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![Strong fundamentals support Global demand
growth in agribusiness
Global Demand Drivers Selected Commodities Consumption
[MM MT]
World population has been growing at
Population 1.7%p.a. 1,100 FAPRI
Growth Growth is mostly concentrated on Corn Projections
emerging economies 1,050 Wheat
Soybean
Income Global income has been improving 1,000 Sugar
mostly in emerging markets +110
Growth
950 939
Urbanization process in large countries
increases the consumption of 900
Urbanization industrialized food, with direct impact on
the demand for vegetable oils and 841 +66
850
proteins
800
Based on the factors above, food demand
tends to continue growing at strong levels 750
Food Demand
FAO expects food production to grow over
40% by 2030 and over 70% by 2050
Strong biofuel programs are under
Additional 300 287 +56
development in various countries,
Demand increasing the demand for sugar-cane,
cane,
grains and oilseeds 250
200 184
Greater Global Demand for +43
0
Agribusiness Products 99 01 03 05 07 09 11 13 15 17 19
Source: FAO, FAPRI, Rabobank](https://image.slidesharecdn.com/2010cordingley-100906161102-phpapp01/85/2010-cordingley-9-320.jpg)
![Brazil is one of the largest agricultural commodity
producers with enormous potential
Highlights Brazil as Producer and Exporter of Key Commodities
- Brazil ranks number 1 or 2 on major commodities Exp. Value
production and exports Production Exports
(USD MM 2009)
- Agribusiness is a strong pillar of national economy Sugar 1st 1st 2,748
representing close to 25% of total GDP st st
Coffee 1 1 4,270
- Brazil has significant potential to increase yields for FCOJ 1 st
1 st
396
several field crops nd st
Ethanol 2 1 1,338
- Brazil still enjoys great potential to expand crop areas nd st
Beef 2 1 4,118
- Infrastructure bottlenecks play a critical role in the Soybeans 2 nd
2 nd
10,925
agribusiness expansion towards new areas rd st
Poultry 3 1 5,535
th nd
Soy Oil 4 2 1,223
Source: Rabobank analysis Source: USDA
Evolution of the Agriculture GDP Growth (%) Brazilian Agricultural Commodity Exports
[Index (2000=100)] Pulp Sugar [Million MT]
GDP Agricultural GDP Corn Animal Protein
Estimated GDP Estimated Agricultural GDP 163 Coffee Soybean
162 8,1%
73
143 142 68 65
60
142 51 54
46
122 133
100 111
00 01 02 03 04 05 06 07 08 09 10 11 12 13 03 04 05 06 07 08 09
Source: MCM Consultores Source: Bloomberg, USDA, UNICA](https://image.slidesharecdn.com/2010cordingley-100906161102-phpapp01/85/2010-cordingley-17-320.jpg)
![Macroeconomic fundamentals have been
consistently improving in Brazil…
Gross Domestic Product (GDP) Evolution of Interest Rates - SELIC
[US$ Trillion] Actual [Nominal] Actual
Forecast Forecast
CAGR CAGR
-5,2%
23,0%
19,1% 17,5%
18,2%
10,4% 16,2% 16,9%
15,3%
11,9% 12,5% 12,0% 10,8%
10,1% 9,8% 10,5%
00 01 02 03 04 05 06 07 08 09 10 11 12 13 00 01 02 3 04 5 6 07 08 09 10 11 12 13
Note: current R$ converted by average exchange rate Note: annualized variation
Source: MCM Consultores (BACEN) Source: MCM Consultores (BACEN)
Evolution of Inflation Average Exchange Rate
[Consumer price index (IPCA) – annually (%)] Actual [R$/US$] Actual
Forecast Forecast
CAGR
-4%
12,5%
2,35
9,3%
7,7% 7,6%
6,0% 5,7% 5,9%
4,5% 5,3% 4,7%
4,3% 4,5% 4,5%
3,1%
00 01 02 03 04 05 06 07 08 09 10 11 12 13 00 01 02 03 04 05 06 07 08 09 10 11 12 13
Note: accumulated in the period Note: period average
Source: MCM Consultores (BACEN) Source: MCM Consultores (BACEN)](https://image.slidesharecdn.com/2010cordingley-100906161102-phpapp01/85/2010-cordingley-18-320.jpg)
2010 cordingley
