rabobank in362 brazilian aquaculture melo and nikolik january 2013

Brazilian Aquaculture

A Seafood Industry Giant in the Making

Rabobank Industry Note #362 - January 2013

/11 | Rabobank Industry Note #362 - January 2013

Rabobank International Food & Agribusiness Research and Advisory

Guilherme Melo [email protected] +55 11 5503 7138 Gorjan Nikolik [email protected] +31 30 71 23825 www.rabotransact.com

Contents

Introduction 1 Domestic aquaculture

industry is in its infancy 2 The Brazilian seafood

industry remains

fragmented, with limited

presence of multinationals 5 Seafood consumption is one

of the fastest growing food

segments in Brazil 6 Unlocking the potential will

require significant changes

in legislation and

investment 8 Conclusion 10

Brazil has all the necessary ingredients to become the next seafood super power, rivalling established producers such as Thailand, Norway and even China. However, in spite of its intrinsic natural resources and large availability of grains, the Brazilian seafood industry still has to overcome significant barriers to realise its potential, including heavy bureaucracy to obtain licences to start an aquaculture operation, lack of biosafety standards, low yields and a relatively underdeveloped feed industry. Rabobank’s view is that despite the challenges, the Brazilian aquaculture sector—led by private and governmental investments—will enlarge its importance in the global aquaculture scenario.

Introduction Global seafood is undergoing a vibrant period of growth based on increasing demand and a constrained wild catch supply. It is estimated that in 2010, global capture fisheries and aquaculture supplied the world with around 168 million tonnes of seafood, of which 143 million tonnes were destined for human consumption. This volume represented 24 percent of all globally consumed animal protein, rising from a 15 percent share in 1992.

While global demand has increased steadily, global capture fisheries have remained relatively flat at around 90 million tonnes since 2006 and are set to hover around current levels over the coming years given the need to control fishing efforts in order to restore overexploited stocks and achieve long-term sustainability (see Figure 1). This implies the additional production required will need to be met by the aquaculture industry. However, current leading producers such as China, India, Thailand, Vietnam and Norway have relatively limited ability to expand due to constrained resources. Brazil, on the other hand, has all the ingredients necessary to play a key role and fulfill the expected supply shortfall.

Figure 1: Static global capture fisheries and growing aquaculture production million tonnes

Source: FAO, 2012

Brazil’s intrinsic natural resources make it a potential aquaculture powerhouse. Its exclusive economic zone (EEZ)—sovereign territorial waters—is one of the twelfth largest areas of water in the world, measuring 3.5 million km2. It also has a coastline that stretches for 8,500 kilometres bordering the Atlantic Ocean. Brazil’s long coastline and fresh waters stretch across a diverse range of tropical and subtropical climates that are ideal for aquaculture similar to that of South east Asia and China, which currently account for over 80 percent of the global production. Brazil also possesses 12 percent of the planet's available freshwater reserves, with over 5.5 million hectares of federal controlled land.

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Capture production Aquaculture production


Brazilian Aquaculture Moreover, Brazil’s current vast grain production along with its still large potential for further growth (available arable land) provide the country another advantage in production of species that consume a vegetarian diet as feed costs make up around 60 percent of the total cost of fish production. A feed cost advantage was also a substantial factor behind the growth of the poultry and pork industry in Brazil, which are now the second and fourth largest in the world, respectively.

Box 1: The Brazilian feed industry key driver to cost competitiveness

In the years to come, Rabobank believes that the Brazilian feed sector has all the conditions (favourable climate, good precipitation levels and available arable land) to continue supporting animal protein production growth, which will be driven by the growing demand (domestic and international) for these types of products, including seafood.

The Brazilian feed industry is the fourth largest in the world and has posted an average annual growth of 5 percent over the past ten years, boosted by the growing animal protein industry combined with a large supply of grains, notably corn and soybeans. Brazil holds 28 percent of the world’s soybean production and 7 percent for corn. Poultry and pork account for 79 percent of the total feed output, but the aquaculture segment is the one that has shown the fastest growth rate, albeit from a fairly low basis (see Figure 2). Figure 2: Feed consumption by species

million tonnes

Source: Sindirações, 2012

Domestic aquaculture industry is in its infancy Although Brazil has enormous potential to become a prominent aquaculture player, growth is still ‘crawling’. In 2010, its total seafood production amounted to only 1.26 million tonnes, of which, 70 percent came from maritime and continental capture with only 479 thousand tonnes originating from aquaculture. Although aquaculture production remains low, it has grown rapidly in recent years in the wake of the uncertainty about quality and quantity of the final product obtained through wild capture. Between 2003 and 2010 the aquaculture segment posted an annual growth of 8 percent (see Figure 3).

