Insect protein: Rising in popularity for animal feed

While pet food, mainly for cats and dogs, currently has the highest demand for insect protein, a report released by Rabobank, an agriculture banking specialist, found that its high protein factor and low production costs could make it viable for the animal feed market.

Read more

Beer consumption suffered during lockdown

Across the globe, beer consumption suffered from the Covid-19 pandemic in the early stages of 2020. In some countries – such as South Africa – alcohol consumption was restricted, while others – like Mexico – classified brewing as a non-essential activity and ceased beer production.
“In most countries, consumers faced a lockdown and the on-premise channel was closed, creating varying degrees of pain for nearly all brewers,” according to Francois Sonneville, Senior Analyst – Beverages at Rabobank .
“In North America, the overall market has held up relatively well, helped by its reliance on off-trade sales and stellar e-commerce growth. Brewers large and small have proved surprisingly nimble and adaptable – which may lead to notable changes to the on-premise moving forward,” says Sonneville. Craft brewers, who are more dependent on the on-trade, have so far avoided closures, although the winter might impact those dependent on outdoor seating.
Read More: Food fraud being uncovered
In Europe, on-trade markets have been hit hard, especially in tourist areas, and beer
going stale in kegs has caused additional problems. As new Covid cases are on the
rise and the risk of a second lockdown increases, chain integration might help to
lower costs.
Despite a sharp recovery in China, the loss of summer sales will hang over 2020
Asian beer volumes. As China comprises 70% of total Asian beer consumption, it is
critical to recovery. Thailand and Japan have shown smart recoveries in Q3 2020. For
the rest of Asia, specifically, India, the Philippines, and Vietnam, there are mixed

Grain markets look to Australia to fill European shortfall

All eyes are on Australia’s developing winter crop as global grains markets look to Australia to offset a poor European harvest hit by drought, an international grains strategist has told local growers.

Rabobank London-based global grains and oilseeds strategist Stefan Vogel, speaking on the bank’s Australian Grain Mid-season Webinar, said when it comes to wheat and canola in particular, “we are all looking for good crops in Australia to make up the shortfall caused by the poor season in Europe”.

Vogel said after an excellent 2019/20 European harvest where the European Union exported 38 million metric tonnes (mmt) of wheat, this year’s EU export volumes are set to fall at least 10 mmt with most European grain-growing nations – including France, Germany, Poland, Romania and Bulgaria – beset by dry conditions and poor yields. While Ukraine, another  global wheat exporter, is expecting an almost 10 per cent smaller crop than last year.

And this shortfall would remain, he said, even with Russia, “the big guy in the room”, still expected to produce a bigger wheat crop than last year, bring some harvest pressure to recent market tightening.

“So who can offset that shortfall in European production that would be going into export markets? Everyone is banking on Australia to make that happen on the world market because no one else has a whole lot of buffer to make that up. So if we want to keep stable or even growing global export volumes, Australia is actually required to give us a decent amount of wheat on to the world export market,” he said.

For canola too, Vogel said, a poor harvest in Europe will likely see the EU producing its lowest crop since 2006 in the 2020/21 season. And this spells good news for Australia, pushing EU import demand to likely exceed last season’s record high.

This will potentially see Europe double its volume of canola imports from Australia, he said, “Once again in Europe, we have an extremely poor rapeseed/canola crop this year, after suffering the adverse effects of very warm and dry conditions during last year’s autumn plantings and during yield development this April and May. Last year, the European rapeseed crop was bad, but this year the already-harvested crop is even worse.”

Added to this, Vogel said, Ukraine – a country from which Europe usually imports as much canola as is available – will also deliver a diminished crop this year. And Canadian canola – which usually makes up the residual in the EU import mix – is less favoured by EU oilseed processors and canola meal feeders due to its typical GM content.

“So Europe is actually going to need a lot of Australian canola – depending on how much you can ship to us, maybe close to doubling the amount we took last year and getting back to volumes seen in 2017 and 2015 of around 1.9 million tonnes,” he said.

This European supply shortage had been helping to support canola prices, Mr Vogel said, despite temporarily-reduced demand for biodiesel – a key end use for canola oil in the EU market – due to the decline in travel during COVID-19 lockdowns.

“The European price for biodiesel was down during April and May on the back of low demand, but has since largely recovered as we have now chewed through stocks and driving has almost normalised again,” he said. “COVID-19 has clearly hit the prices of canola in Europe, although they are in the meantime still holding above the last few years given improved demand and the extremely poor European crop.”

COVID impacts
Overall for the global grains and oilseeds market, Vogel told the webinar, the immediate effects of the coronavirus pandemic had primarily been felt in the biofuel sector, as well in malt and cotton.

“Clearly we’ve seen with the lockdowns, people were not driving as much to go out or go to work, so the demand for biofuels as a whole suffered. And the same is true for malt where food service and hospitality was closed for the most part and sporting events were shut, so people weren’t consuming the same volumes of beer,” he said.

“And for cotton, people have not been buying as many clothes because they have not been going out or to the office as much, but instead stayed home.”

Vogel said the bank predicts recovery in all these sectors in the next 12 months – albeit potentially not fully, but to “between 85 to 95 per cent of normal levels”.

For the feed grain sector – which, along with food grain, had been relatively unscathed by the effects of the pandemic so far – the impacts of COVID-19 may become more pronounced in the coming 12 months, he said, as the economic downturn triggered by the coronavirus resulted in reduced meat consumption in developing countries.

“We are actually thinking this could get worse in some countries where reduced incomes may see consumers not being able to afford as much meat as they normally consume. We have to consider if there will be a reduction in meat demand and therefore a reduction in livestock feed demand,” he said.

Australian outlook
Rabobank Australian senior grains and oilseeds analyst, Cheryl Kalisch Gordon, told the webinar the bank maintained a positive outlook on the year ahead for Australian grain growers.

While Rabobank had slightly revised down its forecast 2020/21 wheat production to 25 million tonnes due to dryness in some production areas, Dr Kalisch Gordon said Australia would be back as a significant player on the global grain export markets this year.

“With production prospects higher for grain growers in most areas, it will be a year that will start to make up (although not entirely) for the troubling years we’ve had recently,” she said.

In terms of pricing, Kalisch Gordon said, “basis was always going to be moving down from the highs of recent years, which had been fuelled by drought-driven supply shortages”, however prices were expected to find a level of support from the rebuilding of grain stocks needed in Australia.

For wheat, while prices were expected to come in below the current five-year-average – which has been elevated by some ports recording AUD450/tonne wheat for extended periods during the drought – prices should be above the 10-year average.

In addition, she said, growers, particularly those in the eastern states, had a greater – and increasing – capacity for grain storage than in the past, and therefore more capability to avoid harvest sales.

