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Global Agribusiness

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Monthly commentary from our Agribusiness experts around the Globe

March 2016

ContentsRegional views 2

Did you know? 9

Publications 12

Calendar of events 15

Prices 16

Global Agribusiness contacts 23

Regional views

OverviewWith teams around the Globe, this document sets out to give a flavour of what our local agribusiness experts are observing in their territories. Some dominant themes recur every month. M&A for instance, where we discuss the DuPont and Dow Chemical merger. It’s worth reflecting on the fact that, together with the ChemChina offer for Syngenta, these two deals alone amount to US$170bn of deal activity. Food Trust remains a concern for our clients globally, and we discuss Chipotle’s recent problems in the US. Elsewhere we see continued investment in Ag Tech globally, and I note that investment in 2015 doubled to c.US$5bn. Finally, we see continued inward investment across Africa to stimulate production levels. As a reminder, it’s a snapshot only: do feel free to contact the local experts to discuss their views in more depth.

Mark James

2 | Global Agribusiness | PwC

Argentina An improving macro and political outlook In the last few years, the economic and financial landscape of Argentina has been characterized by five key issues:

•Diminishing current account surpluses driven by a reduction in commodity prices and a fall in competitiveness due to i) low export exchange rates, ii) export taxes on important agricultural products like soybeans and iii) high inflation

•High inflation, with a rate ranging from c. 20% to c. 40% over the past five years

•An artificially overvalued currency resulting from high inflation and controlled devaluation that generated a cost escalation in USD terms, keeping workers’ wages high, among other effects

•Fiscal deficits which occurred in spite of Argentina having one of the highest fiscal pressures in the world (tax revenues represented more than 40% of GDP last year)

•Diminishing foreign reserves due to a chronic energy deficit, the monetization of fiscal deficits and subsequent inflationary pressures, falling foreign direct investment and Argentina’s lack of access to capital markets, following a decade-long battle with holdouts from the 2001 debt default

New measuresMauricio Macri took office on 10 December as President of Argentina, after twelve years of Peronist government. New economic policies and agricultural regulations implemented by Macri’s administration have been aimed at: normalizing economic variables, lowering/eliminating export taxes and generating the appropriate infrastructure.

One of the first measures taken by the government has been to liberate the exchange rate, switching to a managed floating exchange rate. Additionally the Government has eliminated export taxes on maize, wheat and meat and lowered them on soya (from 35% to 30%), aimed at repairing reserve adequacy through stimulation of production and supply in order to obtain an influx of dollars. These measures have been well received by both producers and consumers.

Macri’s administration also promised to carry out large infrastructure works projects aimed at improving the productivity/efficiency of industries. One key project in Macri’s agenda is Plan Belgrano, a social, production and infrastructure development program directed towards promoting growth and equality in conditions/opportunities for 10 northern Argentinian provinces. The project consists of a US$16bn infrastructure investment over the next 10 years.

Mariano TomatisSebastian Azagra

AustraliaPrices for Australian beef have continued to break records with the assistance of a weak Australian dollar and some tightening in supply. The Eastern Young Cattle Indicator (EYCI) as published by Meat and Livestock Australia (MLA) reached over 600 cents a kilogram (carcase weight) earlier this year, a price more than double that of the same time in 2014. With the Christmas period bringing the gift of rain for many parts of the country (though not drought braking), producer confidence has risen with many holding back heads from sale with good pasture available for better finishing yields.

At the end of 2015, agricultural exports reached the status of Australia’s second most valuable commodity export at A$39.3 billion, behind iron ore and up from A$35 billion in 2009. With the decline of iron ore and coal exports in recent years, calls to support more

investment in agricultural export oriented infrastructure have increased. Constraints caused by years of under investment in rail infrastructure in particular, have been cited many times by those in the industry and drive at the heart of Australia’s ongoing competitiveness on the global stage.

Craig Heraghty

Brazil2015 year in reviewWith 2015 final figures firming up, we take an in depth look at 2015 trends and the outlook for the current season.Agribusiness GDP grew 0.6% yoy in 2015 to BRL 1.2trillion, according to the Confederation of Agriculture and Livestock of Brazil (CNA) and the Centre for Advanced Studies in Applied Economics. This is despite the country’s economic situation (overall GDP fell 3.7% yoy) and takes the sector share of GDP to 23% vs. 21% in 2014.

InputsFarm credit fallsCredit disbursements were 7% lower in the first five months of the 2015/16 season (July to November) at BRL73.5 bn, with the number of signed contracts falling 26% yoy. The decline in disbursements was driven by lower contracts for investment (down 57% to BRL13.5 bn).

Machinery and Pesticides sales poorSales of tractors and harvesters fell 33.7% yoy in the first 11 months of 2015. The turbulence in the economic and political environment, coupled with the contraction in credit, discouraged investment (although some recovery is expected in 2016). Agrichemicals sales also fell, declining 23% yoy to BRL9.5 bn. Headwinds included lower credit as outlined above, together with a weakness of BRL against USD.

PwC | Global Agribusiness | 3

Animal proteinBeef weak In 2015, Brazilian beef exports fell 7% yoy in volume and 17% in value, driven by lower beef purchases by Russia, Venezuela and Hong Kong. The first two are going through a severe economic crisis and Hong Kong faces greater scrutiny of China against illegal triangulation of meat.

