Outlook for the Global and
EU industry
Shapen the industry for
competititiveness
Nan-Dirk Mulder, 27 February 2017
Content
1. Global Egg Industry Outlook
2. EU Egg Industry outlook
3. Shaping the industry for competitiveness
Rabobank:
The world’s leading global F&A bank
Rabobank group global presence
Animal protein is our sweet spot
North America
South America
Europe
14 out of top 20 meat companies are client of Rabobank
Exposure in Animal Protein: EUR 19 billion
Asia & Oceania
Fast growth in animal protein:
40% more demand in 2030
Global demand for animal protein 2015-2035
x 1,000 tonnes
900,000
800,000
+20%
700,000
600,000
+24%
500,000
400,000
Change:15/35
Seafood:+30%
+18%
Eggs:
+50%
+25%
+40%
Poultry: +65%
300,000
200,000
Pork:
+35%
Beef:
+30%
100,000
1985
Seafood
1995
Eggs
2005
Sheep
2015
Poultry
2025
Pork
2035
Beef
Source: Rabobank analysis based on FAO, OECD, FAPRI, 2017
60% of global meat and egg
demand growth is in Asia
Global market volume change 2015-2025
X 1,000 tonnes
25,000
First tier: 55%
First tier: 27%
20,000
15,000
10,000
5,000
-5,000
Poultry
Source: Rabobank, FAO, FAPRI, OECD. 2017
Pork
Beef
Sheep
Eggs
18%
Eggs growth outlook: Further
shift to emerging markets
Global egg market growth outlook 2015-2025
Per capita
Consumption
kg/head
Mature/decline
moderate growth
Slight growth
Fast growth
25
20
15
10
5
-1.0%
0
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
CAGR Egg Demand 2015-2025
Source: Rabobank analysis based on FAO, OECD, FAPRI, 2017
Asia lacks adequate resources, Latin
America and Africa have plenty
Global land and water availability
per capita
Available new agricultural land
20
100,000
18
90,000
16
80,000
14
70,000
12
60,000
10
50,000
8
40,000
6
30,000
4
20,000
2
10,000
0
0
Acre per capita
Water availability per capita
Source: Rabobank, FAO 2017
Rest of the
world
15%
Brazil
10%
Argentina
7%
Other South
America
11%
Russia
9%
Sub Saharan
Africa
45%
Other Eastern
Europe/Central
Asia
3%
Global grain and oilseed prices:
Lower but volatility remains
Grains and oilseed price monitor 2000-2016
USD/tonne
Commodity boom years
New reality
700
600
500
400
Prices still
50%
above pre
2007 long
term
average
300
200
100
0
Wheat
Source: Rabobank analysis based on Bloomberg 2017
Corn
Soybeans
Grain surplus countries have a
cost benefit
Cost of production eggs
EURct/kg
120
100
80
60
40
20
0
EU
Ukraine
Other
•
Housing
US
Argentina
Feed
Source: Rabobank analysis, USDA, LEI, FAO, local statistic 2016
India
Layer
Rapid rising role of global trade in
eggs and egg products
Global trade in eggs and egg products
X 1,000 tonnes
3,500
Limited growth: CAGR: +2.4%
Fast growth: CAGR: +7.4%
3,000
2,500
2,000
1,500
1,000
500
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014
Source: Rabobank analysis based on FAO, USDA, IEC, 2017
Content
1. Global Egg Industry Outlook
2. EU Egg Industry outlook
3. Shaping the industry for competitiveness
EU meat and egg market:
Egg and poultry grow relative fast
EU animal protein market 2007-2015 and forecast 2020
x 1,000 tonnes
60,000
Recovery
Economic crisis years
Meat and eggs: CAGR: -0.6%
Outlook
CAGR: +2.4%
Meat and eggs: CAGR: +0.3%
CAGR: +1.1%
Eggs: CAGR: +0.7%
50,000
Eggs: CAGR: +0.7%
40,000
CAGR: +3.0%
Poultry: CAGR: +1.4%
Poultry: CAGR: +0.9%
30,000
Beef: CAGR: -2.2%
CAGR: +1.5%
Beef: CAGR: -0.1%
CAGR: +2.9%
Pork: CAGR: +0.1%
20,000
Pork: CAGR: -1.2%
10,000
0
2007
2008 2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Source: Rabobank analysis based on Eurostat, 2017
Smaller EU egg market, but
recent recovery is promising
EU Egg market 2007-2016f
X1,000 tonnes
9,000
8,000
14.3 kg/
capita
13.8 kg/
capita
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
Production
2008
Consumption
2009
2010
2011
Exports
2012
2013
2014
Imports
2015
2016
Source: Rabobank analysis based on Eurostat, 2017
Ongoing volatility in EU Supply, recovery
in Spain, France, Romania and Poland?
