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Global poultry industry trends
Rabobank International
Shaping the industry for competitiveness
Nan-Dirk Mulder, 27 April 2016
Global poultry outlook
Column containing text
1. Long term market outlook
2. Key investment themes
3. Strategic global industry outlook
Content
Rabobank: The world’s leading global F&A bankRabobank 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
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
Poultry gains further market share in the animal protein market, 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%
Feed grains: Ongoing overproduction with stock rebuilding at all world grains markets
Corn Wheat Soybeans
0
50
100
150
200
250
300
350
400
550
600
650
700
750
800
850
900
950
1,000
1,050
Ending stocks Production
Consumption
0
50
100
150
200
250
300
350
400
450
500
550
570
590
610
630
650
670
690
710
730
750
Ending stocks Production
Consumption
0
20
40
60
80
100
120
140
150
170
190
210
230
250
270
290
310
330
Ending stocks Production
Consumption
Avian Influenza has become a global challenge
Avian influenza outbreaks Jan 2014 – Feb 2016
Long term outlook: 65% more poultry in 20 years
Global demand for animal protein
Source: Rabobank analysis, FAO, OECD, FAPRI, 2015
-
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%
65% of global protein demand growth is in Asia
Global market volume change 2014-2024
Source: Rabobank forecast based on FAO, FAPRI, OECD. 2015
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
Asian chicken production is 30-50% more expensive as Brazilian production
14
0
50
100
150
200
250
Processing Live broiler
Cost price comparison whole broiler 2013EUR/100 kg
Source: Rabobank, WUR, 2015
0
2,000
4,000
6,000
8,000
10,000
12,000
Chicken Beef Pork
x 1,000 tonnes
Growing importance of trade, but volatile global market conditions
15
Global trade in meat 2000-2015
Source: Rabobank, USDA, 2015
Pork: CAGR: +5.4%
, 6% of global
supply
Poultry: CAGR: +5.5%
, 12% of global supply
Beef: CAGR:
+3.7%,
17% of global
supply
Global poultry production outlook: Growth everywhere, especially in BRICs
16
-
5,000
10,000
15,000
20,000
25,000
30,000
35,000
2005 2015 2025
x 1,000 tonnes
+1.2%
+1.9%
+2.2%+0.9%
+7.2%+3.0%
+2.7% +6.9% +2.2% +4.4% +2.5% +2.7%
+2.4%
+1.8%+2..6%
Global broiler production outlook 2025
Column containing text
1. Long term market outlook
2. Key investment themes
3. Strategic global industry outlook
Content
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
Consumer concern driven change to change global industries especially in emerged markets
CaliforniaJan 2015 cage ban
EU: 2012 Cage ban 2013 sow house ban
D: GermanyInitiative Tierwohl
ACT, WA:Bans on cage houses and sow stalls
China: Antibiotics, melamine scandals
Canada: ban on pig gestation
Alberta: Phase out of
battery cages
NL: Chicken of tomorrow
Source: Rabobank, 2016
Brazil discussion about cage
ban
Client based push to non cage eggs
Antibiotics free
Premium chickens: An opportunity?
• Source: Rabobank analysis, 2015
Animal
- Slow growing bird
- Lower density
- Straw, light
Environment: Sustainanable Soy
Netherlands: NGO and retail driven change
Germany: Initiative Tierwohl
Program
- Separate programs for red meat and poultry industry
- 80% of German supermarkets
- More space per bird
Labels to guarantee standards of production
United Kingdom France
Europe: High welfare concepts US: Antibiotics free and QSR
standardsNorth America: Antibiotics free
QSR and retail: higher animal welfare standards
From volume to value: The journey to higher margins
Brand
Value added food
Value added chicken
Premium chicken
Standard chicken
Investors who
follow this strategy
The poultry value added pyramid
Low
High
Margin
level
Chinese industry still struggles with low confidence in white chicken
Animal disease fears: Human H7N9 cases
Why are there so manyfood scandals?
Food safety scandals
China: Breeding stock shortage to affect market and imports in H2 2016
23
China poultry and pork priceChina breeding stock
imports
Source: Rabobank analysis based on local statistics, 2016
Pork
Poultry
1.71
1.9
1.49
1.35
1.49
1.21
0.7
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
1.8
2
2009 2010 2011 2012 2013 2014 2015
4
6
8
10
12
14
16
18
20
Shandong Province Hog Price
China will recover, but in another shape. Regaining confidence is keyChina poultry consumption: low
Source: Rabobank/USDA, 2015
Road to recovery
Avian influenza
management
Supply management
Value chain model
Branding
Wet market policy
Wet markets = 70%
Broiler meat markets = 30%
-
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
45.0
kg/head
South East Asia: Growing interest from regional and global investors
+6.0%
+5.1%
+1.0%
+6.1%+4.9%
+2.1%
Thailand PhilippinesVietnam
Indonesia
Malaysia
Myamar
International investorsSouth East Asia market growth and
regional internationalisation
Source: Rabobank analysis based on USDA, FAO and local statistics, 2016
Eastern European industry is growing very fast driven by local and export market growth
EU poultry production growth Jan- Oct 2015 versus 2014
Source: Rabobank analysis based on Eurostat, 2016
-8.0%
-6.0%
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
-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: Investments are also taking off
Africa meat and egg market
2025fAfrica Poultry Growth by Market
Kg/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%
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
20,000
Production Consumption Exports2007 2008 2009 2010 20112012 2013 2014 2015 2016f
x 1,000 tonnes
-10%
US broiler sector: Exports -12%
US: Oversupply after 2015 avian flu crisis
28
AI
-12%
+4%
+7%
Source: Rabobank analysis based on USDA, 2016
US Layer hen herd versus egg and feed prices
0
50
100
150
200
250
250
260
270
280
290
300
310
320
330
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2012 2013 2014 2015 2015
Feed index Laying hens Egg price
Million laying hens Index 2012=100
AI
-12%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Wholechicken
Breast Cuts Processed
Brazil US Thailand China EU Turkey Other
Mitigate AI risk: Higher dependence on limited suppliers, opportunities for newcomers
Global export market shares by
country
AI
AI
AI AI
Opportunities for new comers
Product High potentials
Whole
Breast
Cuts
Processed
Source: Rabobank analysis, 2016
AI: To change breeding supply, local programmes and internationalisation
Global
Local
Further globalization of distributionand compartmentalisation
Domestic programs to reduceImport dependence
Source: Rabobank analysis, 2016
Column containing text
1. Long term market outlook
2. Key investment themes
3. Strategic global industry outlook
Content
Column containing text
Globalisation of the industry: Companies from emerging markets take the lead
Top 20 Global meat companies 2016
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 trade
China’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%
Internationalisation in the meat industry to continue
Globalization in the animal protein industry
Africa
Middle East
SE
Asia
Australi
a
Russia
EU
United States
Mexic
o Brazil
Argentin
a
ChinaJapan
India
Source: Rabobank, 2016
Column containing text
Towards the Asian and African decades in poultry development
Global
investments
1980 1990 2000 2010 2020
2030
Global investments in the poultry and egg industries
Source: Rabobank, 2015