Australian Agricultural Company Limited · ASX:AAC
Australian Agricultural — SAFF Livestock Industry Seminar (March 2012)
36 slides from Australian Agricultural's conference presentation, Mar 1, 2012
Slide 1: Is it time for a boneless beef trimmings derivative contract?
Is it time for a boneless beef trimmings derivative contract? David Farley 1st March 2012
Slide 2: Why does AAco care?
Why does AAco care? Substantial price risk over 680,000 head of cattle which AAco has limited ability to take protection AAco 2012 2011
Slide 3: Why this is different?
Why this is different? CME Live Cattle Futures Open Interest – the markets have grown! 420000 400000 Boneless 380000 beef futures 360000 market 340000 operating 320000 Number of contracts outstanding on the CME 300000 280000 260000 240000 220000 200000 180000 160000 140000 120000 100000 80000 60000
Slide 4: Key Characteristics of a Successful Futures Contract
Key Characteristics of a Successful Futures Contract Substantial price volatility Homogeneous product Large and growing cash market Large number of buyers and sellers Little pricing intervention by government Large deliverable supply Good information on cash markets AAco 2011
Slide 5: Key Characteristics of a Successful Futures Contract
Key Characteristics of a Successful Futures Contract Substantial price volatility Homogeneous product Large and growing cash market Large number of buyers and sellers AAco 2011
Slide 6: Increasing trim prices
Increasing trim prices US domestic 90CL 220.00 200.00 180.00 USd/lb 160.00 140.00 120.00 100.00 Jan Mar May Jul Sep Nov 2010 2011 2012 5yr Avg USDA, 2011 AAco 2011
Slide 7: Very high volatility in trim markets
Very high volatility in trim markets US domestic fresh and imported frozen 90CL 1990-2011 250.00 2008-2011 200.00 1990-1993 150.00 USd/lb 100.00 50.00 0.00 2005 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2006 2007 2008 2009 2010 2011 Domestic Fresh 90CL Impo
Slide 8: Australian and New Zealand context
Australian and New Zealand context Australian US Cow, NZ Cow and NZ Bull Prices 4.00 Jan 11 - Present 3.50 Feb 08-Jun 09 3.00 USd/lb 2.50 2.00 1.50 1.00 Australia US Cow N. Zealand Cow (195-220k cwt) N. Zealand Bull (270-295cwt) AAco, 2012 AAco 2011
Slide 9: Increasing volatility in trim markets
US$/k 0.50 1.00 1.50 2.00 2.50 3.00 3.50 04/26/03 07/26/03 10/26/03 01/26/04 AAco 2012 04/26/04 07/26/04 10/26/04 01/26/05 04/26/05 07/26/05 10/26/05 01/26/06 04/26/06 07/26/06 10/26/06 Uruguay Manufacturing 01/26/07 04/26/07 07/26/07 10/26/07 01/26/08 04/26/08 Manufacturing Meat Prices 07/26/08 10/
Slide 10: Key Characteristics of a Successful Futures Contract
Key Characteristics of a Successful Futures Contract Substantial price volatility Homogeneous product Large and growing cash market Large number of buyers and sellers AAco 2011
Slide 11: Homogenous product – price relationships
Homogenous product – price relationships USA Beef Trimmings 200.00 150.00 USd/lb 100.00 50.00 0.00 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Dom 90 85CL 75CL 65CL 50CL Informa Economics, USDA 2012 AAco 2011
Slide 12: But what about primal cuts?
