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Challenges and opportunities for Latin America
Adolfo Fontes
October 2017
Global pork market
2
Pork Global Market Perspectives
A changing world
Pork global market
Latin American potential
Challenges
Conclusions
3
4
Pork Global Market Perspectives
A changing world
Pork global market
Latin American potential
Challenges
Conclusions
5
Three point that describe the meat market
We should be prepared for more changes
Opportunities and threats are also changing
Fonte: Rabobank, 2017
The market has changed
6
A changing world
7
Millennials seek quality over quantity and are driving sales today with a strong adoption of diverse choices in meat
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
5
15 20 25 30 35 40 45 50 55 60 65 70
Po
pu
lati
on
in
millio
ns
Age in 2015
92 M MILLENIALS
61 M GENERATION
X
77 M BABY
BOOMERS
US Population
8
World population growing
Source: US Department of Commerce, 2014
Bilh
ões
2014 7.2 More food will be needed in the first half of this
century, than it was consumed in the last 7,000
years
Bil
lion
9
But not just population
Population
Urbanization
And per capita income
10
Pork Global Market Perspectives
A changing world
Pork global market
Latin American potential
Challenges
Conclusions
11
Pork market overview
Fonte: Rabobank
Brazil – Brazil’s political turmoil
has impacted the meat sector
Mexico – 3% increase in the sow
herd. However, there is still
issues with PEDv. Production is
still behind consumption,
increasing imports
Argentina – Pork
consumption and imports
growing in 2017
USA – Two new plants in the US
are expected to add 7% to US
packing capacity
China – China pork imports
expected to declined around 10%
in 2017
Russia – Russia is
becoming less dependent
on pork imports
Europe – Growing dependence on
exports to Asia
12
[MM ton]
Pork production 2017
Source: USDA, April 2017 (Major Traders)
Others
12,6
Russia
2,9
USA
11,3
EU
23,4
China
53,0
6,7
0,50,5
1,4
3,7
Chile Argentina Mexico Brazil
Latin America
Total: 111 million tons
China is responsible for almost half of global pork production
13
[Million tons]
Source: Rabobank; USDA
China slowing down and the US increasing pork production
Pork production per country
União Européia
3,0 2,9 2,6 3,8 3,7 3,5
11,8 11,3 11,1
23,5 23,4
2,8 2,7 2,0
Vietnam
2,0 2,0 2,6
23,2
China
52,8 53,0 54,9
EUA Brasil Rússia Canada
2015 2016e 2017p
14 Note 1: Compound annual growth rate Source: Rabobank, OECD, FAO
+1,4%
CAGR¹
2015-2025
+1,1%
+1,6%
+2,0%
312
14 (4,6%)
113 (36,1%)
118 (37,7%)
67 (21,6%)
2015 2005
254
12 (4,7%)
83 (32,7%)
61 (24,0%)
+1,4%
+2,5%
1995
189
9 (4,8%)
46 (24,3%)
98 (38,6%)
78 (41,3%)
56 (29,6%)
2025p
357
17 (4,9%)
131 (36,8%)
131 (36,6%)
77 (21,7%)
Globally, pork consumption will achieve 131 million tons.
Global consumption of meat [ MM tons]
Pork
Poultry
Sheep
Beef
15
(M tons CWE)
Pork demand should be sustained by emerging markets
2014-2024 pork meat consumption growth forecast
Source: FAO, USDA, Rabobank
0.1 0.1
1.8
0.1
1.0
Chin
a
4.8
Arg
entina
South
Kore
a
Indonesia
Bra
zil
Mexic
o
Russia
USA
Vie
tnam
0.7
Philip
pin
es
0.4 0.4
Ukra
ine
0.4
0.2
0.7
0.2
Thailand
0.4 0.2
Austr
alia
Oth
ers
Colo
mbia
16
Pork imports (million tons)
Source: USDA, Rabobank Analysis
0.4
2016 7.9
2026 8.6
0.6
0.2 0.9 2.4 0.5
0.2 2.4
0.3
1.3
0.7
0.5
1.3 1.3
1.0
0.5
0.5 0.2 0.7 0.4
Hong Kong Rússia México Coreia do Sul
Austrália China
Japão
EUA Filipinas Outros
710 thousand additional tons of pork will be imported annually
by 2026. Mexico, Philippines and South Korea will be the main destinations of this volume.
