standard bank agribusiness...
TRANSCRIPT
Standard Bank AgriBusiness
Conference Charles van Niekerk
Barloworld Agriculture
2
Agri Business Dynamics
3 3
•The agricultural industry
•World trends affecting agriculture
•Innovation and technology
•Agricultural value chain
•Future strategies
•Conclusion
Contents
4 4
Why Agriculture today ?
Which commodities are worth buying or holding on to?
“I really think agriculture is going to be the best place to
be. Agriculture’s been a horrible business for 30 years. For
decades the money shufflers, the paper shufflers, have been
the captains of the universe. That is now changing.
The people who produce real things (will be on top). You’re
going to see stockbrokers driving taxis. The smart ones will
learn to drive tractors, because they’ll be working for the
farmers. It’s going to be the 29-year-old farmers who have the
Lamborghinis (Land Cruisers). So you should find yourself a
nice farmer and hook up with him or her, because that’s where
the money’s going to be in the next couple of decades.”
Jim Rogers (co-founder of the George Soros legendary Quantum Fund in 1970) in response to a question from Maria
Bartiromo (CNBC), Business Week 9 March 2009
5
World trends affecting agriculture
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9 9
Powerful Forces Driving Growth
Population growth
Increased protein consumption
Ag productivity improvements
in developing world
Farm income expanding
Strong industry
tailwinds
10 10
Growing Demand For Food
Source: AGCO
2X
70-150
100
Food Production
(Indexed)
100
+~100%
Population Growth
• Growing world population
from 7 bn to 9 bn
• Increased consumption:
– growing population
– protein consumption
11 11
Rapid Growth in Chinese Protein Consumption
0
10
20
30
40
50
60
70
80
90
100
1961 1964 1967 1970 1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003 2006 2009 Pork
Poultry
Beef
Fish
Eggs
Cereals
Fruits & veg
Oil & oil crops
Pulses
Starchy roots
Milk
Other
(g/person/day)
Source: CLSA
• World demand is also driven by the Chinese increased consumption of all
agricultural products. It feeds 20% of the world’s population on only 10% of
the world’s arable land and with only 6% of its water.
12
Positive Industry Fundamentals will Drive Growth
Wheat Stocks /
Use Ratio (1985-2010e)
Soybean Stocks /
Use Ratio (1985-2010e)
Corn Stocks /
Use Ratio (1985-2010e)
Food Stocks Declining
Source: Bloomberg
70%
60%
50%
40%
30%
20%
10%
0%
100%
80%
60%
40%
20%
0%
30%
25%
20%
15%
10%
5%
0%
13 13
World Maize Production & Consumption
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
-
100 000
200 000
300 000
400 000
500 000
600 000
700 000
800 000
900 000 M
illio
n t
on
nes
Production Consumption Carry Over % Carry Over Source: agrimoney
World demand for maize kept growing at a constant rate during the recession after 2008, when the
demand for almost all other commodities took a serious dip
14 14
World maize price
50
100
150
200
250
300
19
80
19
81
19
82
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83
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84
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85
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86
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88
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89
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90
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91
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92
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93
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94
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95
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96
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97
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98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
$ /
to
n
Source: CBOT
The consistent growth in demand for maize and the thin carry over stocks have put upward
pressure on the international maize price.
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Agricultural produce demand growth
• World output needs to grow nearly 20% every decade for the next 40 years
• We need to produce an extra 90 million tones of grain a year every year for the next 10 years
• An extra 20 million tons of oilseeds is needed every year by 2020
• Dairy output needs to increase by 30 million tonnes a year over the next 10 years
16 16
Africa represents about 60 percent of the potentially
available cropland in the world
80
970
2009
590
300
Sub-Saharan
Africa
Latin
America
Others
216
38
45
49
53
53
66
72
Others
Tanzania
Central African
Republic
Mozambique
DRC
Angola
Sudan
Zambia
75
31
39
155
Others
Venezuela
Argentina
Brazil
1 Cropland defined as land-producing output greater than 40% of maximum yield under rain-fed conditions,
excluding forest areas.
