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Key investment trends shaping theindustry in 2019
Nan-Dirk Mulder, 13 February 2019
Global poultry and feed outlook
1.Global poultry and feed outlook
2.Regional perspectives on global poultry and feed markets
3.Key investment trends shaping the industry in 2019
Content
Rabobank: Leading global Food & Agri bank
EMEA
Latin America
Latin America
North America
Asia / Australia
Rabobank global presence and selected clients by regions
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
Consumer demand is changing when economies develop further
Source: Rabobank analysis, 2019
Big global differences in preferenceand level of meat consumption
Global per capita consumption meat
Source: Rabobank analysis based on USDA, FAO and local statistics, 2019
0
20
40
60
80
100
120
140
Pork Poultry Beef Sheep Other
Kg/capita
Global average
-
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, 2019Source: 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%
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
-2,000
0
2,000
4,000
6,000
8,000
10,000
12,000
poultry Pork Beef
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%
Significant differences in cost of production
Live broiler cost of production, 2017EUR/kg
Source: Rabobank estimate based on WUR and local statistics, 2019
Global average-22% -20%
+50%
-17%
+24%+11%
-10% -8%+8%
-7% -3% -3% 0% 0%
-
0.20
0.40
0.60
0.80
1.00
1.20
1.40
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
+50% in 35 years
Further decline
ExpansionEfficiencyYield
EfficiencyCultivationYield
Source: Rabobank, 2019
Global trade of poultry will rise: but depends also on food security strategies
Global supply strategies
ImportersFood security
Locals
Exporters
High costs
Low costs
Openmarket
Closedmarket
World poultry trade flows in 2017
1.Global poultry and feed outlook
2.Regional perspectives on global poultry and feed markets
3.Key investment trends shaping the industry in 2019
Content
Global industry performance:Global price pressure, but 2019 recovery?
Global meat protein margin monitor
Source: Rabobank analysis based on Bloomberg, CBOT and USDA, 2019
Outlook: Gradual improved but volatile conditions_ African swine flu-- China tight supply- Oversupply US and EU- Brazil trade restrictions- Economic volatility- US-China turmoil
Poultry and eggs the winning protein; China growth is slowing down
Global market excl. China 2007-2019f China market 2007-2019f
Source: Rabobank analysis based on USDA, FAO and local statistics, 2019
CAGR: +3.1%
CAGR: +2.3%
CAGR: +1.4%CAGR: +0.4%
Meat consumption: CAGR: +1.8%
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
Chicken Eggs Pork Beef
World ex China
2012 2013 2014 2015 2016 2017 2018 2019f
X 1,000 tonnes
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
Chicken Eggs Pork Beef
China
2012 2013 2014 2015 2016 2017 2018 2019f
X 1,000 tonnes
CAGR: -1.8%
CAGR: +3.9%
CAGR: -0.2%
CAGR: +3.8%
Meat consumption: CAGR: -0.1%
A new poultry trade reality; slow, volatilegrowth to push internationalisation
Source: Rabobank analysis based on Bloomberg, OIE, 2019
Global chicken trade 2011 Q1- 2018 Q3 Global pork trade 2010-2018X 1,000 tonnes
AI
AI
AI
AI
Brazil’s meat and poultry industry challenging market conditions
Brazil exports in volume by destination
Source: Rabobank analysis based on USDA and local statistics, 2019
Brazil meat production and exports
X 1,000 tonnes
+3.7%
+10%
-8% -1.5%
-10%
SA:Changingstandards
EU: Banned BR export plants
China safeguard
RSA traderestrictions
UAE changingstandards
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
Production Exports Production Exports Production Exports
Beef Chicken Pork
2012 2013 2014 2015 2016 2017 2018
-2.8%
Lots of volatility is coming fromEurope and the Middle EastEU chicken imports: Brazil 2011-2018f: -50% Saudi Arabia: Poultry imports: -25%
0
100,000
200,000
300,000
400,000
500,000
600,000
700,000
2011 2012 2013 2014 2015 2016 2017 2018f
Tonnes
0
100
200
300
400
500
600
700
800
Brazil France UAE US Other
2015 2016 2017 2018f
X 1,000 tonnes
China – US import tariff will further shake up trade – and Brazil
Impact of China –US Soybean import levies
High soybean
prices
Relative low
soybean
prices
Relative low
soybean
prices
Rising
soybean
prices
Rising
soybean
prices
Relative low
soybean
prices
Global soybean imports
Source: Rabobank analysis based on USDA, FAO and local statistics, 2019
X 1,000 tonnes
China imports62% of global
Soybeans trade
China-US Import tax
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
100,000
199
0/1
99
1
1992
/19
93
1994
/19
95
1996
/19
97
199
8/1
99
9
20
00
/20
01
200
2/2
003
200
4/2
005
20
06
/20
07
200
8/2
009
2010
/201
1
20
12
/20
13
20
14
/20
15
20
16
/20
17
20
18
/20
19
Feed grains fundamentals: falling stocks in corn and wheat; soybean volatilityCorn: Lower stocks Wheat: More pressured Soybeans: Rising US stocks
Source: Rabobank analysis based on USDA, 2019
China ASF outbreaks will impact marketsand industry structure in coming years
ASF cases in China since 3 August 2018 China pig farming: forced changes
0
500
1,000
1,500
2,000
Potential Gap Potential Buildup
Th
d t
on
nes
Lower BoundUpper BoundExtra exports from BrazilExtra exports from Canada
Production -5%
Production -10%
PotentialAdditional
imports
2019: The return of Chinese poultry?
