BB Agribusiness scenario challenges and opportunities Agribusiness importance
BB & Agribusiness: scenario, challenges and opportunities.
Agribusiness importance to Brazil + 35% Brazilian exports 197. 9 40. 9 Brazil GDP Agribusiness GDP US$ 1, 262. 3 bi US$ 296. 4 bi 160. 6 41. 9 41. 1 137. 5 40. 4 Agriculture US$ 210. 7 bi (71. 1%) 118. 3 96. 5 37. 4 73. 1 55. 1 20. 6 2000 58. 2 23. 8 2001 36. 9 36. 4 35. 9 60. 4 30. 6 24. 8 2002 2003 TOTAL - US$ billion 39. 0 2004 2005 76, 5% Cattle Raising 58. 4 49. 4 43. 6 36. 3 71. 8 23, 5% Agribusiness 2006 AGRIBUSINESS 2007 US$ 85. 7 bi (28. 9%) Other 2008 % Trade Balance - Brazil variation: - 0. 4% 60. 0 - Agribusiness variation: +132. 6% Employment 46. 1 44. 8 Agribusiness 37% 33. 7 34. 1 38. 4 42. 7 40. 0 24. 8 25. 8 2003 24. 7 2004 2005 Brazil Source: MAPA CEPEA-USP, SUT/CNA and IPEA – Employment data: 2004 49. 7 2006 Agribusiness 2007 2008
2008 BRAZIL GDP Agribusiness led the GDP growth by sector in 2008 AGRICULTURAL INDUSTRY SERVICE 5. 8% 3. 6% 3. 0% 2. 4% -1. 3% -0. 5% 5. 1% 4. 8% 4. 3% 1. 4% 1. 3% GDP 1. 6% 1. 7% 0. 9% 0. 8% -0. 2% -0. 4% -3. 6% -7. 4% 2008/1 Source: IBGE – Brazilian Statistics and Geography Institute 2008/2 2008/3 2008/4 2008
Brazilian rural properties profile Small Producers Other Producers Credit Operations at BB: 1, 469, 394 North: extractivism, fishing; Northeast: caprine-culture, chestnut, castor bean, bean; Middle West: beef cattle, soy, corn; Southeast: coffee, bean, corn, beef cattle, co-operativism; South: bean, corn, soybean, beef cattle, tobacco, aviculture, swineculture, integration, co-operativism. Credit Operations at BB: 243, 636 North: soybean, coffee, beef cattle, florests; Northeast: beef cattle, fruits, shrimpculture, soybean; Middle West: beef cattle, soybean, corn, sugar cane, florests, aviculture, swineculture; Southeast: coffee, daity cattle, sugar cane, orange, co-operativism, contracts; South: corn, soybean, rice, sugar cane, beef cattle, aviculture, swineculture, integration, co-operativism.
Brazilian rural properties profile Strengthens § Productive process management; § Technology absorption capacity; § Embrapa; Weaknesses § Land regularization and environmental issues; § Producers indebtedness; § External fertilizer dependency; § Relief; § Producers scale; § Climate; § Financial management and § Water; § Production increase capacity. producers risk; § Financial matrix; § Logistics.
