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

2

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




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.

13

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



3.  Fundamental Drivers


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

5

6/25

/200

5

9/25

/200

5

12/25/20

05

3/25

/200

6

6/25

/200

6

9/25

/200

6

12/25/20

06

3/25

/200

7

6/25

/200

7

9/25

/200

7

12/25/20

07

3/25

/200

8

6/25

/200

8

9/25

/200

8

12/25/20

08

3/25

/200

9

6/25

/200

9

9/25

/200

9

12/25/20

09

3/25

/201

0

6/25

/201

0

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

-

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

-

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





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





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 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 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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