Figure 3: Aquaculture production in Brazil is growing rapidly

tonnes

Source: MPA, 2012

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2010 2011 2012E

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Brazilian Aquaculture Of the total aquaculture output in 2010, finfish species made up 81 percent, followed by shrimp production with 16 percent, and the remaining part coming from by mollusks and frogs. The majority of production (80 percent) is undertaken in fresh water, while the rest is from coastal waters.

From a global standpoint, Brazil’s seafood production (wild and farmed) is falling behind countries such as India, Vietnam, Indonesia and China, a nation that far exceeds the other countries in production (see Figure 4).

Figure 4: Brazilian production is falling far behind other countries Aquaculture (excluding aquatic plants)

Total seafood (wild and farmed)

Countries Thousand tonnes

Countries Thousand tonnes

China 36,737 China 63,495 Indonesia 2,362 Indonesia 11,662 India 4,648 India 9,348 Vietnam 2,671.8 Japan 5,292 Phillipines 744.7 Phillipines 5,162 South Korea 475 Vietnam 5,127 Bangladesh 1,308 US 4,874 Thailand 1,286 Peru 4,355 Japan 718.5 Russia 4,196 Norway 1,008 Myanmar 3,914 Chile 701 Chile 3,761 Brazil 479 Brazil 1,260 Source: FAO, 2012

Tilapia, shrimp and tambaqui lead the way in Brazil Although there are currently around 40 different species of fishes being commercially farmed in Brazil, tilapia, shrimp and tambaqui are the most important ones by far. The three species combined accounted for nearly 60 percent of the total output in 2010.

Shrimp: From exports to domestic oriented Shrimp farming began in Brazil during the 1980s, but it was only after 1995, with the introduction of Penaeus vannamei (a variety of shrimp), that the industry experienced a period of rapid development. Between 1997 and 2003, production grew from 3.6 thousand tonnes to 90 thousand tonnes at which point Brazil had become one of the leading shrimp producing regions. Yields increased from 1,050/kg/year/ha to 6,084, which is 490 percent growth in only six years. The currency devaluation in this period, which increased the attractiveness of exports, also added fuel to the advancement of shrimp farming.

However, by 2003, the shrimp industry was hit hard by the outbreak of the Infectious Myonecrosis Virus (IMNV). This, coupled with an antidumping action imposed by the Southern Shrimp Alliance (SSA) in the US and the appreciation of the Brazilian real, resulted in a sharp decline in total output to 63 thousand tonnes in 2005. Since then, production has slightly recovered, stimulated by the rise in domestic demand.

Indeed, initially an export industry, Brazil’s shrimp farmers are currently dedicated to the internal market only. Compared to most Central American and many Asian producer regions, with the notable exception of China, Brazil has the unique advantage of having a large domestic market. In our view, an industry growth rate of 10 percent per year or above could be maintained for at least the medium term without the need to rely on export markets.

Tilapia: The driver of Brazilian aquaculture growth Tilapia farming has posted one of the fastest growth rates among the aquaculture sector in Brazil and in the world. According to the Brazilian Ministry of Fisheries and Aquaculture, while total aquaculture production has grown by a compounded rate of 8 percent per year, the tilapia output has risen at an annual rate of 17 percent during the past four years. In 2010, Brazil’s tilapia production amounted to 155 thousand tonnes, placing the country as the sixth largest tilapia producer in the world.

At present, it seems tilapia is the most attractive and likely species that Brazil could export. Worldwide tilapia has been one of the most successful aquaculture industries. Its consumption is growing in markets such as Asia, South America and Egypt as well as in western markets such as the United States (US), which is the leading importer of tilapia. In


Brazilian Aquaculture the US, tilapia imports have grown at more than 20 percent per year for the last decade and tilapia has become the fourth most popular species only behind shrimp, tuna and salmon. Key exporters of frozen tilapia to the US are China (90 percent) and Indonesia (5 percent), while the suppliers of fresh tilapia to the US are Ecuador (37 percent), Honduras (39 percent) and Costa Rica (9 percent) (see Figure 5).

