Viable Growth in the Australian Pulse Industry Peter Wilson

Chief Executive Officer – AGT Foods Australia

Chairman Pulse Australia

Key future drivers

• Global Issues • Supply chain integrity

• Government intervention

• Geopolitical instability and conflict

• Market transparency and price discovery

• Domestic Issues • Industry focus

• Pulse Australia’s role

• Opportunities to flow from International Year of Pulses

Rural Renaissance

“a future in which agriculture provides societal solutions to energy supplies, health promotion and climate change.”

“whatever producers and processors do, they must be done in innovative ways that resonate with their customers.”

3

Agriculture – Not just commodities anymore

• Agriculture not just hitting the “breadbasket” anymore

• Protein is a key driver of agricultural markets

• Food safety – non negotiable

• Impact reaching far outside Agri-Food: o Health sector

o Energy sector

o Environment sector

o Immigration sector

o Food Aid sector

o Economy overall

5

Pulse Industry Growth Growth Opportunity

• Traditional price conscious markets are increasingly ‘commoditized’

but “more reliable”

• The agricultural and agri-food industry needs…

• To leverage nutrition, health, energy, food security/safety and the

environment profile to achieve sector growth

• Find new approaches to build on existing strengths in non-

traditional markets and products

• To tap into the growth potential for feed in domestic and

international markets

• Food, Fibre and Feed

• Pulses ingredients like flour, protein, starch and fibre as well as

premium pulses with market demand in consumption markets

• Enormous healthy snack food potential

How to realize the potential:

• Non-traditional uses for grains and pulses like ingredients and

industrial uses

• Move up the value-chain with branded packaged wholesale and retail

• Increase value-added milling capacity for pulses

• The Asian and MENA markets are in close proximity and large in size

• Research partnerships with industry

• Focus on food safety, logistics, market development and access

6

Factors Driving Global Demand

7

Benefits of

Pulses

• Pulses are a sustainable source of protein

• GMO-free, gluten-free, low allergen, major source of protein and fibre, which developing nations particularly rely on

vegetable sources for their protein and energy requirements

• Lower energy use, reduced greenhouse gas emissions, improved soil health through rotational cropping, increased

water use efficiency

Emergence of

the Middle Class

• Overall food output to increase due to population growth, urbanization and income growth

• Middle class may increase from 1.8 billion to 3.2 billion by 2020 and to 4.9 billion by 2030 - with 85% of this growth coming from Asia.

• Global spending by the middle class may grow from $21 trillion today to $56 trillion by 2030

Health and

Wellness Trend

• Consumer movement towards healthy lifestyles in non-traditional markets

• Pulses offer many benefits for nutrition, health and chronic disease prevention

• As a result, there has been increased interest from food companies in using pulses in product formulations, for cost,

characteristic, allergen, GMO-free and other reasons

Alternative Fuels

& Sustainability

• Pulses production globally is at all time highs from multiple origins

• Pulses are a rotational crop for cereals and canola which are used in ethanol and biodiesel production

• Pulses lower the carbon footprint and support the sustainability efforts of processors, food companies and meet the

demand of consumers for sustainably produced products

Source: UN FAO; OECD

Source: UN FAO

Markets for Pulses & Staple Foods

Growth Driver: Population & Global Demand for Food

• 2050 - Global population expected to rise 30%

• Global food output will have to grow by 70% to feed the world with

growing middle class

• Pulses are a sustainable source of protein, a key nutrient for large

numbers of the world’s populations

Growth Driver: Health, Nutrition and Sustainability

• High Protein and Fibre, Nutrient Dense, Low Fat, Gluten Free, non-

GMO, Low GI and Allergenicity -> snackfoods

• Lower Energy Use, Reduce Greenhouse Gas Emissions, Improve Soil

Health through Rotational Cropping, Increase Water Use Efficiency

South Asia

Middle East and North Africa

Latin & Central America

Europe

North America

China

New Markets for Pulses Traditional Markets for Pulses

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Plant Fixing Nitrogen Lower Energy Requirement Increased Water Use Efficiency

Pulses & Sustainable Agriculture

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Source: Hoekstra and Chapagain, Globalization of Water, U. of

Twente, Waterfootprint.org National Geographic, April 2010

• 43 gallons of water required to produce one pound of pulses

• 1,857 gallons of water required to produce one pound of beef

1,857

Gallons/ lbs

43

Gallons/

lbs

Pulses

756

Gallons/ lbs

469

Gallons/ lbs

• Pulses Use Less Non-Renewable Energy Relative to Other Crops

• 70% of the non-renewable energy used in cropping systems in western Canada is attributable to fertilizers

Source: (Zentner et al. 2004)

• Pulses produce their own fertilizer by fixing nitrogen

Global Pulse Production Rising

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Why is pulse area increasing?

