PhilippedeLapérouse - Global Aquaculture Alliance€¦ ·...
Transcript of PhilippedeLapérouse - Global Aquaculture Alliance€¦ ·...
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Philippe de Lapérouse HighQuest Partners United States Philippe de Lapérouse is director of HighQuest Partners’ global food and agribusiness prac:ce. He has more than 20 years experience in senior leadership posi:ons with global companies in the agro-‐industrial and value-‐added food chain, as well as in private-‐equity inves:ng. Previously, de Lapérouse was a principal at Vanikoro Advisory LLC and director of business development for Bunge North America Inc.
Agriculture As An Emerging Asset Class
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Philippe de Lapérouse HighQuest Partners LLC
2. Size of global ag market
3. Fundamental drivers
4. Expected range of returns
5. Summary
1. HighQuest Partners + Soyatech
HighQuest + Soyatech
Strategic advisor in global food, agribusiness and biofuels
Media and conferences for global agriculture
RepresentaKve Clients HighQuest works globally for strategic and financial investors opera=ng across the sector
Global AgInvesKng Europe 2012 December 3-‐5 | London
Global AgInvesKng Middle East 2013
February 25-‐27 | Abu Dhabi
Global AgInvesKng 2013 April 29-‐May 1 | New York City
www.globalaginves:ng.com
Upcoming Events
Assets Under Management
Additional AUM in Three Years
Ag-Focused Investment Managers $16.2 billion $17.3 billion
Diversified Investment Managers $3.6 billion $3.4 billion
End Investors $1.2 trillion $8.2 billion
New York 2012 conference aVendees
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New Investment – Strategy
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New Investment – Geography
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New Investment – Products
1. HighQuest Partners + Soyatech
2. Size of global ag market
3. Fundamental drivers
4. Expected range of returns
5. Summary
Total global agriculture market value is es:mated at more than $6.4 trillion (including the food & beverage sector), represen:ng over 8.5% of the world’s economic acKvity in 2010.
Global Agricultural has been Experiencing Steady Growth
of 4 -‐ 5% in Recent Years
Note: Illustra:ve • 1980-‐1999 uses 2000 pricing • 2011-‐2020 uses 2010 pricing (which is not a bad mean going forward
Agricultural commodi.es trade is forecast to exceed 520 million metric tons in next ten years due to rising demand in China, India, Southeast Asia and Middle East.
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Global Agricultural Trade Volume to Increase 2.7% (CAGR) Over the Next 10 Years
Wheat
Corn
Soybeans Soybean Meal
Sugar Palm Oil
Rapeseed Soybean Oil
Rapeseed Meal Rapeseed Oil
0
100,000
200,000
300,000
400,000
500,000
600,000
(1000M
T)
Global Trade Volume by Crop, 1980-‐2020F
Wheat
Corn
Soybeans
Soybean Meal
Sugar
Soybean Oil
Rapeseed Oil Rapeseed Meal
-
50,000,000
100,000,000
150,000,000
200,000,000
250,000,000
1980
19
82
1984
19
86
1988
19
90
1992
19
94
1996
19
98
2000
20
02
2004
20
06
2008
20
10
2012
20
14
2016
20
18
2020
(000 USD
)
Total Export Value, 1980-‐2020F
Rapeseed Palm Oil
Source: USDA staKsKcs and baseline projecKon, CME
Input
• Seed; • Fertilizer; • Pesticide; • Herbicide • Farm
equipment • Energy
ProducKon
• Growers; • Cooperatives
Storage Handling/ Trading
Storage Handling/ Trading
• Grain elevators;
• Brokers and traders
TransportaKon& LogisKcs
• Ocean; • Barge; • Rail; • Truck
Processing
• Primary processing;
• Food and feed ingredients
End users
• Food • Feed • Biofuels • Industrial
Agriculture Value Chain
A complex market structure which requires apprecia:on for how margins are shared amongst players at different points along the supply chain.
