IFC Global Agribusiness

Niraj H Shah Senior Investment Officer IFC South Asia Department ASSOCHAM 2nd International Summit cum Exhibition Processed Food, Agribusiness & Beverages Investments and Business Opportunities September 15, 2010

IFCs Products and Services

Senior Debt On-lending Liquidity management Acquisition financing Warehousing facilities Syndicated loans Structured Finance Partial credit guarantees Securitization Bond underwriting Mezzanine Finance Convertible debt Subordinated debt Other Tier II instruments Private Equity Common shares Preferred shares

Credit Enhancement
Advisory Services Corporate governance Risk management Small and medium business banking Housing finance Energy efficiency finance Sustainable Finance Carbon finance

Global Trade Finance Program $1 billion program Guarantees to issuing banks 46 issuing banks in 24 countries 92 confirming banks in 62 countries $579 million of issued guarantees in first 12 months

Renewable energy
Supply chain financing Cleaner production

IFCs investments in the Agribusiness value chain exceeded US$2.0 billion in FY2010
IFCs Goal:
Deliver development impact along the global agri-supply chain, through investments and advisory services with the private sector, to create opportunities and improve peoples lives
Fertilizers and other Chemicals Land Farm Production

Project/Corporate Finance
CIT Access to Markets Collection Processing Marketing Distribution

Inputs

Retail

Infrastructure/Logistics

Financial Institutions Pre-Harvest Finance

Market Infrastructure Trade Finance

Risk Sharing Facilities

IFC Agribusiness Portfolio Overview Agri-related Investments

(including Syndications) IFC has significantly increased its agri-financing in recent years
IFC'S COMMITMENTS IN AGRIBUSINESS BY FISCAL YEAR
2,000 1,800 1,600 1,400 $ Millions 1,200 1,000 800 600
546 m 347 m 304 m 120 m
Agribusiness Production and Processing 75%

The active portfolio of agri-related investments was $3.9 billion at FYE10 (excludes Trade Finance)
IFC'S AGRIBUSINESS PORTFOLIO BY REGION
Europe and Central Asia 25%

2.0 bn 2.0 bn Agri-Wholesaling Rural and Trade Finance Fertilizers Food Retail Agri Infrastructure Equity Funds Agribusiness Production & Processing
848 m

Africa 6%

Middle East/North Africa 2% South Asia 11%

1.3 bn

1.4 bn

Latin America 45%

East Asia 11%

IFC'S AGRIBUSINESS PORTFOLIO BY SECTOR

406 m 483 m
Equity Funds 3% Food Retail 12% Fertilizers 6%
Agri Infrastructure 4%

400
200 0

FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10

Technical Assistance is a significant part of IFCs contribution

North Andre, China ECOM, Africa/Asia

Establishing Farmer Training Centers to support small farmers to increase productivity, improve quality and meet international standards Development of a traceability system to enable small farmers to meet GLOBALGAP standard in the apple sector

Bertin, Brazil
Pilot project with Bertin to create a Sustainable Cattle Ranching Model in the Amazon.

Mars, Indonesia
Partnership w/Mars Symbio Sciences focusing on sustainable cocoa and more recently sustainable mariculture

Global Agri-Snapshot

Dynamics of global food prices have become much more complicated

Feedback Loops
Increasing speculation by financial players Increasing trade protectionism Rising correlation with oil prices

Key Demand Drivers

Population and income growth, especially in Asia Shifting diets; more protein, edible oils, and processed foods Diverting food commodities for biofuel production

Price of Food

Key Supply Drivers

Further productivity improvements Availability of additional land Availability of water Diverting land for biofuels

Uncertainties
A severe El Nio (or similar) event Climate change A renewed surge in oil prices A sharp depreciation of US dollar
Source: Modified from Nomura Global Economics

Global Snapshot 2010

Global alert for grain price spikes, although not expected to 2008-09 levels

40% drop in production in major grain areas of Russia and Kazakhstan due to drought and excessive heat; announced export bans of wheat for rest of 2010. Drops in output throughout Europe, but not to these levels, leads to precarious global grains situation which will depend on Southern Hemisphere supplies (Australia & Argentina)

Current Prices are rapidly approaching pre-2008 highs

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Main Issues in Global Agri-Industry

Increasing role for BRICs
Volatility in the commodity markets to continue Increased focus on land and agri-commodities as an investment class Sovereign Wealth Funds interested in large scale land investments in regions where land is available to address food security Emergence of regional Latin America and Asian players (e.g., JBS, Marfrig, Olam, Wilmar, Mengniu, Yili) as global leaders

