trends in the global marketplace: volatility and … · iv i iv i ii iii iv i ii iii iv i ii iii iv...

Presented by: Terry Barr, Senior Director of Industry ResearchKnowledge Exchange Division, CoBank, ACBE-mail: [email protected]

14th Annual Farmer Cooperatives ConferenceNovember 3, 2011

Trends in the Global Marketplace: Volatility and Opportunity

Chart source: Knowledge Exchange Division, CoBank, ACB (confidential and proprietary)

The near term outlook for the food, fiber and agriculture sector is strong but the drivers of that prosperity will change in the decade ahead!

In the past decade net cash income has averaged one-third higher than the previous decade, farm prices have reached record levels, land prices have increased over 80 percent and the value of exports has nearly tripled. And the sector has been resilient through a severe global recession!


The major drivers of this past decade have been: rapid growth in the ethanol industry weather the rapidly growing emerging markets,

particularly China, and the massive amounts of global liquidity

fostered by accommodative monetary policy and the extraordinary lack of fiscal discipline in the advanced economies.


The next decade will be dramatically different as the world confronts the fact that these drivers are not sustainable. At the same time the opportunity to position for that future has never been better. The cost of investment and debt capital is as cheap as we are likely to see for many decades.The future will be about the agility of balance sheets, management and farmer cooperative boards!


Commodity Markets Pressured Lower With Reduced Growth Prospects

0

100

200

300

400

500CRB Indexes (1967=00) (commodity futures)

Reuters/ Jefferies-CRB

58 60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12

Supply issues and liquidity seeking returns will drive commodity markets!


* Currencies weighted by relative market importance to total U.S. trade.

70

80

90

100

110

120

130

140

150Indexes of major currencies/US$ (March 1973=100)

80 82 84 86 88 90 92 94 96 98 00 02 04 06 0874 76 78 10 12

From October 2010 …... -0.2%From 1997-03 average … . -28%

Dollar Erosion Has Boosted Foreign Buying Power and Commodity Prices

Weak dollar benefits exporters and sectors

facing import competition!


Deficits, Debt & Stagnation:Operation Twist and Fiscal Follies

Geopolitical challenges and energy:Arab Spring transitioning to Fall

Sovereign debt, defaults and Who Pays? China focus on inflation

and monetary tightening

A Lack of Confidence While Passing Through a Global Minefield


Over the past few months virtually every major risk to the global economic recovery seems to have resurfaced and occupied the front page. Sovereign debt issues in Europe

and the United States, rising inflation in China, oil market volatility and deteriorating expectations for U.S. housing and job markets.

This will be like “Groundhog Day”!!!!!

No Confidence That U.S. or Europe Has Political Will for Needed Action


Global Economy Facing Crisis of Confidence Regarding U.S. and Europe

70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12

-2

0

2

4

6

Percent change in annual world growth (purchasing-power parity rates)

Advanced countries Rest of world China India

Advanced economies accounted for over half of world growth rate from 1970 to 2008. From 2010 to 2016 they will account for less than one-third. This will be a world with a 2-speed recovery reliant on emerging markets!

Growth prospects in Europe and the U.S.

are weakening!


U.S. Agriculture Export Destinations Have Increasing Asian Flavor

1.China2. Canada3. Mexico4. Japan5. EU-276. South Korea7. Hong Kong8. Taiwan9. Indonesia

10. Turkey11. Egypt12. Philippines13. Thailand14. Viet Nam15. RussiaTotal all exports

19.518.517.014.010.5

6.53.33.53.02.92.82.01.51.51.4

137.0

Top 15 Markets 2012

1.Japan2. Canada3. EU-274. Mexico5. South Korea6. Taiwan7. China8. Hong Kong9. Egypt

10. Philippines11. Turkey12. Indonesia13. Russia14. Dominican Rep.15. Saudi ArabiaTotal all exports

9.37.56.56.32.52.01.51.21.10.90.70.70.70.50.5

50.8

Top 15 Markets 2000

Asian markets account for 43% of U.S. exports and occupy 9 of the top 15 market destinations. China has become the #1 market with Thailand and Viet Nam growing rapidly!

