AGRICULTURE

A Global Perspective!

Covenant Capital &

Microfinance

Michael Olorunninwo

July 2013

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Outline

Global Demand for Agricultural Produce

Pressure on Grains, Cassava, etc.

Impact of Growing Middle Class on Protein Demands

Opportunities in Nigeria

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Credits

• United Nations Food & Agriculture Organisation (UNFAO)

• World Bank

• United States Department of Agriculture (USDA)

• World Health Organisation (WHO)

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2030

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Introduction

World Sub-Saharan Africa

Food Consumption per Capita (kcal), 2007 to 2030

13%

22%

• Buoyed by increasingly income

and sophistication

• Sub-Saharan Africa has highest

incidence of food insecurity

• By 2050 it will also witness highest

proportion of population growth and

account for 20% of population

2540

3050

3,050 kCal x 6.5 billion people!!!

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Introduction

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Trend shows increases in the

average price index of food items

45%+

Global Food Price Index 2008 to 2013

Index rebounded after 2008 financial crisis

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Introduction

Trend shows increases in the average

price index of food items

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Meat

Dairy

Cereals

Indices for Cereals & Diary products follow general Food Index

Global Price Index for Meat, Dairy & Cereals (2008 to 2013)

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Drivers of Global Agricultural Demand

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World Population will increase by 35% to 9.3bn by 2050

21%

35%

58%

130%

0%

20%

40%

60%

80%

100%

120%

140%

160%

2030 2050

World

Sub-Saharan Africa

Nigeria

Expon. (Nigeria)

NIG: Additional

231 million

• By 2050, Nigeria’s population will increase to 389 Million

63%

146%

Base Year: 2010

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Significant Number of People Now Live in Urban Areas

• Today, about 70% of world

population, live in urban areas

• This shift happened in 2008

• Compared to 1960, almost the

same number of people live in

rural areas

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High Proportion of Dependent /Consuming population

• World population is ageing with 65%

between ages 16 and 64 years

− Increased Longevity

− Low Fertility

• Africa has the highest proportion of

dependent (consuming) population

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Increasing Income Levels

• Global GDP per Capita grew by almost 100% between 2002 and 2012, from less

USD5,338 to USD10,170

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4000

6000

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12000

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

91%

• By 2030 the world will be 80%

richer

• More money means increased

demand for more food, most

importantly protein and diet-

variety

GDP per Capita, 2002 - 2012

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Reasons for Pressure on Grains & Cassava

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Grain production is land intensive

Adverse weather conditions is wiping out harvestable crops

Discovery of novel uses of grains as biofuels

Contributing Factors to Grain Demand Pressures

Increased use of grains as animal feed to meet protein demands

More pressure on arable lands as yield growth declines

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Composite Use Increasing Demand Pressures

Humans

Grains, Cassava,

etc.

Livestock

Biofuels Production

Energy Consumption

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Food, 1000

Animal Feed,

750

Industrial

Use, 500

Others, 50

0%

10%

20%

30%

40%

50%

60%

70%

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90%

100%

Tonnes (millions)

• Only about 40% of production is used as food

• Industrial use such as biofuels is taken increasing proportion

Production and Uses of Grain in 2012

43%

33%

22%

2%

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Ethanol Production from grains has increased by 300%

Ethanol Production, mostly from grains

• 25billon gallons of ethanol will be produced, mostly from grains, in 2016

• Major source of biofuels & biodiesels include corn, soybean, sugarcane, wheat, etc.

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Growth in Cereals Production from 2000-2010

• In terms of Production,

Harvested Area & Yield,

Africa is registering

significant improvements

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Demand for Protein

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Livestock is Major Source of Protein

Humans

Grains, Cassava,

etc.

Livestock

Biofuels Production

Energy Consumption

Milk

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Demand for Meat Increases with Income

• High income countries consume more meat

• Per Capita meat consumption and income are positively correlated

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Meat Consumption is Higher in High Incomes Countries

• Meat consumption i.e. demand for protein and diet diversification is expected to rise

• Low income countries have low meat consumption per capita and vice versa

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Uses of Grains & Cassava – Meat Conversion Rates

• Feed-to-meat conversion rates, not favourable

• Chicken is most feed-efficient

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• Only about 12% of world marine stock is under/moderately exploited

Aquaculture will be a major source of fish protein

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Opportunities in Nigeria

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Agriculture is Land Intensive!

