Outlook for the global meat industry
14 September 2010
Rabobank: A leading Food & Agribank
Presence in 41 countries
New perspectives
World growth indicators and drivers
for agriculture
Nan-Dirk Mulder, Rabobank International
How to reach sustainable growth in a
much more dynamic industry?
Competition for food: what’s next?
700
600
500
2006Globalisation of
industry
2006Commodityprice volatility
2008Exchange-rate
volatility
2008Economic crisis
Next:
-Sustainability
-Animal welfare
- Volatility
-Trade
liberalisation vs
protectionism
400
300
200
100
0
Market dynamics and animal diseases
1
Corn
Wheat
Rice
Soy Beans
R
Outlook for the global meat industry
14 September 2010
What is driving commodity prices?
Key challenge: Global food supply
Policies
•
•
•
•
•
Trade Policy
Agricultural Policy
Biofuel/Energy policy
Food safety regulations (e.g. GMO)
Sustainability criteria
Supply factors
•
•
•
•
•
•
Meat demand
Food demand
Fuel
demand
Meat supply
Food supply
Fuel supply
Demand factors
Agricultural land
Yield (output/ha)
Farm management
Farm input prices
Weather
Diseases
•
•
•
•
Commodity price
Feed
Food
Biofuels
Industrial
•
•
•
•
•
•
•
Source: Rabobank, 2009
Expansion
Efficiency
Yield
Livestock/poultry supply
Other price determining factors
Livestock supply
Fund activity
Exchange rates
Freight rates
Crude oil prices
Technical specifications
Market sentiment and speculation
New non-agri market entrants
Grains and oilseed supply
???????
How to produce?
How to produce 500 million tonnes?
Global demand for agriculture (change 2008-18)
Grains and oilseeds
Sugar
Livestock and dairy
Biofuel
Additional demand: 500 m. tonnes
De
Grains and oilseeds markets 2008-2018
200%
Wheat
Coarse grains
Rice
Oilseeds
180%
160%
Share
developing
Market volume growth Growth % markets
+ 70 million tonnes
10%
72%
+ 190 million tonnes
17%
50%
+ 46 million tonnes
10%
98%
+ 133 million tonnes
20%
78%
140%
Demand for agriculture 2008-18
De
100%
80%
Brazil
54%
Food, feed, fuel
demand 2020
Additional
Yield improvement
Food, feed, fue
l demand
2010
40%
LOW
Wheat
Coarse
grains
Rice
Oilseeds
Beef
Pigmeat
Source: OECD, FAO, Rabobank estimate, 2009/10
2
HIGH
YIELD
0%
Poultry
Milk
Sugar
Ethanol Biodiesel
Feed/Animal
protein, 190
million tonnes
EU-27
11%
Hectares
Food, 180 million
tonnes
20%
U.S.
11%
FSU
21%
Fuel, 130 million
tonnes
60%
Unused arable land:
180 million hectares
South Africa
3%
HECTARES
140 million
120%
Efficiency
Cultivation
Yield
Land use
Great challenge for sector: Fast-growing
demand for agricultural products
220%
+20% in
10 years
30% yield increase
Grains yield (tonnes/ha) in 2007/2008
Wheat
Corn
Brazil
2,100
3,800
EU-15/27
4,830
6,480
Russia
2,020
3,790
Ukraine
2,340
4,210
U.S.
2,720
9,660
Source: OECD, 2009
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Outlook for the global meat industry
14 September 2010
70% of global growth in demand for
meat will be in Asia
Who’s going to produce world meat
demand?