Bil. US$ Bil. US$


70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 120

15

30

45

60

75

90

105

120

135

150Billion dollars per fiscal year

Exports Imports Balance

U.S. Exports Provide Significant Boost to Agriculture Sector


76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 120

15

30

45

60

75

90

Billion dollars per fiscal year

High value products

Bulk commodities

High Value Products Lead Surge in U.S. Agriculture Exports


Much of Global Trade Strength Linked to China

70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 100

25

50

75

100

125

150Million metric tons or bales

Coarse grains

Wheat

Soybeans

Cotton40% to China

60% to China


Middle East and North Africa


93-02 2005 2006 2007 2008 2009 2010 2011 20120

1

2

3

4

5

6

7

8Percent growth rate per year

Egypt

93-02 2005 2006 2007 2008 2009 2010 2011 20120

1

2

3

4

5

6


Saudi Arabia

93-02 2005 2006 2007 2008 2009 2010 2011 20120

1

2

3

4

5

6

7


Middle East and N. Africa(5% GDP / 6% pop)The Middle East-North Africa market

represents 5 percent of world economy and 6 percent of world population. Oil and geopolitical instability characterize a region that may now be in transition and has future market potential!


Suez canal2 mil. barrels/daySUMED pipeline

2 mil. barrels/day

Straits of Hormuz16 mil. barrels/dayBahrain is home to

U.S. 5th Fleet

Strait of Bab el-Mandeb

3 mil. barrels/day

Middle East Turmoil Will Keep Oil Markets Unsettled Well into 2012

Saudi ArabiaRussiaIranUAENorwayKuwaitNigeriaAngolaAlgeriaIraqVenezuelaLibyaKazakhstanCanadaQatar

7,3227,1942,4862,3032,1322,1241,9391,8781,8071,7641,7481,5251,2991,1441,066

Top World Oil Exporters*

ExportsThousand barrels per day


Oil Price Tracks Global Growth and U.S. Dollar During Turmoil

19861987

19881989

19901991

19921993

19941995

19961997

19981999

20002001

20022003

20042005

2006

2007

20082009

20102011

2012

$10$20$30$40$50$60$70$80$90

$100$110$120$130$140Dollars per barrel; spot price West Texas Intermediate

Questions for oil:Middle East keeps uncertainties in the market.US dollar value still a factor.OPEC: limited output adjustmentsGlobal growth expectations are setting price expectations.a

2007 avg.$72

2008 avg.$100

2009 avg.$62

2010 avg.$79

2011 avg.$92

2012 avg.$90-95


Asia- World’s Growth Engine


93-02 2005 2006 2007 2008 2009 2010 2011 20120

5

10


China (14% GDP / 20% pop)

93-02 2005 2006 2007 2008 2009 2010 2011 2012

-6

-4

-2

0

2

4

Percent growth rate per year

Japan (6% GDP / 2% pop)

93-02 2005 2006 2007 2008 2009 2010 2011 20120

1

2

3

4

5

6

7


Asean-5

(pop= 533 million) Indonesia,Philippines,Malaysia,Thailand & Vietnam

93-02 2005 2006 2007 2008 2009 2010 2011 2012

0

2

4

6

8


Newly Industrialized Asian Economies (pop = 83 million)

Hong Kong, Singapore, S. Korea & Taiwan


China Has Made Inflation a Priority Issue for the Future

-2

0

2

4

6

8

10Percent (headline inflation)

China

Advanced economies

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011Data source: International Monetary Fund, WEO

Monetary tightening to combat inflation and asset bubbles may slow growth! No new stimulus. Food price

inflation is priority issue.

13.4%+ food


Latin America and Caribbean


93-02 2005 2006 2007 2008 2009 2010 2011 2012-1

0

1

2

3

4

5

6

7


Brazil(3% GDP / 3% pop)

93-02 2005 2006 2007 2008 2009 2010 2011 20120

2

4

6

8


Argentina(0.8% GDP / 0.6% pop)

93-02 2005 2006 2007 2008 2009 2010 2011 2012-2-10123456


Latin America and Caribbean(9% GDP / 8% pop)The Latin America and Caribbean

market represents 9 percent of world economy and 8 percent of world population. Young populations and abundant natural resources make this region a significant competitor for the U.S., in both European and Asian markets.


Capital Flows to Latin America Boosted by Foreign Direct Investment

I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV-4

-2

0

2

4

6

8Percent of GDP

FDI PFE PFD Other Total

2005 2006 2007 2008 2009 2010 2011

FDI: foreign direct investment; PEF: portfolio equity flows; PDF: portfolio debt flows.


