MARCOS S. JANK JAPAN BRAZIL Bilateral Dynamics and Partnership in the Agri-Food Sector JAPAN-BRAZIL BUSINESS COUNCIL Tokyo, Japan 24 th July 2018
Japan and Brazil Competitive Advantages in the Agri-Food Sector JAPAN 4 th top importer, after the EU, the United States and China. Free Trade Agreements and Economic Partnerships with 16 countries: ASEAN, TPP, Mexico, Chile, Peru, Switzerland, Australia, India, Mongolia. Reputation and differentiation: quality, food safety, food chain coordination, traceability. Value-added products and branding. Japanese conglomerates are top investors throughout the Brazilian agrifood sector (long experience). BRAZIL 3 rd ag exporter (> 200 destinations). Availability of natural resources: land, water, climate conditions. Tropicalization : genetics, double cropping, crop-livestock integration, no-till, large scale farming systems, integrated supply chains, migrations. Benchmark in advanced biofuels. Commodity based exports: volumes and low costs, value-added still a challenge. Farmers: young entrepreneurs, motivated, risk takers, migrations. New ag frontiers (e.g., MAPITOBA). Huge complementarities with Japan!
USD billion Top Agri-Food EXPORTERS in the World (value in US dollars) 180 160 140 120 100 80 EU USA Brazil China 2017 (%) CAGR % 11% 5% 10% 5% 6% 6% 6% 8% 60 40 20 Canada 4% 4% Indonesia 3% 6% Australia 2% 6% Thailand 2% 4% Argentina 2% 4% Mexico 2% 8% India 2% 10% 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Source: USDA and UN Comtrade Data BRAZIL ranks 3 rd on world ag exports high growth rates and competitiveness
USD billion Top world agri-food IMPORTERS (value in US dollars) 200 180 160 140 120 100 80 60 EU China+HK USA China Japan 2017 (%) CAGR % 12% 3% 11% 12% 11% 5% 10% 12% 5% 1% 40 20 Canada South Korea Mexico Rússia India 3% 5% 2% 6% 2% 4% 2% 2% 1% 12% 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Source: USDA and UN Comtrade Data. Note: China + Hong Kong may occur double counting JAPAN is the 4 th top importer, responding for 5% of the world total import value (~US$ 80 billion).
BRAZIL Agri-Food EXPORTS by Destination Asia receives 48% of Brazilian Agri-Food exports Source: MAPA (Agrostat). Note: Asia Ex-China includes Eastern Asia (ex. China), South Asia, Southeast Asia, Russia and Central Asia; Europe includes European Union, EFTA e Eastern Europe. MAPA s definition of agri-food used, which takes into account 2949 agri-food products. 100% 90% 19% 8% 8% USA and Canada Africa 80% 3% 8% Latin America 70% 13% 10% Middle East 60% 5% 18% Europe 50% 40% 43% 18% Asia (Ex-China) 30% 20% 10% 11% 30% China and Hong Kong 0% 4%
USD Billion 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 BRAZIL vs. JAPAN Agri-Food TRADE BALANCE (value) USD Billion 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 100 80 60 BRAZIL Exports (11% p.a.) Balance 100 80 60 JAPAN Imports (2% p.a.) 40 40 20 - Imports (9% p.a.) 20 0 Exports (6% p.a.) -20-20 -40-40 -60-60 -80-80 Balance -100-100 Source: MAPA (Agrostat), USDA and UN Comtrade
USD billion JAPAN Agri-Food IMPORTS by Products 100 90 2017 (%) CAGR % 80 70 60 50 40 30 20 Others Wine and beer Fresh fruit Dairy Products Corn Soybean complex Poultry Processed vegetables Beef Pork Forest products 33% 0% 2% 4% 3% 2% -1% 2% 4% -4% 4% 3% 5% 5% 5% 5% 7% 1% 13% 0% 10 0 Fish Products 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 19% 0% Source: USDA and UN Comtrade Note: soybean complex includes beans, meal and oil
BRAZIL - JAPAN Total and Agri-Food TRADE BALANCES 9 8 7 6 5 4 3 2 1 0-1 -2 USD billion10 Total imports (5% p.a.) Total exports (8% p.a.) Agri-Food exports (9% p.a.) Total Trade Balance Source: MAPA (Agrostat) Note: Total and agri-food EXPORTS include the value of fuel ethanol exports on ETBE from the US to Japan.