“Added to this, our house view is the Australian dollar will be closer to 64 to 65 US cents by the end of the year and harvest period, and therefore a correction from the higher level it is now at,” she said. “Plus we’ve also had fairly favourable input pricing, especially the cost of urea, which is helpful in boosting yields and protein levels.”

Barley – which typically accounts for between around 20 per cent of Australian farmers’ cropping programs – was going to be “less easy to deal with”, she conceded, with the challenge of finding new export markets to replace being shut out of the main Chinese market due to recently-imposed trade tariffs, and with global stocks high.

“Moving our barley is going to be tricky. The capacity for the barley price to find strength is really going to depend on how farmers hold barley for that feed grain complex in Australia,” she said.

“But globally there is still an animal proteins deficit, so feeding stock isn’t going to be a bad outcome, especially if you are a mixed farmer.”

Sweet outlook for global sugar markets

Having endured the full brunt of COVID-19’s disruption – decreased consumption, distribution hold-ups, plunging oil prices and diving commodity prices – the global sugar industry is now looking towards recovery, according to Rabobank’s latest global Sugar Quarterly report.

As lock-downs ease and foodservice resumes, world sugar prices are starting to rebound, with the ICE #11 Raw Sugar futures finishing the third week of June at 12.18 USc/lb, almost a three cent recovery from April, when prices dropped to as low as 9.21 USc/lb.

And in Australia, domestic prospects are also on the improve – a favourable season driving production, elevated 2020 regional premiums helping buoy margins, and prospects of a low Australian dollar bolstering export opportunities, the bank says in its report for Q2 2020.

Rabobank commodity analyst Charlie Clack said the bank had now lowered its forecast for global sugar consumption for the year ending October, from flat to a one per cent decline – largely driven by the pandemic’s impact in countries such as India, Indonesia and Brazil.
As a result, he said, this would see global sugar stocks declining by less than previously forecast – Rabobank now anticipates a smaller global deficit of 4.3 million metric tonnes raw value through the 2019/20 (October to September) season, revised from its previous estimate of 6.7 million metric tonnes raw value.

“Looking ahead, we expect consumption to recover from the pandemic and go back to trend growth in 2020/21, resulting in a 1.7 per cent increase, and for global production to increase by almost five per cent, driven by a recovery in India and North American crops,” Clack said.

Assessing COVID-19’s impact on global consumption
MClack said sugar consumption during COVID-19 restrictions varied across the world and, although food service outlets were now re-opening, demand was unlikely to return to pre-COVID-19 levels in the near-term.

In the EU and UK, he said, the loss of demand in the beverage and dairy sectors, and overall negative economic impact on purchases, had weighed heavily on the sugar sector.
Strict COVID-19 restrictions across India had also led to a drop in 2019/20 consumption of 3.4 per cent, year-on-year.

“While we anticipate a sharp drop in India’s food service sales and consumption in quarter two 2020, this is also a key period for sales of ice-creams, beverages and other sugary snacks,” Clack said. “Rabobank forecasts a recovery in the 2020/21 season in India as behaviours return to a ‘new normal’.”

In North America, the pandemic appears to have had less of an impact on consumption – with the higher usage of high-fructose corn syrup, rather than sugar, in soft drinks minimising the decline of sugar demand in beverages in the US and Mexico.

Looking ahead, MClack said it was broadly agreed that COVID-19 would negatively impact 2019/20 global consumption, but the full extent was very much unknown.
“Potential “second-wave’ infection events, the longevity of social-restrictions and the severity of a global recession will all play into consumption, as will consumer behaviour,”
he said.

Global sugar production outlook
Global fundamentals should take higher priority for sugar markets, Mr Clack said, as the southern hemisphere crush gains pace, and Asian cane crops are underway.

He said India’s 2020 monsoon season was on time, and at pace, with the favourable season contributing to predicted increase in production – the report forecasting Indian 2020/21 production at 33.5 million tonnes, up 16 per cent year-on-year, if realised.

Indian exports were also strong, despite port congestion and labour issues. In Brazil, port congestion was set to ease, Mr Clack said, better positioning the country to distribute a bumper harvest.

“Dry weather has permitted a flying start for the centre/south harvest in Brazil, and by the end of May, 145 million tonnes of cane had been harvested, versus 129 million tonnes at the same time last season,” he said. “As expected, progress to date shows a pronounced swing to sugar production this season, with 46 per cent of cane going to sugar production over ethanol, versus 33 per cent last season.”

With the 2020/21 Thai cane crop suffering a poor season due to drought, Mr Clack said the impact was compounded by a likely year-on-year cut in domestic acres, and a lower availability of irrigation water.

As such, he said Rabobank expected Thai sugar output to reach just 8.15 million tonnes, down five per cent year-on-year and 47 per cent from 2018/19.
“Overall, easing Brazilian port congestion, coupled with flowing Australian and Indian raw sugar is forecast to keep 2020 ICE #11 prices confined to the 10.5-12 USc/lb region, however, we cannot rule out the influence of energy markets, FX and speculators when looking ahead,” Clack said.

Australian outlook
With the 2020 crush now underway in northern and central Queensland, with southern and NSW mills scheduled to begin in coming weeks, Mr Clack said, wet weather delays had dampened early progress in the Burdekin, Herbert and Tully regions.

As a result, crushing pace was some 20 per cent behind last season and 51 per cent behind the 2018/19 season. And with above-average rain predicted over coming months, he said, a slow 2020 crush – and a late-season finish – was expected.

However, Mr Clack said, the favourable season had much improved yield prospects, with Australian 2020 cane production expected to reach 31 million tonnes, up one million tonnes year-on-year.

Australian sugar production was forecast to reach up to 4.4 million tonnes, up marginally from 2019.

“While 12-month expectations for the ICE #11 are subdued, below 12 USc/lb in the 12-month period, demand prospects in Australia’s major Asian export markets – namely Korea, Japan, Indonesia – following COVID-19 lockdown will be keenly watched as the new crop flows and is supported by our low Australian dollar,” Clack said.

He said the risks of COVID-19 disruption to the Australian crush remained low, following the industry’s implementation of measures to prevent virus transmission, as well as a low national infection rate.

Strong domestic cattle market to counter global pandemic

Opposing forces will dominate the Australian cattle market in 2020, with limited supply and strong local demand driving prices, but tempered by the global COVID-19 disruption, according to Rabobank’s Australian Beef Cattle Seasonal Outlook.

The just-released report, titled The Battle of the Bulls versus Bears, outlined that despite the market being seriously tested by contracting global economic growth and COVID-19 containment measures, domestic forces would emerge victorious, keeping cattle prices high.

Rabobank senior animal proteins analyst Angus Gidley-Baird said widespread rain had buoyed local restocking motivation among producers, reducing cattle sales and adding buying competition in an already supply-constrained market, with Australia’s cattle inventory reportedly at a 30-year low.