Wheat SND 2010 2016

World Supply 647 733

World Demand 663 709

Stocks 181 240

Stocks to use 27% 34%

Relative Australian Pulse Area, Production and Value

ABS/ABARE/Pulse Australia Limited/AGT Foods Australia

$0.40

$0.82

$0.62 $0.69

$0.84 $0.88

$1.11

$1.00 $1.07

$1.70

$2.03

$-

$0.50

$1.00

$1.50

$2.00

$2.50

0%

2%

4%

6%

8%

10%

12%

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Area Production Value (Billion A$) Expon. (Value (Billion A$))

Spread Prices basis CFR

Mumbai

($700)

($600)

($500)

($400)

($300)

($200)

($100)

$0

$100

$200

$300

$400

$500

Desi/Yellow Pea Yellow Pea/CBOT Wheat Desi/Lentil Linear (Desi/Yellow Pea) Log. (Yellow Pea/CBOT Wheat) Log. (Desi/Lentil)

$0

$200,000,000

$400,000,000

$600,000,000

$800,000,000

$1,000,000,000

$1,200,000,000

$1,400,000,000

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

4,000,000

4,500,000

India Bangladesh Egypt Pakistan Sri Lanka United ArabEmirates

Saudi Arabia Malaysia United Kingdom Indonesia

$ value

MT

Destination Country

Top 10 Export Destinations for Australian Pulses

Sum of Quantity (tonnes) - 2005 - 2009 Sum of Quantity (tonnes) - 2010 - 2014 Sum of Quantity (tonnes) - 2015 - Feb 2016

Sum of Value (FOB) (plain $!) - 2005 - 2009 Sum of Value (FOB) (plain $!) - 2010 - 2014 Sum of Value (FOB) (plain $!) - 2015 - Feb 2016

$0

$500,000,000

$1,000,000,000

$1,500,000,000

$2,000,000,000

$2,500,000,000

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

Chickpeas Beans Lentil Field Peas Mungbean Lupins

AUD Value MT

Pulse Commodity

Pulse Exports from Australia Over Time

Sum of Quantity (tonnes) - 2005 - 2009 Sum of Quantity (tonnes) - 2010 - 2014 Sum of Quantity (tonnes) - Nov15 - Oct16

Sum of Value (FOB) (plain $!) - 2005 - 2009 Sum of Value (FOB) (plain $!) - 2010 - 2014 Sum of Value (FOB) (plain $!) - Nov15 - Oct16

Indian Pulse Production, Consumption and Gap

0

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

30,000,000

35,000,000

40,000,000

45,000,000

50,000,000

2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17

MT

Production Consumption Gap

Challenges and opportunities for Australian Ag Sector

• Australia is almost fully dependent on export markets

• Market access is an ongoing priority for the pulse industry

• Bilateral free trade agreements

• China – faba beans/lupins

• Sanitary/phytosanitary issues, other non-tariff barriers

• Differentiate and capture market and sales opportunities over competing origins, processors, traders.

• Primary vs. Secondary processing – Balance between the two. Need to up value some products and efficiently ship others

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Ocean and Intermodal Containers

• Transportation advances and inland freight hubs are creating freight options that were not available before.

• Transformational projects like the Toowoomba Range Crossing and the future Inland Rail Project will change the way product flows in north eastern Australia.

• Full containers in = empty containers available for outbound shipments – adjusting to the downturn in car industry imports

• Free-Trade Agreements with key partners will be a big opportunity for Australian agribusiness

• AGT Foods Australia is one of the largest agri-product container shippers in Australia

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• Managing Director of the Grains & Legumes Nutrition Council and Non-Executive Director of Pulse Australia, Ms Georgie Aley chairs the International ‘Creating Awareness’ theme as well as being the chair of the Australian Steering Committee.

• Pulse Australia CEO, Tim Edgecombe is a member of both the global ‘Market Access and Stability’ and ‘Productivity and Environmental Sustainability’ theme committees

• Michelle Broom, Nutrition Program Manager at the Grains & Legumes Nutrition Council, is a member of the global ‘Food and Nutrition Security and Innovation’ theme.

• The Australian national IYP committee will continue to hold industry workshops and engage with stakeholders throughout 2015 to capitalise on the opportunities available to the Australian pulse and food industry through the IYOP16.

2016

International Year Of Pulses

• What’s in it for the Australian Pulse Industry? • Greater promotion and awareness of pulses for human consumption.

• Greater investment interest in further value addition for domestic and export demand.

• Better asset utilisation – margin improvement

• More options for farmers as liquidity improves

• What’s in it for the Australian Grains Industry? • More sustainable industry – lighter carbon footprint.

• Future model for grains industry integration and supply chain efficiency.

• Opportunity for grain and pulse food product collaboration.

International Year of Pulses

Conclusions • Agriculture in in the midst of a renaissance impacting

many sectors of the economy

• Opportunities as agri-production moves up the value-chain focused on food, fibre, feed and fuel as well as packaged and retail products and ingredients

• Global race for protein is on and Australia has the opportunity to become the “protein-basket of the world”

• Global agri-products markets are deep with need for secure and stable food supplies

• Initial investment, follows an idea, sustained investment in this sector follows supply and demand confidence.

• International Year of Pulses set to drive supply, demand and investment -> margin

• Australia needs to harness the legacy benefits of the Mining Boom as it migrates to the sustainable benefits of the Dining Boom

• https://vimeo.com/135428491

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Questions?