Although 2015 was a difficult year for the sector in the international market, forecasts for 2016 are more positive, with growth in beef exports anticipated at 25%yoy (which would be a new record). China has opened its market to receive Brazilian meat; Japan has lifted the embargo imposed on processed meat from Brazil, and the United States should carry out the first Brazilian meat purchases in the first semester. In addition, Australia should have a lower availability of beef depending on their herd contraction, creating opportunities for beef exporters like Brazil.

Chicken and pork strongPoultry sales were very strong in 2015. The Brazilian Association of Animal Protein (ABPA) estimates that 2015 poultry exports were up 4% yoy, hitting a new record. Bird flu in the United States was the main driving factor. Production increased by 3.5% yoy, also registering a record.

Pork consumption per capita reached the record highs last year due to lower beef supplies (and consequent higher prices). As a result, pork production increased by 4.9% yoy.

Dairy weak globallyThe current dairy market is characterized by strong supply and weakened demand globally. The European Union has increased its milk production given the end of quotas that took place in April 2015. A number of exporting countries were able to reduce production, but not enough to eliminate stocks. In addition, global consumption has been affected by the economic crisis in China and Russia. Domestic consumption also fell due to the financial crisis now facing the country.

Sugar and ethanolExpectations are that the sugarcane industry might be able to reduce its debt in the 2015/16 season, thanks to better prices for both sugar and ethanol.

In sugar, production should fall 2.7% yoy, according to the National Supply Company (Conab). This is due to an increased allocation of sugarcane for ethanol production (which reached a better return at the beginning of the harvest), and excess rain, which hindered cane harvesting at the end of the cycle, reducing the supply of raw material.

International market are already pointing to a potential world sugar deficit in the 2015/16 crop, reinforcing strong prices. However, some events deserve attention. Russia, a traditional importer of sugar is likely to reduce purchases and will be able to broadly meet its domestic demand due to an excellent harvest of sugar beet. In India, the government has approved subsidies for the production of sugarcane. So exports of sugar in India should be high, putting added pressure on prices.

In ethanol, Brazilian production is set to increase 2015/16. Increases in gasoline prices and tax have in turn led to an increased demand for ethanol and higher prices. Another factor that should benefit ethanol is the Paris Agreement re. global warming, opening up opportunities for biofuel in international markets.

Grains and other cropsSoybean complex. Strong volumes but weak prices.Conab and FCStone both believe soybean production will hit record levels in 2015/16 at c. 99m tons. In terms of exports, the Brazilian Vegetable Oil Association believes volumes will increase, but revenues may fall. International prices are likely to continue to decline and the real devaluation will not be enough to fully offset the lower prices. Projected revenues from exports of the soybean complex (grain, meal and oil) are US$ 25bn in 2016, 8% lower yoy and the lowest level since 2011. Over and above this, Brazil is likely to face greater

competition in soybean exports from Argentina as the new president, Mauricio Macri has reduced taxation on soybeans exports from 35% to 30% (see our section on Argentina above)

Coffee. Production to fall from record highsCoffee exports in 2015 hit a new shipment record. The appreciation of the dollar helped, and robusta coffee in particular saw significant increases in export volumes. Vietnam is the main producer robusta variety, but in 2015 its participation in the international market was modest, making room for Brazilian exports.

The robusta price surge also affected the domestic industry that uses this variety for the formulations of blends. As a result, retail prices increased by c. 4% yoy, although this doesn’t appear to have impacted on consumption.

Looking forward, in 2015/15, Conab estimates production at 43.2m bags, down 5.3% yoy. Weather problems at the end of 2014 are still being felt by the crop, and both, arabica and robusta production will drop, by 1.7% and 14.4%, respectively, compared to 2015.

Ana Malvestio

MexicoGrowth set to continue. Consensus continues to anticipate solid growth in Mexican agribusiness in the three year period to 2019. Whilst growth rates are expected to slow. We expect positive trends in domestic production and consumption in the dairy, sugar, livestock and coffee segments, but a more subdued outlook for the grains market. Whilst rising disposable incomes should continue to deliver demand-side growth, competitiveness remains an issue for the Mexican agricultural sector as a whole, particularly in the grains, livestock and sugar subsectors.

Syngenta maintains its focus on Mexico. For the last 80 years, Swiss company Syngenta has been offering technology, innovation and solutions to Mexican agribusiness. The firm is the main


supplier of materials to Mexican agriculture, excluding fertilizers, and its manufacturing site in San Luis Potosí was recently awarded a Prize for Excellence by the Ministry of Labor (STPS) for its standards in security, environment and health.

Syngenta’s interest in Mexico has led the company to establish a new Experimental Centre in Culiacán, Sinaloa (vs. other contender countries such as Israel, Brazil, Spain and South Africa). The Centre will effectively import world-class technology and should help provide tailwinds for Mexico’s agricultural exports.

Per Syngenta: “Mexico has gained an international reputation as one of the finest producers of chili peppers and tomatoes, among many other products. We have seed technology and crop management for greenhouse and open field production that we use in Mexican agribusiness to help them sell their products to international markets such as Europe, Japan, Russia and the US. As the first link in the food chain, Syngenta promotes the export of high value-added products.”

