CONNECTING AUSTRALIAN BEEF PRODUCTION TO GROWING

ASIAN DEMAND

Troy Setter – CEO ABARES Outlook

Conference

1st March 2016

WHO IS CPC?

2

CPC is Australia’s largest private cattle producer with a current capacity of over c.375,000 head in Australia.

Our history goes back to 1860 with the company consolidated in 1983.

With 20 cattle stations covering 5.7m hectares in Australia and 2 feedlots in Indonesia.

Currently over 230 staff in Australia and 250 staff in Indonesia.

Terra Firma (UK Private Equity) acquired 95% of CPC in 2009

3

CPC’S STATIONS, FEEDLOTS AND CONNECTION TO CUSTOMERS

4

CONNECTING AUSTRALIAN SUPPLY TO ASIAN DEMAND

Source: MLA – 2016 Beef Projections Workshop

Beef Production Down 13% In 2016

AUSTRALIAN BEEF PRODUCTION

AUSTRALIAN BEEF PRODUCTION

Source: JBS

1985 2015

Northern Australian Based Processing

6

7

AUSTRALIAN BEEF PRODUCTION CONNECTING TO ASIA – CHILLED AND

FROZEN

Source: JBS

Australian Beef Processing

Advantages • Optionality domestic v export

• Cuts based marketing

• Significant number of markets

• Cheap container shipping per kg

• Growing demand

Challenges

• Australian processing cost

• Increasing competition

Processing costs – Australia is • 2.4 times higher than the US

• 3.0 times higher than Brazil

• 1.5 times higher than New Zealand

• Up to 20 times higher than Indonesia

• Up to 10 times higher than Indonesia

8

AUSTRALIAN BEEF PRODUCTION CONNECTING TO ASIA – LIVE EXPORT

Source: JBS

Australian Live Export

Advantages • Location to markets

• Feeding in country with lower priced feed

• Local labor

• Growing demand

• Offal and fresh access

Challenges

• Australian shipping costs

• Increasing competition

• Limited cuts based marketing

• Once in country, hard to re export

Regulation Challenges • Australian Government regulation cost

• AMSA

• ASEL

• ESCAS

• Importing country Government regulation

ASIAN POPULATION GROWTH AND CONSUMER TRENDS

China imports over 20% of its

beef requirements - represents

approx. 15% of the total global

trade in beef.

Sources: World Population Statistics, Rabobank, Macquarie and Forbes

Over 3.6bn, or roughly

half the globe now live in

Asia.

The rise of the Asian Beef

consumer

9

By 2030, the rising middle classes of China and

India will account for approx. 40% of global

consumption.

Australian Beef is known for its

high quality and oversight.

Rising & expanding Asian

middle class – consuming

more beef.

Australia’s competitive advantage -

the vast majority of Asia is less than a

10 hour plane ride away from

Australia.

10

BEEF CONSUMPTION IN ASIA

Source: MLA

Beef Consumption per Capita (2004 – 2024f)

-

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

18.0

OECD Countries

Korea China Indonesia Vietnam

2004 2014 2019f 2024f

Beef Imports – China Projected to Become More Dominant in

Global Beef Trade Over the Next Decade

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AUSTRALIAN BEEF PRODUCTIVITY NOT KEEPING UP WITH DEMAND

0

50

100

150

200

1978 1990 2000 2012

Index of total factor productivity

Rates of productivity growth

in the Australian beef

industry:

• 1978-2013 1.3%

• 1988-2000 1.9%

• 2000-2012 0.7%

Productivity growth in the Australian Cattle industry has been softening

Source: JBS

LIVE EXPORT MARKETS

12 Source: MLA

-

200

400

600

800

1,000

1,200

1,400

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Indonesia Vietnam China Other

Australian Live Exports to Asia (2000 to 2015)

CURRENT MARKET ENVIRONMENT - INDONESIA

Source: MLA Industry Insights – Market Snapshot – Indonesia – Feb 2016

Consumption of Protein in Indonesia Grocery Retail Market Shares

INDONESIA BEEF PRICE

Source: MLA – 2016 Beef Projections Workshop

Jakarta Wet Market Prices Keep Increasing

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INDONESIA

16.

CURRENT MARKET ENVIRONMENT - CHINA

Source: Rabo AgForce - January 2016

China’s total beef consumption is expected to reach around 7.25 million tonnes in 2015 and increase to around 8 million tonnes in 2020

(BMI).

Beef Imports – China Projected to Become More Dominant in Global

Beef Trade Over the Next Decade

CPC CHINA EXPERIENCE

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CURRENT MARKET ENVIRONMENT - BRAZIL

Source: MLA Industry Insights – Brazil – Feb 2016

Brazilian Live Cattle Exports Brazilian Beef Exports

CURRENT MARKET ENVIRONMENT - BRAZIL

Source: MLA Industry Insights – Brazil – Feb 2016

Efficiency in First Stage Key for the US When Compared to Brazil and Australia

CURRENT MARKET ENVIRONMENT - BRAZIL

Source: MLA Industry Insights – Brazil – Feb 2016

Cattle Prices Brazil and Australia (USD terms) Cattle Slaughter and Beef Production

CURRENT MARKET ENVIRONMENT - INDIA

Source: MLA Industry Insights – Market Snapshot – India – May 2015

Projected Composition of Indian Bovine Meat

Production Indian Carabeef Exports

BEEF MARKETS

23 Source: MLA

Beef Consumption Growth Index for the Asian Region & OECD

70.0

80.0

90.0

100.0

110.0

120.0

130.0

00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15f 16f 17f 18f 19f 20f 21f 22f 23f 24f

OECD Countries Bangladesh China Indonesia Malaysia Philippines Thailand Vietnam