Global Agricultural Market Outlook
Meat & aquaculture
Seed
Ag chemicals & ferKlizer
Ag machinery
Ag producKon
Food& beverage
Animal feed
Biofuels
Ag investment
Ag insurance
2010 market value (est.) 2015 market value (est.) EsKmated CAGR 2010-‐2015
$37 billion
$134 billion
$56.1 billion
$ 1.3 trillion
$3.84 trillion
$263 billion
$672 billion
$56.4 billion
$20 billion
$23 billion
$47 billion
$196 billion
$80.5 billion
$1.46 trillion
$4.6 trillion
$313 billion
$815 billion
$80 billion
$40 billion
$66.6 billion
3.5%
6.5%
7.5%
2.4%
3.7%
3.5%
3.9%
7.2%
15%
20%
Range of Investment OpportuniKes in the Ag Sector Real Assets
• Farmland • Infrastructure
Private Equity • Upstream
o inputs(seed, chemicals, fer:lizer, technology services, capital goods • Downstream
o storage and logis:cs o value added processing of ingredients o food/feed/industrial processing
Venture Capital • Biotech • Enabling technologies (precision ag) Water theme investments Liquid Assets
• Public equi:es • Commodity index funds
1. HighQuest Partners + Soyatech
2. Size of global ag market
3. Fundamental Drivers
4. Expected range of returns
5. Summary
Key Issues Driving Farmland Values PopulaKon growth and increase in GDP
• World popula:on 9 billion in 2050 • Increased demand in developing markets, par:cularly Asia, SE Asia and North
Africa • Shie in diets from grain to animal protein (Bennef’s law)
Increasing urbanizaKon • Pressure on available arable land for crop produc:on • Increasing reliance on processed foods
Constraints on supply • Access to water • Climate change • Linkage to energy markets(biofuel mandates) • Slowdown in yield increases
Human capital • Genera:onal transfer in both developed and developing markets • Lack of capacity building in developing markets
Historical global harvested acreage(ha) on a per capita basis (1964 – 2012 proj.)
0.12
0.15
0.18
0.21
0.24
Note: The crops include barley, corn, millet, oats, rye, sorghum, wheat, mixed grain, rice and oilseeds (copra , palm kernel, coBonseed, peanut, rapeseed, soybean, sunflower seed).
• Global harvested acreage has increased by 41% to es:mated 916 million hectares in 2012 from 648 million hectares in 1964.
• Global harvested acreage on a per capita basis has dropped 35% to es:mated 0.13 ha/person in 2012 from 0.2 ha/person in 1964.
Shrinking ContribuKon to the Global Food Supply
Historical world per capita demand for corn, wheat and soybean (kg) (1964 – 2012 proj.)
0
30
60
90
120
150
Per capita corn demand Per capita soybean demand Per capita wheat demand
• Global consump:on of corn, soybean and wheat has increased 305%, 772% and 187% respec:vely to 863 million MT 261 million MT and 673 million MT.
• Per capita soybean consump:on has been growing significantly (by 311% to over 37 kg/ person since 1964) thanks to increasing demands from industrial sector and animal feed sector, while per capita corn and wheat consump:on will reach 122.4 kg/ person (growth of 87%) and 95.5 kg/person (growth of 33%) respec:vely in 2012.
Per Capita Demand for Major Crops Increasing
Historical global per capita feed grain and oilseed ending stocks(MT) (1964 – 2012 proj.)
0.00
0.03
0.05
0.08
0.10
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.
Market VolaKlity Driven by Uncertainty of Available Supply
Trends in Per Capita Biocapacity and Ecological Footprint
Source: The 2050 Criteria report published in 2012 by WWF.
.
0
0.01
0.02
0.03
0.04
0.05 Soybeans
-‐1%
1%
3%
5% Corn
-‐1%
1%
3%
5% Rice
0%
1%
2%
3%
4%
5%
1971
1974
1977
1980
1983
1986
1989
1992
1995
1998
2001
2004
2007
2010
Wheat
Trailing 10-‐Year Yield Improvement
0.0
1.0
2.0
3.0
4.0
5.0
6.0
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
2016
2018
2020
Global Yields for 4 Major Crops Historical and Projected
(MT / ha) Corn
Rice
Wheat
Soy
Source: USDA; HighQuest Analysis
Declining ProducKvity Gains
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Source: CME; NYMEX; HighQuest Partners Analysis
0.00
20.00
40.00
60.00
80.00
100.00
120.00
140.00
160.00
180.00
200.00
0.00
10.00
20.00
30.00
40.00
50.00
60.00
70.00
80.00
90.00
100.00
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Soybean Oil and Crude Petroleum (January 2000 to March 2011 -- Weekly Continuous Near Futures)
Jan ’97-‐Dec ‘06 CorrelaKon = 0.25
Jan ’07-‐ Oct ‘09 CorrelaKon = 0.88
New Pricing Dynamic Created by Biofuels Mandates
Soybean Oil
Crude Petroleum
Crude Petroleum So
ybean Oil
Pricing -‐ Corn
Ethanol
Feed
FSI
$-‐
$0.50
$1.00
$1.50
$2.00
$2.50
$3.00
$3.50
$4.00
3/25
/200
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6/25
/200
5
9/25
/200
5
12/25/20
05
3/25
/200
6
6/25
/200
6
9/25
/200