Major Importers – Export opportunities
Additional volume imported
MEXICO
PHILIPPINES
SOUTH KOREA
AUSTRALIA
HONG KONG
242
210
130
55
50
18
Self-sufficiency in animal protein and GDP per capita (1980-2014)
Source: USDA, FAO
As China grows economically, it will not only import grain but also meat
40%
50%
60%
70%
80%
90%
100%
$0 $10,000 $20,000 $30,000 $40,000 $50,000
Percen
t self
-su
ffic
ien
t in
an
imal
pro
tein
GDP per capita (current prices, US$)
Japan
Korea
China (including Hong Kong)
19
China’s Slower GDP Growth, But Still Above 6%
2018E Real GDP Growth China GDP Growth 2007-2020E
Sources: China National Bureau of Statistics, IMF Aug 2017
0%
2%
4%
6%
8%
10%
12%
14%
16%
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017E
2018E
2019E
2020E
0%
1%
2%
3%
4%
5%
6%
7%
8%
India
Chin
a
Indonesia
Mala
ysia
Thailand
Kore
a
United S
tate
s
Fra
nce
United K
ingdom
Bra
zil
Germ
any
Russia
Japan
20
0
5,000
10,000
15,000
20,000
25,000
2011 2012 2013 2014 2015 2016 2025f
78%
20%
28%
40%
4%
40%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2007 2008 2009 2010 2011 2012 2013 2014 2015E 2025f
Below 500 500 - 10,000 Above 10,000
Greater Consolidation in the Coming Decade
Source: Boyar, Rabobank, 2015 Source: MOA, Rabobank, 2015
Structural change in pig farming sector Changes in number of designated abattoirs
21
-10%
-5%
0%
5%
10%
15%
0
10
20
30
40
50
60
70
Pork Production YOY Growth
However, Chinese pork production will slow down into 2020
Source: China Statistics Yearbook 2015, Rabobank
China pork production (unit: million tonnes)
22
Diverging Performances of Meat Consumption
Source: MOA, Rabobank
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1990 1995 2000 2005 2010 2015 2020f
Pork Beef Sheepmeat Poultry
Change of meat consumption structure
23
China’s Pork Prices Compare with Those in Other Countries
Source: European commission, USDA, PEI pork, Rabobank, 2016
5.00
7.00
9.00
11.00
13.00
15.00
17.00
19.00
21.00
23.00
RMB/ KG
China US EU Canada
24 Source: China customs; Rabobank, 2017
China Will Continue to be the Largest Pork Importer
25 Source: China customs; Rabobank, 2017
However, 2017 imports are expected to be lower than 2016…
Import from Tonnes 2016 2017
YOY % Change
Jan - July Jan - July
US
To HK 33,116 37,621 13.60%
To China 134,832 105,850 -21.49%
Total 167,948 143,471 -14.57%
Canada
To HK 3,200 2,120 -33.74%
To China 102,892 114,007 10.80%
Total 106,092 116,127 9.46%
Europe
To HK 52,931 74,706 41.14%
To China 599,002 423,142 -29.36%
Total 651,932 497,848 -23.64%
Brazil
To HK 78,742 53,565 -31.97%
To China 35,332 32,781 -7.22%
Total 114,074 86,347 -24.31%
Global
To HK 203,963 213,383 4.62%
To China 945,702 749,981 -20.70%
Total 1,149,665 963,364 -16.20%
26
Pork Imports Will Stay at High Levels
40
45
50
55
60
65
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017f 2018f 2019f 2020f 2021f 2022f 2023f 2024f 2025f
Production Net Import
Million Tonnes
Source: National Bureau of Statistics of China, China Customs, Rabobank, 2017
European Union
28
European Union is the largest pork exporter region in the world
Source: European Commission; Rabobank 2017
30.0
30.5
31.0
31.5
32.0
32.5
18 000
19 000
20 000
21 000
22 000
23 000
24 000
2010 2011 2012 2013 2014 2015 2016 2017f 2018f
kg per year Thousand tonnes
Pork production Consumption Per capita consumption
China is the most important export market followed by Japan and Hong Kong Pork production remains well ahead of consumption
30
US hog slaughter forecast, 2015-2019f
Source: Rabobank 2017
31
Mexico and Japan dominate on US exports of Pork
Source: USDA, Rabobank
0%
5%
10%
15%
20%
25%
30%
35%
40%
Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17
US % of exports by destination
Japan Mexico Canada South Korea China (ML) Hong Kong Australia
32
US exports of Pork reaching a plateau?