“We estimate the Australian cattle slaughter will fall 14 per cent in 2020 to 7.29 million head, with a further decrease of two per cent in 2021,” he said.

Production was expected to drop to 2.1 million tonnes – among the lowest volumes seen in 15 years – with seasonally-driven increases in slaughter weights failing to offset reduced numbers. While price-positive for graziers looking to sell livestock, Gidley-Baird said low cattle availability would create challenges for producers, processors and feedlots, forced to manage their businesses with lower livestock numbers and high cattle prices.

Low slaughter numbers were also expected to contribute to a dramatic decline in Australian beef exports, forecast to drop 17 per cent in 2020 to one million tonnes. The significantly decreased cow slaughter – reducing Australia’s production of lean manufacturing beef – was also expected to result in a shift in volumes between export markets, Gidley-Baird said.

“The US is a large market for lean manufacturing beef – 62 per cent of exports to the US are manufacturing beef – and, all other things being equal, we expect exports to the US to drop in 2020,” he said.

Forecasts suggest a dramatic contraction in global economic growth in 2020 resulting from COVID-19 that will be worse than experienced in the global financial crisis (GFC) of 2009, with large economic declines expected in key Australian beef markets such as the US, China and Japan.

As a high-priced protein, Gidley-Baird said, beef would feel the impact of reduced consumer expenditure, with overall beef demand – particularly for premium products sold through full-service restaurants – expected to decline. Heavily reliant on foodservice trade, Australia’s beef exports would also be hit by COVID19-led social restrictions, particularly in China, where more beef was eaten out of home.

“This disruption to food service and slowing economic conditions is expected to place downward pressure on Australia’s beef export prices, creating a difficult price squeeze for those in the beef supply chain managing high cattle prices in a softer global market,” he said.

At the same time, Gidley-Baird said, a weaker Australian dollar, China’s reduced pork availability due to African swine fever, and the US-China trade deal were all positive offsetting factors.

Domestic price outlook Despite countering global and domestic forces at play, the report forecasts the average annual Eastern Young Cattle Indicator (EYCI) to increase by 30 per cent in 2020, to equal the annual average record set in 2016 at AUc632/kg. Based on the last reported EYCI price of AUc741/kg on March 19, this would mean prices were expected to ease but still remain strong over the remainder of the year.

However, given the forecast dramatic reduction in economic activity, uncertainty remained surrounding global beef price performance. Australian regional outlook With climatic conditions taking a toll on northern cattle herds in past seasons, breeding inventory across Queensland and Northern Territory was estimated at a 20-year low in late 2019.

Gidley-Baird said breeding numbers in some areas of southern Queensland were expected to be 75 per cent below normal, yet, despite tough conditions, well-priced sales had generated solid returns, placing producers in a strong position to start the recovery. As such, the report tipped Queensland would emerge as the “colosseum” of the Australian cattle recovery.

“Producers, feedlotters, processors and live exporters are all vying for a very small pool of cattle, and prices in Queensland may see some of the strongest gains across all states given this fierce competition,” Gidley-Baird said.

Breeding cattle numbers were also significantly down in central and northern New South Wales, while higher breeder numbers and calf availability out of the south of the state remained closer to normal.

He said Victorian producers remained well-positioned to capitalise on national restocking demand and higher prices, with most areas – east Gippsland excluded – maintaining close to normal breeding numbers.

In South Australia, producers could also look forward to a positive year, despite 2019’s dry conditions and reduced cattle inventory in the northern pastoral country.

“There may be slightly softer demand by local producers for replacement cattle, compared to NSW and Queensland, but these markets will still provide strong buyer interest for South Australian producers looking to sell cattle,” he said.

Dry conditions across much of Western Australia’s cattle-producing regions had driven increased slaughter rates, and would curb 2020 production, Gidley-Baird said, however upward price pressure would come from east coast demand. In Tasmania, current breeding cattle on-farm numbers were similar to early 2019, reflective of normal levels, yet increased competition from the mainland could see the movement of cattle out of the state.

Softening the COVID-19 disruption risk

Increased use of precision agriculture practices and other workarounds can play a key role in softening the impact of potential agricultural input shortages due to COVID-19, agribusiness specialist Rabobank said in recent research.

As the nation’s grain growers begin sowing the winter crop – in some of the most favourable seasonal conditions experienced in recent years for many – optimism has been tempered by concerns the coronavirus pandemic may restrict availability of supplies of some imported agricultural chemicals and fertilisers.

Rabobank agricultural analyst Wes Lefroy said while the bank’s research indicates adequate supplies of agricultural inputs – including urea and agrochemicals – would be available in most instances, in cases where there were supply shortages, satisfactory alternatives or workaround strategies could be adopted.

These include the expanded use of precision agriculture practices, such as plant and soil testing and variable rate application.

“While global farm input supply chains are operating at near-full capacity, the risk of interruption still remains high”, Lefroy said. “The source of this interruption may be at production, or moving the product by road or at the port.”

Despite earlier concerns regarding the availability of agrochemicals, Australian growers have generally been able to access adequate stocks to begin seeding. However, more recently, urea imports have become an increasing concern to growers, particularly those looking to make the most of the first favourable soil moisture they have seen for some time following good rainfall and on the back of a promising outlook for the season ahead, Lefroy said.

“In the event of major disruption to supply which causes shortages of either fertiliser, including urea, or agrochemicals, we see a number of ‘work arounds’ for growers to consider,” he said.

Precision ag and work-around strategies
In particular, Lefroy said, grain growers would benefit from expanding precision agriculture practices this season.

“In light of a potential reduction in the availability of inputs for this season, we consider the full use of available precision agriculture practices will help growers maximise ‘bang for their buck’. This includes soil testing, plant testing and variable rate technology to ensure maximum efficiency of ag chemical and fertiliser usage,” he said.

Lefroy said following a below-average crop for many farmers across the country last season – and in some cases for multiple past years – residual nutrients in the soil were likely to be higher than usual heading into the new season, allowing for lower rates of fertiliser application.

“In addition, a wet summer will have driven greater mineralisation of nitrogen in the soil,” he said. “So both of these factors mean, in some cases, additional nutrient requirements may be lower than usual.”

Lefroy said growers’ planting intentions may be altered according to the suite of chemicals and fertilsers available to them. “In particular,” he said, “early-planted crops, such as canola may be most at risk of substitution in favour of cereals, which can be planted later in the seeding program, when inputs arrive.”

Assessing alternative weed management strategies should also be a consideration. “Depending on the availability of particular chemicals, some growers may be forced to change the suite of chemicals used on a crop,” he said.

Lefroy said growers would be prudent to maintain regular contact with suppliers about the availability of ag chemicals in their region and to consult with their agronomists about “plan B and plan C should adequate ag chem and fertiliser not be available”.