Market growth estimate for key meat markets 2010-2020
Broiler cost of production (USD/kg)
25 000
25,000
Pigs cost of production EUR/kg cwe
1.2
20,000
1,80
1,60
1
1,40
0.8
15,000
1,61
1,40
1,20
1,04
1,00
0.6
10,000
1,62
1,57
1,40
0,91
0,80
0,60
0.4
0,40
0.2
5,000
0,20
-
0
US
-
BRA
ARG
EU
RUS
CHI
THA
IND
NL
DE
DK
ES
PL
US
BR
Source: Rabobank estimate
-5,000
10% of global production is traded internationally
S
R
Poultry
FAO FAPRI OECD
Beef
Pork
Future meat production growth
Water issues will start to bite
Global meat production 2009 – 2018 (1,000 tonnes and CAGR 2009-2018)
100,000
90,000
+2.3%
80,000
70,000
60,000
50,000
+1.0%
40,000
+0.5%
+3.5%
30,000
,
20,000
+4.0%
10,000
+2.6%
+1.0%
+1.8%
+0.3%
-
Source: Rabobank/OECD, 2010
3
Poultry
Pork
Beef
R
Outlook for the global meat industry
14 September 2010
Importance of land quality will
increase
‘Ring of fire’ region as future spearhead in
global trade
Rabobank International
A fast-changing global meat industry
landscape
1,000 tonnes
14,000
Global ranking: Meat companies
The beef industry most consolidated
industry on global level
Consolidation in the global meat industry
12,000
,
100%
90%
10,000
80%
8,000
70%
60%
6,000
50%
4,000
40%
2 000
2,000
30%
20%
-
+2%
10%
0%
20%
7%
Pork
* Including Bertin, Pilgrim's Pride
** Merger Perdigão, Sadia Source: Rabobank estimate based on public sources
4
Poultry
Beef
Pork
20%
7%
Beef
Other
+1%
9%
Poultry
Pipeline
9%
7%
+2%
Meat
7%
7%
Feed
Top 3 market share
Source: Rabobank estimate
R
Outlook for the global meat industry
14 September 2010
Brazilian and US companies drive global
consolidation process in meat industry
Bounce back: dealing with volatility as
key successfactor for whole value chain
Grains and
oilseeds
Feed
Farming
Processing
Customer
Market
M
k t
intelligence
Information
exchange
=
+
Volatility in
grains and oilseeds
Volatility in livestock and
poultry markets
Market power
Request for
stable sales
prices
Hedging/price
management
Volatility in
exchange rates
Risk
management
Corporate social responsibility: Example
global warming
Tonnes CO2-e per tonne of production
Lobbying: Sweden
Governments policy
•
Swedish Beef
Approx. 16 - 20 kg CO2e per kg meat
•
Europ eanBeef
Approx. 20 - 27 kg CO2e per kg meat
•
Brazilian Beef
Approx. 38 - 40 kg CO2e per kg meat
A future picture?
LOCAL TRADE
GLOBAL TRADE
= Always buy Meat from Europe
Retail
Fresh perishable products
-Fresh meat
-Speciality products
5
Not perishable products
- Frozen products
- Further processed products
R
Outlook for the global meat industry
… or this?
14 September 2010
Or is this the future?
European sector should better utilise large
European market
And beef?
Does beef deserve its premium price
position?
Do we deliver on:
- taste
- tenderness
- juiciness
- consistency of the above
- consumer friendliness in preparation
- social attributes (associated with
production, processing) such as animal
welfare, environment
- product STORY?
Scandinavia:
High incomes
Large differences in
competitive advantages
UK: Added-value
market; strong retail
NW Europe:
One market;
consumer
concerns
Southern Europe:
Traditional demand,
growing market
6
EU-27:
EU
27: Almost 500
million consumers
Poland: 40 million
consumers;; costprice advantages
Poultry industry still a
domestic ihdustry
Romania:
22 million
consumers;
labour costs
EUR 200/month
R
Outlook for the global meat industry
14 September 2010
The European industry moves from national to
regional and from regional to pan-European
Consolidation in fragmented EU
meat landscape
Top 25 EU meat industry (1,000 tonnes)
Northwest - 173 million consumers
North- 20 million consumers
South- 171 million consumers
S th E
South
Eastt - 41 million
illi
consumers
East - 79 million consumers
3,000
2,500
2,000
1,500
1,000
500
-
Poultry
Beef
Pork
The middle segment need to choose:
Scale or speciality focus
Irish food & agrisector: livestock
sector drives industry growth
Number of
companies
- Organic products
- Small product groups
- Innovations
Old
Speciality products
- Small volumes
- Differences
- Specialisation
Ex
xport/Import
Future
S
Commodity
- Basic products
- Large volumes
- International
Source: Rabobank
Production growth (00/07)
7
R
Outlook for the global meat industry
14 September 2010
Winners and losers in global food
industry
How to compete in the current
competitive industry landscape?
VOLUME
VALUE
8 golden rules for winners in the food industry
1. Focus on the right segments in the market and market intelligence
Efficiency
Branding”Ireland”
Scale
Internationalisation
Pasture based
Future
Irish food
industry
3. Manage the value chain
4. Be prepared for higher volatility in the value chain
Free range/organic
Sustainability
Value Chain
2. Be preferred supplier of the right customers or brand your product
5. Ensure 100 p
percent safety
y with strong
g corporate
p
social responsibility
p
y strategy
gy
6. Be price competitive
7. Mitigate your risks
Premium products
Sustainability
8. Have adequate scale and regional spread
Risk management
Conclusions
Great long-term meat demand potential for global industry with growing emphasis on yield
throughout the value chain
Dealing with volatility in feed ingredients and exchange rates will be a key challenge for
the industry in the coming years
Waves of protectionism and diseases put significant impact on markets and industries
N
Growing importance of consumer concerns in industry. Industry should participate in
global discussions and come with innovative ideas
Consolidation in the global industry is driven by Brazilian and US companies; Europe is
fragmented and does not utilise opportunities in large EU market
T
Global feed to meat industry landscape will change significantly in the next 10 years –
Companies from emerging markets (China, Brazil) will play a leading role
N
R
N
8
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