EU egg production 2005-2015
X 1,000 tonnes
1,200
1,000
CAGR:
+0.7%
CAGR:
+0.1%
800
Nordic countries:
280,000 tonnes
CAGR:
+1.5%
CAGR:
-0.3%
CAGR:
+2.2%
CAGR:
+1.2%
CAGR:
+0.1%
600
400
CAGR:
+0.6%
CAGR:
+1.4%
200
0
•
Source: Rabobank analysis based on Eurostat, 2017
CAGR:
-1.9%
CAGR:
+2.8%
CAGR: CAGR:
+0.5% +2.9%
Highly consolidated trade
streams in Europe
EU egg self sufficiency 2015
X 1,000 tonnes
1,200
Nordic countries
1,000
800
600
400
200
-200
-400
-600
Import surplus
Production for domestic
Export surplus
Source: Rabobank analysis based on Eurostat, 2017
Content
1. Global Egg Industry Outlook
2. EU Egg Industry outlook
3. Shaping the industry for competitiveness
EU egg industry: volatile margins
Germany, gross margin per 100 eggs, barn
(versus long term average)
EUR/kg
8
German conventional
cage ban
EU conventional
cage ban
Oversupply
US Avian
flu
7
6
5
4
3
2
1
0
-1
Jan
Apr
Jul
Oct
Jan
Apr
Jul
Oct
Jan
Apr
Jul
Oct
Jan
Apr
Jul
Oct
Jan
Apr
Jul
Oct
Jan
Apr
Jul
Oct
Jan
Apr
Jul
Oct
Jan
Apr
Jul
Oct
-2
2009
2010
2011
2012
2013
2014
2015
Rabobank analysis based on EMA, 2017
2016
EU Egg sector: Market recover
helps to rebalance overcapacity
EU Egg industry: New oversupply after better 2015
Mio hens German conventional
400
cage ban
EU conventional
cage ban
EUR/100 kg
US Avian flu
210
390
190
380
170
370
EU Egg price
150
360
130
350
110
laying hens
90
340
330
70
FEED PRICE INDEX
320
50
1 4 7 10 1 4 7 10 1 4 7 10 1 4 7 10 1 4 7 10 1 4 7 10 1 4 7 10 1 4 7 10 1
2009
2010
2011
Feed price index
2012
2013
Laying hens
2014
2015
EU Egg price
2016 2017
Source: Rabobank analysis based on Bloomberg, MEG, Eurostat, 2017
Big differences in margins:
room for improvement
EU Egg market EBITDA margin levels
30.0%
25.0%
20.0%
15.0%
10.0%
5.0%
0.0%
-5.0%
-10.0%
AVERAGE
Lowest
Highest
Rabobank analysis based on Public data, 2017
Why? Several factors determine the
difference between winners and losers
Market focus
and leadership
Value focus
Market
intelligence
EU regional
leadership
Appropriate
value chain
strategy
Risk mitigation
From
volume to
value
Cost of
production
Economics
of scale
Cost leadership
Source: Rabobank analysis, 2017
Cost leadership:
More important as ever before
Cost price of eggs in the EU by country in 2013
Grain and
oilseeds
Feed
Breeding
Farming
Packaging
Processing
Client
Feed price
(EUR/100 kg)
Hen
(EUR/hen)
FCR
Laying
period
Eggs/
Hen
Egg weight
Total costs/egg
NL
30,2
4.11
2.01
420
363
61.4
104,7
France
28.8
4.33
2.13
369
322
62,3
104,5
Spain
29.4
4.40
2.07
410
345
64,0
97,8
UK
32.7
4.91
2.15
345
340
62,5
112,2
Poland
29,7
4,40
2,12
332
332
63,0
99,1
Denmark
31,5
5,26
1,99
389
343
61,6
115,9
Horizontale
Efficiëncy
- Efficiency feed production
- Access to cheap grains
•
Source: Raboabnk analysis based on LEI data
- Efficiency
hatcheries
Modern and efficiency
farms
- Knowhow and skills
Efficiency processing
and distribution
Modern
distribution
From volume to value:
The journey to higher margins
The egg value added pyramid
High
Brands
Egg based
Food products
Margin
level
Organic eggs
Tailor made egg products
Free range eggs
Egg whites/Egg yolks
Barn eggs
Low
(Enriched) cage eggs
Whole egg products
Source: Rabobank analysis, 2017
Egg production concept market
will further change
Laying hen housing systems in 2015
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Enriched cage
Free range
Barn
Organic
Source: Rabobank analysis based on Eurostat, 2017
Consumer concern driven change
more important factor for volatility
Canada: ban on
pig gestation
NL: Chicken of tomorrow
Alberta:
Phase out of battery
cages
EU: 2012 Cage ban 2013 sow
house ban
D: Germany
Initiative Tierwohl
China: Antibiotics,
melamine scandals
US – EU
Antibiotics
Client based push
to non cage eggs
California
Jan 2015 cage ban
Brazil discussion
about cage ban
ACT, WA:
Bans on cage
houses and sow
stalls
Source: Rabobank, 2017
Egg products offer global and EU
market growth opportunities
Egg products production by country in 2014
35
2%
489(-50)
1,320 (+50)
1,650 (+80)
32%
26%
20%
22(+20)
2%
130
180 (+145)
150
0.8%
25%
5%
LEGEND
(x 1,000 mt,
eggs, 2014)
9
1.5%
12
Production
3%
xx%
71 (+33)
Importance of
egg products
in total egg production
4%
9 (+1)
2%
73 (+15)
10%
•
Source: IEC, Rabobank estimate, FAO, 2016
21
10%
Avian influenza: Industry need to
deal with ongoing pressure
Global avian influenza outbreaks Jan 2014- jan 2017
Source: OIE, 2017
European egg industry will
internationalize
Northwest - 173 million consumers
South- 171 million consumers
•
Source: Rabobank analysis, 2017
Nordic region- 20 million consumers
2017-2025
From
national to
regional to
panEuropean
East- 120 million consumers
Conclusions
Global egg market is one of the fastest growing protein markets with more than 50%
growth in next decade and faster growth for egg products
EU market will keep growing, but product demand will gradually shift to higher
standard concepts like free range and organic. Barn will become the basis product
Industry will become significantly more international and Danish industry will further
integrate in pan-Nordic / Northwest European industry
Danish (and Nordic) industry is relative small but in an interesting growing regional
market with a high share in the fast growing organic egg segment
Thanks for your attention
Questions?
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