Southeast Asian Wheat Foods Industry 9 th Annual Southeast Asian Meeting International Association of Operative Millers October 1, 2018 Manila, Philippines Joe Sowers Regional Vice President Philippines and South Korea
ASEAN GDP PPP (trillion int. dollars) Real growth rate forecast GDP 2018 2013 2014 2015 2016 2017 2018 Indonesia 3.243 5.6 5.0 4.9 5.0 5.1 5.3 Thailand 1.229 2.8 0.9 3.0 3.3 3.9 4.4 Malaysia 0.926 5.5 6.0 5.0 4.2 5.9 5.2 Philippines 0.876 7.1 6.1 6.1 6.9 6.2 6.8 Vietnam 0.647 5.2 6.0 6.7 6.2 6.7 6.2 Singapore 0.527 4.7 3.6 2.2 2.4 3.6 3.2 Myanmar 0.331 8.4 8.7 7.3 6.5 6.3 6.8 Source: CIA World Factbook/World Bank
ASEAN Population Growth Population 2018 (millions) Growth Rate Median age Indonesia 260,581 0.9% 30.2 Philippines 104,256 1.6% 23.5 Vietnam 96,160 0.9% 30.5 Thailand 68,414 0.3% 37.7 Myanmar 55,124 0.9% 28.2 Malaysia Japan 126,451 31,382 (0.2%) 1.4% 47.3 28.5 Cambodia/Laos South Korea 51,181 23,397 0.5% 1.5% 41.8 24.6 Singapore Taiwan 23,508 5,889 0.2% 1.9% 40.7 34.3 Source: CIA World Factbook
Philippines/Japan Age Pyramids 60% 89%
Growing Prosperity and Urbanization Shifts Appetites Per Capita Wheat Consumption for Food Use kg/capita Indonesia Thailand Vietnam 35 30 Up 121% from 1993 25 20 Up 139% 15 Up 228% 10 5 Source: USDA/Euromonitor
30 28 Per Capita Wheat Consumption for Food Use and GDP Growth Philippines 10 8 26 6 24 4 2 kg/capita 22 20 0 % growth -2 18-4 16-6 14-8 12-10 Source: USDA/Euromonitor
Philippines: New Capital of Call Centers $70 billion - 8% of GDP 1.5 million employees Companies shift facilities from India to the Philippines Proficient English, preferred accent and customer service aptitude Fast paced, 24/7, commuting lifestyle
US futures prices HRS HRW SRW
U.S. AVERAGE FARM PRICES Hard Red Spring Wheat Per Ton $350 Per Bushel $9.52 $300 $8.16 $250 $6.80 $200 $5.44 $150 $4.08 $100 $2.72 Source: USDA, Annual Price Summary
HRW/Russian FOB prices 350 18,000 330 16,000 310 290 270 14,000 12,000 10,000 $US/MT 250 230 8,000 rubles/mt 210 6,000 190 4,000 170 2,000 150 0 HRW $US Russian $US Russian ruble
Ruble/$ and WTI
90 80 Russian wheat production 70 60 Million metric tons 50 40 30 20 10 0
Southeast Asia Flour Milling Industry - Capacity Change from 2000 through 2018 Myanmar 109% Thailand 5% +39% Vietnam 50% +34% Philippines 8% +40% Malaysia 15% +0% Indonesia 40% +39% Annual Regional Milling Capacity Increases by 3 MMT from 2000-2010 and an additional 7 MMT from 2010-2018 Regional milling use up 10.4 MMT from 2000-2018
1970-98
Top 13 Wheat Importers in the World 12 11 million metric tons 10 9 8 7 6 5 07/08 08/09 09/10 10/11 11/12 12/13 13/14 14/15 15/16 16/17 17/18 Indonesia Egypt Brazil Algeria Source: USDA: Production, Supply and Distribution
Indonesian Mills Single mill with ~ 50% market share Pundi Kencana, 6% Sriboga, 5% Bungasari, 5% Bogasari also has interest in Eastern Pearl Market making price power CY 17 actuals Eastern Pearl, 7% Cerestar, 10% 50% of flour sold at negative margin Several balance sheets are weak Feed wheat is saving the weakest 8.8 MMT milling wheat in MY17/18 Bogasari, 50% 79% utilization Panganmas, 3% WINA, 3% Nutridon, 2% Source: Aptindo Others, 10%