With most of the season’s phosphate requirements already on farm, all eyes are on urea – both in terms of import volumes and prices – ahead of nitrogen application during winter and spring, Lefroy said.

“We are now heading into the key importing period for urea in Australia,” he said. “On average, 60 per cent of our yearly imports of urea arrive on Australian shores during the April-July window. And Australia typically imports 90 per cent of its total urea requirements, so we are heavily reliant on global supply chains.”

To date, Lefroy said, production and logistics were operating with little interruption in Qatar and Saudi Arabia – Australia’s two largest sources for urea imports.

“And, in a scenario where supply was interrupted from the Middle East, sufficient alternative urea would be available from China, Indonesia and Malaysia – with whom we also have a strong trading history,” he said.

In terms of pricing, after an 11 per cent bounce in global urea benchmarks (FOB ex-Middle East) during late Feb and early March, prices have since retreated seven per cent in USD terms, and lie well below the five-year average.

”Chinese urea production has also increased to 70 per cent utilisation after the COVID-19 shutdown period in China. So, as the domestic spring peak finishes, we expect China to have more urea available for export which will weigh on global prices,”  Lefroy said.

However, despite favourable global prices, Australian growers should expect to pay slightly more than they budgeted for fertiliser this season, Lefroy cautioned, due to expectations for a sustained lower Australian dollar.

“Taking into account the currency impact, local prices will remain slightly above average for the next three months,” he said.

Lefroy said while not forecast by the bank, a scenario where there was a significant disruption to global or local urea supply chains which prohibited arrival of product, remained a potential risk in the current circumstances.

“If this were to occur, it would bring some significant upward movement to local prices, which will be amplified if we saw favourable rainfall conditions accelerate demand,” he said.

Ag chemicals
For agricultural chemicals, Rabobank said, a “perfect storm” had impacted some supplies – especially for glyphosate and trifluralin – with a combination of pre-existing lower production and higher local demand being compounded by disruptions to production and logistics in China due to the coronavirus pandemic.

“Prior to COVID-19, the ag chem supply chain was already under severe pressure,” Lefroy said. “This was due to a couple of factors. From 2017 to 2019, China cut agrochemical production by 44 per cent due to a combination of tighter environmental regulation and the Chinese government addressing domestic over-supply issues.

“With China supplying approximately 90 per cent of Australia’s agri chemicals, this lower supply was compounded by an increase in demand sparked by significant rainfall in early 2020, diminishing stocks held by local retailers.

“Then on top of this, COVID-19 has caused disruption to production and logistics in China, which added an estimated three to five-week delay on stock coming into Australia.”

However, current observations are that Chinese ag-chem production is ‘ramping-up’ and logistics chains have started to move supply out of China to export markets, which will help address shortages, according to Lefroy.

“In the past couple of weeks, a number of major suppliers have reported arrival of new shipments and product on the water,” he said. “Some retailers have more stock than others and this varies from region to region. In the majority of cases, growers will have enough inputs to commence sowing as planned.”

Dairy to tread cautiously through COVID-19 challenges

While the local dairy industry has remained buoyant thanks to recent record-high milk prices and export returns, Rabobank’s Australian Dairy Seasonal Outlook warns caution as COVID-19 diminishes demand, and prices, globally.

The full impact of COVID-19 on the global dairy market remains unclear, however the report – titled A Global Storm is Coming – said the worst was yet to come.

Rabobank senior dairy analyst, Michael Harvey said the “upward trajectory” milk prices enjoyed in late 2019 had now stalled, with prices falling in the first quarter of 2020 as the pandemic spreads and global dairy fundamentals deteriorate.

Based on this current global trend, Harvey warned a more cautious approach to southern export milk prices was necessary, particularly considering a global market down cycle similar to that of the global financial crisis was now very plausible.

As foodservice and hospitality industries wind back in the wake of COVID-19, the report predicted a sizeable global demand slowdown was imminent, and that the current surge in consumer demand, as supermarket shelves are stripped bare, would be short-term.

“Around the world, in major dairy markets, demand will inevitably fall as unemployment rises and discretionary spending slows,” Harvey said. Spring flush in the northern hemisphere, where milk production had gradually gained pace, would also add to the supply and pricing pressure.

“We forecast modest growth through the spring flush, but, at a time when dairy demand is expected to be considerably weakened, this could have significant consequences on global pricing,” he said. Under the worst-case scenario, demand would significantly weaken, inventories would build up across supply chains, and dairy commodity prices, particularly in Europe, could fall a further 10 to 15 per cent from April 2020 levels.

Under this scenario, the report predicts the commodity farm gate milk price for 2020/21 across the southern export region may sit at 5.20/kgMS. Australian dairy farmers, however, could take comfort in the low Australian dollar boosting export returns and domestic market premiums flowing through to help bolster farm gate returns.

“The Australian dollar is likely to be lower than it was during the global financial crisis, an almost unprecedented fall that will be a game-changer for the Australian export sector, helping support farm gate returns in 2020/21 and proving key to preserving farm gate milk prices above breakeven levels,” he said.

Harvey said the ongoing battle for milk supply would ensure there were premiums above the commodity mix on offer in the market, with some dairy farm businesses insulated from the global market downturn thanks to contractual supply arrangements and/or exposure to domestic consumer markets.

He said Rabobank’s base case scenario for an annualised southern export milk price in 2020/21 stands at $5.70/kgMS.

“For these farm businesses, it will take longer to reflect global price movements, while a branded consumer market will also provide a safely net during the 2020/21 season,” he said.

The current in-home consumption surge has also supported a short-term boost, with retail price increases working their way through the value chain and reflected in farm gate milk prices. However, with the Australian economy headed towards recession, he said this demand would be short lived.

As a result of the current global market forces, Harvey said, more conservative opening prices from Australian dairy exporters were warranted, and that dairy farm businesses should budget accordingly.

At the farm gate, better seasonal conditions in 2020/21 would relieve feed costs, while elevated cull cow prices and a buoyant live export sector would also provide opportunity to support business margins.

“There’s been a period of lower margins, which we expect will continue through the coming season, so dairy farmers will need to carefully consider the financial merits of rebuilding equity versus major investments and/or expansion projects,” he said. “However we do predict margin respite coming in the form of a return to growth in milk pools, better plant utilisation and signs of ‘peak competition’.”

The Australian milk pool was expected to close out the 2019/20 season at 8.4 billion litres, a 4.9 per cent drop on the previous year, however the report predicted strong growth in 2020/21, pending seasonal conditions, with a 4.3 per cent lift in national milk production forecast.

Harvey said the Australian dairy industry must equitably reverse the downward trajectory of milk production over a period of multiple seasons, with supply chain fine-tuning along the way.