Brazilian share of agribusiness world trade PRODUCTION EXPORTS % WORLD TRADE Coffee 1 st 28 Orange Juice 1 st 86 Meat 1 st 25 Sugar Cane Soy Complex 1 st 39 2 nd 36 Poultry 2 nd 1 st 44 Corn 2 nd 13 Swine 3 rd 3 nd 10 Cotton 4 th 5 PRODUCTS Source: USDA – PSD Online (2008)
Evolution. . . at grain production. 143. 8 131. 8 123. 2 119. 1 100. 3 76. 0 68. 4 81. 1 68. 3 82. 4 78. 4 135. 3 122. 5 - Production: + 97% - Area: + 24% 96. 7 83. 0 76. 6 73. 6 113. 5 48. 8 47. 9 46. 2 47. 4 47. 7 43. 9 47. 4 38. 5 35. 6 39. 1 38. 5 37. 0 36. 6 35. 0 36. 9 37. 8 40. 2 91/92 92/93 93/94 94/95 95/96 96/97 97/98 98/99 99/00 00/01 01/02 02/03 03/04 04/05 05/06 06/07 07/08 08/09* …and at meat production. 11, 220 10, 247 Poultry: + 71. 4% 9, 200 9, 400 3, 026 3, 2007 2008 6, 650 Bovine: + 38. 3% 5, 977 Swine: + 53. 8% 1, 967 2000 * 08/09 estimated – 2008/09 6º crop-year survey (march/09) Source: CONAB, MAPA, CNA, UBA, ABIPECS and ABCS 2001 2002 2003 2004 2005 2006
BEFORE THE WORLD CRISIS Food consumption increases due to emerging countries GDP growth. Agro-energy. Only Brazilian agribusiness has conditions to attend world demand for food CREDIT INVESTMENT
BEFORE THE WORLD CRISIS Net Income Generation = Income - Production Cost (Depreciation, opportunity costs, land capital costs not included ) Brazil’s Projection - Soy, Corn, Rice, Wheat and Cotton 22. 3 R$ billion 18. 3 17. 7 15. 8 12. 0 All farming considered from PAM/IBGE 2005 Source: Agroconsult – April/08
BEFORE THE WORLD CRISIS Accumulated Debts x Accumulated Net Income Generation Soy, Corn, Rice, Wheat and Cotton by State SC PR SP MS OTHER BA MA-PI-TO MG RS GO MT BRAZIL 2006 Source: Agroconsult – April/08 2007 2008 2009 2010 2011
AT THE WORLD CRISIS - GRAINS 2008 2 nd half: Ø production cost was already defined. Ø commercial credit reduction (tradings and suppliers): Rural credit, self resource and fertilizer deduction compensated. 2009 1 st half: Ø dry weather at South and Argentina will allow price raise. Ø marketing will be made at harvest time. Ø producer is less affected by price volatility until harvest time. Purchaser is the one who participate in high prices. Ø supplies price begin to decrease. Ø investment capacity reduction. Margins at Middle-West begin to improve.
IN THE WORLD CRISIS – MEAT, TOBACCO, ALCOHOL 2008 2 nd half: Ø reduction of credit from banks (working capital). Ø international banks and foreign trade credit reduction. Ø sales volume reduction. 2009 1 st half: Ø importer countries stock reduction. Ø lodging reduction. Ø alcohol middle crop year beginning. Ø foreign trade financing recovery.
BEYOND THE WORLD CRISIS Ø Domestic market importance. Ø “Nevertheless, we are lucky to have agricultural economy commodities. Even if the world economy decelerate, Chinese people that already started eating will continue to do it so. And that is good for Brazil. ” José Alexandre Scheinkman, economist. Veja Magazine, 2081 ed. Ø Until 2025, FAO estimates that global population will go from 6. 2 billion people to 8. 3 billion. Food demand will expand from 2. 45 billion to 3. 97 billion ton. It will be necessary to double world’s agricultural production within 18 years. 1990 2000 2025 World Population (billion) 5. 20 6, 20 8. 30 Food Demand (billion ton) 1. 97 2. 45 3. 97 U. S. A. new government and agro-energy?
