Latin America To Reclaim Production Leadership?

Transcription

1 Latin America To Reclaim Production Leadership? - ICCO Cocoa Market Outlook September 2015 Doug Hawkins September 2015

2 Latin America To Reclaim Production Leadership? The Challenge Is In Its Infancy 2015 ESTIMATED COCOA PRODUCTION Asia, (m mt) SOURCE: ICCO [VALUE], [PERCENTAG E] 2013 COCOA AREA HARVESTED (ha) SOURCE: FAOSTAT Asia, [VALUE], [PERCENTAG E] Latin America, 0.74, 18% Latin America, 1,699,179, 17% Africa, 6,293,170, 64% Africa, 2.98, 72% Page 2

3 Latin America Leads On Production Growth African Cocoa Production Asia Cocoa Production Latam Cocoa Production e 2015f e 2015f e 2015f Production (m mt) (ICCO) Production (m mt) (ICCO) Production (m mt) (ICCO) Yield (mt/ha) (right axis) Yield (mt/ha) (right axis) Yield (mt/ha) (right axis) Linear (Production (m mt) (ICCO)) Linear (Production (m mt) (ICCO)) Linear (Production (m mt) (ICCO)) production growth: 48% African yield trends flat production growth: -15.4% Negative growth in yield production growth: 84.2% Latam yield trending up Page 3

4 The Evidence For Sustainability? Only In Latin America Africa Harvested Area Asia Harvested Area Latam Harvested Area 7,000,000 6,000,000 5,000,000 4,000,000 3,000,000 2,000,000 1,000, ,000,000 1,800,000 1,600,000 1,400,000 1,200,000 1,000, , , , , ,800,000 1,600,000 1,400,000 1,200,000 1,000, , , , , Harvested Area (ha) (FAOSTAT) Harvested Area (ha) (FAOSTAT) Harvested Area (ha) (FAOSTAT) Yield (mt/ha) (right axis) Yield (mt/ha) (right axis) Yield (mt/ha) (right axis) Production growth area led Production in steep decline Yield and area both expanding Page 4

5 Sustainable Growth No, It Is Not!!! Palm - World Harvested Area (ha) Source: FAOSTAT Cocoa - World Harvested Area (ha) Source: FAOSTAT, ICCO Millions Millions Harvested Area (ha) FFB Yield (MT/ha) (right axis) Harvested Area (ha) ICCO Yield (MT/ha) (right axis) Page 5

6 Reasons To Worry The cocoa consumer sector depends on the sure supply of good quality commercially priced cocoa In the 14 years 1997/8 to 2011/12 the four leading West African producers expanded their collective harvested area by 38% yields (mt/ha) have expanded by 12.6% In 2015, market confidence has been shaken by Ghana (20.6% of world supply 2013/14): Ghanaian production forecasts pared back for the 2014/15 cocoa year from nearly 900,000 mt to 696,000 mt Confusion surrounding the reasons behind the shortfall on forecasts Due to Area Expansion, 68.7% TOTAL PRODUCTION GREW BY 55.6% BETWEEN Combination of Area Expansion & Yield Increase, 8.7% Due to Yield Uplift, 22.6% Page 6

7 Cocoa Empires A Lot At Stake $117bn world chocolate confectionery sales 2014 (Euromonitor estimate) International chocolate confectionery brands with household names have an estimated value in excess of $200bn (current market values) Chocolate Confectionery Manufacturer Index vs S&P 500 (Source: Reuters, World Bank) /00 01/01 01/02 01/03 01/04 01/05 01/06 01/07 01/08 01/09 01/10 01/11 01/12 01/13 01/14 01/15 4,000 3,500 3,000 2,500 2,000 1,500 1, S&P 500 (Rebased) Combined Choc Index (LISN, BARN, PEFO, HSY, MDLZ) Cocoa Price ($/MT) (right) Lindt & Sprungli = 9.8% organic growth in revenues 2014/ Market Cap $15.4bn Hershey = 6.97% five year annual revenue growth / Market Cap $14.4bn Barry Callebaut = 2.5% volume growth for 3 quarters of 2014/15/ Market Cap $6.1bn Page 7

8 Commitments To Sustainable Sourcing By % Sustainable Cocoa Page 8

9 Commodity Price Driver Source: IMF, ICCO, Hardman Agribusiness Source: IMF, ICCO, Hardman Agribusiness Page 9

10 A Nucleus Commercial Sector in Latam Current Commercial Cocoa Plantations of circa 200 ha plus at end 2014* Number of Plantations Hectares Planted Latam 38 16,000 Asia 4 6,500 Africa 5 2,500 Total 47 25,000 World Harvested Area (FAOSTAT) ,012,333 Es=mated Commercial Area as % of World Harvested Area 1.4% *known to Hardman Agribusiness Latam Region attractive for secure land tenure, supportive banking sector, good availability of labour and a traditional cocoa culture Page 10

11 Investment For Growth Latam Leads Proposed Cocoa Plantations or Extensions to Existing Commercial Plantations at end 2014 (all over 200 ha)* Number of Plantations Hectares Proposed for Planting Proposed Ha as % of Existing Commercial Planted Area Estimated Cost of Development Inclusive of Land Acquisition ($m) Latam 28 19, % Asia 1 1, % 10.0 Africa 2 2, % 27.0 Total 31 23,450 $235.0m *known to Hardman Agribusiness Page 11

12 Conclusions West African supply growth in was 69% due to increased cultivation area, yields still circa 0.5 mt/ ha Not sustainable African farmers are handicapped without land title and access to capital Where, how is investment to be made in African production? $200m of new investment committed to Latam sector Latam has a defined professional production sector, small but expanding Asia a picture of persistent decline over region as a whole How then do the Cocoa Empires meet their sustainability pledges? A sophisticated $120bn pa global consumer goods sector depends on one of the least sophisticated farming sectors in the world Cocoa price will continue its upward path and rising levels of investment will flow into the Latam sector Jan-90 Jul-90 Jan-91 Jul-91 Jan-92 Jul-92 Jan-93 Jul-93 Jan-94 Jul-94 Jan-95 Jul-95 Jan-96 Jul-96 Jan-97 Jul-97 Jan-98 Jul-98 Jan-99 Jul-99 Jan-00 Jul-00 Jan-01 Jul-01 Jan-02 Jul-02 Jan-03 Jul-03 Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Page 12

13 Page 13 Questions?

14 Thank you! How to contact us Hardman Agribusiness 11/12 Tokenhouse Yard London EC2R 7AS Doug Hawkins Direct Line: +44 (0) Mobile: +44 (0) Yingheng Chen Direct Line: +44 (0) Page 14