Global Agribusiness

www.pwc.com

Monthly commentary from our Agribusiness experts around the Globe.

April 2014

ContentsRegional views 2

Did you know? 8

Publications 11

Calendar of events 13

Prices 14

Global Agribusiness contacts 21

Regional views

OverviewWith teams around the Globe, this document sets out to give a flavour of what our local agribusiness experts are observing in their territories. This month we have seen ground breaking alliances between Antipodean territories and Japan/China. In Australia, for example, Australia has broken through the formidable tariff barriers protecting Japanese agriculture to secure a deal hailed by both governments as the most significant advancement in their economic relationship since the 1957 post-war trade pact. We discuss the implications. In New Zealand, The New Zealand–China two-way trade goal has been increased to NZ$30bn by 2020 after a meeting between China’s President and New Zealand’s Prime Minister. The latter also attended the launch of the China-New Zealand Dairy Exchange Centre in Beijing, which should provide the opportunity for China’s dairy industry to learn from New Zealand’s development in dairy technology. Elsewhere, the Saudi Agricultural Development Fund is launching phase 2 of its transformation project for the Saudi poultry sector. As part of phase 2, PwC will define a 10-year strategy for the poultry sector and will help establish a National Poultry Board. We will also help design a Poultry Disease Management Centre. As a reminder, it’s a snapshot only: do feel free to contact the local experts to discuss their views in more depth.

Mark James

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PwC | Global Agribusiness | 3

ArgentinaHarvest updates for soy and corn

Whilst c.21% of the cultivated soybean area has now been harvested, progress has slowed due to the rains that have affected much of the core zone (provinces of Santa Fe, Buenos Aires y Cordoba). It is believed that the soy which could not be collected is the most susceptible to reduced grain quality. So far, harvested yields in the core zone are c.15% below last year, ranging from 3.3 to 3.8 tons/ha. Despite this, however, expectations for the overall harvest remain c.54m tons of soy for Argentina as a whole.

Elsewhere, c.16% of the planted corn area has now been harvested. The National Agriculture Ministry has reported that 74% of the cereal is in good and very good condition. Expectations for the total crop remain c.25m tons.

Growth in crushing capacity

Growth in crushing capacity was c.122 % over the last decade, according to research by the Rosario Stock Exchange. Installed capacity grew from 97.560 tons in 2003 to 216.931 tons in 2013. The Great Rosario area contains 20 production plants, and is considered one of the most important oily industrial complexes in the world.

Mariano Tomatis

Gustavo Barrichi

AustraliaAustralia has broken through the formidable tariff barriers protecting Japanese agriculture to secure a deal hailed by both governments as the most significant advancement in their economic relationship since the 1957 post-war trade pact.

Talks on a free trade agreement with Japan were initiated as far back as 2005 by the Howard government, with beef and dairy being the key talking points in the deal that will see tariffs and duties reduced or removed on 97% of Australian exports to Japan:

•The 38.5% tariff on frozen beef imports into Japan will fall to 19.5% over 18 years. The tariff will be cut by 11% in the first three years, including an 8% cut in year one.

•The 38.5% tariff on fresh or chilled beef will drop to 23.5% over 15 years. It will be cut by 8% in the first three years, including a 6% cut in year one.

In return, Australia will immediately scrap 5% tariffs on Japanese electronic and household goods. A 5% car tariff will be eliminated immediately for 75% of Japanese vehicles and over three years for the rest.

Beef industry representatives, in Tokyo as part of the delegation with Mr Abbott, estimated that the value of the industry would grow by A$2.8bn as a result, with export increases worth A$5.4bn over 20 years.

In dairy, the duty free quota on cheese (currently Australia’s single largest dairy export to Japan with trade worth A$372m p.a.) is estimated to grow by 20,000 tonnes over 20 years. Expectations are that a 9,000 tonne increase on the current quota of 27,000 tonnes will occur in the first year of the agreement.

With Japan about to negotiate a trade agreement with the United States as part of the Trans-Pacific Partnership, Australia secured a ‘most favoured nation’ status on beef and dairy, meaning if the US or any other nation secures a better deal, it will automatically apply to Australia.

There are also significant advantages for other agricultural products, with fruit and vegetables, seafood and wine among the winners. However, Australian dairy farmers have expressed extreme disappointment at the deal with no other movement in tariffs for dairy, particularly on fresh cheese, with tariffs to remain at 29.8%. Australian rice growers will also miss out with tariffs to also remain on rice, due to its special cultural significance to Japan.

Craig Heraghty

BrazilPricing and volume trends

According to the Ministry of Agriculture, Brazilian agribusiness exports have reached nearly US$8bn, c.4% up yoy. During March, the trade balance was up 6% to c.US$7bn.

c.US$2.5bn agricultural commodity futures contracts were traded on the BM&FBovespa in March, up c.75 % yoy. The number of contracts traded was up by 33% yoy with a trading volume of approximately 201,000 contracts.