Javier Alonso Luz Cecilia Aguilar Alvarez

Greaves

New ZealandGrowth in exportsNew Zealand’s primary sector export revenue to June 2016 is forecast to increase NZ$1.9bn to NZ$37.6bn. Strong forestry and horticulture exports are expected to increase NZ$613m and NZ$700m respectively, offsetting the weak market for dairy. Recent World Trade Organisation (WTO) talks have yielded a landmark decision for the agricultural industry. Agricultural export subsidies have been immediately banned for all developed member countries. Fonterra’s Chairman has said this is good news for New Zealand dairy producers as the threat of export subsidies have been suppressing world dairy prices. The New Zealand – Korea Free Trade Agreement has come into force as at 20 December 2015. Tariffs on $792m (48%) of New Zealand exports to Korea have been removed. The FTA is predicted to boost exports of wine, cherries, and kiwifruit to NZ’s fifth largest trade partner.

Continued pressure in Dairy…The ANZ Commodity Price Index fell a 1.8% in December and a further 2.3% in January, leaving world commodity prices 14.7% down y/y. A depressed NZD has largely shielded local producers from international commodity price declines, as NZD commodity have fallen on 1.6% y/y. The biggest decliners in the

index were wool, skins, cheese and whole milk powder. Global Dairy Trade (GDT) auction price on 19 January fell 1.4% and a further 7.4% on 2 February. The average milk price on 2 February was US$2,276/MT and the whole milk powder (WMP) was US$1,952/MT. Fonterra have cut its forecast farmgate milk price for the current season from $4.60 to $4.15 although maintained its dividend range from 35c – 40c. Open Country Dairy and Westland Milk Products have also reduced forecast payout ranges to $4.00 – $4.30 and $4.15 – $4.45 respectively. Volumes sold at GDT auctions over 2015 were down 28% from 2014 as Fonterra has targeted more direct contracts and value-add products. Higher European production, sanctions on exports to Russia, weak Chinese import demand and other major importers being overstocked have all contributed to recent dairy price declines.

.. and in LambSustained sheep meat price lows and drought conditions have caused sheep farmers to cull herds in record numbers. Processed lamb numbers reached 3.9m to mid-December, up to 620,000 from last year. Beef and Lamb NZ has also estimated that 1.7m fewer lambs were born in the spring. Local producers have been competing with high sheep meat stocks from the Middle East, China and the United Kingdom and the impact of this extra supply on world prices.

Craig Armitage


South AfricaUS agri cooperative Land O’Lakes buys a 52.5% stake in South Africa’s Villa Crop ProtectionLand O’Lakes’ first major commercial investment in Africa aims to leverage their complementary portfolios of productivity-enhancing crop input products and services to help farms improve their yields sustainably. With this partnership, Villa Crop Protection plans to expand its operations to the rest of Africa.

While the focus of foreign investment in African agriculture has been primarily towards growing production through an increase in farmed area, productivity improvements can play a much greater role. In that context, more such deals can be expected in the future.

Richard Ferguson

TanzaniaAgDevCo to invest US$15.4m to support smallholder across AfricaAgDevCo, in partnership with The MasterCard Foundation, has launched a US$15m initiative to boost smallholder incomes in Ghana, Malawi, Mozambique, Senegal, Tanzania, Uganda and Zambia. The company has established a Smallholder Development Unit (SDU) which would provide training; access to quality inputs and mobile technology solutions; and assist with long-term purchase contracts. The SDU aims to benefit up to half a million farmers through 25 out-grower schemes over five years.

The out-grower model is a key component of many agribusiness expansion strategies, as they conserve capital and assure local community support. Initiatives such as these are important for establishing the viability of out-grower schemes across Africa.

Tanzania considering liberalising agribusiness marketingAn official in the Tanzania Prime Ministers’ Office recently said that the government is considering letting

farmers decide where and at what price to sell their output. Freeing farmers from government control at the marketing stage will likely ensure higher incomes and in turn would contribute to productivity improvements.

Richard Ferguson

USAMergers and acquisitions. DuPont and The Dow Chemical Company agreed to combine in a merger of equals. The new company will be named DowDuPont. The parties intend to subsequently pursue a separation of DowDuPont into three independent, publicly traded companies through tax-free spin-offs. The three businesses that the boards intend to separate are: Agriculture Company, Material Science Company, and Specialty Products Company. The spin-offs are expected to occur 18-24 months after the merger completes. Upon the merger closing, DowDuPont would have a combined market capitalization of approximately $130 billion (at announcement).

Food trust.Safety, quality, and trust in food continues to be a hot topic in the US and is certainly top of mind for many restaurants in light of recent activity at Chipotle Mexican Grill. In 2015, Chipotle had a series of E. coli, Salmonella, and norovirus outbreaks at restaurants around the country. Management believes the worst is behind them and has an optimistic outlook for 2016, but 4Q15 and full-year 2015 results did not go unscathed.

Chipotle’s 4Q15 comparable restaurant sales decreased 14.6% compared to 4Q14. Management stated the decrease was primarily driven by publicity during the quarter surrounding the food-borne illness incidents. Full year 2015 comparable restaurant sales decreased 0.2%. Management believes the recent outbreaks could cost the company between US$14m and US$16m. Chipotle’s stock has plummeted, it’s being sued by customers, and the company has been served a subpoena by

the US Food and Drug Administration’s Office of Criminal Investigations. The company’s reputation is also on the line, as it’s been receiving criticism and mockery in the news and on social media.

In addition, the company continues to have supplier issues. In mid-January, the company suspended one of its pork suppliers for violating the company’s Food with Integrity program standards. The suspension has reportedly resulted in the absence of carnitas as an option in around one-third of their restaurants.

