Transcript

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Global Agriculture Markets: Today and Tomorrow

AgriEvolution SummitNew Delhi, India

JB Penn – Chief EconomistDecember 5, 2013

Fourth World Summit on Agriculture MachineryDecember 5-6, 2013 ~ New Delhi, India

Global Agriculture Markets: Today and Tomorrow

• Brief Historic Review (2000-2013)

• Subtle Market Structure Shifts Occurring

• Looking Beyond 2013

• Concluding Observations

2Fourth World Summit on Agriculture MachineryDecember 5-6, 2013 ~ New Delhi, India

Brief Historic Review

3Fourth World Summit on Agriculture MachineryDecember 5-6, 2013 ~ New Delhi, India

Brief Historic ReviewGlobal Agriculture Markets

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• Period of unprecedented prosperity in developed country agriculture

• Key drivers: population and income growth, urbanization• - Dietary shifts• - Renewed attention to developing country agriculture

• Now, another market transition?

4Fourth World Summit on Agriculture MachineryDecember 5-6, 2013 ~ New Delhi, India

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014F

2015F

2016F

2017F

2018F

-4

0

4

8

12

Developed DevelopingAnnual % Change

Global Macro EconomyWorld GDP growth rates

5

Source: International Monetary Fund (IMF), World Economic Outlook , October 08, 2013

5Fourth World Summit on Agriculture MachineryDecember 5-6, 2013 ~ New Delhi, India

1995 2000 2005 2010 2014F

-10

-5

0

5

10

European Union Central and eastern Europe

Commonwealth of Independent States ASEAN-5

Latin America and the Caribbean Sub-Saharan Africa

United States

% change

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GDP Growth Rates

Source: International Monetary Fund (IMF), World Economic Outlook , October 08, 2013

6Fourth World Summit on Agriculture MachineryDecember 5-6, 2013 ~ New Delhi, India

Population Growth and Distribution 2000 to 2013

Source: International Monetary Fund (IMF), World Economic Outlook , October 08, 2013

1950 1975 2000 2025 20500

5

10

More Developed Regions* Less Developed Regions Least Developed Regions

Billions

56%

30%

4%

9%

1.2%

9.6B

2013

2050

2000

1.1B

7.2B6.1B

7Fourth World Summit on Agriculture MachineryDecember 5-6, 2013 ~ New Delhi, India

Urbanization: Rural-Urban Population Shift

1970 1980 1990 2000 2010 2020 2030 2040 20500

1

2

3

4

5

6

7Urban Rural

Population in Billion

Source: UN World Urbanization Prospects, The 2009 Revision Population Database

8Fourth World Summit on Agriculture MachineryDecember 5-6, 2013 ~ New Delhi, India

Commodity Index Prices, Jan 1990 – Nov 2013

Commodity Metals Price Index, 2005 = 100, includes Copper, Aluminum, Iron Ore, Tin, Nickel, Zinc, Lead, and Uranium Price IndicesCommodity Fuel (energy) Index, 2005 = 100, includes Crude oil (petroleum), Natural Gas, and Coal Price IndicesCommodity Food Price Index, 2005 = 100, includes Cereal, Vegetable Oils, Meat, Seafood, Sugar, Bananas, and Oranges Price Indices

Source: IMF Primary Commodity Prices

1991 1995 2000 2005 2010 20130

50

100

150

200

250

300

Food Metals Fuel

USD Nominal

9Fourth World Summit on Agriculture MachineryDecember 5-6, 2013 ~ New Delhi, India

Subtle Market Structure Shifts Occurring

10Fourth World Summit on Agriculture MachineryDecember 5-6, 2013 ~ New Delhi, India

Global Grain Market Dynamics

Major shifts underway since 2000

• not widely recognized

Competitiveness among producing regions slowly shifting – due to:

• On farm technology – cost/ton at farm gate• Infrastructure investment – cost/ton at export location

• Government policies shifting:

• Subsidies policies shifting in developed and developing

11Fourth World Summit on Agriculture MachineryDecember 5-6, 2013 ~ New Delhi, India

Major Grain Exporter Market Shares Shifting

Argentina Australia Ukraine Brazil Russia India Kazakhstan0%

5%

10%

United States Canada EU-27 Other0%

20%

40% 1990s Avg. 2000s Avg. 2010s Avg.