Source: World Bank/FAO "Awakening Africa’s sleeping giant"; McKinsey Global Institute
Additional available cropland,
20091
Million ha
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Innovation and technology
18 18
Change
It is not the strongest of the species that survive,
nor the most intelligent: it is the one most
adaptable to change.
Charles Darwin
19 19
Technical information
20 20
Computer chips
Chip power is doubling every 18 months
21 21
Data transfer: Commoditisation of Bandwidth
22 22
Time to get worried
23 23
Future trends
In the last 5 minutes:
•67 babies were born in the USA
•274 were born in China
•395 were born in India
•694 000 songs were illegally downloaded
•By 2050, a $1 000 computer will exceed the computational
capabilities of the entire human species.
•NTT Japan has successfully tested a fibre optic cable that pushes 14
trillion bits per second down a single strand of fibre.
•That is 2 660 CD’s or 210 million phone calls per second.
24 24
Drones (UAV)
Scientists are already using remote-controlled helicopters to detect
diseases in farmers’ fields. Unmanned helicopters are also popular in
Japan where more than 2,300 are used to keep a close watch on the
health of crops. Producers who farm large fields could use the
machine to inspect crops for insect or disease damage.
25 25
Amazone delivery service
Amazone plans to launch their Prime Air delivery service during 2015,
which will guarantee a 30 min delivery after order
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Agricultural value chain
27 27
Size of Agricultural Production (R m)
Grain, R 42 345
Sugarcane, R 7 030
Potatoes, R 8 028
Vegetables, R 9 625
Fruit, R 26 604
Livestock, R 39 248
Poultry, R 44 873
28 28
Agricultural Value Chain
29 29
Farmers profile
50%
Of farmers had a post-matric
qualification in
1997.
Farmers with internet access
46%
65%
72%75%
81%
2000 2002 2004 2006 2008
57%
2000
60%
2006
Most farmers intend to reduce laborers and mechanise more.
There are 50% less farmers today than in 1985
30
Applicable technology
DISCING
644 ha / 24 h
PLANTING
571.9 ha / 24 h
WORLD RECORDS
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Emission control
Exhaust Gas Recirculation -EGR Selective Catalytically Reduction - SCR
•Diesel engines emits
pollutants like CO2 and
NOx
•Engines in Europe now
have to comply with tier IV
•SA – tier II
•Various ways of reducing
pollutants
32 32
Precision Agriculture
•Digital farm maps
•Yield monitoring
•Telemetry
•Guidance and controlled traffic
•Variable application and plant spacing
•Flow and application control
•Water solutions
•Topography and drainage
•Remote cameras and tracing
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Future strategies
34 34
•The first Forbes Top 100 Companies list was published in 1917
• In 1987 only 39 of these companies still existed
• Only 18 of these were still in the top 100
•On the Standard & Poor’s (S&P) 500, from 1957 to 1987, in 30 years only
74 companies remained and most of them performing below average.
•In the 1920’s and 30’s companies remained on the S&P 500 for about 65
years, by 1998 this his diminished to 10 years.
Growth and survival
35 35
Strategic Business Objectives
Source: Barloworld Logistics supply chain foresight
36 36
Disruptive Innovation
• A disruptive innovation is an innovation that helps create a new
market and value network, and eventually goes on to disrupt an
existing market and value network, displacing an earlier
technology.
• It entails innovations that improve a product or service in ways that
the market does not expect, typically first by designing for a
different set of consumers in the new market and later by lowering
prices in the existing market.
• Examples:
• Model T Ford,
• I-tunes
• Kalahari.com - Kindle
37
Conclusion
38 38
Agriculture is an excellent industry to invest in
• The world population of 7 billion people is projected to grow to 9 billion
by 2050.
• Changes in the diet, specially of the growing urbanised population,
towards increased per capita consumption of sugar, fat and animal
products are increasing the demand for grains even more.
• The increase in the demand for non-food usage of agricultural products,
like bio-fuels and ethanol is adding to the rapidly growing demand .
• Agricultural commodity prices have rapidly grown to their highest levels
ever.
• Arable land and water supply are becoming scarce resources which
increases the pressure for more effective production practices.
• You have to embrace technology. How do you utilise it to improve your
effectiveness and survival?
• Agriculture is the industry to be in for the future given the growth in
demand. How do you capitalise on it?
39
Thank You