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12/25/20
06
3/25
/200
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6/25
/200
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9/25
/200
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12/25/20
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3/25
/200
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6/25
/200
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9/25
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12/25/20
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3/25
/200
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6/25
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3/25
/201
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6/25
/201
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9/25
/201
0
Ethanol, Corn and Price Spread(weekly cont. futures 4/1/05-‐10/15/10; $/gal etoh)
Correlations:4/1/05 -‐ 8/30/07 = 0.059/1/07 -‐ 10/15/10 = 0.95
Corn (per gal etoh)
Ethanol
Spread
R² = 0.90382
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
$1.00 $1.50 $2.00 $2.50 $3.00 $3.50 C
orn
$/bu
Ethanol $/gal
Corn vs. Ethanol weekly continuous futures prices
9/1/07 - 10/15/10
RelaKonship – Ending Stocks (inventories) and Prices
$-
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
0%
10%
20%
30%
40%
50%
60%
70% 19
61
1963
19
65
1967
19
69
1971
19
73
1975
19
77
1979
19
81
1983
19
85
1987
19
89
1991
19
93
1995
19
97
1999
20
01
2003
20
05
2007
20
09
US$
/Bu
US Corn Stocks-to-Use Ratio vs. Corn Price
Stocks-‐to-‐Use
Price
Demand for CommodiKes Driven by Rapid GDP/Capita Growth in Developing and Emerging Markets
Animal Protein ConsumpKon Highly Correlated with Per Capita GDP
Animal Protein ConsumpKon (kg) Per Capita vs. GDP Per Capita (PPP basis) -‐ 2010
R² = 0.67086
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20
40
60
80
100
120
140
- 10,000 20,000 30,000 40,000 50,000 60,000
Consum
pKon
per cap
ita (k
g)
GDP per capita(PPP)
Australia USA
Japan
UAE
S. Korea Norway
New Zealand
China
China – Increases in Total Protein ConsumpKon Highly Correlated with Increases in GDP
R² = 0.95
20
30
40
50
60
70
80
0 1,000 2,000 3,000 4,000 5,000 6,000 7,000
Con
sum
ptio
n pe
r cap
ita (k
g)
GDP per capita (PPP)
Chinese Total Protein ConsumpKon Per Capita vs. GDP Per Capita(PPP basis) (1994-‐2009)
Source: USDA; IMF; HighQuest Analysis
China – Same CorrelaKon Between Vegetable ConsumpKon and GDP
R² = 0.96
0
5
10
15
20
25
30
35
40
0 2,000 4,000 6,000 8,000
Con
sum
ptio
n pe
r cap
ita (k
g)
GDP per capita (PPP)
Chinese Vegetable Meal ConsumpKon Per Capita vs. GDP Per Capita
(1994-‐2009)
Source: USDA; IMF; HighQuest Analysis
R² = 0.93
0
20
40
60
80
100
120
0 10000 20000 30000 40000 50000
Oils
eed
Mea
l Con
sum
ptio
n/Ca
pita
GDP/Capita (PPP-basis)
2009 Oilseed Protein Meal Consumption/Capita vs. GDP/Capita (PPP-basis)
US
Canada
EU
Argentina
Middle EastFSU-12SE AsiaN. AfricaSSA
IndiaS. Asia
Higher GDP Driving Demand for Oilseed Meal
China – Meal Demand Forecast to Increase by 60%
Over the past 15 years, meal consumption in China has had a 99% correlation with GDP per capita. Based on this correlation and OECD projections for future GDP growth in China, HighQuest projects that Chinese meal consumption will increase by 60% over the next decade (50 to 80 million MT).
Projected Global Demand by 2020
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500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
3,500,000 1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
2016
2018
2020
Sunflowerseed Cotton Peanut Sorghum Rapeseed Barley Soy Rice Wheat Corn
Global ProducKon of 10 Major Crops (Historical1980-‐2010; Projected 2011-‐2020; 000 MTs)
Source: USDA; HighQuest Analysis
Farmland Required to Supply Projected Demand
Conservatively, 65-85 million net incremental hectares will be required.
0 10 20 30 40 50 60 70 80 90
Net AddiKonal Farmland Required by Crop
(2010-‐2020; million hectares)
Availability and LocaKon of Available Global Land Reserves
WHILE LAND IS AVAILABLE FOR PLANTING, MUCH OF IT IS NOT EASILY ACCESSIBLE
Sources: FAO; HighQuest Analysis
Net Reserves
547 18%
Forest804 26%
Protected 204 Urban
58 2%
Current Arable141147%
Potential Rainfed Cropland (3,024 million hectares)
Africa256 47%
Latin America
152 28%
Asia87
16%
North America
30 5%
Oceana18 3%
2
Net Reserves By Region(547 million hectares)
Source: World Bank (2011)
Geographic OpKons for Increasing Farmland ProducKon
Grain yields (in metric tons per hectare) rise from lowest (dark blue) to highest (dark red)
Grain Yield DistribuKon Around the Globe
Source: Center for Sustainability and the Global Environment (SAGE), University of Wisconsin.
