Philippe de Lapérouse - PDF Free Download

Philippe de Lapérouse HighQuest Partners United States Philippe de Lapérouse is director of HighQuest Partners global food and agribusiness practice. He has more than 20 years experience in senior leadership positions with global companies in the agroindustrial and value-added food chain, as well as in private-equity investing. Previously, de Lapérouse was a principal at Vanikoro Advisory LLC and director of business development for Bunge North America Inc. 1

Trends in Global Feed Demand for Aquaculture Philippe de Lapérouse Managing Director HighQuest Partners

Global daily calorie intake per capita World: 2780 kcal/person/day Developed countries: 3420 kcal/person/day Developing World: 2630 kcal/person/day Sub-Saharan Africa: 2240 kcal/person/day Central Africa: 1820 kcal/person/day Kilocalorie: A unit of measurement of dietary energy. One kcal equals 1,000 calories and one kj equals 1,000 joules. In the International System of Units (ISU), the universal unit of dietary energy is the joule (J). One kcal = 4.184 kj. Source: UNEP-GRID-Arendal based on FAO Statistics Division Food Balance Sheets (2010) 3

Global meat consumption per capita Source: UNEP-GRID-Arendal based on FAO STATS(2010) 4

Global fish consumption (2006) Note: Fish includes wild caught fish as well as commercial aquaculture products. Source: FAO SOFIA 5

Global aquaculture production(1000 MT) Source: UNEP-GRID-Arendal based on FAOSTAT (2011) 6

China is by far leading global producer of aquaculture Aquaculture Production by Country 1950-2011 Source: FAO MMT 90 80 70 60 50 40 30 20 10 0 1950 1952 1954 1956 1958 1960 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 Other Egypt Thailand Norway Korea, Republic of Bangladesh Philippines Vietnam India Indonesia China Source: FAO Fishstat Database. 7

Total seafood production and consumption per capita Historical Seafood Production and Per Capita Consumption (1980-2009) Source: FAO MMT 160 140 120 100 80 60 40 20 0 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 20 18 16 14 12 10 8 6 4 2 0 kg/capita/year Source: FAO FishStat Database Production Per Capita Consumption 8

Projected seafood consumption by source through 2050 180 160 140 120 Projected Global Seafood Production through 2050 Source: FAO, HighQuest Analysis MMT 100 80 60 40 20-1950 1953 1956 1959 1962 1965 1968 1971 1974 1977 1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010 2013 2016 2019 2022 2025 2028 2031 2034 2037 2040 2043 2046 2049 Wild Catch Aquaculture HQP estimate based on linear growth rate (1980-2011) of production for wild catch(1.0%) and aquaculture(8.1%): 2013-2021 at historical growth rate 2022-2031 at 75% of historical growth rate 2032-2041 at 50% of historical growth rate 2042-2050 at 25% of historical growth rate 9

Breakdown of total wild catch and aquaculture production Misc. aquatic animals 1% 2011 Wild Capture Production Molluscs 7% Source: FAO Aquatic plants 1% Crustaceans 7% Diadromous fish 2% Freshwater fish 10% Misc. aquatic animals 1% Marine fish 2% 2011 Aquaculture Production Source: FAO Molluscs 17% Aquatic plants 25% Crustaceans 7% Marine fish 72% Freshwater fish 43% Diadromous fish 5% 10

Global protein consumption demand Seafood and poultry will see the largest increases in demand in the coming decade 350,000,000 300,000,000 250,000,000 200,000,000 150,000,000 100,000,000 50,000,000 Global Protein Demand 2.3% 0.7% 1% Poultry Beef Pork Salmon Shrimp Catfish Pellagic fish Shrimp has the fastest growth rate out of all animal proteins at 4.6% annually. Catfish and poultry follow with a 10 year forecasted CAGR of 2.7% and 2.3% respectively. As seafood demand grows and aquaculture production replaces wild-caught harvests, demand for feed within the aquaculture industry, specifically soybean meal, will increase rapidly. - 4.6% 2.7% 1990 1993 1996 1999 Source: FAO; HighQuest Partners 2002 2005 2008 2011 2014 2017 2020 11

Aquaculture growth exceeds other animal proteins MMT Global Animal Protein Production for Food Consumption (1960-2009) Source: FAO 800 700 600 500 400 300 200 100 0 1961 1964 1967 1970 1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003 2006 2009 Seafood Meat Eggs Milk MMT 1,400 1,200 1,000 800 600 400 200 0 Global Growth in Protein Production (1980-2009) Source: FAO 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 CAGR (1980-2009) +8.2% +1.0% +1.4% +3.2% +2.6% Meat Eggs Milk Wild Catch Aquaculture 12