Need to capture available arable land for agriculture purposes

−Livestock production is even more land intensive

−Focus on sub-Saharan Africa by European farmers seeking for Arable Land

−Opportunity exists for Lease and Capital Gains income

80% of land in Nigeria is Arable

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How About CASSAVA!

Reliable source of food in Nigeria, 90% of cassava production is processed into Food

Significant demand exists

−Use of High Quality Cassava Flour (HQCF) as 10% replacement in bread flour, noodles,

adhesive, about 1.15 million tons in demand

−100% duty on flour imports

−Native and modified starches in food, paint and pharmaceutical industries

−Dried cassava chips had regional market and can be used for local animal feed

−Nigeria adopted 10% ethanol E-10 policy, representing 1 billion litres per annum

Need to improve value-chain efficiency and quality control

Investment in Farmer Education and Extension services

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Cassava Production – Nigeria and Thailand

Nigeria Thailand

Production ('000t) 36,804.00 30,088.00

Harvested area ('000ha) 3,126.00 1,326.00

Yields (t/ha) 11.70 22.70

Utilization

Garri (60%) Native & Modified Starch

(40%)

Fufu (20%) Fuel Ethanol (20%)

Lafun (10%), Tapioca (5%), Native Starch (3%), Animal feed (2%)

Chips/pellets (40%)

Farm Size (ha/Farm) 1 to 2 4 to 5

Cassava area (Ha/farm) 0.5 to 1 2 to 3

Crop System - Monocrop – Intercrop

10% 95%

90% 5%

Time of Planting Apr-June Apr-May

Land Preparation Manual/tractor Tractor

Weed control Manual Tractor/herbicide/manual

Fertilization - Organic - Chemical

none medium

very little medium

Labor costs (US$/day) 3 to 4 4 to 5

Prod. costs (US$/ha) (US$/t fresh roots)

450-900 650-800

37.99 28.68

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Fishery, Poultry and Animal Husbandry

Meat consumption in Nigeria is expected to increase with income levels

− Increasing levels of middle class population and diet sophistication will drive demand

Known protein sources such as fish, beef, chicken, goat, eggs will continue to be in

demand

Beef

41%

Fish

24%

Egg

12%

Goat Meat

12%

Chicken 6%

Mutton

3%

Pork

2%

Protein Consumption in Nigeria

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Other Opportunity Areas

Fertilizers

– Less government involvement

– Currently driving private participation in production, processing and marketing

– Use of subsidies to promote usage by Farmers and improve Yield

Marketing

– Government promoting independent marketing companies to expand supply pipeline

– Marketing companies to coordinate production, promote investment, establish standards

Financing

– Access to US$500m fund from CBN through incentive-based risk management system under NIRSAL

– Banks are becoming more open towards agricultural-financing

Infrastructure – 30% of produce are lost annually

– Need for quality storage facilities

– Need to improve transport logistics

– Requires efficient supply-chain management services

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Other Opportunity Areas

Capacity Development

– Need to attract young Nigerians into the Sector

– Need for investments in training and development

– Advanced skills in animal husbandry, crop expertise or veterinary science is scarce

Grains – Wheat, Rice, Corn

– Imposition of Import Tariffs on major grains such as wheat and rice

– Demand for noodles, cereal meals, biscuits, bread, pasta, will keep demand up

– Provision of adequate storage facilities

– Use of grains for animal feed

– Investment in processing facilities

Importation & Assemblage of Implements

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The Nigerian Consumer

Analysis of Consumer Buying Patterns, 2015 est. (N’b)

Food & Bev.

59%

Clothing &

Footwear

11%

Health & Med.

Serv.

8%

Household

Goods & Serv.

6%

Alcoholic Bev.

& Tobacco

4%

Comm.

3%

Misc. Goods &

Serv.

9%

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