Investment opportunities in a fastchanging world

Nan-Dirk Mulder, 26 June 2019

Global protein market outlook

Rabobank: The financial link in the Food and Agriindustry with animal protein as a key focus industry

•

Toronto

New York

Mexico City

Sao Paulo

Buenos AiresSydney

Santiago

Willemstad

Calgary

Nairobi

Chicago

Atlanta

Dallas

El Centro

San Francisco

Tasmania

Melbourne

Wellington

Cedar Falls

St Louis

London

MadridMilan

Frankfurt

Utrecht

Hong Kong

Singapore

Mumbai

Shanghai

Jakarta

TokyoBeijing

Delhi

Kuala Lumpur

Moscow

Istanbul

Dublin

Labuan

Amsterdam

Paris

Perth

Antwerp

Bangalore

Kolkata

Clients around the globe

14 of the Top 20 global Animal Protein companies are Rabobank clients

135

14/20

53Pork & Beef

40Poultry

42Seafood

# of Rabobank relationships with global Animal Protein

companies:

3

Worldwide 35% more demand for animal protein in next 20 years

Global animal protein demand projections 2017-2037f

Seafood: CAGR +1.2%

Poultry: CAGR +2.0%

Pork: CAGR +1.0%

Beef: CAGR +1.1%

Eggs: CAGR +1.6%

CAGR: 2017-2037f

Aquaculture is the fastest growing animalprotein industry and 2/3 Asia based

Poultry and aquaculture: key drivers

Source: Rabobank analysis based on FAO, USDA and local statistics, 2019

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90

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Mill

ion

s M

T

China Other SEA producers Rest of world

Global aquaculture1 supply by region

Consumer demand is changing when economies develop further

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 - $15,000Income: $15,000 - $40,000

Income: > $40,000

Time free

Location Bound

Time bound

Location free

Source: Rabobank analysis, 2019

The expansion of the new mega citiesGlobal urbanisation:

many of the leading cities in AsiaIndia’s mega city 2030 economy

compared to mid-income ecomies

Source: FAO, Rabobank projection based on FAO and McKinsey, 2019

-2,000

0

2,000

4,000

6,000

8,000

10,000

12,000

poultry Pork Beef

90% of global growth is in emergingmarkets; 60% in Asia

Projected change in meat consumption 2017-2027fX 1,000 tonnes

Source: Rabobank analysis based on USDA, FAO and local statistics, 2019

Subcontinent excluding IndiaOther Africa

South-East Asia

Middle East

North AfricaMexico

China

South America

Caribbean and Central America

Canada

Japan and Korea

Russia

Other CIS

Oceania

US

EU-28

India

-10

0

10

20

30

40

50

60

-1.0% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0%

absolute growth in billion litres

CAGR (volume growth 2016-2022)

Dairy demand growth is very much Asia focussed

Size of bubble represents estimated 2016 demand

Global dairy demand outlook 2018-2023

• Source: Various sources, Rabobank• China include Taiwan and Hong Kong

Global agricultural land use is declining; while especially Asia has limited resources

Available land and water per capita

Source: FAO/Rabobank analysis 2019Source: Rabobank, FAO 2019

Worldwide land use 1961-2015Million hectares

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

3.5

4.0

4.5

5.0

5.5

6.0

1961 1967 1973 1979 1985 1991 1997 2003 2009 2015

1961-1997Ongoing global land expansion

+11%

1997- nowGradual decline?