Figure 5: Breakdown of the US tilapia imports in 2011 by origin

Source: USDA, 2012

Brazil has the potential to be competitive on the fresh market as most of the competing producers in this market have higher feed costs and limited ability to commit large new areas of fresh water to tilapia farming.

On the frozen side, China is the dominant exporter of tilapia fillets due to a combination of low production and processing costs. At the moment, China’s position is unchallenged, but in 2011 the first signs of weakness appeared in the Chinese tilapia industry as weather problems affected China’s ability to rapidly expand production and exports. Although exports recovered strongly in 2012, the Chinese tilapia industry was not profitable. Rising feed and labour costs as well as rising domestic demand are hampering China’s ability to continue to be the world’s key tilapia exporter. This may also create opportunities for Brazil for to become an important frozen fillet supplier.

Tambaqui: Can it become Brazil’s trademark seafood species? The expansion of the tambaqui species (Colossoma macropomum) has caught Brazil’s attention. Tambaqui is an indigenous fish that has become increasingly popular among consumers given its low fat content and its considerably attractive flavour. Indeed, besides being largely available in Brazilian supermarkets, it has been exported to European countries such as Portugal and France. In 2010, Brazil produced 54 thousand tonnes of tambaqui, an increase of 17 percent over the year before.

Other species Apart from these species, there are others that may have their position strengthened in the years to come. This is the case for pirarucu (Arapaima gigas), which is originally from the Amazon area and whose carcass yield can be more than 50 percent. Another example is the beijupirá (Rachycentron canadum), which has already been cultivated in the state of Pernambuco and is highly valued in the international market.

Looking forward, based on our relatively conservative assumptions, in which the rate of growth over the next ten years would be equal to half the rate realised during the past five years, Brazil’s aquaculture industry could reach a production level of 1 million tonnes by 2022 (see Figure 6).

37%

39%

8%

11%

4%

Fresh

Ecuador Honduras Costa Rica Colombia Others

90%

5% 1% 4%

Frozen

China Indonesia Thailand Others


Brazilian Aquaculture Figure 6: Strong growth likely in Brazilian aquaculture production

million tonnes

Source: Food & Agriculture Organization of the United Nations, Rabobank estimates, 2012

The Brazilian seafood industry remains fragmented, with limited presence of multinationals The Brazilian seafood industry can be divided into two different types of players: primary producers and processing companies, with the former acting either independently or vertically integrated. However, regardless of the type of player, the aquaculture market is very fragmented and is composed of small to mid-sized players (see Figure 7).

Although the availability of information on the processing side is quite scarce, some sense of the size of the companies involved can be got by reviewing the data compiled by the Brazilian Development Bank BNDES based on Relatório de Informações Sociais (RAIS). It indicates that there are 661 seafood processing companies in Brazil, of which only 7 can be considered large scale enterprises (i.e. companies with more than 500 employees).

The leading processors are Gomes da Costa, which is owned by the Spanish Calvo Group, and Camil. These two players are mostly focused on canned seafood (sardine and tuna) and combined, account for approximately 85 percent of the canned market in Brazil. While the former is a traditional player, Camil stepped into the market in 2011 when it acquired Femepe and Coqueiro from PepsiCo. By that time, they were the second and third largest canned companies in Brazil, respectively.

Of the vertically integrated companies, the leading players are Leardini, Netuno and Nutrimar/Aquacrustra. The first two companies have their roots in the processing link of the chain, but they are also setting their sights on aquaculture production. Leardini, for instance, purchased Cavalo Marinho, a mussel and oyster farm. Netuno, which is owned by Japan based Nissui, has also given notice that it intends to enlarge its tilapia production, aiming to enter the Brazilian and US markets.

On the other hand, Grupo Nutrimar, was created mainly to target the production of Aquacrustra, which is owned by the same family as Nutrimar and is focused on shrimp production. The company also imports seafood for distribution in Brazil.