Separately, the eight major agricultural commodities traded by Brazil abroad ended March with average prices higher than in February, both in New York (sugar, coffee, cocoa, cotton and orange juice) and Chicago (soy, corn and wheat). It was the second straight month of increased prices. However, the adverse effects of the drought in South-Central Brazil has impacted the domestic supply of sugar, coffee, orange juice, soybeans and corn, consequently impacting earnings in these segments.

Animal Protein

Meat and UHT milk were responsible for the fourth and fifth largest impacts, respectively, on the inflation rate in March, behind only airfares, tomatoes and potatoes. This increase was due to the severe drought that has affected the quantity and quality of fresh products, as well as pasture quality for grazing herds. Many farmers have had to resort to supplementary feed, contributing to the increase in production costs.

In meat exports, shipments were up in March yoy(by 1% in volume to 498,000 tonnes), but sales were down (by 9% yoy to U$1.25bn). Average prices were more than 9% lower in the period. Poultry exports, which remain the biggest component at US$570m, fell 16% yoy in March.

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Sugarcane

Some sugarcane mills based in South-Central region of Brazil have started their 2014/15 season in March, harvesting since the beginning of the month. A reduction in this seasons productivity is expected, due to the severe drought in some regions. The mills have adopted the strategy of extending the period of harvesting and grinding sugarcane, trying to maintain high production in offseason periods, when ethanol supply is lower.

As for exports, sugar and ethanol export revenues fell 33% yoy to US$ 641m. This was mainly down to sugar where revenues fell 35%, amidst volumes down 20% and average prices down 19%. It’s worth noting the announcement of a joint venture between a Brazilian and a U.S. company – two of the largest global sugar exporters.

Grains and large crops

The National Supply Company (Conab) reduced its estimates for Brazilian grain production this season to c.189m tonnes due to the severe weather problems in the country. This cut in projections impacted many crops, but was more pronounced for soybean, with estimates falling from c.90m tons in February to just over 85m tonnes in March.

In terms of exports of the whole soybean complex (which includes oil and meal), revenues reached US$ 3.6 billion (up 53% yoy) with over 7 million tonnes shipped (up 65%). Soybean grain revenues rose by 65% to more than US$ 3 billion and volume rose by 76% to more than 6m tons shipped this month, while the average price fell 6.5% to US$505 per tonne.

In terms of market activity, maize contracts traded were up 13% yoy in March, to US$413m. March was also positive for coffee futures contracts, with contracts worth US$359m traded, up 112%yoy.

Jose Rezende

MENAThe Abu Dhabi Farmers Services Centre is celebrating its third year of operations serving fruit and vegetable farmers in the Emirate of Abu Dhabi. ADFSC provides a range of services to local farmers to help them sell their produce to large and small retailers. ADFSC provides technical assistance to farmers to ensure they use good agricultural practices, takes responsibility for the collection and packing of produce at regional collection centres, and negotiates sales contracts with large retail chains on behalf of the local farming community.

Separately, the Saudi Agricultural Development Fund is launching phase 2 of its transformation project for the Saudi poultry sector. As part of phase 2, PwC will define a 10-year strategy for the poultry sector and will help establish a National Poultry Board. The National Poultry Board will bring together large and small producers to help them work collaboratively on key issues facing the Saudi poultry industry, including improving disease management, promoting investment in domestic production capacity, and managing the relationship with large distributors. In addition, PwC (in collaboration with Wageningen University in the Netherlands) will design a Poultry Disease Management Centre that will be responsible for coordinating the detection of disease outbreaks and coordinating the response with public officials and private producers. The centre will also provide technical support to farmers through diagnostic capabilities and veterinary assistance to improve animal health management.

Mark Webster

NetherlandsNidera acquisition

COFCO, China’s largest food trading company, has acquired a 51% stake in Nidera BV. Nidera BV is a major global player in the trade of grains, oilseeds, vegetable oils and biofuels with a turnover of US17bn. COFCO plans to use Nidera’s network to get improved access to the South American market. Nidera in turn hopes to have found a strong partner in COFCO to help with expansion into the Asian market.

Interest rate swap exposure

Many Dutch agribusinesses took out interest rate swaps a few years ago that, given declining interest rates, have led to substantial unprofitable positions. We expect the impact of these swaps on the sector to come under increasing scrutiny.

Van Hattem

Van Hattem, a big meat processing company in the Netherlands, has been given permission to restart its slaughter activities. Due to temporary failure to observe the applicable rules, the business of Van Hattem was partially shut down, and the company was forced to recall 28m kg of meat at the start of 2014. After the bankruptcy of one of the entities within the Van Hattem group, Van Hattem is now restarting its activities under increased supervision of the authorities.