-2%

Global food supply challenge: more focus on yield and efficiency

Animal protendemand

Biofueldemand

Grains and oilseed supply

Meat supply Food supply Fuel supply

Land use

Food demand

Livestock/poultry supply

+60% in 2050

Further decline

ExpansionEfficiencyYield

EfficiencyCultivationYield

Source: Rabobank, 2019

Emerging market growth and challenges are driving to modern farming

High feed prices/limited resources

Food safety

Higher incomes and welfare

Modern distribution

Modern value chain

Larger companies

Vertical integration

Efficiency

Yield

Value chain management

Sustainability

Animal disease threat

More modern compound feed demand

Efficiency improvement is and will remain a key focus of the industry

Benchmark costs in broiler production in 2017

Feed price

(EURct/kg)

DOC(EURct/

kg)

Feed conversion

Weight WageEUR/hour

Processingcosts

Total costwhole

chicken

China 37.5 23.5 1,85 2.0 3 19 154

France 29.2 30.3 1.67 1.9 20 31 154

Netherlands 31.1 31.1 1.58 2.4 22 33 147

Spain 31.5 32.0 1.72 2.6 14 27 144

Hungary 30.2 30.9 1.63 2.3 5 21 136

Poland 31.4 31.5 1.62 2.3 6 22 134

Thailand 29.6 28.9 1.68 2.4 2 17 120

US 24.1 27.0 1.83 2.7 14 25 117

Ukraine 24.2 32.0 1.74 2.5 2 18 112

Brazil 24.4 22.3 1.79 2.6 3 17 108

Source: Rabobank analysis based on WUR/LEI, 2019

Upside in milk yield comparison

0

5

10

15

20

25

30

35

kg/day, average

More West – East trade flows to supplyAsian markets

Rabobank 2018 global poultry trade map

Source: Rabobank, 2019Source: Rabobank, 2019

Rabobank 2018 global pork trade map

Global grains and oilseed markets: China ASF, US-China trade war, improved supplyGlobal soybean imports

Source: Rabobank analysis based on USDA, FAO and local statistics, 2019

China imports62% of global

Soybeans trade

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

20

00

/20

01

20

01/

20

02

20

02

/20

03

20

03/

20

04

20

04

/20

05

20

05/

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06

/20

07

20

07/

20

08

20

08

/20

09

20

09

/20

10

20

10

/20

11

2011

/201

2

2012

/201

3

2013

/201

4

2014

/201

5

20

15/

20

16

2016

/201

7

2017

/20

18

Brazil United States Other

Global Soybean exportsX 1,000 tonnesX 1,000 tonnes

-

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

Asia Pacific North America Europe Middle East andAfrica

Latin America

2010 2011 2012 2013 2014 2015 2016 2017 2018

Social changes can impact the outlook for animal protein markets

Source: Rabobank analysis based on Euromonitor, 2019 Source: Rabobank analysis based on WUR, 2019

Carbon footprint of food productsMeat substitutes retail sales

Meat substitutes share <0.5%

in global protein markets

Global CAGR: +4.4%

X 1,000 USDCAGR: +3.5%

CAGR: +10.2% CAGR: +10.1%

CAGR: +3.2% CAGR: +10.2%

Kg CO2 eq. per kg product

Social concern driven changes are rising globally and impact industry

CaliforniaJan 2015 cage ban

EU: 2012 conventional cage

ban, 2012, sow houses

D: GermanyInitiative Tierwohl

ACT, WA:Bans on

cage houses and sow

stalls

China: Antibiotics, melamine scandals

Baby milk

Canada: ban on pig gestation

Alberta: Phase out of

battery cages

Europe: chicken concepts

Brazil discussion about cage

ban

Client based push to non cage eggs

US – EUAntibiotics

Selected regional social concern driven changes Themes with big global impact

Source: Rabobank analysis, 2019

0

50

100

150

200

250

300

2013 2014 2015 2016 2017 2018

Online is changing the food industrymore than ever

On-line food sales

in China (CNY million)

On-line food sales

in United States

USD 40 billionCAGR: +40%

USD 16 billionCAGR: +21%

Source: Rabobank analysis, 2019

Confidence in opinion

leaders in Germany, 2017

0% 20% 40% 60% 80% 100%

Politicians

Business

Journalists

Scientists

NGOs

Affected

Independent experts

Top box Bottom box

Market demand is changing; more concepts and higher standards

Source: Company Announcements, Rabobank Estimates, 2019

US: Customer driven shift to conceptsEurope: animal welfare driven change; NL example