- 1. Food in theworld and emerging opportunities for Chile Bill Cordingley Head of Food & Agribusiness Research and Advisory Americas region Rabobank International, New York Rabobank International
- 2. Rabobank Food &Agribusiness Research and Advisory A global network of research professionals! Over 70 people in 12 different countries Focus areas: London −Animal Protein Utrecht Beijing −Beverages New York Shanghai New Delhi Hong Kong −Dairy −Farm Inputs Mexico Mumbai City Singapore −Food Retail −Fruits & Vegetables −Grains & Oilseeds Sao Paulo −Sugar & Sweeteners Sydney Santiago Melbourne de Chile Buenos Aires Christchurch 2
- 3. Contents Section 1: Global economy Section 2: The big picture for global agriculture Section 3: Emerging markets: Brazil, China and India Section 4: Some key trends shaping the global market Section 5: Chile: positioning for the future 3 Rabobank International
- 4. CONFIDENCIAL The financial market has been severely impacted: Global banking system almost USD 1.1completely! - credit write-downs are almost failed trillion so far downs IMF estimates write offs of $2.2 trillion 2.2 trillion IMF predicts losses of USD Change in market value (USD billion) of selected banks Value Jan. 20, 2009 Value 2Q 2007 RBS BNP UBS Paribas Deutsche Societe Barclays Unicredit Bank Credit Generale Morgan 120 108 116 Agricole 93 Stanley 91 76 80 49 67 16 4.6 10.3 26 32.5 26 35 17 7.4 Citigroup HSBC 255 JP Morgan 215 165 Goldman Santander Sachs Credit Suisse 116 100 75 27 35 64 19 85 97 Source: Bloomberg, 10th 2009 Food & Agribusiness Research and Advisory
- 5. The global financialcrisis and “great recession” The deepest economic contraction in the last 50 years, and not just in the U.S. The worst financial and banking crisis since the Great Depression of the 1930’s Large and growing public deficits Lack of liquidity in the financial system and rapid deleveraging adding to the credit crisis Millions of insolvent individuals (foreclosures) Contraction in consumption and consumer confidence at lowest levels since they started measuring Doubling in unemployment in key developed markets
- 6. Recovery from greatrecession better than expected driven by developing world! 6
- 7. Latin America hasbeen a new millennium success story! Brazil v Chile stock index
- 8. Contents Section 1: Global economy Section 2: The big picture for global agriculture Section 3: Emerging markets: Brazil, China and India Section 4: Some key trends shaping the global market Section 5: Chile: positioning for the future 8 Rabobank International
- 9. Strong fundamentals supportGlobal demand growth in agribusiness Global Demand Drivers Selected Commodities Consumption [MM MT] World population has been growing at Population 1.7%p.a. 1,100 FAPRI Growth Growth is mostly concentrated on Corn Projections emerging economies 1,050 Wheat Soybean Income Global income has been improving 1,000 Sugar mostly in emerging markets +110 Growth 950 939 Urbanization process in large countries increases the consumption of 900 Urbanization industrialized food, with direct impact on the demand for vegetable oils and 841 +66 850 proteins 800 Based on the factors above, food demand tends to continue growing at strong levels 750 Food Demand FAO expects food production to grow over 40% by 2030 and over 70% by 2050 Strong biofuel programs are under Additional 300 287 +56 development in various countries, Demand increasing the demand for sugar-cane, cane, grains and oilseeds 250 200 184 Greater Global Demand for +43 0 Agribusiness Products 99 01 03 05 07 09 11 13 15 17 19 Source: FAO, FAPRI, Rabobank