2007/08 Source: MAPA 2008/09 2009/10 2010/11 2011/12 Production 2012/13 2013/14 Consumption 2014/15 Export 2015/16 2016/17 2017/18 36, 461 80, 914 2017/18 44, 406 35, 490 77, 966 2016/17 43, 579 34, 520 77, 450 2015/16 42, 751 33, 550 2014/15 41, 924 74, 504 Consumption 32, 574 2013/14 41, 099 73, 984 Production 31, 620 71, 054 2012/13 40, 265 30, 631 13, 503 2011/12 39, 452 12, 327 2010/11 70, 514 11, 152 2009/10 22, 907 21. 732 20, 556 19, 381 18, 205 17, 030 15, 854 14, 679 11, 554 2008/09 29, 680 67, 612 67, 115 64, 024 63, 842 60, 072 2007/08 38, 619 28, 782 37, 752 27, 622 37, 040 27, 071 35, 851 25, 750 35, 050 52, 488 73, 249 71, 763 70, 278 68, 793 67, 304 65, 827 64, 323 51, 550 50, 611 49, 672 48, 734 47, 795 46, 856 45, 918 62, 870 61, 321 60, 033 57, 826 44, 979 44, 040 43, 102 44, 000 58, 586 BEYOND THE WORLD CRISIS BRAZIL DOMESTIC MARKET CORN 2007/08 – 2018/19 +25. 0% +19. 3% +98. 3% 2018/19 Export 2007/08 – 2018/19 SOY +34. 7% +26. 7% +41. 6%
2007/08 Source: MAPA 2008/09 2009/10 2010/11 2011/12 Production 2012/13 2013/14 Consumption 2014/15 Export 2015/16 2016/17 2017/18 6, 602 10, 841 17, 443 2016/17 6, 322 10, 528 16, 851 2015/16 6, 043 10, 215 16, 258 Consumption 9, 903 2014/15 5, 763 15, 665 2013/14 5, 483 9, 590 Production 15, 073 2012/13 5, 203 9, 277 14, 480 13, 888 2011/12 4, 924 8, 964 2010/11 4, 644 8, 651 13, 295 2009/10 4, 364 8, 338 12, 703 12, 110 2008/09 4, 085 8, 025 7, 713 11, 517 2007/08 3, 805 3, 615 7, 514 11, 130 4. , 27 4, 427 4, 227 4, 027 3, 827 3, 627 3, 427 3, 227 3, 027 2, 827 2, 627 2, 400 10, 226 15, 512 15, 060 14, 608 14, 155 13, 703 13, 251 12, 799 10, 024 9, 822 9, 620 9, 418 9, 216 9, 014 8, 812 12, 346 11, 894 11, 442 10, 989 8, 611 8, 409 8, 208 8, 013 10, 382 BEYOND THE WORLD CRISIS BRAZIL DOMESTIC MARKET BOVINE 2007/08 – 2018/19 49. 4% 2018/19 27. 6% 92. 8% 2018/19 Export POULTRY 2007/08 – 2018/19 56. 7% 44. 3% 82. 6%
BEYOND THE WORLD CRISIS Nowadays Products Brazilian share of international market 2018/19 Brazilian Exports Brazilian share of international market Brazilian Exports POULTRY 44. 6% 3. 6 million ton 89. 7% 6. 6 million ton ETHANOL 52. 0% 3. 5 billion litres 66. 7% 8. 9 billion litres SUGAR 58. 4% 21 million ton 74. 3% 32. 6 million ton SOY 36. 0% 25. 7 million ton 40. 0% 36. 5 million ton COFFEE 28. 1% 26. 5 million bags 30. 0% 29. 1 million bags SWINE 10. 1% 21. 0% 1, 113, 500 ton CORN 13. 0% 21. 4% 22. 9 million ton COTTON 4. 8% Source: MAPA 625, 000 ton 11. 5 million ton 520, 000 ton 9. 3% 686, 700 ton
CHALLENGES Working capital for agribusiness companies. Contract model and credit to sector. Dry weather. Insurance and hedge. Marketing. Rural producers and 2009/2010 crop year credit. cooperatives juridical structure Logistics. Sanitary defense and traceability. Environmental aspect. Source: MAPA
OPPORTUNITIES Production Projection million ton Grains 2007/08 2018/19 Meat 2008 2018 Soy 60. 1 80. 9 Poultry 11. 1 17. 4 Corn 58. 6 73. 2 Bovine 10. 4 15. 5 Wheat 5. 4 7. 9 Swine 3. 1 4. 3 Rice 12. 1 13. 5 24. 6 37. 2 Bean 3. 5 4. 3 139. 7 179. 8 +40 million ton (28. 7%) Source: MAPA +12. 6 million ton (51. 0%)
