AUSTRALIAN FEEDLOT SECTOR

03 August 2017

ANZ’S SUPER REGIONAL NETWORK

Note: *GCC - Gulf Cooperation of Council countries**Pacific Islands comprises of Guam, Solomon Islands, Fiji, Kiribati, Samoa, American Samoa, Cook Islands, Timor Leste, Tonga, Vanuatu and New Caledonia. Fiji operations comprises of Commercial/International Banking, Large Corporate & Institutional Banking, and Retail Banking & Wealth Management

KEY:Commercial/ International Banking

Large Corporate & Institutional Banking Private Banking

Retail Banking & Wealth Management

Partner Bank Representative Office

ANZ has an established regional network across 33 markets which include 15 Asian markets and representation in Europe, America and Middle East. ANZ is a leading bank in Australia and the largest bank in New Zealand & the Pacific Islands (12 markets)

GERMANYFrankfurt

LAOS

VIETNAM

THAILAND

MYANMAR

UNITED KINGDOM

London

CHINA

UAE(GCC*)

INDIA

CAMBODIA

SINGAPORE

MALAYSIA

SOUTH KOREA

JAPAN

HONG KONG

TAIWAN

UNITED STATES OF AMERICANew York

PHILIPPINES

INDONESIA

PAPUA NEW GUINEA

AUSTRALIA

PACIFIC ISLANDS**

NEW ZEALAND

2

CONNECTING YOU TO THE FOOD, BEVERAGE AND AGRIBUSINESS SECTORS

CONNECTING YOU FROM ‘PADDOCKTO PLATE’ ACROSS THE GLOBE

• Producers and growers

• Storage and handling companies

• Agricultural input suppliers

• Global trading houses

• Transport and packing companies

• Global food and beverage companies

• Global quick-serve food establishments

ANZ has been banking clients in the Food, Beverage and Agribusiness sectors since 1865 and covers stakeholders across the global supply chain

3

PARTNER WITH ANZ TO ACCESS

• 4 out of Australia's 5 largest milk producers processors

• NZ’s 3 largest dairy processors accounting for over 90% of NZ’s dairy production

• Some of the world’s largest food and beverage companies

• Countries that receive over 85% of Australia’s live cattle exports and over 90% of Australia’s exported beef

• 80% of Australia’s cotton exporters

• 95% of Australian sugar exporters

• Major Food, Beverage & Agribusiness markets across the Asia Pacific region thanks to ANZ’s reach into key origin and destination geographies (China, India, SEA, Greater Mekong and the Pacific)

BENEFIT FROM OUR INDUSTRY EXPERIENCE AND EXPERTISE

Dairy

Oilseeds

Sugar

Coffee

Wine

Cotton

Cocoa

Protein

Grains & rice

Forestry

Rubber

FEEDLOT SECTOR CONTINUES TO EVOLVE

4

AUSTRALIA’S FEEDLOT SECTOR

• Important component of domestic feed complex• Must continue to be strategic in maintaining social

licence• Approaching continuing consolidation• Facing strong global competitors• Focus of growing agri investment• Massive agtech/data potential• Needs to adapt with customers

5

AUSTRALIA ACCOUNTS FOR ~3.5% OF GLOBAL PRODUCTION AND ~15.7% GLOBAL BEEF EXPORTS…

6

Australia Feedlot Capacity 1.2 million head

Australia Cattle Population 27.4 million head

5.6%

8.6%7.7%

4.2%

41.4%

20.4%

2.6%

15.1%

53.8%

31.4%

6.0%

3.3%

Source: MLA, ALFA

Note: Feedlot Capacity is based on March 2017 & Australian Cattle Population is as of June 2015

Australia Beef Production & Slaughter

With herd re-building in progress, beef production is likely to decrease and marginally recover through 2021

-

6%

12%

18%

24%

30%

36%

-

0.5

1.0

1.5

2.0

2.5

3.0

2013 2014 2015 2016 2017F 2018F 2019F 2020F 2021F

Beef Production (m tonnes cwt) Slaughter as % of Cattle herd (RHS)

-

200

400

600

800

1,000

1,200

Mar-09 Mar-11 Mar-13 Mar-15 Mar-17

< 500 500 - 1k 1k - 10k > 10k

REDUCED AVAILABILITY OF CATTLE LED TO CATTLE HELD ON FEED FOR LONGER PERIODS…

7

Cattle on Feed (‘000 head) by Feedlot Type

Source: MLA, ALFA

8

-

20

40

60

80

Q1'05 Q3'06 Q1'08 Q3'09 Q1'11 Q3'12 Q1'14 Q3'15 Q1'17

Japan Korea Other

Grain-fed beef exports (‘000 swt)