Australian’s annual food waste bill hits $10.1bn

Rabobank has released its 2019 Food Waste Report showing that Australians spent a total of $10.1 billion in 2019 on food that ended up in our bins rather than in our stomachs, up from $8.9 billion in 2018.

The Rabobank Food Waste Report highlights that Aussies are now wasting an average of 13 per cent of their weekly grocery spend, equating to $1,026 each year.

With food waste on the rise across all states and all generations, Australia as a nation is losing the battle against food waste with significant negative impacts for not only our hip pockets but also our planet.

Glenn Wealands, Head of Client Experience, Rabobank Australia said, “Food waste is one of the most significant challenges facing our nation and planet today.  According to the Food Sustainability Index, developed by The Economist’s Intelligence Unit, Australia is the fourth highest food waster in the world. Given the increasing pressure on the planet to provide for a growing population there is an urgent need for greater action across governments, industry, retailers, and consumers to drive real change.”

The biggest offenders when it comes to food waste are consumers. Household waste makes up 34 per cent of food waste nationally, with 31 per cent from primary production and 25 per cent from manufacturing.

“As individuals, each and every one of us can and must make a difference. When we waste food, the ramifications go far beyond just dollars, impacting our planet and precious resources. We know from this research that more than three quarters of us care about reducing food waste and are annoyed by it. However, it is alarming that less than three out of 10 of us recognise the impact our food waste has on the environment,” Wealands added.

We need to raise awareness and change behaviour
Most Aussies don’t link the impact of their own household waste to bigger picture issues with 54 per cent believing it contributes to landfill, yet only four in ten linking it to pollution and one third recognising it increases Co2 emissions. Less than a third of Australians connect the impact of their waste with climate change, water shortages and animals becoming extinct.

Consistent with previous years, the top reasons for household waste include food not being prepared properly, not knowing what to do with left overs, buying too much and changing plans.

Consumers are also finding new ways to waste food with the rapid uptake of food delivery services linked to our increasing food waste habits.

Gen Z has work to do
Gen Z are the future custodians of this planet, they make up a quarter of the population and are the most socially aware generation. However today, they’re also the biggest culprits when it comes to food waste, according to the survey, binning $1,446 of the food they purchase every year, up $234 from 2018.

Baby Boomers remain the least wasteful of all Australians, throwing out only $498 of their food.

Generation Value of annual food waste Change from 2018
Gen Z $1,446 + $234
Gen Y $1,394 + $175
Gen X $918 + $79
Baby Boomers $498 + $17
Across the states
In 2019, there was an increase in food waste across all of the states. However, Queenslanders have been keeping the closest eye on their waste habits, indicating the smallest increase in food waste year on year. People living in capital cities waste 14 per cent of their weekly shop, compared to people in rural areas who only waste 11 per cent.
State % of food wasted annually Change from 2018
QLD 11.8% + 0.5%
WA 13.3% + 0.9%
NSW 12.8% + 1.2%
NT 10.4% + 1.9%
TAS 11.4% + 2.3%
SA 12.8% + 2.4%
VIC 13.9% + 2.6%

Mr Wealands added: “But there is hope! We have some fantastic organisations in Australia that are committed to fighting food waste, such as OzHarvest, Foodbank and Yume.“However, we can definitely learn from best practice in other countries, for example, governments in Italy and France banned supermarket food waste in 2016, legislating that unsold goods must be given to food banks or charities. Ultimately, there must be a highlighted sense of urgency now, given we’re wasting more than ever before.”

The 2019 Rabobank Food Waste Report is part of Rabobank’s annual Financial Health Barometer (FHB), surveying over 2,300 financial decision makers aged between 18 and 65, polling attitudes and behaviours towards saving, debt, farming, food production and food waste.

Research shows huge opportunity for grain-fed beef sales to China

Australian grain-fed beef on the rise, with opportunity to triple exports to China
Grain-fed production is set to play a larger role in Australia’s beef sector, with the opportunity to triple the nation’s exports of grain-fed beef to China by 2030, according to new industry research.

In its report, Opportunities For Growth in Australian Grain-Fed Beef, agribusiness banking specialist Rabobank said while the backbone of the Australian beef industry will remain a grass-based production system, grain feeding is forecast to play an increased role in the country’s overall beef production over the coming 10 years.

Continued growth in beef consumption in Asian countries, particularly China – along with Australia’s strong market access and competitive supply chain – will provide the opportunity for the nation’s total grain-fed beef exports to increase 65 per cent to more than 500,000 tonnes by 2030, according to the research. Exports of Australian grain-fed beef to China alone could triple in the same period – from the current 50,000 tonnes to close to 200,000 tonnes.

“Rabobank believes there will be strong growth in the global demand for grain-fed beef, fuelled principally by China,” the report said.

Report author, Rabobank senior animal proteins analyst, Angus Gidley-Baird, acknowledges Australia’s vast areas of pastured land – and limited and volatile feed-grain production – suit a grass-based beef production system. However, at a time where China is the centre of global beef demand, there is an opportunity to capitalise on the growing need for grain-fed beef for part of the Australian industry, he said.

“Since the opening of the Chinese market more widely to Australian beef imports in 2013 – and with a growing appetite for beef among Chinese consumers – there has been an increasing demand for grain-fed beef,” he said.

“Chinese beef consumption will continue to grow over the next decade and, with limited growth in local Chinese beef production, imports will play a much larger role in meeting this demand. At the same time, consumers in Asian markets, including China, have a strong affinity with highly-marbled grain-fed beef as it suits their palate and cuisine, fuelling a demand for grain-fed beef imports that has the potential to grow at a faster rate than overall beef imports.

“Given projections in Chinese income growth, per capita consumption of beef and food service trends – it is reasonable to expect Chinese grain-fed beef imports to grow to represent 20 per cent of China’s total beef imports by 2030 (from an estimated six per cent today).”

However, the report said, while increasing Australia’s focus on grain-fed beef production is an opportunity worth pursuing, it comes with risks and challenges.

Enough room for everyone
While Australia is in a strong position to capture a sizeable portion of the growing global
demand for grain-fed beef, particularly in China, the report says, it will not be on its own.
Other major grain-fed beef exporters – primarily the US, Canada and also likely South
American countries in the future – are also expected to increase their export volumes.
But the good news is, says Angus Gidley-Baird, with the Chinese market forecast to
require close to 500,000 tonnes of grain-fed beef exports by 2030, “there will be enough
room for everyone”.

“Rabobank believes that the other suppliers of high-quality grain-fed beef would not fill
more than 300,000 tonnes of this increased Chinese demand,” he said.

“Given the potential size of the Chinese grain-fed beef market and, provided Australia is
competitive on price, the opportunities for Australia will likely outstrip the production
growth of grain-fed beef in Australia.”