Historical Shir of Price Equilibrium in Brazil
1960s
1980s
2000s
5 Key Risk Factors Step-‐change improvement in yields Launch of drought resistance varie:es
1. Seed Technology
China SE Asia North Africa/Middle East
2. Slower Growth
On the distant horizon biofuels; protein meal; fat
3. Algae or Microorganisms
Double-‐edged sword Inverts the supply curve
Food security Export bans / trade embargoes GMO acceptance
4. Infrastructure/ Food Wastage
1. Seed Technology
5. Trade Policy
1. HighQuest Partners + Soyatech
2. Size of global ag market
3. Fundamental drivers
4. Expected range of returns
5. Summary
US Farmland Returns vs. Other Major Origins
ComparaKve ProducKon Economics
Key origins offer significant differences in both price and cost structures.
Historical Returns -‐ 100-‐year Illinois Farmland AppreciaKon
Thesis for Farmland Investment 1. Fundamentals
a) Supply < Demand Increase in supply slower than increase in demand
b) Demand Ra:oning High & vola:le prices Price signal for capacity expansion New demand crea:on – biofuels and industrial uses
c) Higher Land Values... ...and poten:ally afrac:ve economics throughout the sector resul:ng from applica:on of technology and efficient agronomic prac:ces which will generate higher cash rents per unit of land which will be capitalized into the value of the land.
2. InflaKon & currency protecKon
3. Uncorrelated returns
Returns on US Farmland Compared to Other Assets
US Cropland (USDA)
Timber (NCREIF)
US Cropland (NCREIF)
Russell 2000
S&P 500
Comm'l RE (NCREIF)
LT Corp Bonds
10-‐yr Treasuries
Gold
GSCI
0.00
2.00
4.00
6.00
8.00
10.00
12.00
0.00 5.00 10.00 15.00 20.00 25.00 30.00
Mea
n Re
al R
etur
ns
Standard Deviation of Returns
Mean Real Return vs. Standard Deviation (1991-2009)
Historical CorrelaKon vs. InflaKon and Other Asset Classes
Farmland Values Low RelaKve to Capitalize Value
Source: USDA farmdoc daily, August 24, 2012
1. HighQuest Partners + Soyatech
2. Size of global ag market
3. Fundamental drivers
4. Expected range of returns
5. Summary
ExpectaKons of Returns for Farmland Investment By Region
North America Risk: Low
Return: Low Vola:lity: Low
Return Expecta:ons:
8-‐12%
South America Risk: Medium
Return: Medium Vola:lity: Medium Return
Expecta:ons: 12-‐20%
Western Europe Risk: Low
Return: Low Vola:lity: Low
Return Expecta:ons:
8-‐12%
Africa Risk: High
Return: High Vola:lity: High
Return Expecta:ons:
25-‐35%
Eastern Europe Risk: Medium
Return: Medium Vola:lity: Medium Return
Expecta:ons: 12-‐14%
Former Soviet Union
Risk: High Return: High Vola:lity: High
Return Expecta:ons:
20-‐30%
Australia & New Zealand Risk: Low
Return: Low Vola:lity: Low
Return Expecta:ons:
9-‐16%
Due diligence consideraKons • ExperKse and experience of management • Risk miKgaKon
• Vola:lity of prices • Exposure to health and environmental risks • Focus on species where there is signficant historical experience vs. novel species
• CalculaKon of necessary inputs(and costs)to achieve opKmal yields • Local economics
• Cost/:me to source inputs and ship to consump:on markets • Cost of energy and fuel • Infrastructure and access to inputs/consump:on markets • Local market for qualified management and labor
• Economic sustainability • Financial risk(leverage and capacity to generate sustainable margins)
• Macro consideraKons • Fuel/energy intensity for produc:on • Changes in demand for output • Alterna:ve land use • Poli:cal, trade and regulatory assessment
Example of Sub-‐AllocaKon Framework for an Ag Poruolio
Geography
Opera.onal / Development
Type of Asset
• Australia • S. America • E. Europe • Russia • Africa
• Land Ownership (Free Title) • Risk-‐ Sharing Lease Structures • Farm Management • Land Development / Conversion • Value Chain Investment
• Permanent Crops • Dairy • Animal Protein ProducKon
Core 8-‐10%
• North America • Row Crop Land • Cash Lease
Philippe de Lapérouse
Managing Director HighQuest Partners, LLC
314-‐994-‐3282 [email protected]
www.highquestpartners.com
1005 North Warson Road, Suite 226 – St. Louis, Missouri 63124 – USA (314) 994-‐3282 | www.highquestpartners.com
Thank You!
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