EXPORTS TO EU, CHINA & MIDDLE EAST GRADUALLY INCREASED THEIR SHARE…

Source: MLA, ALFA

~80% OF COST BASE IS MADE UP OF FEEDER CATTLE PURCHASES

9

Purchases 80.7%

Wages 1.4%

Depreciation 1.5%

Utilities 1.7%

Rent 0.8%

Other 0.8%

Profit 13.1%

Industry Cost Structure

Source: IBIS Research

FEEDER CATTLE PRICES INCREASED BY ~220% SINCE 2007…

10

-

50%

100%

150%

200%

250%

300%

Sep-07 Aug-09 Jul-11 Jun-13 May-15 Apr-17

Saleyard Feeder Steer QLD - OTH - Grain Fed Cattle

Weekly prices rebased to Sep 2007 prices

Source: MLA

FEEDER CATTLE PRICES ARE NEGATIVELY CORRELATED WITH GRAIN PRICES…

11

-

100

200

300

400

500

Aug-09 Mar-11 Oct-12 May-14 Dec-15 Jul-17

Feeder Cattle (Ac/kg lwt) Wheat - New Castle, NSW(Ac/tonne)

Price comparison of Feeder Cattle vs Wheat price (feed grade)

Source: Feeder Cattle price sourced from MLA, while Wheat (feed grade) sourced from Bloomberg database (AUWH0142 Index – New Castle, NSW)

12

Short, medium and long-term net profit margins for beef feedlots (2014)

(60%)

(40%)

(20%)

-

20%

40%4

30

52

0

55

00

52

0/1

50

28

K

72

00

75

K

15

00

26

K

63

0/8

00

68

0

17

00

94

0

20

00

15

K

30

00

75

K

25

K

Spain Canada US MexicoArgentina Brazil Peru China Aus. S Africa Nam-ibia

Short Term (Cash) Medium Term (Cash-Depreciation) Long Term (Cash-Depreciation-Opportunity Costs)

AUSTRALIAN FEEDLOTS HAVE MEDIUM TO LONG TERM PROFITABILITY OF 11-14%...

Source: MLA/ Agribenchmark

FINISHING COSTS IN AUSTRALIA ARE ~23% HIGHER THAN SOUTH AMERICAN FEEDLOTS…

13

-

200

400

600

800

1,000

1,200

A -

25

FA

-3

5A

-1

20

G -

26

0G

-2

85

G -

52

5T

G -

80

0F

-60

F -7

0F

-20

0S

P -

43

0S

P -

52

0S

P -

55

0U

K -

45

UK

-8

0U

K -

90

UK

-7

50

IR -

40

RU

-6

40

CA

-2

8K

US

-7

20

0U

S -

75

KA

R -

38

0A

R -

63

0A

R -

80

0A

R -

90

0A

R -

26

KU

R -

90

BR

-6

0B

R -

36

0B

R -

40

0B

R -

68

0B

R -

80

0B

R -

17

50

CO

-1

30

CO

-1

60

CO

-5

20

CO

-8

00

PE

-17

00

CH

-7

0C

H -

15

0C

H -

30

0C

H -

94

0C

H -

20

00

IN -

2IN

-4

IN -

10

0A

US

-6

5A

US

-8

5A

US

-1

50

AU

S -

32

0A

US

-3

60

AU

S -

38

0A

US

-5

40

AU

S -

90

0N

Z -

37

5S

A -

30

00

SA

-7

5K

NA

-6

00

NA

-2

5K

Europe US &Canada

South America Asia Aus. NZAfrica

Cash costs Depreciation Opprtunity Costs Regional Averages

Cattle finishing cost benchmarking (2014)USD per 100lwt

Source: MLA/ Agribenchmark

BEEF FEEDLOTS REVENUE IS FORECAST TO STAGNATE IN NEAR FUTURE…

14

2.7 2.7

2.9

3.7

4.6 4.6 4.7 4.7 4.6 4.7 4.8

FY2012 FY2014 FY2016 FY2018 F FY2020 F FY2022 F

Beef Cattle Feedlot Industry Revenue (AUD bn)