Source: USDA, Rabobank
33
Pork Global Market Perspectives
A changing world
Pork global market
Latin American potential
Challenges
Conclusions
34
Competitive Advantages
35
Water availability
Source: Harvard Business School
and availability Use of water
Ideal conditions for agriculture
Agroclimatic factors: • Soil
• Climate & rainfall
• Topography
Abundant agricultural land resources, few competing alternative uses
Relatively cheap labour
37
Pork production costs
Source: AHDB Pork
0,46
0,650,61 0,63 0,66 0,65
0,81
0,90
0,63
0,72
0,54
0,11
0,090,12
0,180,18 0,22
0,22
0,16
0,24
0,17
0,110,05
0,050,11
0,100,10
0,10
0,130,12
0,12 0,07
0,050,07
0,07
0,08
0,150,16
0,17
0,17 0,16
0,16
0,10
0,10
1,34
DEN
1,06
CAN
0,92
BRA (SC)
0,86
BRA (MT)
0,69
1,33
GER
1,14
FRA USA
0,80
1,10
GB SPA
1,06
NL
1,15
ITA
Depreciation and finance
Feed
Labour
Other variable costs
38
[kg of feed/kg of pork]
[piglets per sow/year]
High productivity in Brazil and Mexico
Feed conversion
Piglets per sow
Sources: CEPEA; Embrapa; IAFDA; Mielle, M. (2006); The Pig Site; USDA
3,23,13,02,92,92,92,92,82,7
Japan South Korea Canada Mexico EU China Brazil USA Philippines
16,016,018,0
21,021,922,022,422,5
Philippines Dominican Republic Ireland France Brazil China USA Australia
39
[thousand ton]
[thousand ton]
Latin America Pork Exports and Imports
Pork exports
Pork imports
Source: USDA, April 2017 (Major Traders)
128178
627
141173
832
160180
900
Chile Mexico Brazil
2017 2015 2016
38
981
4716 42
1.021
7635 46
1.100
9245
Chile Mexico Argentina Uruguay
2017 2015 2016
41
Source: MDIC
-49%
+49% +12% +14%
-11%
+12%
Uruguay
22,6 20,1
Angola
23,3 20,4
Argentina
23,4 15,7
Singapure
25,0 24,4
China
35,7
69,5
Hong Kong
112,3
125,8
Russia
208,6
186,0
+2%
(1.000 tons)
2016 X 2015: +33% Jan-Sep17 x Jan-Sep16: -3,8% Jan-Sep 17
Jan-Sep 16
Brazilian pork exports in 2017 x 2016
42 Fonte: USDA, Rabobank estimates 2017
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017f 2018f 2019f
Pork exports (000s tons)
Brazilian meat per capita consumption (000s tons)
Projections on pork production (000s tons)
0 100 200 300 400 500 600 700 800 900
1,000
37.9 37.1 36.2 37.0 37.0 38.4
13.8 13.9 13.7 13.8 14.0 14.2
44.3 44.8 43.0 44.2 45.7 47.4
0
20
40
60
80
100
120
2014 2015 2016 2017f 2018f 2019f
Beef Pork Poultry
Potential in Brazilian pork market
44
Long term Mexican pork production and imports
Source: SIAVI, USDA 2017
1.734
1.540
1.323 1.2931.178
981
+31,8%
+31,1%
2020 2015 2025
Imports
Production
46
Sources: USDA, Ministry of Agriculture, AAPP, SENASA and Rabobank’s market intelligence
Pork industry in Argentina is still small when compared to other countries, but has presented high growth rates
Pork production and imports evolution (thousand tons)
0
100
200
300
400
500
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Production Imports
Breakdown of pork imports (2015)
62% 12%
12%
8% 6%
By country
Brazil Germany Denmark Spain Others
7,903 tons
0
2
4
6
8
10
12
14
0
100
200
300
400
500
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Kg p
er
capita
Thousand t
ons
Total consumption Per capita consumption
Fresh pork consumption evolution
Breakdown of animal protein consumption (2015)
33% 37%
22%
53%
43%
10% 2%
World Argentina
Turkey
Pork
Beef
Poultry
47
Pork Global Market Perspectives
A changing world
Pork global market
Latin American potential
Challenges
Conclusions
48
Sources: USDA
Russia is becoming less dependent on pork imports
300347408515
868971916876917889