OPPORTUNITIES Exports Projection million ton 2007/08 2018/19 Meat 2008 2018 Soy 25. 7 36. 5 Poultry 3. 6 6. 6 Corn 11. 5 22. 9 Bovine 2. 4 4. 6 Swine 0. 6 1. 1 6. 6 12. 3 Grain 37. 2 59. 4 +22 million ton (59. 7%) Source: MAPA +6 million ton (86. 4%)
OPPORTUNITIES – Consumption raise More attractive countries Source: FAPRI Raising Consumption
OPPORTUNITIES USA subvention tends to decrease = OBAMA = 10. 3% (US$ 476 million) of Brazilian exports (Jan/09) FIGHT FOR FAIR TRADE “Obama and Biden will also pressure the World Trade Organization to enforce trade agreements and stop countries from continuing unfair government subsidies to foreign exporters and nontariff barriers”. Source: OCDE/Obama-Biden Government Plan Decrease tendency of agricultural subsidies in the USA
OPPORTUNITIES USA AGRICULTURAL SUBSIDIES U. S. D. A. subsidies expend in 2009 is estimated at US$ 8. 8 billion (US$ 5 billion for direct payment to producers); 116 thousand rural properties would be reached by the subsidies reduction (5% of total rural properties); Gradual subsidies elimination for rural producers with annual gain above US$ 500 mil. PRICE LESS SUBSIDIES = SUPPLY = INCREASE REDUCTION = AMERICAN EXPORTS REDUCTION Source: USDA/New York Times/Obama-Biden Government Plan OPPORTUNITY FOR BRAZIL
BB AGRIBUSINESS CREDIT PORTFOLIO – R$ 63. 7 billion 120. 000 59. 8% market share 28. 3% of BB credit portfolio 62, 6% 100. 000 59, 9% 58, 7% 59, 8% 80. 000 58, 3% 60. 000 54, 3% 53, 6% 40. 000 20. 000 0 dec/04 dec/05 dec/06 dec/07 SNCR BB jun/08 nov/08 Market Share 3% 6% 23% 34% Source: 4 Q 08 Performance Analysis dec/08 R$ million
BB and 2008/09 Crop Year Disbursements are 29% larger than the same period at last crop year Production Source: Dirag Previous crop year Present crop year July/2007 to July/2008 to February/2008 February/2009 % Familiar Costs Investment 4, 005, 551. 03 2, 952, 280. 07 1, 053, 270. 95 4, 772, 345. 74 3, 368, 240. 32 1, 404, 105. 42 19. 1% 14. 1% 33. 3% Business Costs Investment Marketing 11, 964, 675. 97 8, 855, 508. 10 1, 288, 844. 97 1, 820, 322. 90 15, 821, 867. 29 11, 763, 278. 33 1, 271, 879. 12 2, 786, 709. 84 32. 2% 32. 8% -1. 3% 53. 1% TOTAL 15, 970, 227. 00 20, 594, 213. 03 29. 0%
BB and 2008/09 Crop Year 69% of Agricultural Costs contracts are covered with insurance or Proagro. 2008/09 Crop Year 13. 7% Reinsurance distribution at 2008/09 crop year 3, 8% 58. 6% 10. 8% 13. 0% Mitigated Not Mitigated 2007/08 Crop Year Agricultural Costs Cattle Raising Costs Investment Agroindustrial Credit Marketing Source: 4 Q 08 Performance Analysis 2006/07 Crop Year COMPANY % IRB SCOR SWISS RE PARTNER RE MUNICH RE CATLIN MAPFRE RE HANNOVER 25 15 10 4 3 3 TOTAL 90
Rolled over credit portfolio evolution June/08 to December/08 without third part risk 6. 0% -16. 7% June/08 September/08 December/08 R$ 57. 5 bi R$ 56. 3 bi R$ 59. 5 bi 26. 4% 22. 7% Credit Portfolio: R$ 15. 2 bi PCLD: R$ 2. 6 73. 6% 22. 0% Credit Portfolio: R$ 13. 1 bi Credit Porfolio: R$ 12. 8 bi PCLD: R$ 2. 2 PCLD: R$ 2. 6 78. 0% 77. 3% Credit Portfolio: R$ 42. 3 bi Credit Portfolio: R$ 43. 5 bi Credit Portfolio: R$ 46. 4 bi PCLD: R$ 2. 1 Regular Credit Portfolio Source: 4 Q 08 Performance Analysis Rolled over Credit Portfolio