Source: IBIS Research

~59% OF BEEF FROM FEEDLOTS IS UTILISED IN DOMESTIC MARKET…

15

End markets by Share of Industry Revenue

Source: IBIS Research

44.1%

23.4%

6.2%

11.5%

8.3%

6.5% Supermarkets

Exports to Japan

Exports to South Korea

Other export markets

Butchers

Food service establishments

A FRAGMENTED INDUSTRY BUT CONSOLIDATION WILL CONTINUE…

16

6.0% 5.1%

5.1%

83.8%

JBS Australia Pty Limited

Mort & Co Ltd

Teys Australia Pty Ltd

Other

Source: IBIS Research, ALFA

Beef Cattle Feedlot Industry by Major Players

WITH RISING GLOBAL COMPETITION IN GRAIN, THE DOMESTIC FEEDLOT INDUSTRY

HAS RENEWED IMPORTANCE

-

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

FY'1

3

FY'1

4

FY'1

5

FY'1

6

FY'1

7E

FY'1

8F

WHILE MAJORITY OF AUSTRALIAN GRAIN IS EXPORTED, SIMILAR OTHER AGRI PRODUCE…

18

Val

ue

of

Ag

ricu

ltu

ral

Exp

ort

s (A

UD

m)

Source: ABARES, MLA (data sourced for Beef Production, Exports)

FY'13

FY'14

FY'15

FY'16

FY'17E

FY'18F

FY'13

FY'14

FY'15

FY'16

FY'17E

FY'18F

FY'13

FY'14

FY'15

FY'16

FY'17E

FY'18F

FY'13

FY'14

FY'15

FY'16

FY'17E

FY'18F

68%

32%

55% 45% 100%

74%

26%

Average Exports as % of Production

Grains, Oilseeds & Pulses

Beef Dairy Cotton Wool

71%

29%

A$12.2bn1 A$7.2bn1 A$3.3bn1 A$3.1bn1 A$2.1bn1

Note 1: Average Value of Agricultural exports between 2012-13 (FY13) to 2017-18F (FY18F)

Together these five commodity groups represent ~63% (average) of Total farm exports

19

(150,000)

(100,000)

(50,000)

-

50,000

100,000

150,000

200,000

250,000

Brazil USA ArgentinaUkraine Canada Australia Thailand India Egypt Iran SouthKorea

SaudiArabia

EU Mexico Japan China

2000/01 2005/06 2010/11 2016/17

GROWTH IN STRENGTH OF GLOBAL AGRI POWERHOUSES – WHILE THE BSR CONTINUES TO RISE

Agriculture produce – Net tradeIn ‘000MT, Commodities include Grains, Oilseeds, Meat, Dairy and Sugar

+11% +2% +4% +15%

+2% +2% -1% +28%+5%

+2%

Growth in Net Exports CAGR (2000-16)

Growth in Net Imports CAGR (2000-16)

Source: USDA, ANZ Analysis

RISING GRAIN & OILSEEDS DEMAND IS INCREASINGLY BEING MET BY EMERGENT PLAYERS IN SOUTH AMERICA, BLACK SEA REGION…

20

Grain & Oilseed Export Share (%)% Share of exports of Select Countries

Grain & Oilseeds Export VolumeIn ‘000MT, Major Countries

Source: USDA, ANZ Analysis

Without Soybean

10% 12% 16% 23%

40% 37% 32% 22%

14% 11% 15% 12%

1% 5% 5% 10%

12% 10% 10% 8%

11% 9% 10% 9%

1% 5% 2% 8% 12% 9% 11% 8%

-

20%

40%

60%

80%

100%

2000/2001 2005/2006 2010/2011 2016/2017

-

100

200

300

400

500

2000/2001 2005/2006 2010/2011 2016/2017

-10%20%30%40%50%60%70%80%90%100%

2000/2001

Brazil United States ArgentinaUkraine Canada AustraliaRussia European Union

FEED INDUSTRY – THE LARGEST DOMESTIC GRAIN & OIL SEEDS CUSTOMER MAY BENEFIT FROM LOW PRICES…

21

-

10

20

30

40

50

60

2000/2001 2004/2005 2008/2009 2012/2013 2016/2017

FSI Consumption Feed Consumption Exports

Grain & Oil seeds consumption share estimatesIn Million MT

Source: USDA PSD

RISING PROTEIN CONSUMPTION TO DRIVE FEED DEMAND

22

23

PER CAPITA MEAT AND DAIRY CONSUMPTION TO CONTINUE STRONG GROWTH IN DEVELOPING REGIONS OVER 10 YEARS…

-

50

100

150

200

250

300

350

2013-15 2025 2013-15 2025 2013-15 2025

Developed Developed Other Developing Other Developing Sub-Saharan Africa Sub-Saharan Africa