Figure 7: Net revenues per company in 2011 Company Net revenues

(million USD) Products Brands

Gomes da Costa 317.00 Tuna and sardines Gomes da Costa Camil* 178.54 Sardines, tuna and other species Coqueiro, Alcyon,

Pescador, Navegantes Leardini 119.50 Shrimp, abadejo, linguado Leardini Netuno 110.00 Tilapia, lobster, shrimp Netuno Nutrimar/Aquacrusta 110.00 Shrimp, kani kama, squid, lobster Nutrimar Costa Sul 73.77 Fresh fish, shrimp, kani kama, squid,

octopus Costa Sul

Monteiro Pescados 44.85 Lobster, shrimp, fresh fish, octopus Monteiro Pioneira da Costa 38.16 Marine and freshwater fish Pioneira da costa Ecomar 15.36 Fish Ecomar Geneseas 10.26 Fresh fish Geneseas * Corresponds only to the seafood business Source: Anuário do Agronegócio, 2011, Company information

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Brazilian Aquaculture The ‘on farm’ segment of the industry is quite fragmented. Data collected from the Agricultural Census (IBGE) carried out in 2006 suggest that there were around 156 thousand aquaculture farms in Brazil, of which, 22 percent were concentrated on tilapia production. The remainder of their aquaculture production is spread among the various species.

Seafood consumption is one of the fastest growing food segments in Brazil With its 193 million people—the fifth largest population in the world—Brazil is a traditional consumer of animal protein, accounting for 14 percent and 12 percent of the total worldwide beef and poultry consumption, respectively. However, when it comes to seafood, the picture is quite different, with domestic demand in 2010 amounting to a ‘mere’ 1.8 million tonnes out of a global consumption of above 145 million tonnes, or 1.2 percent of global consumption. Per capita consumption is still significantly low (9.4 kg in 2010) compared to the world average, which hovers around 18 kilogrammes.

Nonetheless, seafood consumption is one of the fastest growing food segments in Brazil, posting a compounded rate of growth of 9 percent over the past six years, outperforming the other animal proteins (see Figure 8). Demand has been largely driven by higher income levels and the strengthening of the Brazilian real, which has made imports more attractive. Additionally, the search for healthier food options has opened Brazilian consumers’ eyes towards new cuisines, such as sushi.

Another factor contributing to increased seafood consumption in Brazil has been the increased availability and variety of alternatives at the retail level. Additionally, increased availability gives access to consumers that do not usually go to restaurants. According to Euromonitor, between 2009 and 2011 the volume of seafood sold through the retail channel grew by 33 percent, jumping from 1.2 million tonnes to 1.6 million tonnes.

Sardines are a cheap fish, which is mainly marketed in a canned form that is largely directed towards low-income consumers. It is estimated that Brazilian consumption of sardines reached 110 thousand tonnes in 2011.

Dried cod (bacalhau in Portuguese) is another type of seafood that has become increasingly valued by Brazilian consumers and is traditionally consumed during the Easter and Christmas periods. Although there are no official figures on the total consumption of this product in Brazil, data from the Brazilian Trade Bureau shows that imports have increased by 40 percent since 2005, reaching 43.4 thousand tonnes in 2011. According to industry sources, this rise in cod consumption may be attributed to two factors: consumers’ purchasing power growth and the appreciation of the Brazilian real, which facilitated imports.

Salmon demand has also helped to boost seafood consumption in Brazil. Its popularity is being driven by the increasing number of Japanese restaurants popping up across the country as salmon is one of the most common sushi and sashimi items. We expect retailers

Figure 8: Seafood is the fastest growing type of animal protein consumption in Brazil, CAGR 2006-2011

Source: MPA, Rabobank estimates, USDA, 2012

9%

5%

3%

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Seafood

Poultry

Pork

Beef


Brazilian Aquaculture will unlock the true potential of the Brazilian market by progressively offering and promoting more whole and fillet salmon.

Salmon consumption in Brazil had an unexpected boost in 2008 and 2009 due to the infectious salmon anaemia (ISA) outbreak in Chile. The Chilean industry had to prematurely harvest nearly its entire Atlantic salmon biomass. These fish, although safe to eat, were too small to be sold as fillets in the US and Europe so were instead sold in large volumes as whole fish on the Brazilian market far below cost of production. This served to promote the fish to millions of new consumers. Currently, spurred by low salmon prices, Brazilian demand is set to reach a new record. Chilean salmon exports to Brazil for the first six months of 2012 have increased by 91 percent to a total of 31 thousand tonnes. Due to the high level of protein consumption but still very low salmon consumption per capita, Brazil is seen as a key driver of global salmon demand over the next five years.