Feed requirements for aquaculture World Protein Production Source: USDA FAS, FAO, HighQuest Analysis Projected Feed Requirements Source: USDA FAS, FAO, HighQuest Analysis 1,000 MT 900,000 800,000 700,000 600,000 500,000 400,000 300,000 200,000 100,000-1,000 MT 1,600,000 1,400,000 1,200,000 1,000,000 800,000 600,000 400,000 200,000 +2.2% CAGR +6.4% CAGR 12% 10% 8% 6% 4% 2% 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 0 0% Land-Based Protein Aquaculture 1990 1992 1994 1996 1998 2000 2002 2004 Land-Based Protein 2006 2008 2010 2012 2014 2016 2018 2020 Aquaculture Aquaculture Share of Feed Demand Note: Land-based protein includes pork, beef, broilers, dairy, and eggs. 13

Rising demand as per capita acreage declines Global consump/on of corn, soybeans and wheat has increased 291%, 768% and 170% respec/vely to 870 million MT 260 million MT and 680 million MT. Per capita soybean consump/on has been growing significantly (by 302% to 37 kg/ person since 1964) thanks to increasing demands from industrial sector and animal feed sector, while per capita corn and wheat consump/on reached 123 kg/ person (growth of 81%) and 96 kg/person (growth of 25%) respec/vely in 2012. Global harvested acreage has increased by 33% to 913 million hectares in 2012 from 689 million hectares in 1964. Global harvested acreage on a per capita basis has dropped 38% to es/mated 0.13 ha/person in 2012 from 0.21 ha/person in 1964. Note: The crops include barley, corn, millet, oats, rye, sorghum, wheat, mixed grain, rice and oilseeds (copra, palm kernel, co:onseed, peanut, rapeseed, soybean, sunflower seed). Proprietary information not for distribution. Copyright 2013 by HighQuest Partners LLC. All rights reserved. 14

Market vola5lity driven by uncertainty of available supply Historical global per capita feed grain and oilseed ending stocks (MT) (1964 2012 proj.) 0.10 0.08 0.05 0.03 0.00 Per capita feed grains ending stock Per capita oilseeds ending stock Global feed grains ending stock has grown by 108% to es/mated 354.7 million MT in 2012 from 170 million MT in 1964 while it has decreased by 4% to 0.05 MT/ person in 2012 on a per capita basis. Global oilseeds ending stock has grown over 42 /mes to es/mated 73.9 million MT in 2012 while on a per capita basis, it has grown by less than 20 /mes to es/mated 0.01 MT/ person in 2012. Proprietary information not for distribution. Copyright 2013 by HighQuest Partners LLC. All rights reserved. 15

Declining yield gains in major crops can trend be reversed? Trailing 10-Year Yield Improvement 0.05 Soybeans 6.0 5.0 4.0 Global Yields for 4 Major Crops Historical and Projected (MT / ha) Corn Rice Wheat 0.03 0.01-0.01 5% 3% 1% Corn 3.0 Soy -1% 2.0 5% 3% Rice 1.0 1% 0.0 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 Source: USDA; HighQuest Analysis -1% 5% 3% 1% Wheat -1% 1971 1974 1977 1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010 Proprietary information not for distribution. Copyright 2013 by HighQuest Partners LLC. All rights reserved. 16

Demand for commodi5es driven by rapid GDP/capita growth in developing and emerging markets Proprietary information not for distribution. Copyright 2013 by HighQuest Partners LLC. All rights reserved. 17

Animal protein consump5on highly correlated with per capita GDP Animal Protein Consumption(kg) Per Capita vs. GDP Per Capita(PPP basis) - 2010 140 Consump5on per capita (kg) 120 100 80 60 40 China New Zealand Australia USA UAE R² = 0.67086 S. Korea Norway Japan 20 - - 10,000 20,000 30,000 40,000 50,000 60,000 GDP per capita(ppp) Proprietary information not for distribution. Copyright 2013 by HighQuest Partners LLC. All rights reserved. 18

Higher GDP driving demand for oilseed meal 120 2009 Oilseed Protein Meal Consumption/Capita vs. GDP/Capita (PPP-basis) Oilseed Meal Consumption/Capita 100 80 60 40 20 0 SE Asia SSA India S. Asia FSU-12 N. Africa Argentina Middle East R² = 0.93 0 10000 20000 30000 40000 50000 EU GDP/Capita (PPP-basis) Canada US Proprietary information not for distribution. Copyright 2013 by HighQuest Partners LLC. All rights reserved. 19