Agrifirm

Agrifirm, a Dutch agriculture cooperative of 15.000 agriculturists, presented its 2013 annual report. Agrifirm’s figures show a predominantly positive picture. The main markets of Agrifirm showed a volume growth in 2013 and revenues grew c.4% yoy.

Marco Jansze

New ZealandDespite healthy sales gains, Fonterra’s half-year net profit fell 53% yoy following a record-high payout to farmers. The net profit for the six months to 31 January 2014 was NZ$217m, down from NZ$459 million a year earlier. Fonterra’s CEO Theo Spierings said the past six months had been a period of mixed fortunes: it had collected a record supply of milk from its farmer shareholders and overall supplies for the seasons were up 4%. Yet, Fonterra’s asset mix meant that around 25% had to be processed into cheese, casein and other non-reference commodity products which earned negative returns over the period. Consequently, Fonterra plans to fast track its capital investment plans to improve its production capacity and flexibility with additional capital expenditure of NZ$400m: NZ$500m over the next three to four years.

Royal FrieslandCampina has increased its stake in Synlait Milk to a strategic level at just under 10%. The Dutch company is a customer of Synlait Milk and the company has said the working relationship continues to develop. Meanwhile, Synlait Milk’s H1 net profit rose NZ$5m yoy to NZ$12m. Revenues increased from NZ$176m to NZ$285m, largely due to sustained high international commodity prices. A NZ$7m increase in gross profit due to strong earnings from its milk powder and cream products was partially offset by lower than expected earnings from its infant formula and nutritional products business. As a result, 2014 full year net profit expectations have been revised down: from a NZ$30:35m range to NZ$25:30m.

In March, Chinese officials completed an eight-day inspection programme of local dairy processing and infant formula production facilities in New Zealand. The audit comes ahead of a new requirement that all infant formula makers exporting to China be registered with the Chinese Government by 1 May 2014. It is unknown exactly when the audit results will be released but, from 1 May until when results are announced, all unregistered New Zealand processors will be unable to export infant formula to China.

The New Zealand–China two-way trade goal has been increased to NZ$30bn by 2020 after a meeting between Prime Minister John Key and China’s President Xi Jinping. The New Zealand Government will spend NZ$40m to build a new Embassy in Beijing, while Hon Key also attended the launch of the China-New Zealand Dairy Exchange Centre in Beijing. The collaborative agreement, signed by Fonterra and National Dairy Industry Technology System (NDITS) could provide the opportunity for China’s dairy industry to learn from New Zealand’s development in dairy technology. The centre will also be a platform for dairy industry communication and a good opportunity for sustainable dairy industry development for both countries.

Craig Armitage

PwC | Global Agribusiness | 5

South AfricaPoultry

Recently the South African (SA) Government provided much needed assistance to the local poultry industry. This was done in the wake of surplus volumes of chicken being exported to South Africa at prices lower than what is viable for local producers. The SA Government has intervened through the implementation of increased import tariffs on specific poultry products. Despite these measures, poultry imports remain at levels that are higher than local production.

South African consumers have a preference towards certain poultry cuts that are different from consumers in other developing countries. Hence, international producers have found a market in South Africa for these cuts that would normally not exist in other countries. These products are then sold on the local market at very low margins. These imports continue in spite of the increased tariffs as products are now routed via Europe under the free trade agreement with the EU.

Another challenge that the South African poultry industry is experiencing is the short supply of maize caused by exports. With global maize harvests under pressure and the weakness of the local currency, the demand for locally produced crops is on the rise limiting the supply to the local market.

The industry continues to operate under severe pressure. Industry stakeholders are working hard to find an acceptable solution that will protect the local industry and related employment, whilst also promoting fair trade.

Wine

The SA wine industry currently appears to have the wind in its back. The weak Rand coupled with raising bulk wine prices in other regions, made SA wine more competitive and helped increase wine exports. Ongoing improvements in cellar technology have also helped. In addition bottled wine shipments appear to have benefitted from expansion into less traditional markets taking place in recent years. In terms of these two factors:

•Cellar technology: The strength of SA’s cellar technology is an important part of the success that SA is currently enjoying, particularly for bulk exports. Several industry participants that are new to buying SA bulk wine admitted that they were initially attracted by pricing but were pleasantly surprised

by the quality as well as the supplier’s ability to produce according to varying specifications. International brand owners are finding that SA bulk wine can work very well in a variety of different wine programmes, more because of the style and quality than the price.

•Bottled wine exports. The challenges ahead for companies that seek to export bottled wine at higher price points are to communicate a compelling story that resonates with consumers and differentiates the products from their competitors. This will require a deeper understanding of the target consumer and what drives his/her purchases as well as the ability to effectively communicate the message.

