Biodiesel around the world

Transcription

1 Biodiesel: Powered by Canola The Westin Calgary July 17 18, 2006 Naturally inspired Biodiesel around the world Alejandro Reca Executive Director Food and Agribusiness Research Americas Rabobank International

2 Presentation Structure Section I Section II Section III Section IV Rabobank Why Biodiesel? Market Framework Looking Forward and Implications for Canada

3 Your vision Our insight Section I Rabobank

4 A Global Cooperative. 9 million clients Including 1,360,000 members 328 co-operative Rabobanks Local member banks with a total of 1,378 branch offices Rabobank Nederland Support to local member banks Group Treasury Interpolis Insurance, Pensions Rabobank International Corporate Investment Banking, Country Banking, Rabo Securities De Lage Landen Leasing/trade & Vendor Finance Gilde Investment Management Venture Capital Rabobank Nederland Cooperative Centrale Raiffeisen-Boerenleenbank BA Robeco Groep Asset management & Investment funds International Private Banking and Trust Private Banking Effectenbank and Stroeve Asset Management/ Advice Schertlen & Co Asset Management Rabo Vastgoed Real Estate Project Development/Finance

5 ..with a strong balance sheet, international network and dedicated know how.. Edinburgh Moscow Dublin London Toronto Utrecht Warsaw Antwerp Chicago New York Paris Frankfurt San Francisco Washington DC Milan Madrid Istanbul Beijing Tokyo Dallas Atlanta Shanghai New Delhi Taipei Mexico City Hong Kong Mumbai Curacao Bangkok Sao Paulo Singapore Jakarta Santiago Bs As 143 offices in 39 countries Global FAR team: about 80 members in 15 offices in 12 countries Perth Melbourne Sydney Auckland Christ Church

6 .. providing financial and advisory services throughout the agribusiness space A C A

7 Your vision Our insight Section II Why biodiesel?

8 Main drivers Environmental concerns Use of a renewable resource Petrol prices Interest across business segments

9 The need for biofuels has today a structural nature in both supply Environmental concerns Kyoto protocol compliance U.S. requirement for ultra lowsulfur diesel in 2006 Ban on MTBE use in the U.S. Support of local production Farmers and governments in developed economies find a form for continued support National security Lower dependence on oil originated among not so stable or predictable suppliers

10 and demand conditions.. Environmental concerns Consumers awareness, particularly in developed countries Income availability Relatively more wealthier consumers willing to support its development Specific importance across developed economies Use of domestic and renewable resource Consumers are favorable to the idea of using a locally produced good Important across both, developed & developing economies

11 ..with petrol prices providing an additional support Price evolution for mineral oil Increasing price trend /4/2004 USD/Barrel 8/4/ /4/ /4/2004 2/4/2005 4/4/2005 6/4/2005 8/4/ /4/ /4/2005 2/4/2006 4/4/2006 6/4/2006 Higher volatility Need for alternative sources Nymex crude for oil (Contract 1) Source: Energy Information Administration

12 ..while it is sustained today by the involvement of investors across sectors Agribusiness Energy Automotive & Ag machinery BIODIESEL Financial / PE Groups Increasing attention Improved economics Higher capitalization

13 ..and geographies Biodiesel investment announcements. Selected players and regions, 2006 New Holland Daimler Chrysler Volkswagen JRI West Coast Biodiesel Ltd CHS Western Iowa Energy Axiom Fuels Big s Daddy Biodiesel ADM AGP Bunge Cargill L. Dreyfus Repsol Bunge Bioverda Sofiproteol Rheinische Bioester SARIA Bio-Industries Golden Hope IOI Corp Peter Cremer ADM - Wilmar Hldgs Petrobras AGD Vicentin Repsol Source: Rabobank analysis based on publicly available data Fox Oil Neckermann

