1
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
4
• 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
6
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
17Fourth World Summit on Agriculture MachineryDecember 5-6, 2013 ~ New Delhi, India
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
22
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
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