- 10. Population growth 484mln (+8.8%) in 10 years in the selected countries Suc :U or e N
- 11. Economic growth hastwo effects: eat more and eat more expensively Source: Bob Thompson, University of Illinois, World Bank
- 12. The effect ofeconomic growth and population growth combined: Food markets to grow by 109% in ten years Source: Rabobank, based on KEO, Economist Intelligence Unit and FAO
- 13. Trade will continueto increase with globalization and growth Source: FAO, UN
- 14. Structurally higher globaldemand can be seen in global grains prices! We are now in an environment where $3 / bushel corn looks cheap! Risks appear to increasingly be on the upside 800 A new range? 700 US corn price seems to have solid support 600 at above $3. With competition for 500 US¢/bushel corn supplies likely to be high in coming 400 seasons it is unlikely that consumers will let 300 coverage slide significantly which will 200 underpin the market 100 0 1959 1964 1969 1974 1979 1984 1989 1994 1999 2004 2009 Monthly CBOT Corn Prices Source: Bloomberg, rabobank 14
- 15. Contents Section 1: Global economy Section 2: The big picture for global agriculture Section 3: Emerging markets: Brazil, China and India Section 4: Some key trends shaping the global market Section 5: Chile: positioning for the future 15 Rabobank International
- 16. Brazil - adeveloping global powerhouse ‘Winter’ crop (corn) Summer crop (soybeans) 16
- 17. Brazil is oneof the largest agricultural commodity producers with enormous potential Highlights Brazil as Producer and Exporter of Key Commodities - Brazil ranks number 1 or 2 on major commodities Exp. Value production and exports Production Exports (USD MM 2009) - Agribusiness is a strong pillar of national economy Sugar 1st 1st 2,748 representing close to 25% of total GDP st st Coffee 1 1 4,270 - Brazil has significant potential to increase yields for FCOJ 1 st 1 st 396 several field crops nd st Ethanol 2 1 1,338 - Brazil still enjoys great potential to expand crop areas nd st Beef 2 1 4,118 - Infrastructure bottlenecks play a critical role in the Soybeans 2 nd 2 nd 10,925 agribusiness expansion towards new areas rd st Poultry 3 1 5,535 th nd Soy Oil 4 2 1,223 Source: Rabobank analysis Source: USDA Evolution of the Agriculture GDP Growth (%) Brazilian Agricultural Commodity Exports [Index (2000=100)] Pulp Sugar [Million MT] GDP Agricultural GDP Corn Animal Protein Estimated GDP Estimated Agricultural GDP 163 Coffee Soybean 162 8,1% 73 143 142 68 65 60 142 51 54 46 122 133 100 111 00 01 02 03 04 05 06 07 08 09 10 11 12 13 03 04 05 06 07 08 09 Source: MCM Consultores Source: Bloomberg, USDA, UNICA
- 18. Macroeconomic fundamentals havebeen consistently improving in Brazil… Gross Domestic Product (GDP) Evolution of Interest Rates - SELIC [US$ Trillion] Actual [Nominal] Actual Forecast Forecast CAGR CAGR -5,2% 23,0% 19,1% 17,5% 18,2% 10,4% 16,2% 16,9% 15,3% 11,9% 12,5% 12,0% 10,8% 10,1% 9,8% 10,5% 00 01 02 03 04 05 06 07 08 09 10 11 12 13 00 01 02 3 04 5 6 07 08 09 10 11 12 13 Note: current R$ converted by average exchange rate Note: annualized variation Source: MCM Consultores (BACEN) Source: MCM Consultores (BACEN) Evolution of Inflation Average Exchange Rate [Consumer price index (IPCA) – annually (%)] Actual [R$/US$] Actual Forecast Forecast CAGR -4% 12,5% 2,35 9,3% 7,7% 7,6% 6,0% 5,7% 5,9% 4,5% 5,3% 4,7% 4,3% 4,5% 4,5% 3,1% 00 01 02 03 04 05 06 07 08 09 10 11 12 13 00 01 02 03 04 05 06 07 08 09 10 11 12 13 Note: accumulated in the period Note: period average Source: MCM Consultores (BACEN) Source: MCM Consultores (BACEN)
- 19.