BB and 2008/09 Crop Year Costs Contracting Profile
Thank you! Agribusiness Board José Carlos Vaz Director Phone. : 55. 61. 3310. 5164 Fax: 55. 61. 3310. 2481 agronegocios@bb. com. br
Support material Margins by Product/Region/State
Margin - Soy Projected margin in February/09 at Middle-West and South regions contemplate production loss caused by dry weather * * ** ** US$ base scenery Direo (oct: R$ 1. 83; jan: R$ 2. 28) ** US$ pessimist scenery Direo (oct: R$ 2. 20; jan: R$ 2. 48) ** ** Sources: Costs - RTA Quotation - BM&F May/09
Projections and simulations – 08/09 Crop Year – Soy (b) estimated income without productive loss (c) estimated income with productive loss (d) estimated income with productive loss March/09 quotation, from 02. 09 to 02. 13. 09 medium, (-) base difference; R$ 2. 28 = US$ 1. 00, EO scenery. Base, 02. 12. 2009; R$/bag 60 kg: PR 46. 33; RS 47. 84; MT 40. 22; MS 43. 80 GO 44. 36; BA 43. 42
Projections and simulations - 08/09 Crop Year - Soy PR October/2008 Profit Area 3 2 1 4 Prejudice Area 1 BM&F quotation in May/09 (US$ 20. 79/bag less base differential and dollar at R$ 1, 80) 3 RTA Projected Price (R$ 41. 93/bag converted do dollar at R$ 1, 80) 2 BM&F quotation in May/09 (US$ 20. 79/bag less base differential and dollar at R$ 2. 20) 4 RTA Projected Price (R$ 41. 93/bag converted do dollar at R$ 2. 20) Sources: RTA, BM&F and Direo
Projections and simulations – 08/09 crop year – Soy PR February/2009 Dry weather production loss contemplated Profit Area 1 3 2 4 Prejudice Area 1 BM&F quotation in May/09 (US$ 21. 93/bag less base differential and dollar at R$ 2. 28) 3 RTA Projected Price (R$ 41. 75/bag converted to dollar at R$ 2. 28) 2 BM&F quotation in May/09 (US$ 21. 93/bag less base differential and dollar at R$ 2. 48) 4 RTA Projected Price (R$ 41. 75/bag converted to dollar at R$ 2. 48) Sources: RTA, BM&F and Direo
Projections and simulations – 08/09 crop year – Soy RS October/2008 Profit Area 3 1 2 4 Prejudice Area 1 BM&F quotation in May/09 (US$ 20. 79/bag less base differential and dollar at R$ 1. 80) 3 RTA Projected Price (R$ 39. 58/bag converted to dollar at R$ 1. 80) 2 BM&F quotation in May/09 (US$ 20. 79/bag less base differential and dollar at R$ 2. 20) 4 RTA Projected Price (R$ 39. 58/bag converted to dollar at R$ 2. 20) Source: RTA, BM&F and Direo
Projection and simulations – 08/09 crop year – Soy RS January/2009 1 2 3 Profit Area 4 Prejudice Area 1 BM&F quotation in May/09 (US$ 21. 64/bag less base differential and dollar at R$ 2. 28) 3 RTA Projected Price - US$ 18. 54/bag (R$ 39. 84/bag converted to dollar at R$ 2. 28) 2 BM&F quotation in ma. M/09 (US$ 21. 64/bag less base differential and dollar at R$ 2. 48) 4 RTA Projected Price - US$ 17. 04/bag (R$ 39. 84/bag converted to dollar at R$ 2. 48) Sources: RTA, BM&F and Direo
Projections and simulations – 08/09 crop year – Soy MT October/2008 Profit Area 1 2 3 4 Prejudice Area 1 BM&F quotation in May/09 (US$ 20. 79/bag less base differential and dollar at R$ 1. 80) 3 RTA Projected Price (R$ 34. 39/bag converted to dollar at R$ 1. 80) 2 BM&F quotation in May/09 (US$ 20. 79/bag less base differential and dollar at R$ 2. 20) 4 RTA Projected Price (R$ 34. 39/bag converted to dollar at R$ 2. 20) Sources: RTA, BM&F and Direo
