Investment outlook for the global animal protein industry Global Political/Economic playing field and influences

Nan-Dirk Mulder, 1 March 2016

Content 1. Short term economic outlook for the industry 2. Investing in global animal protein: a long term view 3. Outlook for the African feed to meat industry

Rabobank: The world’s leading global F&A bank Rabobank group global presence

Animal protein is our sweet spot North America

South America

Europe

Asia & Oceania

14 out of top 20 meat companies are client of Rabobank Exposure in Animal Protein: EUR 19 billion

Worsening of economic conditions has impact on world meat market IMF Economic outlook: GDP Growth 2014-2016f 0.6% 2.4% 1.2%

1.7% -1.0% 0.9% 1.5% 1.7%

Canada

7.3%

-3.7%

Russia

2.5% 2.6% 2.6%

6.6% 6.3% 0.0%

Euro zone

2.1% 2.5% 2.6%

5.0%

United States

3.5%

0.6% 1.0%

Japan 4.0%

China

7.3% 7.3% 7.5%

Mexico

GDP Growth World 2014

Sub Saharan Africa

0.1%

India

3.4% -3.8% -3.5%

2015 (e) 3.1% 2016(f) 3.6% Source: Rabobank, IMF Economic Outlook, January 2016

Australia South Africa

-0.7%

Argentina

2.9%

1.3% 0.7% 0.6%

Brazil

0.5% 0.4%

2.7% 2.4%

Economic volatility: Strong impact on global exchange rates Exchange rate volatility 2007-2016

INDEX

160 140

120 100 80 60 40

-

Jan Apr Jul Okt Jan Apr Jul Okt Jan Apr Jul Okt Jan Apr Jul Okt Jan Apr Jul Okt Jan Apr Jul Okt Jan Apr Jul Okt Jan Apr Jul Okt Jan Apr Jul Oct Jan

20

2007

2008

2009

2010

2011

2012

2013

EUR/USD

BRL/USD

CNY/USD

JPY/USD

RUB/USD

THB/USD

ARS/USD

ZAR/USD

2014

2015 201 6

Source: Rabobank analysis,2016

6

Oil versus grain prices: towards structural lower levels? Oil prices versus corn and soybean prices USD/barrel

USD/tonne

700

160

600

140

500

120 100

400

80

300

60

200

40

100

20

-

0 Brent spot price

Corn

Soybeans

Source: Rabobank analysis 2016

7

Global grain and oilseed prices: A roller coaster Grains and oilseed price monitor 2000-2016 Slowdown demand

USD/tonne

700

Commodity boom years

600

Biofuels

500 400

Supply expansion

300

200 100

Oil prices

0

Exchange rates Wheat Source: Rabobank analysis 2016

Corn

Soybeans 8

High grains and oilseed prices has triggered more investments in new agricultural land Global grains and oilseed area for 2015 Million HA

600

The 1960s and 1970s +115 million hectares

500

The oversupply years: +10 million hectares

The booming years: +70 million hectares

New record 515 million hectare

400 300 200 100

0

Source: Rabobank, USDA 2016

9

Slowdown in biofuel demand 1,000 tonnes oil equivalent

Global demand for biofuels

80,000 Take off years

70,000

Fast growth CAGR: 24%

Biofuel impact on agriculture

Consolidation: CAGR: +3%

60,000

Ethanol: 12% of global corn supply 16% of sugar cane supply

50,000 40,000 30,000 20,000

10,000

Biodiesel: 17% of global soy oil supply 10% of global palm oil supply 25% of global rapeseed oil supply 1% of global sunflower oil supply

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015f Asia Pacific Africa Middle East Europe South & Central America North America Source: Rabobank analysis, BP, 2016

10

Ample stocks in the world grains markets Rabobank price outlook G&O

Stock to use ratio G&O

USD/tonne

Stock/use ratio

0.40 0.35 0.30 0.25 0.20 0.15 0.10 0.05 0.00

1,600 1,400 1,200 1,000 800 600 400 200 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2014

Corn

Wheat

Soybean

Wheat (Usc/bu)

2015

Corn (USc/bu)

2016

2017

Soybeans (Usc/bu)

Source: Rabobank analysis 2016

11

Global animal protein industry has benefited from lower feed prices until recent oversupply Rabobank global meat market monitor

Index, 2007 Q1 =100

250.00

Supply reduction

230.00

210.00 190.00

Asian supply isssues in pork and poultry

170.00 150.00 130.00

Improving pork prices

110.00 90.00

70.00

2007

2008

2009

2010

Feed price

2011

2012

2013

Chicken

Pork

Beef

Source: Rabobank analysis based on Bloomberg, FAO, USDA, local statistics, 2016

2014

2015

Q3f

Q1f

Q3

Q1

Q3

Q1

Q3

Q1

Q3

Q1

Q3

Q1

Q3

Q1

Q3

Q1

Q3

Q1

Q3

Q1

50.00 2016

Global stable feed price

Meat market keeps growing but at slower pace, China remains different Global market excl. China