But what about primal cuts? USDA 2012 AAco 2011
Slide 13: Key Characteristics of a Successful Futures Contract
Key Characteristics of a Successful Futures Contract Substantial price volatility Homogeneous product Large and growing cash market Large number of buyers and sellers AAco 2011
Slide 14: Global protein consumption increasing
Global protein consumption increasing 7.5% 47.7% 41.4% 23.7% 29% 70.2% 48.7% 32.2% 23.3% Food and Agricultural Policy Research Institute (FAPRI), 2010: Protein consumption over the past ten years AAco 2011
Slide 15: Developing countries increasing consumption
Developing countries increasing consumption Beef consumption (including veal) 12,000 10,000 8,000 Thousand Metric Tons 6,000 4,000 2,000 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Brazilian Chinese Indian Other African Other Asian Food and Agricultural Policy R
Slide 16: World Steer Prices: Brazil, USA, Australia, Uruguay, Argentina
World Steer Prices: Brazil, USA, Australia, Uruguay, Argentina Global Manufacturing Prices 2003-2012 5.00 4.50 4.00 3.50 USD/kg 3.00 2.50 2.00 1.50 1.00 Apr-03 Apr-04 Apr-05 Apr-06 Apr-07 Apr-08 Apr-09 Apr-10 Apr-11 Jan-08 Oct-03 Oct-04 Oct-05 Oct-06 Oct-07 Oct-08 Oct-09 Oct-10 Oct-11 Jan-04 Jan-05
Slide 17: US cow and bull slaughter v imports
US cow and bull slaughter v imports 9000 4000 8000 3500 7000 3000 Cow and Bull Slaughter (000s) US Beef Imports (million lbs) 6000 2500 5000 2000 4000 1500 3000 1000 2000 1000 500 0 0 1994 1990 1991 1992 1993 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Cow &
Slide 18: Beef and veal imports
Beef and veal imports US Beef and Veal Imports by Country 000’ pounds 3,500,000 3,000,000 2,500,000 2,000,000 1,500,000 1,000,000 500,000 0 2007 2008 2009 2010 2011 Canada Australia New Zealand Total U.S. Dept Commerce, Bureau of the Census, 2011 AAco 2011
Slide 19: Key Characteristics of a Successful Futures Contract
Key Characteristics of a Successful Futures Contract Substantial price volatility Homogeneous product Large and growing cash market Large number of buyers and sellers AAco 2011
Slide 20: Large number of buyers and sellers
Large number of buyers and sellers Californian dairy sector Japanese Importers Traders Hedge funds Day traders International Speculators trading houses Pastoralists Uruguayan Packing houses exporters Feedlotters Australian beef JBS/ Cargill processors AAco Australian beef New Zealand producers New Z
Slide 21: Global beef (including veal) production
Global beef (including veal) production 60000 58000 56000 1,000 Metric Tons 54000 52000 50000 48000 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010(p) 2011(f) USDA/FAS, Informa, 2011 AAco 2011
Slide 22: Key Characteristics of a Successful Futures Contract
Key Characteristics of a Successful Futures Contract Substantial price volatility Homogeneous product Large and growing cash market Large number of buyers and sellers AAco 2011
Slide 23: AAco 2011
AAco 2011
Slide 24: Current reporting mechanisms
Current reporting mechanisms USDA Blue USDA Sheet mandatory (domestic) pricing Yellow Is this Sheet sufficient? (imports) AAco 2011
Slide 25: Key Characteristics of a Successful Futures Contract
Key Characteristics of a Successful Futures Contract Substantial price volatility Homogeneous product Large and growing cash market Large number of buyers and sellers AAco 2011
Slide 26: Is it time for a boneless beef derivative contract?
Is it time for a boneless beef derivative contract? David Farley 1st March 2012
Slide 27: Scott Hansen
Scott Hansen Managing Director - MLA SAFF Livestock Industry Seminar
Slide 28: CME Group Agricultural Products
CME Group Agricultural Products Brisbane, March 2012
Slide 29: CME Group Agricultural Products
CME Group Agricultural Products • Grains & Oilseeds • Livestock • Dairy • Forestry • Commodity Indexes • Weather • OTC Clearing © 2011 CME Group. All rights reserved 29
Slide 30: © 2011 CME Group. All rights reserved
© 2011 CME Group. All rights reserved 30
Slide 31: © 2011 CME Group. All rights reserved
© 2011 CME Group. All rights reserved 31
Slide 32: OTC Clearing Services: CME ClearPort
OTC Clearing Services: CME ClearPort Strong track record in energy markets with deep liquidity in key industry benchmarks 600 494,216 ADV (in thousands of round turns) 500 467,802 447,189 458,197* 400 335,720 313,128 • 1,200+ products 300 • 14,000 users 200 139,177 56,971 100 24,137 0 2003 2004 2005
Slide 33: Bilateral vs. Cleared Swaps
Bilateral vs. Cleared Swaps Bilateral Cleared Credit Exposure Credit exposure to the swap counterparty Credit exposure is to CME Clearing Margin Depends on the relative credit worthiness Exchange sets margin with possible offsets Requirements of the counterparties against other exchange traded produ
Slide 34: Existing Swap Volume Over the past 12 Months
Existing Swap Volume Over the past 12 Months Feb, to date © 2011 CME Group. All rights reserved 34
Slide 35: Disclaimer
Disclaimer Futures trading is not suitable for all investors, and involves the risk of loss. Futures are a leveraged investment, and because only a percentage of a contract’s value is required to trade, it is possible to lose more than the amount of money deposited for a futures position. Therefore,
Slide 36: © 2011 CME Group. All rights reserved
© 2011 CME Group. All rights reserved
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