Over the last several months, Chipotle has been implementing an enhanced food safety plan which includes a farm-to-fork assessment of ingredients, changes to food prep and food handling practices, and enhanced internal training. In addition, Chipotle closed all of its stores nationwide (more than 1,900 restaurants) for several hours on February 8th to provide an opportunity to talk with its staff about food safety and discuss changes and answer questions. Marketing efforts will also be ramped up throughout 2016 to increase customer visits.

AgTech Financing – Year in Review 2015 According to Agfunder, the agriculture technology (AgTech) sector raised US$4.6bn investment dollars across 526 deals in 2015, far surpassing initial expectations and nearly doubling 2014 figures (US$2.36bn).

Companies located in the US received just over half of all global investment (US$2.4bn) during 2015. By number of deals, this was 58% of the year’s activity, much lower than the 90% share in 2014. AgFunder attributes this not only to increased investment in international deals, but also increased reporting by international companies and the continued globalization of private capital markets. The top 20 US venture capital deals in agtech spanned nearly every sector, with the top two deals going to grocery delivery and sustainable protein. The top two US deals belonged to Blue Apron (US$135m) and Impossible Foods (US$108m).


RegulatoryFood and agriculture policy saw lots of movement in 2015 and it is expected to continue in 2016. The hot topics include:

•Food labeling and regulation of biotechnology – the Safe and Accurate Food Labeling act of 2015, which would create a voluntary GMA labeling scheme and give administration of the program to the US FDA, has been passed by the US House of Representatives and is waiting consideration from the Senate.

•The ethanol standard – The Environmental Protection Agency (EPA) released its Renewable Fuel Standards (RFS) for 2014, 2015, and 2016, which also included its volume requirements for biomass-based diesel for 2017.

•The Food Safety Modernization Act – Several major rules under FSMA were released such as preventative controls for human food and animal food, the produce safety rule, the foreign supplier verification programs rule, and the accredited third-party certification rule.

•The Waters of the United States (WOTUS) – Updated the administrative definition of WOTUS which defines which waters are “jurisdictional,” or subject to the Clean Water Act’s regulatory requirements.

•The federal nutrition policy – guidelines and conversations around sugar and red meat were at the top of the list for 2015.

Tom Johnson

ZambiaAfDB loans US$30mn to support Zambian cassava producersThe African Development Bank (AfDB) has approved a loan of US$30mn to the Zambian government for the Skills Development and Entrepreneurship Project, which aims to promote job creation, gender equality and poverty reduction amongst young cassava producers.

The AfDB expects the project to create 17,000 on-farm and 4,000 off-farm job opportunities for women and youth, and support the development of the cassava value chain with a focus on local and regional market linkages, technology and innovation and enabling government policy reforms. The project will equip 17,000 cassava farmers associations and cooperatives with business and technical skills for efficient production, commercialisation and storage. The project will also finance the construction of 15 cassava bulking centres.

This is similar to developments in other African countries such as Nigeria, which have recognised the potential of cassava to enhance domestic food security through the replacement of wheat imports and the provision of inputs to sectors such as animal feed and paper.

Zambian fishing company Yalelo is investing US$9.5mn to increase tilapia productionYalelo plans to invest US$9.5m at its cage fish farming operations in Siavonga to increase the company’s annual fish production from 7,000 tonnes to 30,000 tonnes in the next five years. Zambia has recently focused on the development of the livestock sector and created a new Ministry of Livestock and Fisheries, along with a separate Ministry of Agriculture.

Globally, interest has been growing in the aquaculture sector with many M&A deals seen in the past couple of years by the likes of Cargill and Mitsubishi.

Richard Ferguson


An extensive global network•We’re a network of firms in 158

countries with close to 169,000 people who are committed to delivering quality in assurance, tax and advisory services.

A dedicated agribusiness service centre in Brazil•Based for almost 40 years in the

northwest region of São Paulo, PwC Brazil is well known for its expertise in serving the agribusiness sector. For this reason, and believing in the growth of Agribusiness in Brazil, PwC has expanded its activities in this industry, creating a dedicated PwC Agribusiness Excellence Centre in 2007.

•Through this centre, Agribusiness clients in this industry throughout Brazil are served in the areas of audit, tax consulting and business consultancy by a team of professionals trained and updated on major issues and industry trends. We have hired dedicated agribusiness professionals, such as agronomists, foresters, veterinarians, agro-economists, environmental managers and others, to add value and help in the understanding of the real needs of our customers.

•We have also created an Agribusiness Research and Knowledge Centre, in order to keep our staff and clients updated on the main issues and trends. With a method specially developed by PwC, analysts study the technical management of the main crops in Brazil, perform environmental, industry and competitiveness analysis, and also studies about the main players operating in each agro-industrial system analysed. The Agribusiness Research and Knowledge Centre is also able to provide market intelligence services and support our professionals in evaluating investment options in the agribusiness industry.

An Agribusiness Service Centre in Argentina•Located in Rosario, at the heart of the

Pampas region, PwC Argentina has opened an Agribusiness Service Centre to provide professional services to the agribusiness community. Argentina is a major player among food producing countries and agribusiness is an important strategic contributor to the economy.

•We believe there is extraordinary growth potential in the long term for further developing agricultural activities. The Agribusiness Service Centre provides value added services to our clients combining strong technical skills with an in-depth industry insights:

•Regional agribusiness clients are better served by coordinating activities with the Agribusiness Centre in Ribeirao Preto, Brazil.