1,000 tonnes

1,000 tonnes

80,000

China meat and egg market 80,000

CAGR: +2.2%

70,000

70,000

60,000

60,000 CAGR: +0.7% CAGR:+2.1%

50,000

CAGR: -0.4%

CAGR: +1.5%

50,000 40,000

40,000

CAGR: +0.4%

30,000

30,000

20,000

20,000

CAGR: -1.6% CAGR: +2.8%

10,000

10,000

0

0

Chicken

Eggs

Pork

Chicken

Beef

2013

2014

2015

Pork

Beef

China

World ex China 2012

Eggs

2016f

2012

Source: Rabobank analysis based on USDA, FAO and local statistics, 2016

2013

2014

2015

2016f

Fastest growing poultry markets are in Middle East and Africa Global poultry consumption growth in 2015 20.0% 15.0% 10.0% 5.0% 0.0% -5.0% -10.0% -15.0% -20.0% -25.0% -30.0% -35.0%

Global 1.8%

Source: Rabobank analysis based on USDA, FAO and local statistics, 2016

Slowdown in expansion global meat trade Global meat trade by major exporters 30,000

-0.1%

Economic slowdown

25,000

15,000

--11% +1% +15% +3%

10,000

-6%

20,000

5,000

Animal diseases: AI and ASF Russia sanctions

+5%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Brazil

United States

EU

India

Canada

Australia

Exchange rate volatility

Other 15

Poultry growth everywhere, pork growth mainly in America and Russia Global meat and poultry production growth in 2015 +8.9% +4.2%

+1.4% +2.0% -5.6% +2.0% +0.3% +0.2% -4.9%

-0.2% +3.9%

+1.2% -1.0% Mexico +3.4%+3.7%

Projected production Growth 2015

Pork:

+0.4%

+2.5% +1.0%

Brazil +4.1%

+9.1%

+9.1% +4.6% Turkey

+0.6%

+2.4%

+0.2% -2.6% Japan

China

Ukraine +1.7% +0.5%

-0.6%

+1.3%

Russia -7.0%

EU-27

US

Colombia

-1.0%

+4.1%

Canada +6.1% +3.8%

+0.2%

-3.0% +0.2% -0.9% +4.5%

+6.0%

+1.0%

+0.0% +0.7%

India

+0.0% South Africa

Thailand

Indonesia +3.3% +0.0%

Chicken: +1.1% +0.0%

Beef:

-1.1%

Argentina Source: Rabobank analysis based on USDA and regional data, 2016

16

+0.4%

Australia

+12.3%

Content 1. Short term economic outlook for the industry 2. Investing in global animal protein: a long term view 3. Outlook for the African feed to meat industry

Fast growth in animal protein: 35% more in next 20 years Global demand for animal protein x 1,000 tonnes

900,000 800,000

+18%

600,000

+24%

500,000 400,000

Change:15/35 Seafood:+30%

+20%

700,000

Eggs:

+50%

+25%

Poultry: +65%

+40%

300,000 200,000 100,000

Pork:

+35%

Beef:

+20%

1985 Seafood

1995 Eggs

2005 Sheep

2015 Poultry

2025 Pork

2035 Beef Source: Rabobank analysis, FAO, OECD, FAPRI, 2016

70% of global meat and egg demand growth is in Asia Global market volume change 2014-2024 1,000 tonnes

30,000

Rest:: 21%

Second tier: 20%

First tier: 59%

25,000 20,000 15,000 10,000 5,000

4%

2%

-5,000

Eggs Source: Rabobank forecast based on FAO, FAPRI, OECD. 2016

Poultry

Beef

Pork

Asia lacks adequate resources Global land and water availability per capita 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 Source: Rabobank, FAO 2015

Available new agricultural land Rest of the world 15%

Brazil 10% Argentina 7%

Other South America 11%

Russia 9% Sub Saharan Africa 45%

Water availability per capita Source: FAO/Rabobank analysis 2015

Other Eastern Europe/Central Asia 3%

Need for a fast modernizing of Asian animal protein industry Higher incomes and welfare

Modern value chain Larger companies

Modern distribution

Vertical integration

Food safety

Efficiency

Animal disease threat High feed prices/limited resources

Yield Value chain management Sustainability

More modern compound feed demand

The rising importance of Asia for global soybean and meat trade China’s rising share in global soybean trade

Asia’s rising share in global meat trade

x 1,000 tonnes 1,000 tonnes

80,000

4,500

70,000

4,000

60,000

3,500

50,000

3,000

48%

46% 43%

2,500

40,000

2,000

30,000

1,500

20,000

1,000

10,000

500

0

1990

China

Rest of the world

Source: Rabobank analysis, Bloomberg, USDA, 2016

1995

2000 Beef

2005 Pork Broiler

2010

Securing supply: Japan, China and Middle East to invest overseas Globalization in the animal protein industry Russia EU Japan

United States

China Japan

China

Middle East Mexico

SE Asia

Brazil

India Africa Australia

Source: Rabobank, 2016

Argentina

Globalisation of the industry: Companies from emerging markets take the lead Top 20 Global meat companies 2016

Global feed industry landscape already dominated by Asian players Top 20 Global compound feed companies

