Viable Growth in the Australian Pulse Industry Peter Wilson Chief - PowerPoint PPT Presentation

Viable Growth in the Australian Pulse Industry Peter Wilson Chief Executive Officer – AGT Foods Australia Chairman Pulse Australia

Key future drivers • Global Issues • Supply chain integrity • Government intervention • Geopolitical instability and conflict • Market transparency and price discovery • Domestic Issues • Industry focus • Pulse Australia’s role • Opportunities to flow from International Year of Pulses

Rural Renaissance “a future in which agriculture provides societal solutions to energy supplies, health promotion and climate change.” “whatever producers and processors do, they must be done in innovative ways that resonate with their customers.” 3

Agriculture – Not just commodities anymore • Agriculture not just hitting the “breadbasket” anymore • Protein is a key driver of agricultural markets • Food safety – non negotiable • Impact reaching far outside Agri-Food: o Health sector o Energy sector o Environment sector o Immigration sector o Food Aid sector o Economy overall 5

Pulse Industry Growth Growth Opportunity • Traditional price conscious markets are increasingly ‘commoditized’ • Food, Fibre and Feed but “more reliable” • Pulses ingredients like flour, protein, starch and fibre as well as • The agricultural and agri- food industry needs… premium pulses with market demand in consumption markets • • To leverage nutrition, health, energy, food security/safety and the Enormous healthy snack food potential environment profile to achieve sector growth • Find new approaches to build on existing strengths in non- traditional markets and products • To tap into the growth potential for feed in domestic and international markets How to realize the potential: • Non-traditional uses for grains and pulses like ingredients and industrial uses • Move up the value-chain with branded packaged wholesale and retail • Increase value-added milling capacity for pulses • The Asian and MENA markets are in close proximity and large in size • Research partnerships with industry • Focus on food safety, logistics, market development and access 6

Factors Driving Global Demand • Pulses are a sustainable source of protein • GMO-free, gluten-free, low allergen, major source of protein and fibre, which developing nations particularly rely on Benefits of vegetable sources for their protein and energy requirements Pulses • Lower energy use, reduced greenhouse gas emissions, improved soil health through rotational cropping, increased water use efficiency • Overall food output to increase due to population growth, urbanization and income growth • Middle class may increase from 1.8 billion to 3.2 billion by 2020 and to 4.9 billion by 2030 - with 85% of this growth Emergence of coming from Asia. the Middle Class • Global spending by the middle class may grow from $21 trillion today to $56 trillion by 2030 • Consumer movement towards healthy lifestyles in non-traditional markets Health and • Pulses offer many benefits for nutrition, health and chronic disease prevention Wellness Trend • As a result, there has been increased interest from food companies in using pulses in product formulations, for cost, characteristic, allergen, GMO-free and other reasons • Pulses production globally is at all time highs from multiple origins Alternative Fuels • Pulses are a rotational crop for cereals and canola which are used in ethanol and biodiesel production & Sustainability • Pulses lower the carbon footprint and support the sustainability efforts of processors, food companies and meet the demand of consumers for sustainably produced products Source: UN FAO; OECD 7

Markets for Pulses & Staple Foods Traditional Markets for Pulses New Markets for Pulses Growth Driver: Population & Global Demand for Food Growth Driver: Health, Nutrition and Sustainability • 2050 - Global population expected to rise 30% • High Protein and Fibre, Nutrient Dense, Low Fat, Gluten Free, non- GMO, Low GI and Allergenicity -> snackfoods • Global food output will have to grow by 70% to feed the world with • Lower Energy Use, Reduce Greenhouse Gas Emissions, Improve Soil growing middle class Health through Rotational Cropping, Increase Water Use Efficiency • Pulses are a sustainable source of protein, a key nutrient for large numbers of the world’s populations North America Middle East and North Africa South Asia Europe China Latin & Central America Source: UN FAO 8