•A Research and Knowledge Centre has also been developed to keep our technical staff and clients updated on main agricultural issues. Specific sub-industry reports have already been developed as well as quarterly agricultural situation reports.

Dedicated agribusiness practice in MENA •PwC has the only dedicated

agribusiness practice in the MENA region among major consultancies. We offer a full range of advisory services to food companies, investors and government agencies. We provide advice on investment and partnership strategies, technical and financial feasibility studies, agricultural and food security policies, corporate transformation initiatives, and supply chain optimisation. We cover a range of crops and animal food production, and we can help companies with market expansion, product portfolio diversification, and positioning along the value chain.

Extensive Agribusiness team in India•We have a 13 member team based at

New Delhi, Mumbai and Pune. Apart from working in India, the team members have experience of working in Nepal, Bhutan, Bangladesh, Tanzania, Ghana and Ethiopia. The team brings vast experience and knowledge of the Agricultural subsectors such as agri-retail, food processing, agri-marketing, farm inputs, farm machinery, warehousing and cold chain infrastructure, agri banking etc.

•Over a period of time the team has been engaged with various private, public and multilateral agencies, advising on supply chain management, project management, value chain assessment, monitoring and evaluation, business plan and growth strategy development, investor/partner search, policy planning and implementation support, technical due diligence, and transaction advisory.

Extensive food security expertise•PwC has helped at least four different

governments formulate comprehensive food security strategies. These have looked at the key risks and exposures those countries face with regards to food security; changing food supply/demand dynamics locally and globally; issues by key food commodity type; assessing current plans to address current issues; formulation of new initiatives to solve key food security risks, both in the short and long term; overall cross-government coordination and implementation plans. A key emphasis of the work was making sure the plans were practical and involved close alignment between government and the private sector.

PwC has:

Did you know?


Commodities risk management expertiseOver the last 4 – 5 years the world has witnessed a period of sustained energy and commodity price volatility, whether this be fuel oil, gas or electricity, metals such as aluminium, steel or copper, or agricultural products such as cotton, wheat or sugar. Commodity price risks are also being quickly transferred through the value chain, for example a company buying plastic will be exposed to the volatile price of oil.

This shift brings major implications for businesses across many sectors. Commodity price volatility is increasingly affecting the profits, cash flows and share prices of companies that use or consume energy or raw materials. It is difficult to think of a business model that isn’t in some way exposed to commodity price volatility – it’s just a matter of how much.

We are seeing a continued trend across corporates, particularly in the consumer and retail goods sectors, towards the implementation of commodity trade capture, valuation and risk management systems. These systems can be vital in ensuring sound controls in an area of

Completed a global agribusiness review for New Zealand Trade and EnterpriseNew Zealand Trade and Enterprise, in partnership with the Ministry of Economic Development, the Ministry of Foreign Affairs and the Ministry for Primary Industries, commissioned PwC to explore opportunities in key international markets with a focus on South America and China. The resulting agribusiness research provides insight into New Zealand’s pastoral production system and related areas of competitive advantage. The research is part of a wider programme of work focused on maximising international opportunities for companies within the agriculture industry. The two-part report provides a comprehensive background analysis and an executive summary outlining five areas of opportunity for New Zealand agribusiness. Segmented by country, the study looks at production opportunity and value chain for each of the seven countries analysed. To learn more and download copies of the report visit: https://www.nzte.govt.nz/en/export/market-research.

high inherent business and reporting risk. However, they can be complex to implement, and therefore require careful selection, project management and integration into the business processes and other systems. We have a dedicated team experienced at doing this.

Efficient tax structure expertiseIncreased competitive pressures and challenging market environment continue to force local, regional and global market players to centralise certain functions. This applies to centralised trading and can be used to plan the tax position of agricultural groups. PwC can help with the centralised, cross-border trading and risk management transactions from a tax perspective, having particular regard to transfer pricing (TP) and thin-cap (TC). PwC has unique experience with respect to advice on corporate tax compliance, and assistance in planning tax efficient trading structures, financing and transactions. In addition we can help with audits, dispute resolution and Advance Priced Agreements to minimise related tax risks.


https://www.nzte.govt.nz/en/export/market-research

https://www.nzte.govt.nz/en/export/market-research

Sustainability and climate change expertsBy 2050 the world’s population is projected have to grow to approximately 9 billion. As competition for agricultural commodities and inputs intensifies and our ability to satisfy this demand is increasingly constrained by economic, social and environmental factors, innovative solutions will be required to ensure that we make better, more efficient, use of resources and in some cases find more sustainable alternatives whilst increasing productivity and driving economic prosperity. PwC is working with organisations including agribusiness, the wider private sector, governments, NGOs and multilateral organisations on a range of sustainability and climate change related projects. Recent projects include; climate change risk mapping for soft agricultural commodity sourcing; sustainability strategy support for agri businesses; evaluating the business case and socio-economic benefit for local sourcing of agricultural raw materials, climate change training for African agri-businesses, the development of a methodology and carbon calculator for understanding emissions from small holder agriculture in Africa, and assessments of market and financial opportunities for climate-smart agriculture.