Cereals Roots and tubers Meat Fish Dairy Sweeteners Vegetable oils

Per capita food consumption by regionIn Kg/cap/year

Source: FAO – OECD Outlook

CHINA DEMOGRAPHICS – INCREASING AGEING

Population by Age Group

CHINA JAPAN GERMANY

(10%) (5%) - 5% 10%

Male Female

Source: US Bureau, International Database

10% - 10%

0-45-9

10-1415-1920-2425-2930-3435-3940-4445-4950-5455-5960-6465-6970-7475-7980-8485-8990-9495-99100+

10% - 10% 10% - 10%

JAPAN’S CALORIE CONSUMPTION HAS CONTINUED TO FALL SINCE 1990

Japan Calorie consumption by Source

Source: FAO Statistics, ANZ

-

500

1,000

1,500

2,000

2,500

3,000

3,500

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010

Dairy and Eggs Grain Meat Produce Sugar and Fat Other

CHINA CONSUMES AS MANY CALORIES PER CAPITA AS JAPAN DID IN 1990

China Calorie consumption by Source

Source: FAO Statistics, ANZ

-

500

1,000

1,500

2,000

2,500

3,000

3,500

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012

Dairy and Eggs Grain Meat Produce Sugar and Fat Other

JAPAN EXPERIENCED A FALL IN CONSUMPTION ACROSS FOOD TYPES

% change in Japan’s Per Capita and Total Consumption by Category 1990-2011

Source: FAO Statistics, ANZ

(14%)

(12%)

(10%)

(8%)

(6%)

(4%)

(2%)

-

2%

4%

Grain Produce Dairy & Eggs Meat Sugar & Fat Other TotalPer Capita Total

HISTORIC CONSUMPTION GROWTH IN CHINA HAD BEEN EXPONENTIAL

% change in China’s Per Capita and Total Consumption by Category 1990-2011

Source: FAO Statistics, ANZ

(50%)

-

50%

100%

150%

200%

250%

Grain Produce Dairy &Eggs

Meat VegetableOil

Sugar &Fat

Other Total

Per Capita Total

-

50,000

100,000

150,000

200,000

250,000

300,000

350,000

2000/2001 2005/2006 2010/2011 2016/2017China SE Asia European Union Japan

Mexico Egypt Saudi Arabia South Korea

CHINA & SE ASIAN COUNTRIES ARE THE LARGEST IMPORTERS OF GRAIN & OILSEEDS

29

Grain & Oilseeds Import VolumeIn ‘000MT, Major Countries

CHINA

ASEAN COUNTRIES

1.27 1.31 1.34 1.38 1.43

2000 2005 2010 2016 2022F

0.51 0.55 0.59 0.64 0.68

2000 2005 2010 2016 2022F

Population (bn)

Population (bn)

4.67 6.32 8.4911.60

16.56

2000 2005 2010 2016 2022F

2.92 5.069.25

15.4023.96

2000 2005 2010 2016 2022F

GDP per capita (PPP)in ‘000 $

GDP per capita (PPP)in ‘000 $

Grain & oilseed demand increased by 6.3x (2000-16)

Population increased by 115m (2000-16)

GDP pcp increased by 5.3x (2000-16)

Grain & oilseed demand increased by 2.3x (2000-16)

Population increased by 123m (2000-16)

GDP pcp increased by 2.5x (2000-16)

Source: USDA, IMF and ANZ Analysis

30

• Consumption is dominated by China

• Rising per capita income levels driving animal protein demand

• Intensifying competition for exports especially from South America

• Increasing integration through supply chain investments in Australia

• Home to some of fast growing economies

• Changing consumption patterns driven by rising income levels

• Increasing import dependency to cater to rising domestic demand

• Regional consumption is dominated by India –characterised by low meat consumption (but dairy industry provide opportunity)

• Major destination of Australia’s pulses export

FEED CONSUMPTION IN ASIA PROVIDE SIGNIFICANT OPPORTUNITY..Asia Feed Consumption Share – Grains & Oilseeds

Source: Data is sourced from USDA PSD Query.

Note: Year noted 2001 represent marketing year 2000/2001

35%

40%

45%

50%

55%

2001 2005 2009 2013 2017Asia Feed Consumption Share (%)

55%

45%

East Asia

Feed FSI

64%

36%

Southeast Asia

Feed FSI

21%

79%

South Asia

Feed FSI

AGTECH AND DATA PROVIDE UNIQUE OPPORTUNITIES

31

MLA IDENTIFIED FOUR AREAS FOR USE OF DIGITAL TECHNOLOGIES IN LIVESTOCK ENTERPRISES…

32

Soil fertility monitoring

Feed allocation systems

Animal production monitoring

Animal disease monitoring

+13% – 26%

+9% - 11%

+4% - 9%

+4% - 13%

Productivity Benefits

Source: Meat and Livestock report, retrieved from Beef central website

HOWEVER, NEED TO ADOPT REALISTIC TIMELINE FOR IMPLEMENTATION OF EMERGING TECHNOLOGIES…Key driving factors that affect level of adoption of a technology or practice by agribusinesses