Source: Foreign Agricultural Service, Official USDA Estimates , September 2013

12Fourth World Summit on Agriculture MachineryDecember 5-6, 2013 ~ New Delhi, India

US Dominant Role Declining Sharply

0%

20%

40%

60%

0

100

200

300

400

1980 1985 1990 1995 2000 2005 2010 2013

Share of Global Exports

MMT US Grain Exports

US Exports Global Export Total US Exports as % of Global Exports (right axis)

Source: Foreign Agricultural Service, Official USDA Estimates , September 2013

13Fourth World Summit on Agriculture MachineryDecember 5-6, 2013 ~ New Delhi, India

Soy Market Shares Also Shifting

Source: Informa Economics, Weekly Soybean Complex, June 2013

0%

10%

20%

30%

40%

50%

60%

70%

80%

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012

% o

f export

s

Share of World Export

U.S. Argentina Brazil All Others

14Fourth World Summit on Agriculture MachineryDecember 5-6, 2013 ~ New Delhi, India

Non-traditional Exporters Are Less Stable Production Regions

Source: Informa Economics, Weekly Soybean Complex, June 2013

0

5

10

15

20

25

30coefficient of variation

Argentina & Brazil

Russia

Australia

USCanada

EU-28

World Average

Kazakhstan

Ukraine

• Growing market instability likely as importance of non-traditional suppliers grows – price volatility, political instability, trade disruptions

15Fourth World Summit on Agriculture MachineryDecember 5-6, 2013 ~ New Delhi, India

Global Grain Market Dynamics

- In addition to new consumers

• 1.1B since 2000 – mostly in lower latitudes

- New export producers also emerged

16Fourth World Summit on Agriculture MachineryDecember 5-6, 2013 ~ New Delhi, India

China Emerges As Major Soy Importer (circa 2000)

Source: Foreign Agricultural Service, Official USDA Estimates , September 2013

1980 1985 1990 1995 2000 2005 2010 20130

10

20

30

40

50

60

70

80

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

Imports

% of Global Soy Exports

MMT World Share

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2000 2005 2010 2013

-10

-5

0

5MMT

China Leaves Global Wheat Market

Source: Foreign Agricultural Service, Official USDA Estimates , September 2013

Forecast to import 8.5 MMT in 2013/2014

1985 1990 1995 1999

-20

-10

0

Trade BalanceMMT

18Fourth World Summit on Agriculture MachineryDecember 5-6, 2013 ~ New Delhi, India

Whither China and the Global Corn Market?

Source: Foreign Agricultural Service, Official USDA Estimates , September 2013

1980 1985 1990 1995 2000 2005 2010 2013

-6

4

14Trade BalanceMMT

• Corn: from 3 MMT (2012) to 20 - 30 MMT (2022)

• Forecast 7 MMT for 2013/2014

• Will corn be added to soy as a basic import? Or import pork?

19Fourth World Summit on Agriculture MachineryDecember 5-6, 2013 ~ New Delhi, India

1980 1985 1990 1995 2000 2005 2010 20130

40

80

120

0%

10%

20%

30%

Grain Exports Soy Exports

Global Grain/Soy Share (right axis)

MMT

• Captures much of global soy trade growth

• Rapidly expands grain, meat, poultry export sales

• Third-largest agricultural exporter (value) after US and EU

• #1 exporter: coffee, soy, beef, sugar, ethanol and frozen chickens

Source: Foreign Agricultural Service, Official USDA Estimates , September 2013

Brazil Gains Preeminence as Global Agriculture Exporter (circa 2000)

20Fourth World Summit on Agriculture MachineryDecember 5-6, 2013 ~ New Delhi, India

Source: Foreign Agricultural Service, Official USDA Estimates , September 2013

Increasing Reliance on South American Exports

1980 1985 1990 1995 2000 2005 2010 20130

10

20

30

40

50

60

70

0%

35%

70%

Corn Soy Corn (% of world) Soy (% of world)