Pulses & Sustainable Agriculture Plant Fixing Nitrogen Lower Energy Requirement Increased Water Use Efficiency • Pulses produce their own fertilizer by fixing • Pulses Use Less Non-Renewable Energy • 43 gallons of water required to produce one nitrogen Relative to Other Crops pound of pulses • 70% of the non-renewable energy used in • 1,857 gallons of water required to produce one cropping systems in western Canada is pound of beef attributable to fertilizers 1,857 756 Gallons/ lbs Gallons/ lbs 43 Gallons/ lbs 469 Gallons/ lbs Pulses Source: Hoekstra and Chapagain, Globalization of Water , U. of Twente, Waterfootprint.org National Geographic, April 2010 Source: (Zentner et al. 2004) 9

Global Pulse Production Rising 10

Why is pulse area increasing? Wheat SND 2010 2016 World Supply 647 733 World Demand 663 709 Stocks 181 240 Stocks to use 27% 34%

Relative Australian Pulse Area, Production and Value 12% $2.50 $2.03 10% $2.00 $1.70 8% $1.50 6% $1.11 $1.07 $1.00 $1.00 $0.88 $0.84 $0.82 4% $0.69 $0.62 $0.50 $0.40 2% 0% $- 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Area Production Value (Billion A$) Expon. (Value (Billion A$)) ABS/ABARE/Pulse Australia Limited/AGT Foods Australia

Spread Prices basis CFR Mumbai $500 $400 $300 $200 $100 $0 ($100) ($200) ($300) ($400) ($500) ($600) ($700) Desi/Yellow Pea Yellow Pea/CBOT Wheat Desi/Lentil Linear (Desi/Yellow Pea) Log. (Yellow Pea/CBOT Wheat) Log. (Desi/Lentil)

Top 10 Export Destinations for Australian Pulses $ value 4,500,000 $1,400,000,000 MT 4,000,000 $1,200,000,000 3,500,000 $1,000,000,000 3,000,000 $800,000,000 2,500,000 2,000,000 $600,000,000 1,500,000 $400,000,000 1,000,000 $200,000,000 500,000 0 $0 India Bangladesh Egypt Pakistan Sri Lanka United Arab Saudi Arabia Malaysia United Kingdom Indonesia Emirates Destination Country Sum of Quantity (tonnes) - 2005 - 2009 Sum of Quantity (tonnes) - 2010 - 2014 Sum of Quantity (tonnes) - 2015 - Feb 2016 Sum of Value (FOB) (plain $!) - 2005 - 2009 Sum of Value (FOB) (plain $!) - 2010 - 2014 Sum of Value (FOB) (plain $!) - 2015 - Feb 2016

Pulse Exports from Australia Over Time 3,500,000 $2,500,000,000 3,000,000 $2,000,000,000 2,500,000 $1,500,000,000 2,000,000 MT AUD Value 1,500,000 $1,000,000,000 1,000,000 $500,000,000 500,000 0 $0 Chickpeas Beans Lentil Field Peas Mungbean Lupins Pulse Commodity Sum of Quantity (tonnes) - 2005 - 2009 Sum of Quantity (tonnes) - 2010 - 2014 Sum of Quantity (tonnes) - Nov15 - Oct16 Sum of Value (FOB) (plain $!) - 2005 - 2009 Sum of Value (FOB) (plain $!) - 2010 - 2014 Sum of Value (FOB) (plain $!) - Nov15 - Oct16

Indian Pulse Production, Consumption and Gap 50,000,000 45,000,000 40,000,000 35,000,000 MT 30,000,000 25,000,000 20,000,000 15,000,000 10,000,000 5,000,000 0 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 Production Consumption Gap

Challenges and opportunities for Australian Ag Sector • Australia is almost fully dependent on export markets • Market access is an ongoing priority for the pulse industry • Bilateral free trade agreements • China – faba beans/lupins • Sanitary/phytosanitary issues, other non-tariff barriers • Differentiate and capture market and sales opportunities over competing origins, processors, traders. • Primary vs. Secondary processing – Balance between the two. Need to up value some products and efficiently ship others 19

Ocean and Intermodal Containers • Transportation advances and inland freight hubs are creating freight options that were not available before. • Transformational projects like the Toowoomba Range Crossing and the future Inland Rail Project will change the way product flows in north eastern Australia. • Full containers in = empty containers available for outbound shipments – adjusting to the downturn in car industry imports • Free-Trade Agreements with key partners will be a big opportunity for Australian agribusiness • AGT Foods Australia is one of the largest agri-product container shippers in Australia 20