785637
728822
529
307
2006
2.557
2008
2.720
2.843
2007
2.897
2009 2010
3.035
3.252
2011 2012
3.268
2.333
2005
2.400
2.119
2004
2.510
2.070
2003
2.615
2.209
2002
2.870
2.189
2001
3.000 1.816
2000
1.648
2.064
2.175
1.077
1.981
1.844
1.736
1.107
1.640
1.444
1.334 1.433
2017f
1.341
3.300
2016
1.287
3.217
2015
1.367
3.023
2014
1.481
3.025
2013
Production
Imports
Russian pork production and imports (thousand tons)
However, there is potential in more mature Asian markets – higher value
Japanese pork imports (thousand tons)
South Korean pork imports (thousand tons)
Sources: USDA
1.3501.3611.270
1.3321.2231.2591.254
1.1981.138
1.2671.210
1.154
1.3141.269
1.0911.1081.022
947
2009 2010 2011 2012 2013 2014 2015 2016 2017 2006 2007 2004 2005 2000 2008 2001 2002 2003
630615599
480
388
502
640
382390430447
410
345
233
163164132
184
2009 2010 2011 2012 2013 2014 2015 2016 2017 2006 2007 2004 2005 2000 2008 2001 2002 2003
50
Price forecast: CBOT Corn
Source: Bloomberg, Rabobank 2017
250
300
350
400
450
500
550
USc /
bushel
CBOT Corn Previous forecast Rabobank forecast
unit Q1'17 Q2'17 Q3'17 Q4'17(f) Q1'18(f) Q2'18(f) Q3'18(f) Q4'18(f)
Corn USc/bu 364 368 366 370 380 395 400 390
CBOT Corn price forecast maintained amid US yield uncertainty and high crop variability
51
Corn prices are historically higher in Asian countries
Source: Bloomberg
$-
$2
$4
$6
$8
$10
$12
ene-0
9
abr-
09
jul-
09
oct-
09
ene-1
0
abr-
10
jul-
10
oct-
10
ene-1
1
abr-
11
jul-
11
oct-
11
ene-1
2
abr-
12
jul-
12
oct-
12
ene-1
3
abr-
13
jul-
13
oct-
13
ene-1
4
abr-
14
jul-
14
oct-
14
ene-1
5
abr-
15
jul-
15
oct-
15
ene-1
6
abr-
16
jul-
16
oct-
16
ene-1
7
abr-
17
jul-
17
USD
/bushel
US Brazil (West Parana) China (Jilin) Japan (Tokyo Board)
52
Local challenges
Infrastructure
Productivity gap
53
Pork Global Market Perspectives
A changing world
Pork global market
Latin American potential
Challenges
Conclusions
54
Takeaway points
Uncertain outlook on political front in important markets.
Consumers increasingly make decisions based on the ‘story’ behind brands.
Growth opportunities are changing – more value than volume.
The good use of market intelligence in additional to a stronger relationship
through the animal protein value chain will make a significant difference to Latin
America’s prospects.
Robust demand for meat in developing countries will be sustained. However, pork
might face stronger competition from other animal protein products.
And it’s not all about exports - the internal market is also big…
55
Thank you adolfo.fontes@rabobank.com
56
The information in this presentation reflects prevailing market conditions and our judgement as of this date, all of which may be subject to change. This presentation is
based on public information. The information and opinions contained in this document have been compiled or arrived at from sources believed to be reliable, but no
representation or warranty, express or implied is made as to their accuracy, completeness or correctness. The information and opinions contained in this document are
wholly indicative and for discussion purposes only. No rights may be derived from any potential offers, transactions, commercial ideas et cetera contained in this
presentation. This presentation does not constitute an offer or invitation. This document shall not form the basis of or be relied upon in connection with any contract or
commitment whatsoever.
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