Characteristics of the Technology or Practice

• Cost of Technology

• Difficulty of implementation

Characteristics of the Target Population

• Financial Capacity

• Education levels

• Social norms

Relative advantages of using the technology or practice

• Improved efficiency

• Better crop yields

• Higher Profitability

Capacity to learn or adapt to generate a relative advantage

• Support infrastructure to aid decision-making and learning

• Update to latest available technology/techniques

“No one technology or technologies would be transformational, and progress on technologies would be incremental, because of the nature of innovation and adoption”

Source: Smart Farming – May 2016, Inquiry into agricultural innovation

BANKS REMAIN INTEGRAL PART OF SUPPLY CHAIN

34

TRADITIONAL VS REAL TIME FINANCING

Real Time Financing

300 Kg 400 Kg 500 Kg

Day 0 Day 50 Day 100

$ $$$ $$$$$

$ Gained $ Gained

300 Kg 400 Kg 500 Kg

Day 0 Day 50 Day 100

$ $$$ $$$$$

$ Lost $ Lost

Traditional Financing

Funding Against Land

Failure to tap the working capital finance opportunity

Works well with operators with long operation history

Technologyprovide opportunity to unlock working capital

24

ABILITY TO ATTRACT NEW CAPITAL IN THE INDUSTRY BY UNLOCKING WORKING CAPITAL

36

20151 20161

0

200

400

600

800

1,000

1,200

Jan 15 Feb 15 Mar 15 Apr 15 May 15

AUD

Mill

ion

Traditional Model Real Time Model

0

200

400

600

800

1,000

1,200

Jan 16 Feb 16 Mar 16 Apr 16 May 16

AUD

Mill

ion

Traditional Model Real Time Model

Note1: Dressing %=52%, 85% of market value for feed lot with 100 day cycle

THE WAY AHEAD

37

Drivers Platform

Cattle in feedlot 2,000

Funding Based on Land AUD 1.0m

Working Capital Opportunity AUD 0.4m

Swipe Right to unlock AUD 400k

2.12.42.73.03.33.63.94.24.54.8

10 11 12 13 14 15 16Australia Eastern Young Cattle Indicator

AU

D /

Kg

MANAGING COMMUNICATION BETWEEN DIFFERENT PARTS OF VALUE CHAIN REMAINS VITAL…

38

Production end

Smart agricultural production alliance

• Strengthen resource management system

• Mass production of excellent traceable products

• Link e-commerce

Consumption end

Convenient services offered by digital agriculture

Product information Consumer habit

Where, What & How produce is consumed?

Change in consumption patterns

Key factors affecting consumer choice

Accurate estimates of crop yield, input applications etc.,

Storage and Marketing of harvest crop

Data to help increase efficiency in operations

Source: Taiwan govt. website, ANZ

AUSTRALIA’S FEEDLOT SECTOR

• Important component of domestic feed complex• Must continue to be strategic in maintaining social

licence• Approaching continuing consolidation• Facing strong global competitors• Focus of growing agri investment• Massive agtech/data potential• Needs to adapt with customers

39

THANK YOUPresented by MICHAEL WHITEHEAD

DISCLAIMER

41

> This document is issued by Australia and New Zealand Banking Group Ltd (‘ANZ’). The information and opinions contained in this document (on which ANZ may have acted or may act for its own purposes) are published for the assistance of recipients but are not to be relied upon as authoritative or taken in substitution for the exercise of judgment by any recipient. While such information and opinions have been compiled or arrived at by ANZ in good faith and from sources believed to be reliable, no representation or warranty, express or implied, is made as to their accuracy, completeness or correctness, any opinions contained in this document may be changed by ANZ without notice. ANZ, its officers, employees, representatives and agents accept no liability whatsoever for any loss or damage, whether direct, indirect, consequential or otherwise howsoever arising (whether in negligence or otherwise) out of or in connection with or from any use of the contents of and/or any omissions from this document

> Information contained in this presentation is strictly confidential. It is the property of ANZ. As such, no part of it may be circulated, copied, quoted or otherwise referred to another party without prior written consent of ANZ

> The terms noted in this presentation is subject to receipt by ANZ of formal credit approval and appropriate legal, accounting, tax and technical advice. This is not an offer to finance

> The points made in this presentation are subject to further discussion with you and we would be pleased to address any comments and queries that you may have in relation to the proposed funding options so as to ensure that your particular requirements are satisfied