For bulk wine, the recent big harvest in Spain has led to declining bulk prices in that market, intensifying competition. As a result, it is unlikely that SA’s 2014 exports of bulk wine to Europe will reach the levels of 2013, leaving SA producers to seek alternative markets.

Frans Weilbach

6 | Global Agribusiness | PwC

USAUS anti-labeling GMO bill

A new bill was introduced in the U.S. House of Representatives that would direct the Food and Drug Administration (FDA) to label genetically modified food. The bill has the support of the American Farm Bureau, the National Corn Growers’ Association and the American Soybean Association.

Titled the ‘Safe and Accurate Food Labeling Act’, this legislation is aimed at overriding bills in roughly two dozen states that would require foods made with genetically engineered crops to be labeled as such. Instead, the bill requires companies to submit new GM products to FDA, which will apply a label to them if there is evidence of adulteration, food safety concerns, or mislabeling. The bill specifically prohibits any mandatory labeling of foods developed using bioengineering.

There are currently 66 legislative proposals across 27 states that would require some type of mandatory labeling.

Stronger exports drive price increases

The Department of Agriculture (USDA) increased price forecasts for U.S. corn and soybeans due to strong export demand. The USDA stated that a 125m bushel increase in corn exports reduced ending stocks and helped push the estimated price for corn up to US$4.40: 4.80 a bushel this growing year. This is up from last month’s estimate of US$4.25: 4.75 a bushel. The USDA also raised projected U.S. soybean imports to 65m, 30 million higher than last month’s estimates. U.S. soybean ending stocks are now projected at 135m bushels, down 10m from last month.

Sean Gaffney

UKThe European milk year drew to a close in March. During the past year the UK has produced 13.67bn litres of milk: the highest volume recorded since before 1994. The reasons for the increased production are buoyant pricing for dairy products worldwide during 2013 and a very favourable production climate in the past year. The UK is not unique and worldwide dairy production has increased in response to these market conditions. However Global dairy commodity prices have been declining in recent weeks with key indicators such as the New Zealand Global dairy trade auction showing marked declines in March 2014. The strong ‘Spring Flush’ (the name given to the increased volume of milk supply signalling the traditional start to the UK dairy season when large numbers of cows calve and recommence milk production) in 2014 has amounted to a significant reduction in the reported spot price being paid for traded milk in the UK to circa 20 pence per litre currently. These factors are likely to feed through to forward contract prices dairy farmers are being paid by processors with market commentators forecasting reductions in the UK contracted milk price for the remainder of 2014.

Separately, AB Sugar: owner of British sugar and part of the ABF Group has reported a 60% drop in operating profit yoy, to £64m. This has been as a result of reduced volumes and pricing plus mothballing costs associated with factories in China.

Liam Hennigan

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An extensive global network

•We’re a network of firms in 158 countries with close to 169,000 people who are committed to delivering quality in assurance, tax and advisory services.

A dedicated agribusiness service centre in Brazil

•Based for almost 40 years in the northwest region of São Paulo, PwC Brazil is well known for its expertise in serving the agribusiness sector. For this reason, and believing in the growth of Agribusiness in Brazil, PwC has expanded its activities in this industry, creating a dedicated PwC Agribusiness Excellence Centre in 2007.

•Through this centre, Agribusiness clients in this industry throughout Brazil are served in the areas of audit, tax consulting and business consultancy by a team of professionals trained and updated on major issues and industry trends. We have hired dedicated agribusiness professionals, such as agronomists, foresters, veterinarians, agro-economists, environmental managers and others, to add value and help in the understanding of the real needs of our customers.

•We have also created an Agribusiness Research and Knowledge Centre, in order to keep our staff and clients updated on the main issues and trends. With a method specially developed by PwC, analysts study the technical management of the main crops in Brazil, perform environmental, industry and competitiveness analysis, and also studies about the main players operating in each agro-industrial system analysed. The Agribusiness Research and Knowledge Centre is also able to provide market intelligence services and support our professionals in evaluating investment options in the agribusiness industry.

An Agribusiness Service Centre in Argentina

•Located in Rosario, at the heart of the Pampas region, PwC Argentina has opened an Agribusiness Service Centre to provide professional services to the agribusiness community. Argentina is a major player among food producing countries and agribusiness is an important strategic contributor to the economy.

•We believe there is extraordinary growth potential in the long term for further developing agricultural activities. The Agribusiness Service Centre provides value added services to our clients combining strong technical skills with an in-depth industry insights:

•Regional agribusiness clients are better served by coordinating activities with the Agribusiness Centre in Ribeirao Preto, Brazil.

•A Research and Knowledge Centre has also been developed to keep our technical staff and clients updated on main agricultural issues. Specific sub-industry reports have already been developed as well as quarterly agricultural situation reports.

