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Global Pork Outlook

Global Pork Outlook. David Nelson, Rabobank Global Strategist. Key Macro Issues. Section I. Introduction. ... But GDP growth is accelerating demand growth. The connection to wealth creation.

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Global Pork Outlook

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  1. Global Pork Outlook David Nelson, Rabobank Global Strategist

  2. Key Macro Issues Section I

  3. Introduction ... But GDP growth is accelerating demand growth The connection to wealth creation... Source: World Bank, IBGE, National Bureau of Statistics China, India Central Statistical Organization

  4. Introduction While most yield improvements are decelerating

  5. Macro Overview Meat production growth < demand World GDP growth = higher prices

  6. Introduction Price gravitates to marginal cost of production What is the market telling us? Brazil will grow more, but... China will have to pay more. If corn cost $5.00, then soy cost $12.00.

  7. Other key issues Brazil: higher but not so volatile Brazil’s farmers have not benefitted as much from rising soy prices as in the US due to appreciating Real Prices need to rise to stimulate incremental production

  8. Black Sea Region Black Sea region rising in importance… Russia, Ukraine and Kazakhstan are the primary incremental producers of the world’s grain

  9. World Grain Stocks-to-Use Ratios With and Without China All grain ex-China fell to 13.6% in 1972/73, and reached 12.8% in 95/96. Corn ex-China was 9.8% in 72/73, and reached 7.6% in 95/96.

  10. U.S. Corn Yield and Area Sensitivity Feed costs: No Light at the End of the Tunnel It would take a record yield and nearly a 5 million acre increase in planted area for the corn stocks to use ratio to get back over 10% -- which is not a terribly comfortable level. Source: USDA, Rabobank

  11. Key Global Animal Protein Issues Section II

  12. Key Global Animal Protein Issues Emergence of the Brazilians has been the big news in recent years China’s pork companies will move much higher in the next few years Growth at Cherkizovo from Russia and MHP from Ukraine will move them into the top ranks

  13. China Industrialization of China’s pork processing industry The 14 largest pork packers that represented 20% of the industry in 2009 are being pushed to grow and consolidate by the government to have 50% share by 2013.

  14. Key Global Animal Protein Issues Intra-country consolidation Most markets are fragmented compared to the US

  15. Key Global Animal Protein Issues Total meat imports

  16. Key Global Animal Protein Issues Russian poultry self sufficiency Russia is rapidly becoming self sufficient in chicken... Reducing elasticity of export capability

  17. Key Global Animal Protein Issues Two areas with rapid growth in animal protein production Grain trapped due to poor infrastructure

  18. Key Global Animal Protein Issues Russian pork: eventual self sufficiency Russia’s goal is to be 85% self sufficient by 2015 and 95% self sufficient by 2020

  19. Government Supports in Developing Countries

  20. Key U.S. Meat Industry Issues New proposed USDA GIPSA rules – there will be unintended consequences

  21. Key Pork Industry Issues EU policy measures threatening competitiveness

  22. Questions from around the world

  23. U.S. Average Gasoline Prices

  24. Key Pork Industry Issues Approximately 1.2mmt swing in 2011 outlook in recent months

  25. Key Pork Industry Issues 2011 Outlook USDA 2011 production estimates for the top 3 world pork producers are overstated: China FMD, most recent sow estimate is -3% EU dioxin contamination causing liquidation U.S. breeding herd -1% YOY in December, but hog prices rising faster than feed costs Source: USDA

  26. China The China corn conundrum

  27. China Industrialization of China’s hog production industry If industrial hog production grows from 55% to 60%, and modified from 11% to 21%, deficit expected to be 23 MM MT by 2015 • Assuming 10 bu. of corn per pig

  28. China China’s corn balance sheet Even with only 2% pork production growth, China could be importing 25 MM MT of corn per year by 2015 due to industrialization

  29. China China coal trade

  30. Japan Source: Japanese Ministry of Ag., Forestry and Fisheries, USDA Japan estimates $198b - $309b in damage vs. $81b for Katrina Earthquake, tsunami and nuclear disaster affected Tohoku and Kanto regions – NE Japan. These two regions account for 44% of hog herd and 27% of broilers. Assuming only eastern half of regions are affected implies 281,600 mt pork production and 172,800 mt broiler production US pork exports to Japan = 391,000 mt EU pork exports to Japan = 220,000 mt US broiler exports to Japan = 48,000 mt EU broiler exports to Japan= minimal Cold storage most likely destroyed Product is flowing through southern ports

  31. Pork Demand Source: Robert A. Brown/Tyson Foods

  32. Currencies

  33. The End

  34. Meat Consumption

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