Competitive position
Although Australia’s grain-fed system is faced with higher feeding and processing costs
than the US and Brazil, the reports says costs of cattle, reduced freight costs and free
trade agreements “balance out the equation” when it comes to being competitive in
export markets.

“As such, Rabobank believes Australian grain-fed beef – with its own particular
characteristics – can be competitive in the global market for grain-fed beef.”

If Australia is to compete successfully with the US and Brazil though, the report says, the
local industry will need to increase the number of genetically-suitable cattle and the
number of cattle that spend a longer time on feed.

“The real value of grain feeding cattle destined for a higher-end Asian export market is in
the ability to more consistently deliver a high degree of marbling,” Gidley-Baird said.
“Australia lags the US in terms of higher marbled beef production. Generally speaking,
Australia’s grain-fed beef production is less focussed on marbling, with less time spent
being grain fed and lower marbling scores.”

Maximising chances
Maximising the chances of growing grain-fed beef exports to meet increased global
demand will require adjustments to the Australian beef system, the report says.

“Producers, backgrounders, feedlots and processors will all need to work together – a challenge in the current system which is heavily influenced by the availability of grass,” Gidley-Baird said.

“Producers and backgrounders will need to deliver consistent volumes of high-quality feedlot-performing animals. And choosing cattle genetics that perform under a feedlot environment and produce the desired quality traits will be essential.

“Feedlots will need to manage feed-grain supplies and encourage crop farmers to focus on feed-grain production while processors will need to play an active role in incentivising and providing market information to encourage the supply of appropriate animals for the system.”

External challenges
There are also a number of challenges outside the sector itself which need to be considered and managed, the report said.

These include social and environment issues (such as concerns about animal welfare and environmental impacts of feedlot production), the use of Australia’s valuable grain supply for animal production and an increasingly volatile global trade outlook.

Nominations sought for 2019 agribusiness leadership awards

Some of the biggest names in agribusiness in Australia and New Zealand have been recognised for their leadership in the sector – and this year two more will join their ranks, with nominations now open for the 2019 Rabobank Leadership Awards.

Last year, the two industry accolades, the Rabobank Leadership Award for an accomplished senior leader and the Rabobank Emerging Leader Award for an up-and-coming younger leader, went respectively to chief executive officer of Nuffield International, Jim Geltch, and AACo chief operating officer Anna Speer. Both winners were acknowledged for their outstanding achievement in – and contribution to – the food, beverage and agribusiness industries.

Announcing the opening of nominations for the 2019 awards, Rabobank Australia & New Zealand Group managing director, Peter Knoblanche, said this year, for the first time in the trans-Tasman award’s history, the presentation ceremony would be held in New Zealand.
“In the 20 years we have been involved in the awards, leaders have been recognised on both sides of the Tasman in sectors including wine, dairy, beef, grains and horticulture and across many fields, such as scientists, economists, educators and researchers,” he said.

“The contribution these leaders have made to their own industries, the agricultural sector in general, and their communities is nothing short of inspirational. Their leadership, courage, passion and foresight has seen them carve a path, as they often take the road not travelled to get to where they are today.

“This was epitomised by last year’s winners, with Jim Geltch recognised for developing and engaging young people in agriculture via the Nuffield agricultural scholarships. While Anna Speer has, in her relatively short tenure in the industry, carved a successful career in the livestock sector as an advocate for innovation and change.”

As peer-nominated awards, Knoblanche encouraged industry participants to put forward those in their industry who make a positive contribution to the future growth and prosperity of the sector.

“There are many unsung heroes in the agricultural sector, and these awards not only bring their business successes to the forefront, but all the initiatives they are involved in at a community and industry level,” he said.

Award nominations close on August 9, 2019 with the winner to be announced at the annual Leadership Award dinner, to be held in Auckland on Thursday, November 28, 2019.
Nominations for both awards

Winter crop yields down – Rabobank

Australia is staring down the barrel of another lower-than-average winter crop, as ongoing dry weather hinders planting across much of the nation, according to Rabobank’s newly-released Australian 2019 Winter Crop Outlook.

With many major cropping regions in the eastern states – as well as South and Western Australia – having begun the season with below-average rainfall, record-low soil moisture and a less than favourable rainfall outlook, the agribusiness banking specialist says it will be “against all odds” for Australia to return to average grain and oilseed production in 2019/20, and is forecasting a total planted area of 18.4 million hectares. This is up one per cent on last year’s planting, but still down almost 13 per cent on the five-year average.
Last year’s overall Australian grain crop came in down 20 per cent to 30 million tonnes, (according to official ABARES figures) – due to severe drought in the country’s east, although WA recorded a 21 per cent increase in production to 17.1 million tonnes, its second-largest harvest ever. Overall wheat production came in at 17.3 million tonnes, the lowest in a decade.

Rabobank forecasts wheat production to again be below 20 million tonnes in 2019/20, with the current rainfall outlook supporting a projection of around 18 million tonnes.

With Australian grain stocks diminished and the estimated stocks-to-use ratio at more than 15-year lows, this will see the nation heading for another year of below-average grain and oilseed exports, the report says. For wheat, Rabobank projects exports to be in the vicinity of just 11 to 12 million tonnes, up 18 per cent year on year (YOY), but still down more than 30 per cent on the (five-year) average.

Report co-author, Rabobank senior grains and oilseeds analyst Cheryl Kalisch Gordon says the dry start to the 2019/20 season represents the third consecutive “sub-optimal planting window” for some of the most important cropping regions in Australia’s eastern states.
“The hottest summer on record and below-average rainfall – on top of two years of below average rainfall – means large areas are experiencing well-below to the-lowest-on-record root-zone soil moisture and there has been no widespread autumn break in most areas,” she said.

And the poor planting conditions are not confined to the east of the country, with parts of South Australia having their driest start to the cropping season in 150 years and almost the entire Western Australian cropping belt still waiting for a repeat of last year’s late seasonal break to “turn dust into dollars”, the report says.

Best prospects
However, it is not all bad news on the weather front, Kalisch Gordon says. Victoria and parts of southern New South Wales are, by contrast, looking at the best start to a winter crop since 2016/17.

“A major cold front that lashed parts of the eastern states at the beginning of May brought critical moisture to these regions, many of which had been heavily impacted by drought last season,” she said. “Follow-up rain has continued to replenish soil moisture levels and enabled farmers to progress towards completing their planned programs.”
And these areas offer the best prospects for helping Australia get back on track towards an average production season, she says.

East and west rebalancing
Kalisch Gordon says this year’s plantings represent a “rebalancing between east and west”, after the 2018/19 season where Western Australia did “most of the heavy lifting” with the country’s grain production.

“Any increases we are seeing in planted areas in the other states are expected to be almost netted out by the exception of Western Australia where we expect a five per cent year-on-year decline in area planted,” she said.