Dedicated agribusiness practice in MENA

•PwC has the only dedicated agribusiness practice in the MENA region among major consultancies. We offer a full range of advisory services to food companies, investors and government agencies. We provide advice on investment and partnership strategies, technical and financial feasibility studies, agricultural and food security policies, corporate transformation initiatives, and supply chain optimisation. We cover a range of crops and animal food production, and we can help companies with market expansion, product portfolio diversification, and positioning along the value chain.

Extensive Agribusiness team in India

•We have a 13 member team based at New Delhi, Mumbai and Pune. Apart from working in India, the team members have experience of working in Nepal, Bhutan, Bangladesh, Tanzania, Ghana and Ethiopia. The team brings vast experience and knowledge of the Agricultural subsectors such as agri-retail, food processing, agri-marketing, farm inputs, farm machinery, warehousing and cold chain infrastructure, agri banking etc.

•Over a period of time the team has been engaged with various private, public and multilateral agencies, advising on supply chain management, project management, value chain assessment, monitoring and evaluation, business plan and growth strategy development, investor/partner search, policy planning and implementation support, technical due diligence, and transaction advisory.

Extensive food security expertise

•PwC has helped at least four different governments formulate comprehensive food security strategies. These have looked at the key risks and exposures those countries face with regards to food security; changing food supply/demand dynamics locally and globally; issues by key food commodity type; assessing current plans to address current issues; formulation of new initiatives to solve key food security risks, both in the short and long term; overall cross-government coordination and implementation plans. A key emphasis of the work was making sure the plans were practical and involved close alignment between government and the private sector.

PwC has:

Did you know?

Commodities risk management expertise

Over the last 4 – 5 years the world has witnessed a period of sustained energy and commodity price volatility, whether this be fuel oil, gas or electricity, metals such as aluminium, steel or copper, or agricultural products such as cotton, wheat or sugar. Commodity price risks are also being quickly transferred through the value chain, for example a company buying plastic will be exposed to the volatile price of oil.

This shift brings major implications for businesses across many sectors. Commodity price volatility is increasingly affecting the profits, cash flows and share prices of companies that use or consume energy or raw materials. It is difficult to think of a business model that isn’t in some way exposed to commodity price volatility – it’s just a matter of how much.

We are seeing a continued trend across corporates, particularly in the consumer and retail goods sectors, towards the implementation of commodity trade capture, valuation and risk management systems. These systems can be vital in

Just completed a global agribusiness review for New Zealand Trade and enterprise

•NZTE, in partnership with the Ministry of Economic Development, the Ministry of Foreign Affairs and the Ministry for Primary Industries, commissioned PwC to explore the opportunity to take New Zealand’s pastoral production system and related areas of competitive advantage into specific international markets, namely South America and China. The research is part of a wider programme of work focused on maximising international opportunities for companies within the agriculture industry. The report was divided into two parts. Firstly a comprehensive background analysis, broken down by country; with both production opportunity analysis and value chain analysis for each of the seven countries analysed. Secondly, an executive summary outlining five areas of opportunity for New Zealand agribusiness. To learn more and download copies of the report visit: http://www.nzte.govt.nz/features-commentary/in-brief/pages/global-agribusiness.aspx.

ensuring sound controls in an area of high inherent business and reporting risk. However, they can be complex to implement, and therefore require careful selection, project management and integration into the business processes and other systems. We have a dedicated team experienced at doing this.

Efficient tax structure expertise

Increased competitive pressures and challenging market environment continue to force local, regional and global market players to centralise certain functions. This applies to centralised trading and can be used to plan the tax position of agricultural groups. PwC can help with the centralised, cross-border trading and risk management transactions from a tax perspective, having particular regard to transfer pricing (TP) and thin-cap (TC). PwC has unique experience with respect to advice on corporate tax compliance, and assistance in planning tax efficient trading structures, financing and transactions. In addition we can help with audits, dispute resolution and Advance Priced Agreements to minimise related tax risks.

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Sustainability and climate change experts

By 2050 the world’s population is projected have to grow to approximately 9 billion. As competition for agricultural commodities and inputs intensifies and our ability to satisfy this demand is increasingly constrained by economic, social and environmental factors, innovative solutions will be required to ensure that we make better, more efficient, use of resources and in some cases find more sustainable alternatives whilst increasing productivity and driving economic prosperity. PwC is working with organisations including agribusiness, the wider private sector, governments, NGOs and multilateral organisations on a range of sustainability and climate change related projects. Recent projects include; climate change risk mapping for soft agricultural commodity sourcing; sustainability strategy support for agribusinesses; evaluating the business case and socio-economic benefit for local sourcing of agricultural raw materials, climate change training for African agri-businesses, the development of a methodology and carbon calculator for understanding emissions from small holder agriculture in Africa, and assessments of market and financial opportunities for climate-smart agriculture.