Extensive forensic skills and supply chain experience We have carried out independent investigations and advised on governance improvements in some of the highest profile reputational crises of recent years. We believe the benefits of a robust, independent review of the facts are considerable. Our specialists help companies respond decisively – a key first factor in maintaining trust and protecting shareholder value. We work with clients to define and implement enhanced supply chain risk management strategies and capabilities. This can

range from conducting supplier risk assessments and audits, supply chain and procurement strategy and organisation redesign, deployment of automated monitoring technology as well as crisis management, financial restructuring and company turnaround, and administration/liquidation services. We can:

•Deliver forensic investigations to identify what may have gone wrong, the potential consequences, and provide support in claims management.

•Perform risk profiling and assessment of the supply chain to quickly identify and quantify key sources of risk, dependency and vulnerability.

•Assess the effectiveness of the control environment and audit approach and re-perform audits to provide assurance as required.

•Deploy risk monitoring solutions to ensure compliance with agreed standards.

•Develop robust supply chain risk management methodology, tools and capability.

•Redesign supply chain structure, strategy and organisation to optimise balance between cost and resilience.

PwC New Zealand assists in development of a food-safety joint venture in ChinaHigher-protein diets and lingering distrust of domestic food sources in China have not only increased New Zealand’s beef and lamb exports, but have presented further opportunities for New Zealand to assist with developing food safety practices.

AsureQuality and PwC New Zealand signed a collaboration framework agreement with China Mengniu Dairy Company and COFCO Corporation to investigate the development of a China-New Zealand agribusiness service and Food Safety Centre of Excellence in China.

AsureQuality is a commercial company, wholly owned by the New Zealand government, providing food safety and biosecurity services globally to the food and primary production sectors.

The objectives of the joint venture are to introduce total management and operational risk management systems to the Chinese agriculture industry. These management systems are based upon the New Zealand agriculture sector model and form a framework for the development of industry best practice across the agricultural supply chain in China, with a focus on food safety.

The partnership also has the support of New Zealand Trade and Enterprise (NZTE) and is the result of extensive research work commissioned by NZTE and carried out by PwC in 2012 to identify international opportunities for New Zealand’s agribusiness sector. In addition, agritechnology is a sector of focus for New Zealand in China, as outlined in the NZ Inc China Strategy.

For more information, visit http://www.pwc.co.nz/foodsafety.

A focus on inclusive businesses in the agricultural sectorAn established Nigerian bank seeking to catalyse a whole new approach to smallholder farming and rural banking, a biscuit manufacturer developing a commercial approach to cassava farming in Malawi, and a summer tomatoes contract farming venture led by a Bangladeshi agribusiness conglomerate. Over the past three and a half years a PwC UK led team has worked with these and other exciting companies to help them develop commercially viable business models that are inclusive of the poor across Africa and Asia. Results, findings and lessons from their work on the UK Business Innovation Facility pilot have been documented in seven case studies, with a final report available here bit.ly/BIFfindings.


http://www.pwc.co.nz/foodsafety

http://www.asurequality.com/news.cfm?itemId=96B3BF97-09CC-EC4E-BC72E1FF28D36746

http://bit.ly/BIFfindings

Wine Insights – New Zealand PwC New Zealand produced the NZ Wine Insights publication as a follow up from the work undertaken after the strategic review of New Zealand winegrowers. The publication comments on various aspects of New Zealand’s competitive advantage and provides insights and observations into the New Zealand wine industry to inform members and stakeholders about the industry’s rapidly changing environment.

Excerpts from the report include:

•The competitive advantage of New Zealand wines lies in markets perceiving New Zealand wine to be of higher quality and more distinctive in style than competitors’ wines, which translates to higher prices for New Zealand exports.

•The New Zealand wine industry remains relatively young in its development compared to many other wine producing nations. The industry has experienced rapid growth and continues to evolve, with substantial structural change occurring in various areas. The industry will continue to develop and evolve, which will present both opportunities and challenges.

•Initiatives aimed at driving efficiency gains and cost reductions, while not impacting quality, should be positive for the industry. Furthermore consolidation opportunities remain.

To learn more and download copies of the report please visit:

http://www.pwc.co.nz/publications/new-zealand-wine-industry-insights/

Publications

Securing Food Supply Chains through Adequate Financing

Report presented at the international summit of cooperatives.

Over the next decades, five major trends will re-shape the world and the food sector: population growth (9.5bn people on Earth in 2050 living mainly in Africa and Asia), switch in economic power to the benefit of emerging markets, accelerating urbanisation, climate change and resource scarcity, and technological breakthrough.

This will put food supply chains under huge pressure.

Between May and August 2014, we interviewed a selection of top managers of food cooperatives all around the world to get their opinion on the upcoming challenges for them in such a context. They told us about ten main challenges all along the value chain that we analyse in our report. Ranging from producing more, differently to customising products to consumers’ new needs and tackling the price volatility or waste issues, these challenges are not specific to cooperatives.

During our discussions, we have identified six key levers that top managers of food cooperatives typically leverage to take up these challenges: 1. Go bigger; 2. Be more global and 3. More integrated; 4. Build stronger brands, 5. Be more innovative and 6. Be more inclusive by opening doors to new type of partnerships.