share TMT Australia 47% 3,854 Canada 20% 1,640 Black Sea 15% 1,230 US 13% 1,066 others 5% 410 8.2 MMT wheat market SME Ind. HH 1,000 metric tons 5,330 2,460 410 Noodles 1,812 2,140-48% Biscuit/conf. 800 246-13% Baked goods 2,399 74-30% others 320-410 9%
SMALL MEDIUM ENTERPRISE (SME) BAKERY Mixers 19
7 US wheat sales to North and SE Asia 6 5 million metric tons 4 3 2 1 0 Japan South Korea Taiwan ASEAN
US Sales to Indonesia all classes 1,200 1,000 839 TMT thousand metric tons 800 600 400 281 TMT 200 0 Source: FGIS
US Sales to Indonesia by class 1,200 1,000 800 thousand metric tons 600 400 SRW HRW SW HRS 200-2007/08 2009/10 2011/12 2013/14 2015/16 2017/18 Source: USDA Export Sales
share TMT US 55% 650 Australia 37% 430 Consistent, sophisticated market Two new mills Canada 8% 100 others 0% 0 700 US wheat sales to Thailand 600 thousand metric tons 500 400 300 SRW HRW SW HRS 200 100-2007/08 2009/10 2011/12 2013/14 2015/16 2017/18
Energy price (US /kwh) Vietnam 7 Indonesia 8 Malaysia 9 Thailand 12 Philippines 14 Strong economic growth New import infrastructure and mills Low energy/wage costs Fumigation issue US wheat blocked from Dec. 16 Aug. 17 Weed seed issues ongoing Australian tariff advantage/canada via TPP 300 250 US wheat sales to Vietnam share TMT Australia 65% 1,300 US 10% 200 thousand metric tons 200 150 100 50 SRW HRW SW HRS Canada 8% 150 others 17% 350-2007/08 2009/10 2011/12 2013/14 2015/16 2017/18
share TMT Australia 65% 1,000 US 15% 200 Canada 10% 150 others 10% 150 350 Home to regional milling companies 10 Subsidized GP flour 40% of market 1 kg bags only, phasing out in 2019 Prices remain depressed Strong market for improvers US wheat sales to Malaysia 300 thousand metric tons 250 200 150 100 SRW HRW SW HRS 50-2007/08 2009/10 2011/12 2013/14 2015/16 2017/18
US wheat sales to the Philippines: 2010/11 through 17/18: 91% average market share Market Share of Philippine Milling Wheat Imports 91% 1% 8% US Canada Australia Source: Philippine Census
Philippine Wheat Foods Use % of total use 1,000 MT (wheat equivalent) Bakery products* 50% 1,450 Noodles 20% 580 Cookies & Crackers 20% 580 Pasta 4% 120 Others 6% 175 *bakery products detail % of bakery segment Pan de Sal and derivatives 35% 500 Loaf bread 30% 450 Buns and rolls 20% 300 Cakes and Pastries 10% 150 Chinese products (sio pao) 5% 70 Source: Industry sources
3,000 US wheat sales to the Philippines: 2,500 2,000 thousand metric tons 1,500 1,000 SRW HRW SW HRS 500-2007/08 2009/10 2011/12 2013/14 2015/16 2017/18 Source: USDA Export Sales
3.5 Top 10 Customers for U.S. Wheat 5-year average 3.0 2.5 MMT 2.0 1.5 1.0 0.5 0.0 Source: USDA FAS Export sales data
Inflation! Php/$USD 54 52 50 48 46 44 42 40 38 Peso/USD exchange rate
800 World Production and Use 750 742 744 700 MMT 650 758 730 600 550 500 Production Use
US futures prices HRS HRW SRW
6,000 US wheat sales to South Asia 5,000 4,000 thousand metric tons 3,000 2,000 SRW HRW SW HRS 1,000 0 2007/08 2009/10 2011/12 2013/14 2015/16 2017/18