14 Your vision Our insight Section III Overall Market Conditions

15 The EU has been ahead in terms of incentives and resulting capacities Biodiesel production. Selected regions f Million tons North America EU Earlier implementation of incentives Higher relative use of diesel But capacity in U.S. and Canada currently growing at higher pace Larger scale (6:1 ratio) e 2006f Source: NBB, EBB and market data, 2006

16 ..but even within its boundaries, supply and demand conditions vary.. Excise duty for diesel fuels across selected EU countries, 2004 ( /hl) Source: Rabobank analysis. Biodiesel Petro UK CR FRA NETH GER Production quotas France, Italy Minimum blends Poland, Germany, Austria, U.K, France Excise duty exemptions or reductions Mandatory blending Austria Discussed elsewhere Product specification Some allow PPO or B100 while others only blends

17 ..while the tax structure on (petro) diesel differs across markets Tax incidence on petrodiesel, 2004 USD/ltr 1.4 Tax 1.2 Base Up to 70% of retail price in EU Higher leverage in EU countries for intervention through differential tax regimes U.S. Can Bra Pol EU-15 Source: OECD

18 Worldwide, current conditions entail a myriad of government measures.. Policy tools supporting biodiesel production or use across regions Minimum blends (5%) Direct payments Minimum blends (2, 5, 10%) Specific minimum blends (2->5%) Differential taxes Export tax differential Minimum blends (5%) Tax reduction Minimum blends (2-> 5.75%) Production quotas Minimum blends (5%) Minimum blends Tax incentives Policy Tools Minimum blends Specific Also with ethanol Direct payments Manufacturers Blenders Differential taxes Procurement Operation

19 Your vision Our insight Section IV Looking Forward

20 Biodiesel provides a significant demand increase for vegetable oils.. World use of selected oils (2005 & 2010) Million tonnes Period CAGR 1990/ % 1995/ % 2000/ % 2005/ % Food Biodiesel 2010f Includes, coconut, cotton, olive, palm, peanut, rapeseed, soybean and sunflower. Source: Rabobank analysis based on FAPRI, 2006 Significant departure from historical rates, reflecting the existence of a new application

21 ..particularly those with a high oil content like canola and palm Production scenarios for selected vegetable oils (2005 & 2010) Million tonnes Canada to capture most of canola s additional production and crushing SE Asia for palm f Soybean Canola Palm Other >300% expansion for canola. 50% from Canada >500% expansion for palm Source: Rabobank analysis based on FAPRI, 2006

22 with canola still holding a dominant position as a feedstock Feedstock used in biodiesel production (2005, 2010) Million tons Other Palm Canola Soy Development of other (geographic) markets Technology (additives) to favor soy and palm as well Source: Rabobank analysis based on FAPRI, 2006 and own estimates

23 and leading to the establishment of additional processing capacity.. Implicit expansion by type and region Type Region Millon tonnes per year Key Success Factors Canola EU 3.0 Manufacturing Crushing Source: Rabobank analysis Canola N. America 1.0 Soybean Americas 2.5 Palm SE Asia 8.2 Palm Row 1.4 Biodiesel EU 5-10 Biodiesel Americas 3.0 Biodiesel SE Asia 1.8 Logistics optimization Procurement Distribution Dealing with by products Glycerin Scale Off take contracts

24 ..giving room for the development of new trade flows, particularly for oils.. Canola oil Soy meal Canola meal Palmoil Soybean oil Source: Rabobank analysis based on Oil World and FAPRI, 2006

25 ..in summary Biofuels in general and biodiesel in particular are demand shifters Aggregate demand increase for vegetable oils highest in recent history Need for additional crushing capacity Agribusiness becomes attractive to existing and new players Existing gap between energy and agribusiness markets to get narrowed down Income gains globally expected to remain strong Vegetable oil food consumption to mitigate any eventual non food use decline Higher relative prices for oils Production of oilseeds and processing expansion Increasing competition from DDGS for vegetable meals Lower relative prices for vegetable meals Redefinition of business model for certain oilseeds

26 The financial link in the global food chain