A 15 pages executive summary can be downloaded here:

https://form.pwc.fr/dev/formulaire_pwc_publication/formulaire_pwc_publication_1.0.0/index.php?tmplvarid=57&id=7312&langview=eng

Please contact:

Ludivine Allardon +33 1 56 57 10 13 [email protected]









Publication: Unlocking the Food Belts of Asia and Africa

Our paper analyses the major agriculture sub-sectors of both continents in terms of production, demand and supply, export potential and processing capability, in order to identify various business and investment opportunities. It also highlights various headwinds to development, in areas like market policies, increasing agriculture input accessibility, access to finance, infrastructure enhancement, skill development, etc. with suggestions on how to overcome these challenges. It also reviews various successful case studies across different countries in Asia and Africa which highlight that good policies, support from government and a favourable business environment can promote agri-business. We have highlighted that forming partnerships between Asian and African countries of Asia and Africa could bring immense opportunities for development and value creation and transform agri-business in both continents. We discuss various partnership models between Government and Private sector, to bring efficiency and improvement in key areas such as skill development, agriculture research, investment in agriculture and agricultural operations.

Click here for a link to the document.

Agribusiness Insights Survey – South AfricaPwC’s annual Agribusiness survey is with a group of agribusinesses with operations mainly focused on delivering agricultural and related services to primary producers. The aim of the survey is to provide the insights of business leaders and the benchmarking of their financial data to add value to the agricultural industry.

The sector is confident about its growth prospects over the next few years amidst a raft of regulations, wage negotiations, land reform and the global economic uncertainty. The main reason for growth expectations as indicated by CEOs is new joint ventures and strategic alliances.

Brazilian Agribusiness ReportIn Brazil we have recently published a series of documents outlining the sector and its characteristics:

•Doing Agribusiness in Brazil: an in depth look at the agribusiness industry.

•Agribusiness highlights.

•Agribusiness overview: key numbers and facts.

PwC involved in major Asia-Africa Business ForumThe Federation of Indian Chambers of Commerce and Industry (FICCI) and the Government of India organised the first ever Asia-Africa Agri Business Forum from February 4 – 6, 2014 in New Delhi. PwC was part of this initiative, as a knowledge partner. We produced a paper ‘Unlocking the food belts of Asia and Africa’ highlighting the potential of the agricultural sector in both continents, and the best areas for collaboration.

Event details

The event was targeted at tapping the tremendous business opportunities between Asian and African continents in the agriculture, agribusiness and food-processing sectors, and had strong political support: the Indian President inaugurated the forum, with agriculture ministers from many Asian and African countries attending. Leading international organisations like African Development Bank, Asian Development Bank, World Bank, World food programme, Department for International Development (DFID) brought a global perspective. It provided a unique business platform for industry leaders, policy makers, governments and other important stakeholders to collectively address the issue of food security and the opportunities to engage with each other while looking at the huge potential for growth, development and business.

This sentiment is also echoed in the Confidence Index of the Agricultural Business Chamber (Agbiz) and the Industrial Development Corporation (IDC). This index indicated a further increase in the agribusiness confidence levels in the fourth quarter of 2013.

CEOs of agribusinesses are also very positive towards the possibility of expansion into the rest of Africa. 70% indicated that they would pursue such opportunities. Africa is increasingly becoming a preferred investment destination and is said to represent the last frontier in global food and agricultural markets with its large percentage of uncultivated fertile land and sufficient water resources, according to a recent report issued by the World Bank. The report calls on governments to work side-by-side with agribusinesses, and to link farmers with consumers in an increasingly urbanised Africa.

The report is available online: http://www.pwc.co.za/agri-business

PwC Netherlands report on megatrends affecting AgribusinessWe discuss five megatrends that heavily impact each link of the sector’s value chain, and explore the drivers of this change and the long term outlook for the sector. Demographic change leads to an aging workforce and fewer students opting for a career in farming and food engineering. In addition, consumers spend less and spend differently – for example on healthier foods, or on smaller packages for singles. Accelerating urbanisation brings expanding cities and farming in closer proximity, shifting the sector’s focus in stakeholder management from ministers to mayors. Cities also face logistical issues how to bring food in – and waste out. Technological advances increased yields and reduced use of energy and water, while food processing extended shelf life, reduced waste and widened variety of products. Logistics enable year-round availability of fresh products. Consumers share recipes on social media – and concerns on food safety. Resource scarcity contests the way we produce,


http://ficci.com/publication-page.asp?spid=20358

http://www.pwc.co.za/agri-business

source and consume. Phosphate for fertilisers, energy for greenhouses, or cocoa for food manufacturers abundance is not obvious. Also, the way we ship, store, sell and dispose food needs ethinking. The shift in economic power increases living standards in high-growth markets, providing opportunities for agrifood companies to further expand their non-European footprint.

Click here for a copy of the report

South Africa: Agribusiness insights survey 2014/15Agribusiness is a hugely important sector for our firm globally. And within this, we have a keen focus on Africa. An abundance of natural resources, coupled with coherent strategic and operational plans, relevant partnerships and sufficient capital, offers great opportunities for value creation in African agribusiness. We are working closely with companies, governments and multilateral organisations to make this happen.

We have been conducting surveys on South African agribusinesses for a number of years. However, with the 2014/2015 survey we are entering a new era by providing insights from Africa CEOs for Africa CEOs in the agribusiness space. The survey provides insights into the strategic challenges CEOs face and discusses a number of megatrends that we believe will shape the future of these businesses.

http://www.pwc.co.za/en_ZA/za/assets/pdf/agribusinesses-insights-survey-2014-2015.pdf

PwC sugar studyPwC France has produced a study about the ‘Impacts of end of EU sugar quotas’ This report gives an overview of the sugar market and details the impacts of the end of EU sugar quotas for industrials.