USD billion BRAZIL - JAPAN Brazilian Agri-Food EXPORTS to Japan 4,0 3,5 3,0 2,5 2,0 Others Orange juice Forest products Soybean (bean and meal) Coffee 2017 (%) CAGR % 7% 3% -2% -2% 7% 0% 9% 5% 13% 3% 1,5 Cereals (corn) 15% 13% 1,0 Ethanol 17% 14% 0,5 Poultry 30% 1% 0,0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Source: USDA Data and Japan Biofuels Annual 2017, UN Comtrade Note: Ethanol EXPORTS include the value of fuel ethanol exports on ETBE from the US to Japan.
USD billion BRAZIL - JAPAN Brazilian Agri-Food EXPORTS to Japan 1,4 1,2 1,0 2017 (%) CAGR % 0,8 Poultry 30% 1% Cereals (corn) 0,6 Coffee Ethanol 17% 14% 0,4 0,2 0,0 Soybeans Forest products Others Orange juice 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 15% 13% 13% 3% 9% 7% 5% 0% 7% -2% 3% -2% Source: USDA Data and Japan Biofuels Annual 2017, UN Comtrade Note: Ethanol exports includes ethanol on ETBE exported from the USA to Japan.
JAPAN Evolution of the Brazilian share for selected imports 100% 80% 60% 40% 20% 0% Corn Total: 3,074 MM Brazil: 435 MM Others USA Brazil 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 60% 50% 40% 30% 20% 10% 0% Poultry Total: 3,668 MM Brazil: 921 MM China Thailand Brazil Others 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 60% 50% 40% Coffee Total: 302 MM Brazil: 77 MM Others 70% 60% 50% Soybean (grains/meal) Total: 2,206 MM Brazil: 289 MM USA 30% 20% Brazil EU 40% 30% 20% Others China 10% 0% Colombia Vietnam 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 10% 0% Brazil 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Source: USDA and UN Comtrade Note: Total is the total amount imported by Japan in million of USD, Brazil is the total imported by Japan from Brazil in million of USD.
JAPAN AGRI-FOOD IMPORTS Market Access and Challenges for Brazil Market Share (% per annum) Increase Decrease Challenges Low value commodities: - Corn and cereals (21% p.a.) - Soy Complex (5% p.a.) - Poultry (-4% p.a.) - Coffee (-4% p.a.) - Ethanol (-44% in 2019) (entrance of US corn ethanol after the new METI s GHG methodology in April 2018) Sugar low polarization required levels. Beef processed meat, FMD (in natura). Pork gate price. Note: Soy complex (beans and meals). Japan has a requirement for a maximum polarization of 97.99% for raw sugar with tax free (beyond that there is a tariff of around US$ 200,00/ton). Brazil has a minimum pol of 99%. FMD (Foot and Moth Disease): Japan specific requirements.
CONCLUSION Main Challenges 1. ANIMAL PROTEIN: open the Japanese market for BEEF, address the PORK gate price issue and expand POULTRY exports. Time to revert the course to low value ag commodities. 2. SUGAR AND ETHANOL: establish the most ambitious ethanol program in the world: 55-60% reduction of GHG emissions with no blending mix, moving to E-10. Work together with Brazil on new technologies for hybrid vehicles using ethanol engines and hydrogen cells fueled by ethanol. On sugar address the requirements for maximum polarization levels. 3. NEW PRODUCTS: explore new segments such as tropical fruits, eggs, dairy. 4. INVESTMENTS AND COOPERATION Japan-Brazil long-term partnership in agri-food. Started more than one hundred years ago with the Japanese migrations to Brazil: horticulture, ag cooperatives, PRODECER (JICA) etc. Today more than 600 Japanese companies are present in Brazil. Time for a new cycle of investments and cooperation. Note: PRODECER Japanese Brazilian Cooperation Program for Cerrados Development.
THANK YOU! Marcos S. Jank Isabel Cleaver marcos@jank.com.br SPONSORS INSTITUTIONAL PARTNERSHIPS