MMT World Share

21Fourth World Summit on Agriculture MachineryDecember 5-6, 2013 ~ New Delhi, India

Source: Foreign Agricultural Service, Official USDA Estimates , November 2013

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Black Sea Sector Stabilizes After USSR Breakup and Late 1990s Crisis – Enormous Potential

1990 1995 2000 2005 2010 20130

50

100

150

200

0%

4%

8%

12%

Production Exports Share Of World Production

MMT World Share

22Fourth World Summit on Agriculture MachineryDecember 5-6, 2013 ~ New Delhi, India

Looking Beyond 2013

23Fourth World Summit on Agriculture MachineryDecember 5-6, 2013 ~ New Delhi, India

00 01 02 03 04 05 06 07 08 09 10 11 12 13F1,700,000

1,900,000

2,100,000

2,300,000

2,500,000

Production Consumption

(MMT)

Looking Beyond 2013: Global Grains

Source: USDA/WASDE, November 2013

24Fourth World Summit on Agriculture MachineryDecember 5-6, 2013 ~ New Delhi, India

00 01 02 03 04 05 06 07 08 09 10 11 12 13F200,000

300,000

400,000

500,000

600,000

12%

16%

20%

24%

28%

32%

Ending Stocks Stocks/Use Ratio

(MMT)

10 Yr Avg. = 20%

Source: USDA/WASDE, November 2013

Global GrainsStocks to Use: 74 Days

25Fourth World Summit on Agriculture MachineryDecember 5-6, 2013 ~ New Delhi, India

Country 2012 (mmt) 2013F (mmt) Change

EU 28 281 304 8%

China 477 480 1%

USA 354 436 23%

Russia 67 88 31%

Canada 52 59 15%

Ukraine 45 60 32%

Corn 26.5 26 -2

Soy 49.4 53.5 8

Corn 81 72 -11

Soy 82 88 7

Argentina (mmt)

Brazil (mmt)

• Planting conditions in Southern Hemisphere Now Market Focus

• Temperature, moisture, and soil conditions dominate next few weeksSource: USDA PSD report, November, 2013.

Large Southern Hemisphere Crops Again in Prospect

for 2013/2014

Northern Hemisphere Harvesting Large Grain Crops

26Fourth World Summit on Agriculture MachineryDecember 5-6, 2013 ~ New Delhi, India

• India produced 239 MMT in 2012/13, and 240 MMT in 2013/14 – 1% increase

1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010

0

100

200

300 $/MT

US Wheat Prices Received by Farmers, 1908 - 2013

1908 to 1939 Average = $38.8

1940 to 1969 Average = $61.8

1970 to 2005 Average = $115.8

$280/mt

$220/mt

Source: USDA Feed Grains Database, November 2013

Ag Commodity Prices Seeking New Trading Range

27Fourth World Summit on Agriculture MachineryDecember 5-6, 2013 ~ New Delhi, India

1900 1920 1940 1960 1980 2000 2020F

0

50

100

150

200

250

$/MT

US Corn Prices Received by Farmers, 1900 - 2012

1900 to 1939 Average = $26.2

1940 to 1969 Average = $48

1970 to 2005 Average = $89.6

$220/mt

$160/mt

Source: USDA Feed Grains Database, October 2013

Ag Commodity Prices Seeking New Trading Range

28Fourth World Summit on Agriculture MachineryDecember 5-6, 2013 ~ New Delhi, India

Observations

29Fourth World Summit on Agriculture MachineryDecember 5-6, 2013 ~ New Delhi, India

Concluding Observations

• Period of unprecedented prosperity – driven by largely external forces

• Sector structure/markets changed significantly – still not widely recognized – calls for new mental models

• After 2013 – few parallels – entirely new situation

• Ag commodity markets seeing new trading range – worldwide weather will be key determinant for 2014

30Fourth World Summit on Agriculture MachineryDecember 5-6, 2013 ~ New Delhi, India

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Global Agriculture Markets: Today and Tomorrow

AgriEvolution SummitNew Delhi, India

JB Penn – Chief EconomistDecember 5, 2013

Fourth World Summit on Agriculture MachineryDecember 5-6, 2013 ~ New Delhi, India


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