- 20. Income and populationgrowth are key drivers of increased food consumption - 2008 Income and population growth in selected countries 2.0% BRIC Brazil India countries CAGR population (06-11) 1.5% (06 Mexico 1.0% Italy US China Canada 0.5% France Japan Germany 0.0% -7% -5% -3% -1% 1% 3% 5% 7% 9% 11% -0.5% Russia Income and population growth are key drivers of increased food consumption -1.0% Source: UN, IMF, Rabobank GDP growth (2008)
- 21. …2009 retraction… Income and population growth in selected countries CHINDIA CAGR population (06-11) now the savior (06 Source: UN, IMF, Rabobank GDP growth (2009)
- 22. …Bounce back in2010… Income and population growth in selected countries CAGR population (06-11) (06 GDP growth (2010) Source: UN, IMF, Rabobank, 2010
- 23. Chinese urbanisation -income divide has fostered this Nearly 60% of China’s consumers are in rural areas. Urban vs. Rural per capita disposable income Urban / rural population balance in China Source: China Statistics Yearbook Source: China Statistics Yearbook 2009 760 million! X 3.5 2007 2005 2003 2001 1999 1997 X 2.5 1995 1993 1991 1985 1978 0% 20% 40% 60% 80% 100% Urban Rural
- 24. Today, urban consumerseat double the meat and drink triple the milk of their rural counterparts Urban vs. Rural per capita consumption (kg) China’s protein consumption forecast (mln MT) Source: China Statistics Yearbook 70 Source: FAPRI, 2010 29% 10 year absolute growth 60 50 40 30 20 26% 25% 10 196% 0 Pork Beef Poultry Fluid Milk 1999 2009 2019
- 25. China’s Corn Position– Is it a structural change? China will increasingly play an important role in the global corn trade, its position as a prominent exporter is increasingly looking untenable. Increasing reliance on the US... 18 140 16 120 China’s export 14 program has 12 drawn down on 100 stocks... Million tonnes Million tonnes 10 80 8 6 60 China has now 4 become a net 2 40 importer of corn... 0 20 Is this an isolated -2 weather event or -4 0 is it a structural issue? Net Trade Ending Stocks Source: USDA, Rabobank 25
- 26. Chile has asmall share but a large opportunity! Total trade USD million Total Exports from Chile USD million 20000 14000 12000 15000 10000 others 8000 10000 Imports (Cif) Industrial 6000 Exports (Fob) 4000 Mining 5000 2000 Primary 0 0 2004 2005 2006 2007 2008 2009 2004 2005 2006 2007 2008 2009 F&A Exports USD million Trade Agreement 1800 1600 salmon • Free trade agreement came into force 1400 Others in October 2006 1200 Wine 1000 800 Fishmeal / oil 600 T. Grapes 400 200 Other Ag 0 Pulp, paper other 2008 2009 forestry prod 26
- 27. India’s dynamic growthand immense production strengths in agribusiness # 1 – Milk producer (108 million tonne) Agriculture represents 17.1% of GDP # 1 – Cattle /buffaloes (283 mn) (2009) # 2 – Arable land area (161 mn ha) Employs 52% of the total workforce 126 million farming families engaged in # 2 – Fruit and Vegetables (188 mn tonnes) primary agriculture Average farm size – 1.41 Ha # 2 – Food grains (229 mn tonnes) Favourable government policies # 2 – Sugarcane (271 mn tonnes) # 3 – Agri commodities India has the potential to be : • One of the largest food markets in the world • One of the top global exporters • The home base for many Indian Multinational Corporations 27
- 28. Rapid growth inIndian F&A sector due to… Favourable monsoon in recent past* Increasing penetration of irrigation Irrigated area (in mn ha) 40 105 2 Growth arte (%) 35 8 7 7 5 100 30 12 1,5 95 25 17 22 90 1 20 23 26 17 15 85 10 0,5 12 9 80 5 6 7 2 75 0 0 2004 2005 2006 2007 2008 1992-97 1997-2002 2002-2007 Cummulative irrigation created (in mn Ha) Excess Normal Deficient Annual growth rate (area created) * data pertaining to the 36 meteorological sub-divisions Annual growth rate (area utilized) Increasing MSPs Increasing FDI in the sector (INR 10.6 bn in FY09) 1200 Tea & coffee Sugar 1000 6% 3% Edible oils 800 6% 600 Fertilizers 400 7% 200 0 Agricultural Food machineries processing 2005 2006 2007 2008 2009 10% Agriculture industries services 55% Paddy Wheat 13% Source: Government of India 28
- 29. Rising income andincreasing urbanisation are in play Income in USD/annum (PPP basis) Percentage of urban households Source: Mckinsey Global Institute Source: Govt. of India 100% 32% 90% 18% 30% 29% 80% 27.8% 49% 25.7% 70% 33% 23.3% 60% 50% 43% 40% 30% 34% 44% 20% 23% 10% 12% 5% 3% 0% 1% 1% 2005 2015 2025 > 116,849 58,424-116,849 23,367-58,424 10,514-23,367 <10,514 1981 1991 2001 2005 2010 • Rapid growth in GDP is leading to higher disposable incomes • The consuming and rich class is projected to grow further • Urban population to constitute 32% of total population 29