Tilapia has also been more appreciated by the domestic market, spurred by its appealing flavour and nutritional value combined with changes in the way it has been marketed to consumers. This includes a shift from selling the whole fish to selling the fillet. Demand has been fuelled by the increase in other meat prices, which have given tilapia a comparatively more attractive value. Assuming that all production stays in the internal market, the consumption of tilapia would still only amount to a mere 155 thousand tonnes or 0.8 kilogrammes per capita.

Imports are bridging the gap Rapidly growing domestic demand together with the limited seafood production and the recent appreciation of the Brazilian real have paved the way for an acceleration in Brazil’s seafood imports in recent years. Between 2008 and 2011, the volume of imports grew at a compounded annual rate of 14 percent, reaching 323.8 thousand tonnes in 2011, and accounting for 18 percent of the seafood consumption in Brazil (see Figure 9).

Figure 9: Brazil's seafood imports, 2008-2011

tonnes

Source: SECEX, 2012

The primary seafood products imported by Brazil are salmon (from Chile) and cod (from Portugal and Norway). These two species together accounted for 25 percent of the total volume imported in 2011, with cod purchases amounting to 43 thousand tonnes, and salmon, 40 thousand tonnes. We expect salmon to record a large growth in imports in 2012 based on the half-year figures.

Moreover, imports of processed fish (fillet) from China are gaining momentum, with the country becoming the largest seafood exporter to Brazil (in volume) in 2011, outpacing Norway, Chile and Argentina, whose main export to Brazil is hake fillet (filet de merluza). Chinese sales to Brazil rose from 7 thousand tonnes in 2009 to 79 thousand tonnes in 2011, up ten times in two years (see Figure 10).

China dominates the global supply of frozen fillets, and as demand in Europe and the US stagnated due to the economic recession, Chinese processors looked towards Brazil as a new growth market. In a similar fashion, the Vietnamese pangasius industry has identified Brazil as a future destination for their fillets, which are increasingly difficult to sell in Europe.

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Brazilian Aquaculture Figure 10: Brazilian seafood imports Countries 2009 2010 2011 Chile 44,532 41,019 47,015 Norway 29,753 34,841 33,072 Argentina 60,331 60,872 49,580 China 7,624 33,050 79,703 Portugal 7,857 11,779 17,250 Morocco 31,380 32,055 12,488 Others 48,696 50,385 84,711 Total 230,173 264,001 323,819 Source: Secex, 2012

In spite of the recent increase in total imports, the Brazilian market is still relatively closed. Imports of shrimp, for instance, have been prohibited since 1999 due to sanitary risks.

Unlocking the potential will require significant changes in legislation and investment The current underdeveloped stage of the Brazilian aquaculture industry can be attributed to several factors, which together have diminished the industry’s appeal to investors.

Bottlenecks to be overcome On the regulatory side, one of the weaknesses is the legal framework concerning the use of water for aquaculture. There is considerable bureaucracy to overcome to obtain all of the permits/licenses to start an aquaculture operation. This is in part explained by the large number of institutions involved in regulating the activity on either federal or state waters. In addition, a common complaint from the industry is the lack of biosafety standards for production of the majority of the species. An example of potential damage that can be rooted in this absence of biosafety rules is the disruption of aquaculture production in an entire region caused by inappropriate husbandry and greater density of fish in a determined farm that ended up contaminating nearby farms.

Low yields and size heterogeneity also prevent the flourishing of the sector in Brazil. As pointed out by BNDES in its recent report on the Brazilian aquaculture, the husbandry methods commonly used in Brazil are still quite primitive. This issue could be partially solved if the relationship between the links of the chain were more coordinated among themselves as they are in the case of pork and poultry production (integrated system). Under such an arrangement, processors (known as integrators) would supply growers with all the necessary inputs and therefore have control of the genetics and feed used. Additionally, integrators generally provide technical assistance to farmers in order to enhance the animal husbandry so that they can capitalise on the high quality inputs.