“In the wake of WA’s most valuable harvest in history – due to high yields and elevated prices – we expect Western Australian farmers to take a conservative approach to winter planting, given the dry conditions and uncertain outlook there.”

Dry sowing and expected yields
With the largely moisture-depleted start to this year’s Australia’s cropping season, Rabobank says a high rate of dry sowing has been undertaken by growers across the country.

“And this, together with opportunistic use of storm rainfall, as well as the good rains in some areas, is what is set to see a one per cent year-on-year increase in planted area,” Dr Kalisch Gordon said. But yields are not expected to be high

“Despite this marginal recovery in planted area, currently forecast seasonal conditions support below-average yields for most areas,” she said.

Big swings
There will be big swings in crops planted, the Rabobank report says, away from canola and pulses to cereals.

“The pivot towards more wheat and barley that we saw last season is expected to be followed again this year, due to the higher local prices we have in cereals and their less risky production dynamics when there are uncertain seasonal conditions,” Dr Kalisch Gordon said.

Rabobank expects cereal crops to make up 81 per cent of Australia’s planted area – up on the five-year average of 79 per cent.

The bank forecasts Australian grain prices to remain in higher ranges over the coming year. Lower forecast local production, depleted local stocks and some support for global cereal pricing will keep Australian prices above five-year averages.

“East coast Australia wheat prices will continue to trade at above-average basis levels while stocks rebuild and another below-average harvest volume is on the cards,” Dr Kalisch Gordon said.

“For barley, while increased planting will help moderate prices this year, the prospects for low production and our expectation that China may need to return to the Australian market for barley for malting in the second half of this year are likely to see prices gain again from current levels.”

The fallout from increased protectionism will continue to weigh on canola and pulse price prospects, the report says.

“China’s 25 per cent tariff on US soybeans and the Chinese ban on Canadian canola are more than enough to weigh on oilseed markets, but when Brazil is expecting its second-largest soybean harvest on record and China will have reduced demand for soybeans as a consequence of African Swine Fever, the weight is magnified,” Dr Kalisch Gordon said. “Meanwhile, reduced expectations that India will relax its import barriers will also limit pulse price increases.”

Kalisch Gordon says low crop production and strong local prices will once again curtail Australia’s export competitiveness in 2019/20, as they had last season.

“And the increased use of Black Sea and Argentinian-origin wheat in our export markets in South East Asia is expected to present a disruption to Australia’s market positioning when our exportable surpluses do return to average,” she said.

Australia facing smallest winter crop in 10 years

A combination of extreme dry weather and damaging frost will deliver Australia its smallest winter crop in 10 years, according to Rabobank’s 2018/19 winter crop production outlook.

The agribusiness bank forecasts a national harvest of just 29.3 million tonnes, down 23 per cent on last year.

Were it not for the better harvest prospects in Western Australia – the only state where grain production is forecast to increase – the country would be facing its lowest winter crop in the past 20 years, the bank explains.

The reduced 2018/19 harvest will see WA, for the first time in 20 years, contributing more than half of the national winter crop at 52 per cent.

READ: Dry weather in Australia significantly impacting crops

Reduced national production – along with continuing strong demand for feed grain in the drought-afflicted eastern states – is, however, expected to see record Australian grain prices hold well into 2019.

The reduced harvest – combined with strong local demand and prices – also has significant implications for Australia’s export markets, with grains exports to be severely curtailed in 2018/19,” the report indicates.

The bank forecasts total Australian grain exports to be down approximately 50 per cent on last year, at 13.9m tonnes.

Wheat exports are predicted to decline almost 50 per cent on last year, to 8.6m tonnes – the lowest export volume since 2007.

Barley exports are set to be down 48 per cent on last year at 3m tonnes, while Australia looks set to export just 1.5m tonnes of canola – 41 per cent lower than 2017/18.

Report co- author, Rabobank agricultural analyst Wes Lefroy, said the hit to Australia’s export capacity is certainly one of the big concerns emanating from the reduced harvest outlook.

“This will severely pressure our market share in crucial markets in South East Asia, certainly in 2018/19, but also placing our competitors, such as the Black Sea and Argentina, in the box seat to get a greater stronghold on these markets into the future,” said Lefroy.

At a projected 29.3m tonnes (31 per cent below the five-year average), the total national winter crop in 2018/19 would be Australia’s fourth lowest in the past 20 seasons – with lows exceeded only in previous years of severe drought – 2002/03, 2006/07 and 2007/08.

Pulse production has been hardest hit in this year’s winter crop downgrade as it is down 43 per cent on last season and 41 per cent below the five-year average at 1.6m tonnes.

Lefroy said this was the result of a combination of lower planted areas – due to pulse prices coming down from record highs seen in 2016 and 2017 – and poorer seasonal conditions.

“Queensland and northern New South Wales, which are home to Australia’s chickpea production, have also been the worst-affected drought regions, so yields will also be well down,” he said.

Canola production is also significantly impacted, expected to be down 32 per cent on last year and also 32 per cent lower than the five-year average, at 2.5m tonnes.

Australian grain prices are forecast to remain high well into 2019, according to the report.

Mr Lefroy said an increasingly tight east coast feed balance had taken wheat and barley prices progressively higher nationally in 2018.

“Wheat basis is at decade highs across the east coast and SA, while ‘domestic’ exports of grain to the east have taken WA basis to seven-year highs. And grain and train shipments from SA and WA are expected to continue well into 2019,” he said.




Nuffield International CEO receives Rabobank leadership award

The chief executive officer of Nuffield International Jim Geltch has taken out the 2018 Rabobank Leadership Award.

Th recognises the role he has played developing upcoming leadership in the Australian and New Zealand food, beverage and agribusiness sectors.

Geltch, who was appointed inaugural CEO of Nuffield International in 2016, was announced as recipient of this year’s award at the annual Rabobank leadership dinner in Sydney on October 11.

Presenting the awards, Rabobank Australia and New Zealand Group managing director Peter Knoblanche said in his work leading Nuffield, Geltch was making one of the most fundamentally important contributions to leadership in the food and agribusiness sector.

READ: Rabobank appoints new group executive with extensive knowledge of food and agribusiness sector

“Jim is one of the great unsung heroes of the sector, whose enormous contribution to agriculture and the food and agribusiness industries is truly deserving of recognition.

“Not only is he an extremely accomplished leader in his own right, he has had a huge impact on the sector and done great good by fostering and developing leadership in others,” said Knoblanche.

“Through his own leadership of the Nuffield organisation, Jim has played, and continues to play, an invaluable role in the future growth and prosperity of the sector, by facilitating the development and engagement of the talented young people in our agricultural and agribusiness industries,” he said.

It was notable that two recent past Rabobank Emerging Leaders were Nuffield Scholars – leading organics farmer Nathan Free and executive director of Australian Fresh Leaf Herbs Jan Vydra, said Knoblanche.