- 30. India offers immenseopportunities….but can be a tough environment requiring a long term perspective Fragmented sub-sectors and small scale sectors F&A is more than a commodity play, but commodity risk cannot be avoided High working capital during the year is normal Lack of infrastructure Limited adoption of modern agricultural practices and use of technology F&A sector is highly regulated There is limited research coverage, given the small number of listed players 30
- 31. Chile's exports toIndia challenged by market complexity, persistence required Total Trade USD million Total Export USD million 3000 2500 2500 2000 2000 others 1500 1500 Imports (Cif) Industrial 1000 1000 Exports (Fob) Mining 500 500 Primary 0 0 2004 2005 2006 2007 2008 2009 2004 2005 2006 2007 2008 2009 F&A Exports (Inc. Forestry) Selected F&A Export to India 50 Other n/e 45 • “Partial reach” trade agreement 40 Others 35 30 Wine • Signed August 2007 25 20 Fishmeal / oil • Immediately after signature 98% of Chilean 15 exports (91 % of Indian exports) underwent T. Grapes 10 an average 20% decrease of import duties 5 Fresh apples 0 • The number of products exported to india 2008 2009 Pulp, paper other represents only 2.7% of the total number of forestry prod prods exported by Chile 31
- 32. Contents Section 1: Global economy Section 2: The big picture for global agriculture Section 3: Emerging markets: Brazil, China and India Section 4: Some key trends shaping the global market Section 5: Chile: positioning for the future 32 Rabobank International
- 33. Rising protein andcalorie consumption in Asia… 33
- 34. The new frugalconsumer – they have no choice!
- 35. Despite the recessionconsumers still becoming more demanding world wide… • Kellogs – Special K ‘Efficient Nutrition’ • Maggi Atta Noodles • Sunfeast Kit Fit ‘The Time factor’ CONVENIENCE ‘The Knowledge factor’ HEALTH ‘Guilt Free indulgence’ ‘Convenience Plus’ INDULGENCE • Kurkure • Gelatos • Haldiram Namkeen • Sugar free chocolates (Kit Kat lite) • Pro-biotic ice cream ‘The Sensory Experience’ 35
- 36. Environment becoming moreimportant for consumers – a challenge and opportunity for Chile 36
- 37. Growing concerns aboutfood safety also presents opportunities! 37
- 38. Consumer trust inthe modern food system is shaken 38
- 39. Contents Section 1: Global economy Section 2: The big picture for global agriculture Section 3: Emerging markets: Brazil, China and India Section 4: Some key trends shaping the global market Section 5: Chile: positioning for the future 39 Rabobank International
- 40.
- 41. Chile has earnedits success! Global Rankings Index Position Corruption Perception Index 2009 Global Ranking Position: 25 (Transparency International) Latin American Ranking Position: 1 Business Environment 2005-2009 Global Ranking Position: 19 (The Economist Intelligence Unit) Latin American Ranking Position: 1 Economic Freedom Index 2010 Global Ranking Position: 10 (Heritage Foundation) Latin American Ranking Position: 1 Global Competitiveness Index 2009 Global Ranking Position: 30 (World Economic Forum) Latin American Ranking Position: 1
- 42. Food and Agribusinessenjoys a prominent and important position in the Chilean economy • 19% of GDP • 29% of work force • Geographically diverse across Chile • FTAs with key F&A importing countries • 21% of exports – USD 11.2 billion in 2009 Fresh fruit – $3b Processed food – $2.3b Salmon - $2b Wine - $1.4b Fisheries - $1.2b Meat 0 $0.75b
- 43. Chile's strengths compellingin a globalizing world • Highly prized premium food exports – fresh fruit, vegetables, seafood, wine, meat, further processed premium foods • Counter seasonal supply • Domestic systems and infrastructure that support exports and new market development • Sanitary and phytosanitary conditions that are conducive to trade into premium markets • Excellent market access provisions through bilateral negotiations • A very stable and welcoming environment for capital, technology and knowhow • A cultural and political view to the world that encourages connections and trade
- 44. The challenges forChile • Leverage rankings • Build on market access gains by developing commercial, trade and government trade links • “Brand Chile” and “Destination Chile” together. • Prioritize premium quality, food safety and environmental stewardship in products, production processes and brand positioning in developed and developing markets • Be aware of the competition and never stand still • Differentiate from competitors on the basis of Chile’s unique strengths • The others are doing better, how does Chile stay ahead and profit from this? • Invest in export markets, value chains and relationships
- 45. “The financial linkin the global food chain”™