Another hurdle to the development of the aquaculture sector is the underdeveloped feed industry for the sector, despite the large availability of grains. As there are many species being grown with a wide range of eating habits and living environments—usually on small-scale farms—it is not economically feasible for companies to produce specific rations suitable for each situation on a large scale. The result of this situation is a combination of poor quality feed and high prices.

Given the key role played by feed for the success of the industry, the aquaculture industry itself will probably have to lead the research focused on enhancing feed quality (e.g. higher conversion rate and digestibility), which may take place through partnerships with universities/research institutes and feed companies.

It is worth highlighting that in the case of tilapia, the ‘technological package’ is more developed given its higher scale of production. Therefore, all aspects involved in animal husbandry related to tilapia are well ahead that for species native to Brazil.

Infrastructure is also another important obstacle for the sector. As pointed out by BNDES, many areas that have been granted to aquaculture farms are very far from roads, ports, feed blenders, consumption areas, and so on, which poses additional challenges to the operation and, consequently, economic feasibility of such projects.

Last but not least, the lack of public information about the sector has likely prevented investors from better assessing the potential of such a market.


Brazilian Aquaculture Enticing opportunities Despite the challenges to be overcome, Rabobank believes the outlook for the seafood sector in Brazil is quite bright. The country possesses the key factors for becoming an aquaculture powerhouse.

On the domestic side, the speed of demand growth for seafood should maintain momentum, driven by rising income levels coupled with changes in consumers’ preference towards food quality and healthier products. Additionally, as per capita consumption is still falling much behind the World Health Organisation’s standards (12 kilogrammes/year/capita), it is very likely that the Brazilian government will continue rolling out incentives to encourage consumption. In fact, the government has already been relatively active in this market through the acquisition of seafood to be distributed in public schools.

Just to demonstrate the magnitude of the potential demand in the future, if we assume that consumption will grow at a CAGR of 7 percent for the next four years—similar to the levels seen in past years—we would see the total consumption jump to 2.6 million tonnes in 2015, which is not far from the actual domestic pork consumption (see Figure 11).

Figure 21: Seafood consumption is anticipated to remain strong in Brazil thousand tonnes

Source: MPA, Rabobank estimates, 2012

This fast-growing domestic consumption is also likely to promote an increase in Brazilian seafood imports as some of the preferred species cannot be grown in Brazil, notably salmon and cod, which require cooler temperatures. Under this scenario, exporters from Norway, Portugal and Chile could also benefit from anticipated demand expansion.

We also envisage export opportunities driven by the growing international demand for seafood, which is expected to grow by 27 million tonnes by 2030, according to Food and Agriculture Organization of the United Nations. Additional boosts to Brazilian exports will come from the declining rate of global aquaculture production growth on the back of water constraints and rising feed costs. Within the aquaculture sector in Brazil, tilapia and shrimp segments—whose value chains are far ahead the others—are the ones who could profit most from this scenario.

For example, the world tilapia trade is dominated by China, the main exporter, and the US, the largest importer. Brazil, curiously, is the major supplier of grains to China, who uses part of such grains to feed fish domestically before shipping them to the US. In addition, large Brazilian meat companies already have big US operations (e.g. JBS and Marfrig), a factor that could facilitate possible trade. The same potential applies to shrimp, where developed countries—represented by the US, EU and Japan—are responsible for 85 percent of total imports, with China, Thailand, Vietnam, Ecuador and India responsible for 36 percent of global exports.

In white fish, the question is whether Brazil can create an industry which will replicate the success of pangasius. Pangasisus is almost exclusively produced in the Mekong Delta in Vietnam, and within a period of less than ten years, expanded from a small backyard industry producing less than 100 thousand tonnes into a professional industry exporting to every large market globally and producing above 1 million tonnes. However, due to a worsening image with Western consumers and rising feed costs, production from the Vietnamese industry has stagnated for the last three years. This may open opportunities for

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Brazilian Aquaculture native species such as tambaqui and pirarucu—with features such as fast growth rate, white colour, mild flavour and a vegetarian diet (and thus low feed cost)—to play a role in the global fresh water white fish market and compete with pangasius.