Slow Growing

Organic

Antibiotic Free

No antibiotics for human health

Traditional

Sp

ecia

lised

pro

du

ctio

n p

ract

ice

Pri

ce p

rem

ium

Producers End Users

Production Practice

0%

20%

40%

60%

80%

100%

2013 2014 2015 2016 2017

Better life Organic

Chicken of tomorrow Regular

Startup Funding Protein industry investor

2011 $387 m

2011 $220 m

2012 $ 85 m

2009 $ 72 m

2015 $ 20 m

2015 $ 4 m

Rising investment opportunities in alternative protein segment

Altenerative proteins market segmentation Alternative protein investments

Source: Rabobank analysis, 2019

Traditional meatreplacers

Start up meatreplacers

Meat ingredientreplacements

Feed ingredientreplacers

The move to concept poultry andother proteins leads to different costs

21

Broiler concepts cost price comparison in NL

100

119 125142

215

0

50

100

150

200

250

Regular Retail 1 Retail 2 Better Life 1star

Organic

Index:regular= 100

A smarter food chain: more circular

New technology will help to solve key supply and social challenges

Online, internet of

things

Genomics and gene

typing

Novel feed additives

and ingredients

Robotics

Artificial intelligence

Blockchaintechnology

Smart farming and big

data

Upcoming new technology

Source: Rabobank analysis, 2019

•Tracking & tracing

•Value chain ` co-ordination

•Benchmarking

•Foot print

•Efficiency

•Energy

•Water usage

•Mortality rates

•Density

•Diseases

•Stress

•Growth rates

•FCR

•Yields

Financial and technical

performance

Animal health and welfare

Quality management, horizontal and

vertical communication

Environmental impact

From intuitive to factbased decisions

From intuitive to more fact based decisions

Animal protein supply chains willchange fundamentally in next decade

Food distribution: a future revolution Value chain models need to change

Grains and

oilseedsFeed Breeding Farming Processing Customer

Grains and

oilseedsFeed Breeding Farming Processing Customer

Grains and

oilseedsFeed Breeding Farming Processing Customer

Grain and

oilseedsFeed Breeding Farming Processing Customer

Horizontal specialisation model

Semi-Vertically integrated value chain

Full vertically integrated value chain: feed to poultry

Multisector –Fully vertically integrated value chain: grains to poultry

New distribution models

Technologic innovationSource: Rabobank analysis, 2019

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

NAFTA Latin

AmericaEurope Asia MEA

Conventional Seed GM seed

16% 27%99% 85% 60%

45% of global

seed market is

GM free

How to supply adequate protein crops to feed rising population?

Million USD

Global GM/GM free seed market by region

Source: Rabobank analysis, Philip McDougall, 2019

Global protein crop production: alternatives for soy bean?

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

2010/2011 2011/2012 2012/20132013/2014 2014/2015 2015/20162016/2017 2017/2018

47%

X 1,000 tonnes

Alternative protein sources are promising, but not competitive yet

Field crops

Synthetic AAs

Concentrates

Future alternatives

Biofuel by-products

• DDGS

• Rapeseed meal

• Sunflower seed meal

• Soybean meal

concentrate

• Expensive?

• Six key limiting

amino acids that can

be synthesised

• Legumes (pulses)

• Hemp

• Leafy crops

Alternative proteins

• Algae?

• Yeast based

ingredients?

• Insect based

ingredients?

• Single cell proteins?Source: Rabobank, 2019

Closer linkages between G&O production and (animal) protein

Grains & oilseeds trade

Feed additives

PremixCompound

feed

Animal protein

production

Source: Rabobank 2019

Global

Europe Europe

Global

Europe

Global

Europe

Global

Europe

Global

Conclusions

Markets• 35% global growth; 90% in emerging markets• More poultry and aquaculture• On-line will change industries• Alternative and concept protein market to grow significantly

Supply• Feeding the world requires efficient supply• Social concerns to drive concept poultry growth• Need for alternative feed protein sources• Global reduction of antibiotics use

Technology• New technology to support industry challenges• Big new pending innovation can support industry to solve social challenges

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