Food Security in AfricaFood security’s significance as a key geostrategic theme was confirmed in 2007-2008 when it emerged at the top of the international political agenda. Although food price inflation has receded in recent years, the underlying supply challenges remain demanding. The collapse in oil prices has forced food security and agricultural development to the top of the political and economic agenda across Africa. To thrive economically and socially, Africa needs first to deal with its own US$35bn structural food deficit before it can play a role in alleviating long-term strategic supply impediments across the world. This report considers food security across Africa with particular emphasis on the policies of nine African countries: Nigeria, Ghana, Angola, Kenya, Tanzania, Mozambique, Zambia, Zimbabwe and Sierra Leone

The complete report can be found at http://www.pwc.com/africafoodsecurity

For further details contact either Richard Ferguson or Mark James


http://www.pwc.nl/nl/publicaties/megatrends-impacting-the-dutch-agrifood-industry.jhtml

Calendar of events

March

23rd – General Mills

April

6th – Monsanto

26th – AGCO

26th – DuPont

26th – Intrepid Potash

27th – Pilgrim’s Pride

28th – Bunge

28th – Dow Chemicals

28th – Ingredion

28th – Potash Corp of Saskatchewan

May

2nd – Sysco Corporation

3rd – Archer Daniels Midland Company

3rd – Balchem Corporation

3rd – Mosaic

4th – CF Industries

5th – Kellogg

9th – Dean Foods

9th – FMC Corp

9th – Omega Protein Corporation

9th – Tyson Foods

12th – Darling Ingredients

18th – Hormel Foods

19th – Flowers Food

20th – Deere & Co


Prices

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Corn, cents/bushel

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Soyabeans, cents/bushel

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Cocoa, US$/mT

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Coffee, cents/lb

Raw Sugar, cents/lb

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Cotton, cents/l

01/01/2008 01/01/2009 01/01/2010 01/01/2011 01/01/2012 01/01/2013 01/01/2014 01/01/20150

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Wool, Aus cents/kg

01/01/2008 01/01/2009 01/01/2010 01/01/2011 01/01/2012 01/01/2013 01/01/2014 01/01/2015

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S&P GSCI Lean Hogs

01/01/201501/01/2008 01/01/2009 01/01/2010 01/01/2011 01/01/2012 01/01/2013 01/01/2014

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CME milk


Pork/Corn (rebased)

Milk/Corn (rebased)

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Global coordinatorMark James+44 (0) 7803 858721 [email protected]

AfricaRichard Ferguson+44 (0) 7880 827282 [email protected]

ArgentinaMariano Tomatis+ 54 11 4850 4757 [email protected]

Sebastian Azagra+54 341 446 8000 [email protected]

AustraliaCraig Heraghty+61 282 661 458 [email protected]

BrazilAna Malvestio+55 16 2133 6624 [email protected]

Jose Rezende+55 11 3674 2279 [email protected]

Daniela Coco+55 19 3794 5400 [email protected]

CanadaHans Andersen+204 926 2407 [email protected]

FranceYves Pelle+ 33 (0) 299 231 705 [email protected]

Germany, Austria and SwitzerlandReinhard Vocke+49 (0) 211 3890 195 [email protected]

Gerd Bovensiepen+49 (0) 211 9812 939 [email protected]

IndiaAjay Kakra+91 124 3306029 [email protected]

Sunjay VS+91 124 3306171 [email protected]

IrelandJimmy Maher+353 (0) 1 792 6326 [email protected]

MENAMark Webster+966 11 211 0400 (Ext. 1555) [email protected]

NetherlandRuud Kok+31 (0) 887926382 [email protected]

New ZealandCraig Armitage+64 3 374 3052 [email protected]

RomaniaAnca Scurtescu+40 21 22 53 871 [email protected]

SingaporeRichard Skinner+65 9823 3771 [email protected]

South AfricaFrans Weilbach+27 (21) 815 3204 [email protected]

UkraineOlena Volkova+38 (0) 56 733 5010 [email protected]

UKMark James+44 (0) 20 7212 1869 [email protected]

Stephen Oldfield+44 (0) 7710 388792 [email protected]

Thomas Sengbusch+44 (0) 7725 069448 [email protected]

Global Agribusiness contactsUSAThomas Johnson+1 612 596 4846 [email protected]

Commodity treasury servicesNick James+44 (0) 20 7212 6550 [email protected]

Tax structuringAnnie Devoy+44 (0) 20 7212 5572 [email protected]

Szymon Wlazlowski+44 (0) 20 7212 1889 [email protected]

Sustainability and climate changeKieron Blakemore+44 (0) 20 7212 4212 [email protected]

Teresa Fabian+44 (0) 20 7213 8309 [email protected]

Supply chain and forensic investigationsFran Marwood+44 (0) 20 7213 4709 [email protected]

Matt Elkington+44 (0) 20 7804 1417 [email protected]

Craig Armitage+64 3374 3052 [email protected]

Private Sector and International DevelopmentCarolin Scramm+44 7808 105691 [email protected]

Jack Newnham+44 7889 521600 [email protected]

Cristina Bortes +44 7769 941119 [email protected]


www.pwc.comThis publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication, and, to the extent permitted by law, PricewaterhouseCoopers LLP, its members, employees and agents do not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.

© 2016 PricewaterhouseCoopers LLP. All rights reserved. In this document, “PwC” refers to the UK member firm, and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details.

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