Grand parent stock imports in China1,000 sets
China poultry per capita consumption: big upside
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
1.8
Source: Rabobank analysis based on USDA, FAO and local statistics, 2019
1.Global poultry and feed outlook
2.Regional perspectives on global poultry and feed markets
3.Key investment trends shaping the industry in 2019
Content
Key investment trends shaping theindustry in 2019
More focus on value added
concepts
Efficiency improvement tokeep a key driver for investments
Social concerns are changing
industries
On-line growthto change
business models
New technologyto drive industry
change
More focus on emerging
market growthand food security
1 2
3
45
6
Access toglobal growth
Increase valueof poultry
Social responsibility andsocial driven change
Stay competitive
Adapt new technologyand become future proof
Source: Rabobank analysis 2019
0
5,000
10,000
15,000
20,000
25,000
Production Exports Production Exports Production Exports
Beef Chicken Pork
2012 2013 2014 2015 2016 2017 2018
X 1,000 tonnes
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
2012 2013 2014 2015 2016 2017 2018
Chicken Beef Pork
CAGR: +2.4%
US meat industry’s rising oversupply with ongoing trade challenges
Source: USDA, Rabobank Estimates, 2019
US meat production and trade 2012-2018US meat market 2012-2018
X 1,000 tonnes Domestic market keydriver for growth
CAGR: + 1.0%
CAGR: + 3.1%
CAGR: +2.3%
+2.3%
+2.2%
+3.1%
China: Short term market recovery, but long term market growth slowdown
Source: Rabobank projections based on USDA, FAO and Local Statistics, 2019
China meat and egg market outlook in tonnes and YOY growth
Focus for investment to shift awayfrom China to other Asian markets
Asia (ex. China) meat and egg market outlook in tonnes and YOY growth
Source: Rabobank projections based on USDA, FAO and Local Statistics, 2019
South and South East Asia will bekey global growth market
Poultry market growth 2017-2027f
Source: Rabobank projections, 2019
EU Pork and poultry production; Relocation to CEECs and Spain
EU chicken production 2010-2017
• Source: Rabobank analysis based on Eurostat, local statistics, 2019
Latin American’s industry growthalternative for slower Brazil growth
Latin America Poultry production by country excluding Brazil
Source: Rabobank analysis based on FAO, USDA, 2019
The rise of African poultry: Accelerating annual 5% growth in next decade
The big 2: 65% The other Sub Saharan African countries: 35% of production
Countries with expected growthof 6-10% year-on-year
between 2015 and 2025
Nigeria Ivory Coast
Ghana Ethiopia
Uganda Kenya
Senegal Malawi
Angola Rwanda
Source: Rabobank projections based on FAO, OECD, USDA and local data, 2019
X 1,000 tonnes X 1,000 tonnes
Further internationalization of the feed to meat industry
Globalization in the meat industry
Africa
Middle East
SE Asia
Australia
Russia
EU
United States
MexicoBrazil
Argentina
ChinaJapan
India
Source: Rabobank analysis, 2019
China more sustainable if European efficiency is adopted
Chinese pork production with Dutch efficiency Advantage in efficiency
Saving 54 million
tonnes grains
Production 13
million tonnes
(20%) more pork
with same
resources
Source: Rabobank analysis, 2019
Consumer demand is changing when economies develop further
Source: Rabobank analysis, 2019
From volume to value: The journey to higher margins
Brand
Value added food
Value added chicken
Premium chicken
Standard chicken
Examples of
nvestors who
follow this strategy
The poultry value added pyramid
Low
High
Margin
level
Source: Rabobank analysis, 2019
Speciality focus: social concerns are opportunities to differentiate markets
Animal welfare friendly
Environmentfriendly
Consumer health
Buy local
Standard meat and chicken
Standardproduct
Differentiatedproduct
Social concern
Market differentiation opportunities
Source: Rabobank analysis, 2019
Food safety
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
0%
20%
40%
60%
80%
100%
2013 2014 2015 2016 2017
Better life Organic
Chicken of tomorrow Regular
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
Securing GM free feed grains supply: a rising challenge
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
NAFTA Latin America Europe Asia MEA
Conventional Seed GM seed
Million USD
Global GM/GM free seed market by region
16% 27%99% 85% 60%
45% of global seed market is GM free
Global seed crop areas by region
0
20
40
60
80
100
120
140
160
180
200
2009 2015
Million acre
Source: Rabobank analysis, Philip McDougall, 2019
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
Online to change industries; Emerging markets in the lead
On-line food sales in China (CNY million)On-line food sales in United States
USD 40 billionCAGR: +40%
On-line food sales in India (Bln INR)
USD 16 billionCAGR: +21% USD 2 billion
CAGR: +45%
Source: Rabobank analysis, 2019
0
50
100
150
200
250
300
2013 2014 2015 2016 2017 2018
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
New technology will help to solve key supply and social challenges
Online, internet of
things
Genomics and gen 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 tofact baseddecisions
Upcoming new technology
Global feed industry in 2019: positionyourself in a fast changing landscape
Source: Rabobank analysis, 2019
Top 20 global feed manufacturers
-
5,000
10,000
15,000
20,000
25,000
30,000x 1,000 tonnes
Key investment themes in 2019
Conclusions
Markets• 35% global growth; 90% in emerging markets• More poultry and aquaculture• On-line will change industries• Alternative protein market to take off
Supply• Feeding the world requires efficient supply• Social concerns to drive concept poultry growth• Global reduction of antibiotics use• Solutions need for disease pressure
Technology• New technology to support industry challenges especially for
social issues• Big data and smart farming could support the industry to
further optimize efficiency and focus
Clients• More consolidation and internationalisation• More value added and concept focused• More vertically integrated
Changing global animal protein markets offer great opportunities for investors in the feed to meat industry
Timing is an important factor for consideration: early investors are set to benefit
4545
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