Extensive forensic skills and supply chain experience

We have carried out independent investigations and advised on governance improvements in some of the highest profile reputational crises of recent years. We believe the benefits of a robust, independent review of the facts are considerable. Our specialists help companies respond decisively – a key first factor in maintaining trust and protecting shareholder value. We work with clients to define and implement enhanced supply chain risk management strategies and capabilities. This can range from conducting supplier risk assessments and audits, supply chain and procurement strategy and organisation redesign, deployment of automated monitoring technology as

well as crisis management, financial restructuring and company turnaround, and administration/liquidation services. We can:

•Deliver forensic investigations to identify what may have gone wrong, the potential consequences, and provide support in claims management.

•Perform risk profiling and assessment of the supply chain to quickly identify and quantify key sources of risk, dependency and vulnerability.

•Assess the effectiveness of the control environment and audit approach and re-perform audits to provide assurance as required.

•Deploy risk monitoring solutions to ensure compliance with agreed standards.

•Develop robust supply chain risk management methodology, tools and capability.

•Redesign supply chain structure, strategy and organisation to optimise balance between cost and resilience.

PwC New Zealand involved with developing a China- New Zealand Food safety joint venture entity in China

As outlined earlier, China consumer trends of higher-protein diets and lingering distrust of domestic food sources have not only increased New Zealand’s beef and lamb exports, but have generated further opportunities for New Zealand to assist with developing food safety practices in China.

New Zealand’s Government-owned food safety agency, Asure Quality, and PwC New Zealand last month signed a collaboration framework agreement with China Mengniu Dairy Company and COFCO Corporation to investigate the development of a China- New Zealand agribusiness service and Food Safety Centre of Excellence in China. The objectives of the joint venture entity are to introduce total management and operational risk management systems to the Chinese Agriculture Industry based upon the

New Zealand agriculture sector model, and form a framework for the development of industry best practice across the agricultural supply chain in China focusing primarily upon Food Safety. The signing ceremony was held in Beijing to coincide with Prime Minister John Key leading the inaugural New Zealand China Council Partnership Forum, in celebration of the 40th anniversary of diplomatic relations and the fifth anniversary of the China New Zealand Free Trade Agreement. http://www.asurequality.com/news.

A focus on inclusive businesses in the agricultural sector

An established Nigerian bank seeking to catalyse a whole new approach to smallholder farming and rural banking, a biscuit manufacturer developing a commercial approach to cassava farming in Malawi, and a summer tomatoes contract farming venture led by a Bangladeshi agribusiness conglomerate. Over the past three and a half years a PwC UK led team has worked with these and other exciting companies to help them develop commercially viable business models that are inclusive of the poor across Africa and Asia. Results, findings and lessons from their work on the UK Business Innovation Facility pilot have been documented in seven case studies, with a final report available here bit.ly/BIFfindings.

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Wine Insights – New Zealand

PwC produced the NZ Wine Insights publication to follow-on from the work undertaken for the Strategic Review of New Zealand Winegrowers in 2011. The publication comments on various aspects of New Zealand wine’s competitive advantage and provide insights and observations into the New Zealand wine industry to inform members and stakeholders in relation to aspects of the rapidly changing environment the industry operates in. Excerpts from the report include:

•While Vintage 2012 presents a challenge in terms of growing international markets due to the significantly reduced volumes produced, the medium to longer term outlook presented in the Strategic Review that by 2021 sales potential for New Zealand wine could grow by 170m litres to reach almost 400m litres (were it unconstrained by supply) to be realistic given the strong growth in export market demand for New Zealand wine and very positive expectations of future growth in key markets in.

•The New Zealand wine industry remains relatively young in its development compared to many other wine producing nations. The industry has experienced rapid growth and continues to evolve, with substantial structural change occurring in various areas. The industry will continue to develop and evolve, which will present both opportunities and challenges. Initiatives aimed at driving efficiency gains and cost reductions, while not impacting quality, should be positive for the industry. Furthermore consolidation opportunities remain.

To learn more and download copies of the report please visit:

http://www.pwc.co.nz/publications/new-zealand-wine-industry-insights/

Global Co-operative report

PwC completed an extensive report on the Top 100 agricultural cooperatives worldwide and the critical issues affecting them.

The cooperative industry is currently facing new challenges. With their unique organisational model and local footprint, cooperatives are faced with strategic development choices. They must become more international, through mergers and alliances, extending their market involvement both upstream and downstream, if they are to fend off stiff competition from non-cooperative companies in the food industry. They will also have to rethink their financing and governance to increase their competitiveness and safeguard their unique model.