During Geltch’s time as CEO of Nuffield Australia, from 2005 to 2016, Knoblanche said, he had been instrumental in guiding the program through a significant growth period, with the number of scholarships – awarded in partnership with industry and the public sector – growing from 10 to 25 per year.

After accepting his award, Geltch said one of the most rewarding aspects of his role heading Nuffield was witnessing the growth and development of the young people coming through the scholarship program, and the impact it was making.

“I’ve always said travel is the best educator you can have. One of the great pleasures of managing the Nuffield program has been seeing the growth of, in some respects, naïve young men and women who come through the selection process and come back in two years’ time after undertaking their scholarships – seeing the self-confidence they’ve developed and the global view they’ve built about agriculture,” said Gletch.

“When you get out of bed in the morning, if you’re enjoying the job, when you get up you’ll do some constructive things, but to actually see that on a day-to-day basis is just one of the greatest pleasures I get out of being involved in Nuffield.”

AACo chief operating officer Anna Speer won the 2018 Rabobank Emerging Leader award.

Rabobank appoints new group executive with extensive knowledge of food and agribusiness sector

Rabobank Australia and New Zealand has appointed Karin van Selm as group executive for wholesale banking.

In her current role, as the bank’s general manager of corporate banking, van Selm provides for the increasingly complex requirements of Rabobank’s large corporate clients operating in the food and agribusiness sector.

She’s worked in her current role with Rabobank since January 2016.

Rabobank Australia and New Zealand managing director Peter Knoblanche said van Selm was ideally placed to take on the position of group executive to ensure a seamless continuation of the expansion and development of Rabobank’s wholesale banking operation.

READ: Shift in rankings of companies listed in Rabobank Global Dairy Top 20

“Karin has extensive experience and exceptional understanding of the corporate banking needs of major companies involved in the food and agricultural sector,” said Knoblanche.

Rabobank is one of Australia’s largest agricultural banks and a major provider of specialist corporate financial services to the region’s food and agribusiness sector.

Van Selm worked in structured finance at ING Barings, before moving to Australia in 2005, from the Netherlands.

She then joined Westpac, where she worked in various roles in the banking consumer and agribusiness team.

She holds a Master of Laws, specialising in international tax and economics.

Van Selm said the future opportunities for Australia and New Zealand’s corporate food and agribusiness were exciting, with both countries producing world-class agricultural produce and with rapidly-growing export markets.

“That said, businesses in the F&A sector are challenged to remain competitive in the various commodity markets, faced with increasing costs of labour, water, energy and insurance, as well as stricter regulatory environments,” she said.

“Rabobank, with its both global and local reach in food and agriculture, and its deep understanding of the various segments of the agri market, is well positioned to enable, facilitate and connect our clients in the value chain and support them with their growth ambitions,” said van Selm.

She will start the new role on the 1st of August, taking over from Els Kamphof, who has been appointed to head the regional wholesale banking operations in the Netherlands and Africa.


Shift in rankings of companies listed in Rabobank Global Dairy Top 20

For the second consecutive year, there are no new entrants to the Rabobank’s Dairy Top 20 list, but there’s been a slight shuffle in rankings.

The world’s largest food and beverage company, Switzerland’s Nestlé, reigns supreme on the list, but the gap between number one and number two has narrowed.

French Lactalis swapped places with Danone, moving into second place.

Danone slipped to the third spot, after divesting Stonyfield following the acquisition of WhiteWave, reducing its stake in Yakult, and selling its holdings in the Al Safi Danone joint venture in Saudi Arabia.

READ: Nestlé pledges to use only certified sustainable palm oil within five years

Dairy price recovery in 2017 has positively affected the combined turnover of the top 20 global dairy companies, which was up 7.2 per cent on the year in USD, RaboResearch has shown.

Dairy senior analyst Peter Paul Coppes said the USD five billion threshold was difficult to achieve due to a scarcity of large acquisitions or mergers.

“However, while the names have remained the same, the order shifted in 2017.”

Merger-and-acquisition (M&A) activity in the dairy sector grew in 2017, fuelled – as in other sectors – by the availability of cheap capital.

Cooperatives are still dominating, but they are also challenged. Deals between Danone and WhiteWave, and Saputo and Murray Goulburn, had limited impact on rankings within the Global Dairy Top 20.

While M&A occurs in the dairy sector, dairy acquisitions tend to be limited in size and financial impact.

There is potential for growth within increased collaborations between Chinese and non-Chinese companies. If this happens, China has the potential to create a pipeline of global management talent.

Chinese companies need to address the integration of non-Chinese management as they consider global growth opportunities.

Rabobank sees an increased amount of disruption-based M&A deals, either defensive or opportunistic.

By nature, these deals are often small and involve start-ups, but they are growing in volume.

Rabobank recommendations to respond to dairy-free


Rabobank has said in a press release that dairy alternatives are on a rise as consumers are increasingly going dairy-free, particularly when it comes to fluid “milk” used on things like cereal or in coffees. More recently, biotechnology has entered the arena, brewing milk proteins through biofermentation.

The time is right for the dairy sector to reflect on the success of alternative dairy products and to consider applying those lessons to dairy, according to the latest Rabo Research global dairy report: Dare Not to Dairy – What the Rise of Dairy- Free Means for Dairy… and How the Industry Can Respond.

Rabobank said that their report pointed out that dairy alternatives have competed in the dairy space for decades, but competition has intensified as dairy alternatives broaden in types, styles, and categories of product. It also said global retail sales growth for dairy alternatives has soared at a rate of 8 per cent annually over the last ten years. With retail sales valued at $15.6b, dairy-free “milk” represented 12 per cent of total fluid milk and alternative sales globally in 2017, according to Euromonitor.

Nutrition, price, and flavour tend to favour dairy, but changing consumer perceptions around health, lifestyle choices, curiosity, and perceived sustainability are increasingly drawing more people to select dairy-free products.

“Global demand for dairy is expected to grow by 2.5 percent for years to come, with demand for non-fluid categories offsetting weak fluid milk sales,” says Tom Bailey, RaboResearch senior analyst – Dairy. “While it’s not essential to diversify into dairy alternatives, it would be wise for the dairy industry to at least learn one thing from the success of dairy alternatives, which may be putting the consumer first and trading in the old grass-to-glass model for glass- to-grass.”

The challenge for dairy lies mostly in fluid milk, where retail sales in western Europe (US$ 18.6bn) and the US (US$12.5bn) declined at an annual rate of 5 and 3 percent, respectively, in the five years to 2017, according to Euromonitor.

The results over the last five years have favoured dairy players who have invested in milk alternatives across the supply chain – from planting almond trees to buying brands. The investments in dairy alternatives have shown returns above standalone dairy.