Projections and simulations – 08/09 crop year – Soy MT January/2009 1 3 2 Profit Area 4 Prejudice Area 1 BM&F quotation in May/09 (US$ 21. 64/bag less base differential and dollar at R$ 2. 28) 3 RTA Projected Price - US$ 19. 03 (R$ 34. 39/bag converted to dollar at R$ 2. 28) 2 BM&F quotation in May/09 (US$ 21. 64/bag less base differential and dollar at R$ 2. 48) 4 RTA Projected Price - US$ 17. 50 (R$ 34. 39/bag converted to dollar at R$ 2. 48) Sources: RTA, BM&F and Direo
Projection and simulations – 08/09 crop year – Soy BA October/2008 Profit Area 1 3 2 4 Prejudice Area 1 BM&F quotation in May/09 (US$ 20. 79/bag less base differential and dollar at R$ 1. 80) 3 RTA Projected Price (R$ 42. 40/bag converted to dollar at R$ 1. 80) 2 BM&F quotation in May/09 (US$ 20. 79/bag less base differential and dollar at R$ 2. 20) 4 RTA Projected Price (R$ 42. 40/bag converted to dollar at R$ 2. 20) Sources: RTA, BM&F and Direo
Projection and simulations – 08/09 crop year – Soy BA January/2009 Profit Area 1 3 2 4 Prejudice Area 1 BM&F quotation in May/09 (US$ 21. 64/bag less base differential and dollar at R$ 2. 28) 3 RTA Projected Price - US$ 21. 26 (R$ 42. 17/bag converted to dollar at R$ 2. 28) 2 BM&F quotation in May/09 (US$ 21. 64/bag less base differential and dollar at R$ 2. 48) 4 RTA Projected Price - US$ 19. 54 (R$ 42. 17/bag converted to dollar at R$ 2. 48) Source: RTA, BM&F and Direo
Projections and simulations – 08/09 crop year – Soy GO October/2008 Profit Area 3 1 2 4 Prejudice Area 1 BM&F quotation in May/09 (US$ 20. 79/bag less base differential and dollar at R$ 1. 80) 3 RTA Projected Price (R$ 42. 97/bag converted to dollar at R$ 1. 80) 2 BM&F quotation in May/09 (US$ 20. 79/bag less base differential and dollar at R$ 2. 20) 4 RTA Projected Price (R$ 42. 97/bag converted to dollar at R$ 2. 20) Sources: RTA, BM&F and Direo
Projection and simulation – 08/09 crop year – Soy GO January/2009 Profit Area 1 3 2 4 Prejudice Area 1 BM&F quotation in May/09 (US$ 21. 64/bag less base differential and dollar at R$ 2. 28) 3 RTA Projected Price - US$ 21. 65 (R$ 43. 07/bag converted to dollar at R$ 2. 28) 2 BM&F quotation in May/09 (US$ 21. 64/bag less base differential and dollar at R$ 2. 48) 4 RTA Projected Price - US$ 19. 91 (R$ 43. 07/bag converted to dollar at R$ 2. 48) Sources: RTA, BM&F and Direo
Margin - Cotton * * ** US$ base scenery Direo (Oct: R$ 1. 83; Jan: R$ 2. 25) ** US$ pessimist scenery Direo (Oct: R$ 2. 20; Jan: R$ 2. 42) * ** Sources: costs - RTA quotation ICE/Nybot July/09
Margin - Corn Projected margin in February/09 at Middle-West and South regions contemplate production loss caused by dry weather Sources: costos RTA quotation BM&F March/09
Projections and simulations – 08/09 crop year – Corn (b) estimated income without productive loss; (c) estimated income with productive loss; (d) estimated income with productive loss; march/09 quotation, 02. 09 to 02. 13. 09 medium, (-) base difference; R$/bag 60 kg: PR 18. 49; RS 20. 40; GO 17. 29; SP 20. 99; BA 18. 04
Margin - Rice Source: RTA
- Slides: 45