All of these factors combined point to the expectation that the leaders in the global seafood industry will increasingly consider Brazil as the next frontier of seafood, notably aquaculture, following the early movers such as Calvo (canned tuna and sardines), Nissui (tilapia and shrimp farming) Pescanova (tilapia faming) and Nutreco (aquatic feed).

This may also entice Brazilian meat giants to venture into the aquaculture space. Brazil's top four meat producers—with combined revenues of USD 62 billion in 2011— have developed logistics, feed production, unrivalled expertise in animal protein production and a global footprint that could be extended to the aquaculture sector. For Brazilian meat companies, aquaculture can be seen as a source of diversification and an opportunity to generate growth levels far higher than in the meat industry.

Conclusion Brazil has all the ingredients necessary to become a seafood superpower, rivalling producers such as India, Norway and even China. However, in spite of its intrinsic natural resources and large availability of grains, the Brazilian seafood industry still has to overcome some barriers to fulfil its potential. Among them, we can highlight the heavy bureaucracy needed to obtain permits to exploit water, lack of biosafety standards for production, underdeveloped feed industry focused on fish and the absence of public information on the sector.

Despite having to overcome such challenges, the outlook for the seafood sector in Brazil is quite appealing. On the demand side, domestic consumption should continue growing relatively fast on the back of the expected rise in income levels coupled with changes in consumers’ preference towards food quality and healthier products. This fast-growing domestic consumption is also likely to promote an increase in Brazilian seafood imports as some of the preferred species cannot be grown in Brazil, notably salmon and cod.

In parallel, we also envisage opportunities on the export side for companies placed in Brazil. This will be motivated by the growing international demand for seafood, which is expected to grow by 27 million tonnes until 2030, according to FAO—assuming consumers will maintain the present level of per capita consumption—along with the low cost of production that these companies may reach here in Brazil.

All in all, Rabobank’s view is that in spite of all the challenges the Brazilian aquaculture sector will have to cope with over the coming years, the country—led by private and government investments—will enlarge its importance in the global aquaculture scenario.

This document is issued by Coöperatieve Centrale Raiffeisen-Boerenleenbank B.A. incorporated in the Netherlands, trading as Rabobank International (“RI”). The information and opinions contained in this document have been compiled or arrived at from sources believed to be reliable, but no representation or warranty, express or implied, is made as to their accuracy, completeness or correctness. This document is for information purposes only and is not, and should not be construed as, an offer or a commitment by RI or any of its affiliates to enter into a transaction, nor is it professional advice. This information is general in nature only and does not take into account an individual’s personal circumstances. All opinions expressed in this document are subject to change without notice. Neither RI, nor other legal entities in the group to which it belongs, accept any liability whatsoever for any loss howsoever arising from any use of this document or its contents or otherwise arising in

connection therewith. This document may not be reproduced, distributed or published, in whole or in part, for any purpose, except with the prior written consent of RI. All copyrights, including those within the meaning of the Dutch Copyright Act, are reserved. Dutch law shall apply. By accepting this document you agree to be bound by the foregoing restrictions. © Rabobank International Utrecht Branch, Croeselaan 18, 3521 CB, Utrecht, The Netherlands +31 30 216 0000 This report has been published in line with Rabobank’s long-term commitment to international food and agribusiness. It is one of a series of publications undertaken by the global department of Food & Agribusiness Research and Advisory. ©2013 - All Rights Reserved.


Brazilian Aquaculture

Rabobank International

Rabobank Food & Agribusiness Research and Advisory Global Animal Protein Sector Team

US—David C. Nelson [email protected] US—Don Close [email protected] US—William Sawyer [email protected] Australia—Sarah Sivyer [email protected] Argentina—Paula Savanti [email protected]

Brazil—Guilherme Melo [email protected]

EU—Gorjan Nikolik

[email protected] EU & Russia—Nan-Dirk Mulder [email protected] EU & Russia—Albert Vernooij [email protected] Mexico—Pablo Sherwell [email protected]

NE Asia—Chenjun Pan [email protected] NE Asia—Daron Hoffman [email protected] SE Asia & India—Pawan Kumar [email protected] New Zealand—Matthew Costello [email protected]

www.rabobank.com

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rabobank in362 brazilian aquaculture melo and nikolik january 2013

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