China meal demand forecast to increase 60% Over the past 15 years, meal consump/on in China has had a 99% correla/on with GDP per capita. Based on this correla/on and OECD projec/ons for future GDP growth in China, HighQuest projects that Chinese meal consump/on will increase by 60% over the next decade (50 to 80 million MT). Proprietary information not for distribution. Copyright 2013 by HighQuest Partners LLC. All rights reserved. 20

Tilapia and shrimp production in the Americas While tilapia production in the Americas is smaller than shrimp production, it is ramping up quickly. From 1971 through 2008, Central and South America have experienced a 4.9% CAGR increase in shrimp aquaculture production. Mexico has experienced a 17% CAGR in shrimp and tilapia aquaculture production during the same period. Central America has experienced a 3% CAGR in shrimp production during this period while South America has experienced an11% CAGR increase. Source: FAO, HighQuest Analysis MT Production MT Produc5on 500,000 450,000 400,000 350,000 300,000 250,000 200,000 150,000 100,000 50,000 0 120,000 100,000 80,000 60,000 40,000 20,000 0 Americas Shrimp Production* (1950-2008) South America Central America Mexico 1950 1953 1956 1959 1962 1965 1968 1971 1974 1977 1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 Americas Tilapia Production* (1950-2008) South America Mexico 1950 1953 1956 1959 1962 1965 1968 1971 1974 1977 1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 22

Soybean meal demand for aqua feed in the Caribbean Basin and Canada MT 500,000 450,000 400,000 350,000 300,000 250,000 200,000 150,000 Caribbean Basin and Canada Soybean Meal Usage for Aqua feed 1950-2030F Honduras El Salvador Panama Nicaragua Costa Rica Colombia Canada Ecuador Soybean meal required for aquaculture rations in the Caribbean Basin and Canada will continue to increase to over 450,000 tons per year by 2030. US suppliers can expect to supply most of the additional soybean meal required by these regions due to landed price competitiveness, preferential trade relationships and the positive marketing of US soybeans and soy bean products throughout the region. 100,000 Mexico 50,000 0 1950 1954 1958 1962 1966 1970 1974 1978 1982 1986 1990 1994 1998 2002 2006 2010 2014 2018 2022 2026 2030 Source: FAO; HighQuest Analysis 23

Salmon feed rations Salmon feed ra@ons are becoming less dependent on fish meal, using soy isolates and meals as replacements. All Additives (oil+vit +min+carbs) 22% Wheypowder 2% Salmon Feed Ra5ons Blood gluten meal 2% Corn gluten meal 2% Fish meal Hi CP 30% Salmon feed is likely to reduce its dependence on fish meal for protein content. Soybean isolates and new varieties of conventional and GM soybeans are being developed to replace the amino acids that are predominantly provideed by fish meal. These new varieties of soybeans are not yet commercially available. Fish meal or oil is currently needed to provide salmon with Omega-3 fatty acids, methionine and cystine. Soybean meal will still grow a viable fish stock, however the Omega-3 s touted as the primary health benefit of salmon consumption is dependent on the amount of Omega-3 fatty acids in the diet. Wheat 10% Soy Protein Conc 10% Soybean Meal, CF<5-7 %; CP > 44 % 5% Source: Jan Van Eys, PhD Soybean Meal, CF<5-7 %; CP < 44 % 1% Fish meal Low CP Rice bran 9% 2% Meat + bone meal 2% Meat meal 3% Soybean meal is unpalatable to Chinook salmon and most carnivorous fish at certain stages of development. Development in additives are being tested. There are lectins present in SBM that reduce nutrient absorption in salmonids, however lectins can be deactivated by treatment during processing. Trypsin inhibitors also present in SBM inhibit some protein absorption. 24

Salmon feed rations Currently, farmed salmon require only 39% fish meal and oil in their diet compared with almost 80% less than a decade ago. This percentage is expected to continue decreasing. Despite a stagnant supply of fish meal, salmon production has been increasing. Soybean meal and other protein substitutes are increasingly being formulated into rations for farmed salmon in an effort to reduce costs and compensate for the decreasing supply of fish meal. A minimum of 15% of the feed ration for salmon needs to composed of fish oil as this is the main source of omega-3-fatty acids, which is an important marketing characteristic of salmon. Commercial rations could reduce the use of fish oil further if a plant based or other plausible source of omega-3-fatty acids were discovered. Currently there are no restrictions on nor monitoring of the levels of Omega-3 s present in salmon. Source: Marine Harvest 25