Brazil: Agri-players in particular consolidating and globalizing, becoming major international players; but infrastructure still needs to improve
Russia: Structurally changed to become a large exporter of grains, in contrast to high dependence on imports in 1970s China: Growing industrialization and demand continues to influence global prices India: In contrast, agri-markets more focused internally and sensitive to local climatic and economic conditions

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The Sustainability Challenge

World food production needs to double within 30 years

Yet, pressure on natural resources is increasing:

40% of the worlds crop and pasture land is degraded, 8 million ha of cropland lost to urbanization, roads, etc every year Agriculture accounts for nearly 70% of global water use By 2025, some 48 countries and 1.4 billion people will experience water stress or scarcity, the majority of those will be in emerging markets 25% of worlds marine fish stocks are overexploited; an additional 50% are fully exploited

Biodiversity/deforestation issues in major emerging markets (Brazil, Indonesia) Climate change is a looming threat to agriculture and food supply Biofuels are becoming increasingly contentious in the environment of rising food prices Global trade liberalization and subsidy elimination are important issues in dealing with the global food crisis.

Intensification, resource efficiency and sustainability are core issues for agribusiness and rural development
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Food insecurity particularly impacts developing countries

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Strategic Context for IFC

Agricultural Development Aid plunged from around 17% of total development aid in 1980 to 3.8% in 2006.
A renewed international commitment to Food and Agriculture is at the centre of the global development agenda. FAO estimates that the world will need to boost agricultural investment to $83 billion a year by 2050, a 50% increase over the last decades average investments to feed a growing population. Most of the additional investment is expected to come from the private sector - from small farmers to large agribusiness companies. IFCs role is to work with the private sector in promoting sustainable agribusiness in emerging markets.

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Examples of existing Agribusiness projects

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Poultry sector
Suguna (India) 2007
$154 million project to more than double sales for Indias pioneer and market leader in integrated poultry production. The companys direct purchasing provides farmer incomes and its backbone kiosk structure provides employment for retailers. $35m Preferred Shares $18.4m A Loan

The Project

IFC Role
Long-term partner for mid-tier growth company preparing for IPO Sharing of poultry sector expertise Corporate governance best practices in preparation for IPO

Employment Creation
500 Direct Jobs Created

Farmers Reached
24,000 Farmers Reached

SMEs Reached
600 Wholesale Distributors

Technical Assistance
Avian Influenza Management

3,600 Total Employees

$300 avg monthly income / farmer

12,000 Sugunabranded live bird kiosks

Biosecurity - Supply Chain Mgmt

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Irrigation
Jain (India) 2008-10
Jain Irrigation Systems (JIS) is Indias largest provider of micro irrigation systems (MIS). JIS is growing rapidly and expanding its manufacturing capacities for MIS as well as its processed fruits and vegetable production. Agriculture uses 80% of water in India; meanwhile less than 5% of Indias irrigated land is MIS, which increases water use efficiency 80-95%.
$60m A loan (4 loans) $14.5 m Equity

The Project

IFC Role
Global agribusiness partner as the company expands internationally Implement environmental and social best practices & guidelines

Employment
5,600 Total Direct Jobs

Farmers Reached
2,300 contract farmers reached

Technical Assistance
Cleaner production technologies

Environmental
Reduce demand for water through efficient delivery

Improved livelihoods

Improved incomes

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Packaged and Processed Food

Pran Foods (Bangladesh) - 2009
The Project
Expansion of one of the leading branded food and beverage producers in Bangladesh. The US$52 million project increases production capacity in rice processing, snacks and confectionary, beverages, and dairy, while addressing permanent working capital needs.
2009 Loan of $15 million

IFC Role
Corporate Governance advisory services for company and sector Support a leading regional player Long-term financing in a difficult local market

Employment Creation
4,100 FullTime Jobs +5,000 Seasonal

Farmer Benefits
Supplies from 9,750 farmers

SME Benefits
1,900 exclusive distributors

Jobs and training

Pran buys half the processed horticulture in country

Distribution network provides backbone for domestic value chain

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Fruit Juices sector

North Andre (China) - 2005
North Andre is a leader in Chinas concentrated apple juice industry. $96.7 million project to expand operations (expand 1 existing plant and 3 greenfield plants) and support capital structure, including working capital - replacing short term debt. $15m A loan (2005)

The Project

IFC Role
Provide long-term financing not available in local market Sustainable development of commercial apple sector Demonstration effect of social and environmental policies/guidelines

Employment Creation
400 Jobs Created, 850 Total

Farmers Reached
25,000 Farmers Reached

Quality Management
ISO 9000: 2000 and HACCP certified

Sustainable Development
SME Linkages

Seasonal Employees

Farmer financing; foster new varieties

Supplier relations w/global players

IFC Technical AssistanceTraceability

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Thank You

Niraj H Shah Senior Investment Officer South Asia Department NShah1@ifc.org

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