Source: Rabobank analysis 2016

25

Content 1. Short term animal protein market outlook 2. Investing in global animal protein: a long term view 3. Outlook for the African feed to meat industry

Sub Saharan Africa: The new frontier in global poultry investments Africa meat and egg market 2025f

Africa Poultry Growth by Market

1,000 tonnes

40

30,000 Meat and egs CAGR +4.1%

25,000 20,000 Meat and eggs CAGR +4.1%

15,000

Beef CAGR +2.0%

35

7%

30

28%

Eggs CAGR +5.1%

20%

17% 6%

5,000 -

15 10

39% 19% 19%

1995 Sheep

25 20

Meat and eggs CAGR +3.8%

10,000

14%

Kg/head

Poultry CAGR +5.5%

2005 Pork Beef

2015 Eggs Poultry

32%

2025

5 0 0.0% -5

2.0%

4.0%

Source: Rabobank projections based on USDA, FAO and local statistics, 2016

6.0%

8.0%

10.0% CAGR 2015-2020

SSA economy keeps growing especially in Eastern Africa with an increasing middle class Real GDP change 2014, 2015 and 2016f

Source: IMF Economic Outlook, 2016

Africa’s Rising Middle Class

Economic development drives food market change Time free ECONOMIC TAKE-OFF Food as a need

ECONOMIC REINVENTION Food as stimulation

Income: < $ 5,000

Income: > $40,000

Location free

Location Bound

Income: $ 5,000 - $15,000 ECONOMIC DEVELOPMENT Food as a social occasion

Income: $15,000 - $40,000 Time bound Source: Rabobank analysis, 2015

ECONOMIC CONSOLIDATION Food as nutrition/well-being

Larger middle class leads to fast expansion of modern distribution Supermarket chains in South Africa

KFC Expansion in Africa

Source: Rabobank analysis, 2016 Source: Rabobank Analysis

Capturing the African investment opportunity Assessment model for successful investments in Africa Investment climate and stability

Availability of inputs: Competitive power

Market potential

Resources and infrastructure Source: Rabobank analysis, 2016

The high potential markets for investments in poultry and eggs Identifying the high potential markets in Sub Saharan Africa Nigeria: - Large and growing poultry industry - Population 174 million, GDP/Capita USD 3,006 - Import restrictions - Oil dependency Angola: - Undeveloped poultry industry and resources - Import substitution - Population 19 million, USD GDP Capita 5,900 - High opportunity, high risk

Zambia: - Most modern poultry industry in SSA except South Africa with hub potential - Population 16 million, GDP/capita USD 1,900 - Infrastructure issues and FX devaluation Source: Rabobank projections based on USDA, FAO and local statistics, 2016

+7.3%

Ethiopia: - Small but fast growing poultry industry - Population 94 million, GDP/capita USD 505 - Resources

+8.4% +4.1%

+3.5%

Nigeria

Ethiopia +6.2% +8.0% +6.5% +5.1%

+9.0% +6.2%

Uganda Kenya

Angola

+7.7% +4.0%

Tanzania +4.5% +4.4%

Zambia

Broilers Eggs LEGEND Forecast market growth 2015-2020

Uganda: - Fast growing poultry industry - Population: 38 million, GDP/capita USD 656 - Hub potential Kenya: - Sizeable and growing poultry industry - Population: 44 million, GDP/capita USD 1,246 - Resources Tanzania: - Poultry industry is taking off - Population 49 million, GDP/capita USD 903

Lessons for successful investors in Africa Feed and hatchery are base for investments

JVs with local player to deal with bureaucracy

Invest in management and training

Secure your inputs: vertical integration

Invest in meat processing if market allows

Mitigate your risks

Source: Rabobank analysis 2016

33

Feed and breeding as base for value chain investments inputs

Grain and oilseeds

Feed

Breeding

Local investors

Secure high quality, low priced feed ingredients Limited available and low quality resources

Farming

Processing

Enter high quality meat market Secure quality Improve efficiency

South African investors

Early adapter margin potential

International investors

Customer Fast growing demand Bigger middle class Expanding retailers and QSRs Wet market sales

Governmental ambitions for food security and self sufficiency Weak infrastructure Access to finance Source: Rabobank analysis 2016

Investing in Africa is a bumpy road, but with significant early adaptor benefits Risks involved as international investor

Exchange rate volatility Index Jan 2013=100

120

Local business climate

Trade disruptions

100 80 60

Economic stability

Exchange rates

40 20

Animal disease Source: Rabobank analysis 2016

1/13/2013

USD/ZAR

1/13/2014

USD/KES

1/13/2015

USD/ZMW

USD/UGX

1/13/2016

USD/NGN 35

Towards the Asian and African decades in animal protein development Global investments

Global investments in the animal protein industry

1980

1990

2000

2010

2020

2030 Source: Rabobank, 2016

More interest from international investors in Africa, South Africa has the lead Why South Africa as leading investor?

Supermarket/ Food service linkages Trade: feed ingredients and genetics Geographical advantage Cultural advantage Risk mitigation advantage Source: Rabobank analysis 2016

Thanks for your attention Questions? [email protected]

Nan-Dirk Mulder, 1 March 2016