Tilapia feed rations Tilapia are herbivorous fish and therefore require little animal protein in their diet; soybean meal currently accounts for 27% of tilapia commercial rations. Wheat 8% Tilapia Protein Feed Rations Wheat middlings 2% Wheat bran 3% Soybean Meal, CF<5-7 %; CP > 44 % 20% Bloodmeal sp.dr. 2% All Additives 9% Corn 8% Corn gluten 3% Cottonseed ext 4% DDGS 7% Feathermeal, hydr 2% Fish meal; CP 3% Fish meal; Low 4% Meat + bone meal 2% Meat meal 3% Rice 3% Soybean Meal, CF<5-7 %; CP < 44 % Rice bran 7% 6% Rape seed, ext 3% Peanut ext 2% As tilapia are herbivorous, there are several viable plant protein options that can be used in tilapia feed. Experiments have been conducted testing various alternatives such as algae, insect meals and plant fodder that is readily available depending on location. For example, in Mexico wheat is used on talipia feed rations as it is a readily available and an abundant crop. Other locally sourced feeds may include pig manure or other natural fertilizers that promote the growth of algae and other organisms that tilapia consume. Tilapia require minimal fish meals and oils in their diet for optimal development. Source: Jan Van Eys, PhD 26

Commercial feed rations for shrimp Commercial shrimp feed consists of 24% soybean meal (incl. soy protein concentrate). Wheypowder 2% Wheat middlings 2% Wheat glutenmeal 10% Wheat 13% Shrimp Feed Rations All addi/ves (fats +carb+min+vit) 12% Corn 5% Whey powder mealdr. 1% Corn glutenmeal 5% Fish meal; CP 10% Fish meal; Low CP 5% Fish oil 3% Meat meal 3% Rice 5% High-quality shrimp feed is essential as these organisms have highly sensitive response systems. For this reason, most all shrimp production uses commercial feed rations. As any fluctuation is the amount of soybean meal used to feed shrimp can be disruptive to nutrient absorption in the digestive tract and cause loss in the shrimp population, typically there is not much variation in the use of soybean meal. Source: Jan Van Eys, PhD Soy Protein Conc 5% Soybean Meal, CF<5-7 %; CP > 44 % 19% 27

Protein meal - historical prices Fish meal prices are expected to continue rising as restrictions on wild catch remain in place and constrains the total fishmeal supply. Fish Meal vs. Soybean Meal Prices Source: The Jacobsen; HighQuest Analysis Fish Meal: Peru Corn Gluten Meal SBM: C. Illinois Soybean meal prices are approximately 30% of the FOB cost of fish meal; $410 / MT for soybean meal compared to $1420 / MT for fish meal. The price of fish meal has been extremely volatile over the past 3-4 years, ranging between $900 - $1900/ton due to shrinking stocks. Fish meal prices will continue rising as fishing bans are implemented and wild fish populations continue depleting due to over fishing. Current fish meal stocks cannot support the growing aquaculture industry and it is unlikely that new sources of fishmeal will be discovered. Advances in developing new amino acid profiles for soybean meal will determine whether soybean meal will be able to completely subsititute for fish meal as a feed ingredient in aquaculture production. 28

Alternative protein meals in aquaculture feed Specialty soybeans and soy isolates will increasingly replace fish meal and other animal proteins. Alternative feeds for both carnivorous and herbivorous fish are being explored based on the recent increases in feed ingredient prices, particularly soybean meal and fish meal. Herbivorous feeds substitutes for tilapia include algae, paraphytin and other grains or oilseed meals including copra, rapeseed, jatropha. Jatropha is being researched heavily to be made commercially available, however soybean meal currently has a better nutritional profile and has not acted as a full substitute in most aqua feeds. Algae research is being conducted based on ideal nutrition profiles along with how to make the algae commercially available. There are algal oils currently being used in the human food market that contain Omega-3 s, however these oils are not economically efficient to extract and therefore are mainly being used in the human food market where retail prices for the products are much higher than fish feeds. Alternative feeds for carnivorous species include: Copepods can be grown on substrates such as woodchips while also acting as a filtration system, thus this is potentially a low cost way of providing feed (this is not yet a commercial viable option but is being researched as such). Insect meal is not commercially available, but could provide a high quality nutrition source for a wider variety of amino acids than vegetable proteins provide. Fish by-products include fish heads, tails, entrails, etc. Fish by-products are difficult to use on a large scale as they require expensive container shipment. Fish meal prices would have to continue to rise to make this worthy of investment. In Alaska alone there are 1MMT of fish byproducts produced per year. This is the entire fish meal demand of US fish farm operations and could feed one billion fish. However, the cost to gather and process fish by-products is not competitive with wild caught fish meal prices. 29

Informed decision making for global agricultural investing Philippe de Lapérouse Managing Director HighQuest Partners, LLC 314-994-3282 pdelaperouse@highquestpartners.com www.highquestpartners.com 1005 North Warson Road, Suite 226 St. Louis, Missouri 63124 USA (314) 994-3282 www.highquestpartners.com 30