Emerging Challenges and Opportunities for the Global

Livestock Sector

Centro de Consignatarios de Productos del PaísBuenos Aires, Argentina

August 22, 2013

1

Major Livestock Industry Trends

High costs of production– High grain and energy prices– Effects of drought and other production

challenges Changing patterns of economic growth Changing consumer demographics

– Aging population in developed (and some developing) countries

– Evolving food culture Increasing regulation Increase in food-issue activism

2

MYA Corn Price

3

Data Source: USDA National Agricultural Statistics Service.

1970

1972

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

0

50

100

150

200

250

300

$US

/ M

etri

c T

on

1970/71-2005/06 Avg. = $89.50 / metric ton

2006/07-2012/13 Avg. = $186.72/metric ton

Persistent Drought

4

July 26, 2011 July 24, 2012

July 23, 2013

Combined Beef, Pork & Chicken Production

5

1985 1987

1989 1991

1993 1995

1997 1999

2001 2003

2005 2007

2009 2011

2013F30,000

40,000

50,000

60,000

70,000

80,000

90,000

Beef + Pork+Broilers

Mill

ion

Lbs.

US Beef Cows and Beef Production

6

19701972

19741976

19781980

19821984

19861988

19901992

19941996

19982000

20022004

20062008

20102012

20000

25000

30000

35000

40000

45000

50000

7.5

8.5

9.5

10.5

11.5

12.5

13.5

Beef Cows Production

1,00

0 H

ead

Mill

ion

Met

ric

Tons

US Meat Consumption

7

1980 1982

1984 1986

1988 1990

1992 1994

1996 1998

2000 2002

2004 2006

20082010

20122014

15

20

25

30

35

40

45

Beef Broilers Pork

kilo

gram

s pe

r cap

ita

Retail Meat Prices

8

ene feb mar abr may

jun jul ago sep oct nov dic8.50

9.00

9.50

10.00

10.50

11.00 Res

2013 2012 2011

US$

/ k

g

ene feb mar abr may

jun jul ago sep oct nov dic6.60 6.80 7.00 7.20 7.40 7.60 7.80 8.00

Cerdo

2011 2012 2013

US$

/ k

g

ene feb mar abr may jun jul ago sep oct nov dic3.40

3.60

3.80

4.00

4.20

4.40

4.60

Pollo

2013 2012 2013

US$

/ k

g

Meat Exports

9

2012 Cantidad de Exportacion:

Pollo: 3.3 bil. kg

Cerdo: 2.4 bil. kg

Res: 1.1 bil. kg

Data Source: USDA Foreign Agricultural Service.

19841986

19881990

19921994

19961998

20002002

20042006

20082010

20122014F

0%

5%

10%

15%

20%

25%

Res Cerdo Pollo

% d

e pr

oduc

cion

Disposable Income Growth

10

Real PDI annual growth rate <=1% for 4 years.

% d

e ca

mbi

o A

/A

Economic Growth

11

Canad

a

Francia

Aleman

iaIta

liaJap

on

Bretan

a

Estad

os Unidos

Argentina

Brasil

ChinaIndia

Indonesia

Mexico

Rusia0

1

2

3

4

5

6

7

8

9

2.23

1.17 1.20

0.61

1.291.62

3.03 3.05

3.90

8.36

6.46 6.43

3.353.61

% cr

ecim

ient

o en

PIB

Origen: Fondo Monetario Internacional

Changing Consumers

12

Freedom to Operate

Regulatory freedom– International pressure to “do something”

about climate change Social license to operate

– Animal rights/welfare, food safety, environmental stewardship

13

Social License

14

retenido/ retraerse

aceptacion

aprobacion

Identificacion psicologica4 Factors Affecting

SLO Level1. Institutionalized Trust2. Inter-actional Trust3. Socio-Political

Legitimacy4. Economic Legitimacy

Levels of Social License to Operate (Adapted from Boutilier and Thomson, 2011)

Implications for Livestock Industries

Continuing advantage for more efficient production

Continued preference for lower-valued products in slow-growing developed world (especially US, Europe, Japan)

Increasing reliance on exports for demand growth for all major meat producers

Pressure on costs from increased regulation and consumer demands for information and/or production system changes

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Meat Industry Statistics

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  Estados Unidos Argentina Mundo

  2003 2013% Change 2003 2013

% Change 2003 2013

% Change

Res            

Production 12,039 11,386 -5% 2,800 2,800 0% 54,345 57,527 6%

Domestic Consumption 12,340 11,476 -7% 2,430 2,622 8% 54,278 56,044 3%

per capita (kg, retail) 30 25 -15% 47 45 -4% 6 6 -9%

Exports 1,142 1,100 -4% 382 180 -53% 6,519 8,601 32%

           

Cerdo            

Production 9,056 10,669 18% 158 350 122% 89,786 107,412 20%

Domestic Consumption 8,818 8,659 -2% 196 389 98% 89,738 106,978 19%

per capita (kg, retail) 24 21 -10% 4 7 76% 11 12 5%

Exports 779 2,361 203% - 1 4,197 7,245  73%

           

Pollo            

Production 14,696 17,012 16% 750 2,022 170% 59,117 84,610 43%

Domestic Consumption 12,549 13,804 10% 719 1,710 138% 58,580 83,255 42%

per capita (kg, retail) 37 37 1% 17 36 111% 8 10 25%

Exports 2,232 3,266 46% 39 315 708% 6,013 10,314 72%

Shares of World Beef Exports

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2003 2013

  Pais Cuota     Pais Cuota

1Australia 19.0% 1India 19.8%

2Brasil 17.8% 2Brasil 18.6%

3Estados Unidos 17.5% 3Australia 17.0%

4Nueva Zelanda 8.4% 4Estados Unidos 12.8%

5UE-27 6.7% 5Nueva Zelanda 5.9%

6India 6.6% 6Uruguay 4.3%

7Canada 6.3% 7Canada 3.8%

8Argentina 5.9% 8UE-27 3.5%

9Uruguay 4.3% 9Paraguay 3.2%

10Ucrania 3.2%  10Mexico 2.6%

Meat Industry Changes

Beef production growing slowly– World shares of exports changing

Pork production/consumption growing moderately– Strong export growth, mostly from Asia

Poultry production/consumption growing strongly

18