Although cooperatives face the same challenges as non-cooperative companies, they also aim to preserve a sustainable and collaborative model over the long term.

However, they must continue to grow in order to stay in the race and finance their expansion plans.

This will require a new mindset, in terms of the way they deal with risk, profitability, strategy and skills.

For a copy of the full (c.100 pages) report, please contact:

Ludivine Allardon +33 1 56 57 10 13 ludivine.allardon@fr.pwc.com

A 10 page executive summary can be downloaded here:

http://www.pwc.fr/cartographie-et-grands-enjeux-du-monde-cooperatif-agricole-a-lechelle-mondiale.html

Publications

Brazilian Agribusiness Report

In Brazil we have recently published a series of documents outlining the sector and its characteristics:

•Doing Agribusiness in Brazil: an in depth look at the agribusiness industry

•Agribusiness highlights

•Agribusiness overview: key numbers and facts.

highlights various headwinds to development, in areas like market policies, increasing agriculture input accessibility, access to finance, infrastructure enhancement, skill development, etc. with suggestions on how to overcome these challenges. It also reviews various successful case studies across different countries in Asia and Africa which highlight that good policies, support from government and a favourable business environment can promote agri-business. We have highlighted that forming partnerships between Asian and African countries of Asia and Africa could bring immense opportunities for development and value creation and transform agri-business in both continents. We discuss various partnership models between Government and Private sector, to bring efficiency and improvement in key areas such as skill development, agriculture research, investment in agriculture and agricultural operations. Click here for a link to the document.

Agribusiness Insights Survey – South Africa

PwC’s annual Agribusiness survey is with a group of agribusinesses with operations mainly focused on delivering agricultural and related services to primary producers. The aim of the survey is to provide the insights of business leaders and the benchmarking of their financial data to add value to the agricultural industry.

PwC involved in major Asia-Africa Business Forum

The Federation of Indian Chambers of Commerce and Industry (FICCI) and the Government of India organised the first ever Asia-Africa Agri Business Forum from February 04 – 06, 2014 in New Delhi. PwC was part of this initiative, as a knowledge partner. We produced a paper ‘Unlocking the food belts of Asia and Africa’ highlighting the potential of the agricultural sector in both continents, and the best areas for collaboration.

Event details

The event was targeted at tapping the tremendous business opportunities between Asian and African continents in the agriculture, agribusiness and food-processing sectors, and had strong political support: the Indian President inaugurated the forum, with agriculture ministers from many Asian and African countries attending. Leading international organisations like African Development Bank, Asian Development Bank, World Bank, World food programme, Department for International Development (DFID) brought a global perspective. It provided a unique business platform for industry leaders, policy makers, governments and other important stakeholders to collectively address the issue of food security and the opportunities to engage with each other while looking at the huge potential for growth, development and business.

Publication: Unlocking the Food Belts of Asia and Africa

Our paper analyses the major agriculture sub-sectors of both continents in terms of production, demand and supply, export potential and processing capability, in order to identify various business and investment opportunities. It also

The sector is confident about its growth prospects over the next few years amidst a raft of regulations, wage negotiations, land reform and the global economic uncertainty. The main reason for growth expectations as indicated by CEOs is new joint ventures and strategic alliances.

This sentiment is also echoed in the Confidence Index of the Agricultural Business Chamber (Agbiz) and the Industrial Development Corporation (IDC). This index indicated a further increase in the agribusiness confidence levels in the fourth quarter of 2013.

CEOs of agribusinesses are also very positive towards the possibility of expansion into the rest of Africa. 70% indicated that they would pursue such opportunities. Africa is increasingly becoming a preferred investment destination and is said to represent the last frontier in global food and agricultural markets with its large percentage of uncultivated fertile land and sufficient water resources, according to a recent report issued by the World Bank. The report calls on governments to work side-by-side with agribusinesses, and to link farmers with consumers in an increasingly urbanised Africa.

The report is available onlne: http://www.pwc.co.za/agri-business

12 | Global Agribusiness | PwC

PwC | Global Agribusiness | 13

Calendar of events

May1st – Bunge

1st – Kellogg

1st – Kraft Foods

1st – Pilgrim’s Pride

5th – CF Industries

5th – Dean Foods

5th – Omega Protein Corporation

5th – Tyson Foods

6th – New Britain Palm Oil

8th – Darling International

9th – WASDE

20th – Hormel Foods

June25th – General Mills

25th – Monsanto

South Africa: IFAMA 2014 World Forum The International Food and Agribusiness Management Association (IFAMA) 2014 World Forum will be held in Cape Town, South Africa from 17 to 19 June 2014. The three overarching forum themes are: ‘The Talent Factor’, ‘Noble Ambition: Feeding the World’ and ‘Africa Agribusiness Age of Opportunity’.

