIEW
ASEAN TRADE
(In USD bn) ASEAN TRADING PARTNERS (In USD bn)
ASEAN TRADE COMMODITY GROUP (In USD bn)
Source: ASEAN Database & ANZ Analysis
Page 22
-
1.5
3.0
4.5
6.0
7.5
IndonesiaPhilippines Thailand Vietnam Malaysia Myanmar Singapore Cambodia Brunei
83%
17%
53% 47% 47%
53% 47%
53%
9,506 8,634
2,905 1,849
RefinedPetroleum
Crudepetroleum
Goodsvehicles
Passengermotor
vehicles
3,193
2,251 2,106
987
Crude… Wheat Gold Aluminium
>22 >22
AUSTRALIA IS WELL POSITIONED TO TAKE ADVANTAGE OF THE ROBUST DEMAND
ASEAN
1967 1992 1997 2005 2007 2008 2008 2009 2010
Birth of ASEAN
ASEAN Free Trade Area
(AFTA)
Vision 2020 China FTA
2010 2010
Korea FTA Japan Economic
Partnership
ASEAN Charter
Road Map 2009-15
Master Plan ASEAN
Connectivity
Australia‐ NZ FTA
India FTA
AUS EXPORT TO ASEAN 2013 (AUD m)
AUS IMPORT FROM ASEAN 2013 (AUD m)
ASEAN IMPORT DEPENDENCE ON AUSTRALIA (2013) WHEAT BARLEY OAT
USD 5.0bn
USD 18.8m
USD 7.3m
ASEAN KEY WHEAT IMPORTERS 2013 (In mt)
Source: ABARES, Trade Map & ANZ Analysis
47% 53%
Australia Other
CHINA–AUSTRALIA FREE TRADE
AGREEMENT (ChAFTA):
IMPACT OF GRAIN INDUSTRY
Page 24
>24
-
100
200
300
400
500
600
700
800
'03/'04 '05/'06 '07/'08 '09/'10 '11/'12 '13/'14
Begg. Stocks Dom. Production Imports
-
8%
16%
24%
32%
40%
'03/'04 '05/'06 '07/'08 '09/'10 '11/'12 '13/'14
End. Stock as % of Consumption
CHINA GRAIN1 SUPPLY (In mt) GRAIN1 ENDING STOCK AS % OF CONSUMPTION
Source: USDA
Note: Grain includes Barley, Corn, Wheat, Rice, Sorghum
CHINA’S GRAIN IMPORT IS LIKELY TO CONTINUE, WITH THE CURRENT ENDING STOCK RECOVERED TO 38% OF ANNUAL CONSUMPTION
Imports form ~3.4% of the China’s grain1 supply in 2013-14. Wheat account for 29.3% of the grain1 imports
THE INDIRECT FACTORS AFFECTING
AUSTRALIAN GRAIN
Page 26
55%
12%
10%
8%
5%
4%2%
4%
Indonesia Vietnam Israel China
Malaysia Russia Philippines Other
~18% of Australian beef exports are grain fed and China accounts for 6% of total grain fed beef exports. With China Australia FTA in place that gradually reduces the tariffs, Australia exports to China will increase. However, recent fall in total beef exports to china highlight the 2013 export levels are not sustainable, which implies limited affect on grain fed beef exports
… AUSTRALIA NEEDS TO LOOK INTO ALTERNATIVE FEEDING SYSTEMS TO LIFT LIVESTOCK PRODUCTIVITY… >26
Australia Beef Exports – 2014 (In Shipped weight tonnes)
LIVE CATTLE EXPORTS – 2014
Grass fed beef 82%
Grain fed beef 18%
Source: Australian Feedlot Association & ANZ Analysis
Page 27
9,200 486 9,686
2013 Additional 2030
5,525345 5,870
2013 Additional 2030
Chinaforecasted
Importsfrom
Australia
China'sforecasted
DairyImports
China
Imports from
Australia
China's
Dairy
Imports
… AUSTRALIA NEEDS TO LOOK INTO ALTERNATIVE FEEDING SYSTEMS TO LIFT MILK PRODUCTION… >27
DAIRY IMPORTS IN CHINA FROM AUSTRALIA -2013 (In million litres)
7% X
9,365
655.5
DAIRY IMPORTS IN CHINA FROM AUSTRALIA – 2030 (In million litres)
16,300
1,141.3
INCREASE IN AUSTRALIA’S EXPORT POTENTIAL TO CHINA (In million litres)
7% X
INCREASE CATTLE YIELD (In litres/cow/year)
Sources: OECD, ANZ Analysis, NDSU: Extension Service
Herd size Share Litres (m)
Milk solids
Feed (mt)
Base case 7% 1,141 75 1.0
Upside 12% 1,956 128 1.7
Aggressive 15% 2,445 161 2.1
INCREASE HERD SIZE (In million)
CURRENT HERD SIZE 1.65 million
EXPECTED HERD SIZE 1.75 million
APPROACH TO ASIAN MARKET: CHANGING
MARKET DYNAMICS
Page 29
38%
24%
22%
9%
3% 3%
Canada
USA
Singapore
UK
Thailand
Other
0.70
0.77
0.84
0.91
0.98
1.05
Jan-13 Jan-14 Jan-15 Jan-16 Jan-17
(50.0)(45.0)
(8.3) (7.1)
18.3
46.0 46.2
Asia
Pacific
Africa Other Latin
AmericaCaribben
Oceania Europe North
America
>29 >29
APPROACH TO ASIAN MARKET: CHANGING MARKET DYNAMICS
JV WITH ASIAN FOOD PROCESSORS
AUD DEPRECIATION: INWARD INVESTMENT
OPPORTUNITY1
FOCUS ON REDUCING TRANSPORTATION
INEFFICIENCY
AUD – USD EXCHANGE RATE 2023 ESTIMATED WHEAT TRADE SUMMARY (In mt)
Australia Asia Rail Port
Sources: OECD, ANZ Analysis, NDSU: Extension Service Note 1: Acquisition analysis over 2005-2015 highlight key Acquirer countries
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