paradigm shift in agri-industry · paradigm shift in agri-industry ... sabic analysis. future...
TRANSCRIPT
PARADIGM SHIFT IN AGRI-INDUSTRYAhmed Al Qahtani, GM- Business Strategy & Investments
September 7, 2016
RECENT CHANGES
No. 2
PRICES OF KEY FERTILIZERS DECLINED SHARPLY
Price development 2012 – 2016 FC
Indexed (2012 =100)
Oversupply
• Urea: 77% Util. Rate
• DAP: 67% Util. Rate
20
30
40
50
60
70
80
90
100
2012 2013 2014 2015 2016
G. Urea AG FOB DAP FOB Morocco
MOP FOB Baltic Sea
- 50%
- 30%
- 40%
China export in Urea
• 2012: 7 mmt
• 2015: 15 mmt
Source: CRU, Ferticon, SABIC
Lower coal and gas prices have pulled down the floor price for N
No. 3
WHEAT AND FARMER INCOME DECLINED
Wheat price development and Farmer Income USA 2012 – 2016 FC
Indexed (2012 =100)
20
40
60
80
100
120
2012 2013 2014 2015 2016
US Farmer Profit Wheat Price
- 41%
- 50%
Fertilizer make up to 20%
of the total farmers `s
costs in field crops
Decline in Farmers’ profit is not supportive of fertilizer prices
Source: CRU, Ferticon, SABIC
No. 4
KEY N IMPORTERS ARE TARGETING SELF RELIANCE
New Capacities by 2020
(in mmt)
Source: CRU , SABIC analysis
1.2
1.3
5.1
Brazil
India
US
0.7
0.8
1.8
2.6
2.8
Malaysia
Egypt
Algeria
Nigeria
Russia
Exports from selected countries
(in mmt)
No. 5
CONSOLIDATION CONTINUES
Global Market Share of top 5 Players per Agro-Industry Segment
62% 60%
35%
19%10%
Seeds Ag-Chemicals Ag Machinery Fertilizers Fert. Dist.
Consolidation
Game
Grain traders limiting
to core business
Fertilizer companies
integrate downstream
in distribution
Source: SABIC analysis
FUTURE CHALLENGES
No. 7
OVERSUPPLY WILL CONTINUE
UREA and DAP Global capacity , damand and utilization development (2013 – 2025)
in mmt and %
Source: SABIC, Fertecon
212
164
279
205
Cap. 2013 Prod. 2013 Cap. 2025 Prod. 2025
Util. rate 77% 73%
+67
+41
UREA
54
34
60
39
Cap. 2013 Prod. 2013 Cap. 2025 Prod. 2025
63% 65%
+6+5
DAPDONE
No. 8
WATER SCARCITY AND SOIL DEGRADATION WOULD NEED DIFFERENT SOLUTIONS
Water scarcity and Micronutrients Deficit
More water soluble fertilizers and micronutrients enhanced base
fertilizers
Source: SABIC, FAO
20% of total arable land
suffer from water scarcity
25 % of the earth’s lands
are degraded
41% of earth surface
consists of high salinity
soils
20% of North American
soils have a S- deficit
85% of the cereal growing
area is affected by low Zn
in India
No. 9
SUSTAINABILITY – ADDRESS ENVIRONMENTAL AND HUMAN HEALTH CONCERNS
Sustainability
Source: Agrotain International, Koch, SABIC
More than 30% of applied
nitrogen can be lost due
to ammonia volatilization,
nitrate leaching and
denitrification
Retaining nitrogen in the
soil to nourish the crop
By applying “control
release” and “slow
release” Urea or NPKs
Consumers would
demand healthy products
Need to provide micro-essentials such as B, Cu, Zn, Se proactively
besides affordable slow/control release fertilizers
No. 10
NEW ENHANCED EFFICIENCY FERTILIZERS NEED A CLEAR COST-BENEFIT CASE
Cost Benefit
Cost +
Application Know
How
New Equipment
Increased Income
Less Intensive
Less Waste
Source: SABIC analysis
No. 11
CHINA – REMAINS A KEY INFLUENCER ?
• Greater reduction in emissions, phasing out old plants
• New coal-fired power plants to be “ultra low emissions”
• Focus on High yielding and cost efficient crop production
• Zero growth in use of pesticide and chemical fertilizers
• Fast in developing and selling new fertilizer solutions
Source: Chinese New 5 Year China economic plan, SABIC assessment
No. 12
“PRECISION FARMING” WILL GAIN IMPORTANCE
Solution for farmer to utilize “big data”
Source: Company reports, SABIC
Site Specific/ crop specific balance dosing of Fertilizers
Data Collection
Crop Yield Monitors
GPS Equipped
Combines
Variable Rate
Technology Seeders
Multi/Hyper
Spectral Satellite
Imagery
Unmanned Aerial
Vehicles
No. 13
SUPPLY MODELS WOULD EVOLVE
Value Chain Integration Fertilizers
Production
Basic
fertilizers
Compound,
Fertilizers)
Distribution/
Trading/ Gov.
inst.
Whole-
salesRetail Farm
Source: SABIC
Existing
Fertilizer
supply
models
New
Fertilizer
models
No. 14
IMPLICATIONS ON GCC PRODUCERS
Major Changes in Fertilizer Supplier Model
Source: SABIC
Indicative FutureExisting
• Commodity portfolio• Commodity plus Value added
Products
• Selling large bulk vessels• Selling solutions, Combine shipments
and flexible/smaller vessels
• Partnership, cooperation's and M&A
• Standard cash management cycle • Value Chain integration and risk
management
• Stand alone business model
• Transactional Model • Partnership Model
THANK YOU