This event will be of particular interest to agribusinesses seeking new technology and services partners, and for international participants seeking to have better understanding of opportunities in the business landscape of African agriculture. We look forward to hosting the agribusinesses of the world in Cape Town.

PwC involved with UK Trade and Investment and Foreign and Commonwealth led trade mission to Nigeria (17 – 21 March).The mission, which visited the financial capital Lagos invited financial and professional UK organisations to explore opportunities to invest in the Nigerian economy. As Africa’s most populous and dynamic country with GDP growth of above 7% in 2013, Nigeria has the ambition of diversifying its economy from crude oil petroleum dependency into agriculture and a subsistence-oriented farm economy. With a growing population of over 170 million people, the country is facing a looming food security crisis and large scale investment opportunities in the agribusiness sector are opening up for investors at federal and state government level.

The Nigerian government and private sector agribusiness organisations are welcoming large scale agricultural investments through public private partnership schemes. They seek investments of large scale mechanised farming enterprises, innovation in agricultural production, storage and marketing, training in aquaculture and fish farming, assistance with improving the regulation of the quality of agricultural produce, climate data analysis, commodity traceability and country mapping technology, amongst many other agricultural services. Our team are in discussions with key government contacts. Contact us for further details.

14 | Global Agribusiness | PwC

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PwC | Global Agribusiness | 15

Corn, cents/bushel

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16 | Global Agribusiness | PwC

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PwC | Global Agribusiness | 17

Coffee, cents/lb

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18 | Global Agribusiness | PwC

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PwC | Global Agribusiness | 19

S&P GSCI Lean Hogs

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20 | Global Agribusiness | PwC

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Global agribusiness contactsGlobal coordinatorMark James+44 (0) 20 7212 1869mark.d.james@uk.pwc.com

ArgentinaSantiago Balart+54 114 850 6866

santiago.balart@ar.pwc.com

Nicolas Lopez Lecube+54 114 850 6176

nicolas.lopez.lecube@ar.pwc.com

AustraliaCraig Heraghty+61 282 661 458craig.heraghty@au.pwc.com

BrazilJose Rezende+55 11 3674 2279jose.rezende@br.pwc.com

Luiz Barbosa+55 16 2133 6694luiz.barbosa@br.pwc.com

CanadaLori Robidoux204 926 2464lori.j.robidoux@ca.pwc.com

IndiaAnand Dikshit+91 (0) 226 669 1750

anand.dikshit@in.pwc.com

K A Ramana+91 (0) 226 669 1561

k.a.ramana@in.pwc.com

IrelandJimmy Maher+353 (0) 1 792 6326james.maher@ie.pwc.com

NetherlandsMarco Jansze+31 (0) 88 792 3133

marco.jansze@nl.pwc.com

Per J. Kroon+31 (0) 88 792 3057

per.j.kroon@nl.pwc.com

New ZealandCraig Armitage+64 3 374 3052craig.armitage@nz.pwc.com

South AfricaFrans van Wyk+23 346 5702frans.p.van.wyk@za.pwc.com

UkraineOlena Volkova+38 (0) 56 733 5010

olena.volkova.ua.pwc.com

UKLiam Hennigan+44 (0) 7841 494011

liam.hennigan@uk.pwc.com

Mark James+44 (0) 20 7212 1869mark.d.james@uk.pwc.com

USAWilliam Coe+1 312 298 2455

william.coe@us.pwc.com

Sean Gaffney+1 216 875 3275

sean.gaffney@us.pwc.com

Commoditytreasury servicesPieter Veuger+31 (0) 88 792 5157

pieter.veuger@nl.pwc.com

Richard French+44 (0) 20 7212 6427

richard.french@uk.pwc.com

Tax structuringMarco Jansze+31 (0) 88 792 3133

marco.jansze@nl.pwc.com

Annie Devov+44 (0) 20 7212 5572annie.e.devoy@uk.pwc.com

Sustainability andclimate changeHans Schoolderman+31 (0) 88 792 7658

hans.schoolderman@nl.pwc.com

Kieron Blakemore+44 (0) 20 7212 4212

kieron.j.blakemore@uk.pwc.com

Supply chain andforensicinvestigations

Fran Marwood+44 (0) 20 7213 4709fran.marwood@uk.pwc.com

Jaap Willem Bijsterbosch+31 (0) 88 792 7491

jaap-willem.bijsterbosch@

nl.pwc.com

Craig Armitage+64 3374 3052craig.armitage@nz.pwc.com

Corporate FinanceGuido Emanuels+31 (0) 88 792 7491

guido.emanuels@nl.pwc.com

www.pwc.com© 2014 PricewaterhouseCoopers LLP. All rights reserved. In this document, “PwC” refers to the UK member firm, and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details.

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