South American Expansion Setting Supply Tone in Oilseeds Market

70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 100

50

100

150

200

250

Million metric tons

Brazil and Argentina

United States

World


Euro Region Remains in Chaos(17 countries)


Euro zone Countries Have Significant Deficit and Debt Challenges

-30 -25 -20 -15 -10 -5 0

Data source: International Monetary Fund, WEO

Portugal

Fiscal deficit as percent of GDP

Ireland

Italy

Greece

Spain

200820092010

200820092010

200820092010

200820092010

200820092010

0 35 70 105 140Government debt as percent of GDP

Portugal

Ireland

Italy

Greece

Spain


European Government Bond Spreads Accelerate Efforts to Find Solution

0

1000

2000

3000

4000

5000

6000

7000

8000Basis points

Ireland

Greece

Portugal

2010 2011J F M A M J J A S O N D J F M A M J J A S O N D

Data source: International Monetary Fund, WEO

0

50

100

150

200

250

300

350

400

450

500Basis points

France

Italy

Spain

2010 2011J F M A M J J A S O N D J F M A M J J A S O N D

two-year yield spreads over German bunds

two-year yield spreads over German bunds


Current Proposal

1. Voluntary reduction in private sector Greek debt held by private sector.

2. Recapitalize Euro zone banks to minimum 9% tier I capital.

3. Expand capacity of European Financial Stability Facility.

Chart source: Knowledge Exchange Division, CoBank, ACB (confidential and proprietary)Data source: International Monetary Fund, WEO

Total Greek debt = 340 bil. euros ($473 bil.)

Debt held by private sector = 200 bil.

Debt held by institutions = 140 bil.

Private sector takes voluntary 50% haircut = 100 bil. euros!

Voluntary reductions will not constitute a default in terms of

credit default swaps!

European Central Bank, IMF and others will not

take a haircut!

1. Voluntary Bank Losses Reduce Greek Debt by Only 30 Percent


30.0

26.2

14.8

8.8

7.8

5.2

4.1

3.6

2.9

1.4

Greece

Spain

Italy

France

Portugal

Germany

Belgium

Cyprus

Austria

Sweden

Data source: European Bank Authority

This requirement basically covers Greek haircut. Stress test by

European Bank Authority (EBA) does not assume EU recession or future defaults in other Euro zone

countries!

2. Recapitalize European Banks with 9% Tier I Capital Target

Estimated New Capital Required by European Banks = 106 bil. euros

Chart source: Knowledge Exchange Division, CoBank, ACB (confidential and proprietary)Data source: International Monetary Fund, WEO

Total EFSF goal =1 trillion euros ($1.39 trillion) lending capacity

Current EFSF = 440 bil. 190-240 bil. euros

committed !

Provide partial protection (20%) for investors against any initial defaults of Euro zone country bonds.Create several funds seeded with EFSF money and solicit funds from outside investors.

3. Expand the Size of the European Financial Stability Facility


Questions Will Remain

Will countries maintain fiscal disciplines? A referendum on the Euro versus austerity measures in early December or new elections!

Is the proposal big enough to address other defaults?

How will emerging recession in Europe impact numbers?

Will role of European Central Bank change under new Italian president?

Do the actions address the fundamental problems of fiscal discipline and the lack of competitiveness of member countries?


93-02 2005 2006 2007 2008 2009 2010 2011 2012-5-4-3-2-101234


Euro Countries(16% GDP / 5% pop)

93-02 2005 2006 2007 2008 2009 2010 2011 2012

-2

-1

0

1

2

3


France(3% GDP / 1% pop)

93-02 2005 2006 2007 2008 2009 2010 2011 2012-5-4-3-2-101234


Germany

(4% GDP / 1% pop)

93-02 2005 2006 2007 2008 2009 2010 2011 2012-5-4

-3-2

-10

12

3


United Kingdom(3% GDP / 1% pop)

?


Central and Eastern Europe and Commonwealth of Independent States


93-02 2005 2006 2007 2008 2009 2010 2011 2012

-5

0

5


Russia

93-02 2005 2006 2007 2008 2009 2010 2011 2012

-5

0

5

10


Commonwealth of Independent States

93-02 2005 2006 2007 2008 2009 2010 2011 2012-4

-2

0

2

4

6


Central and Eastern Europe(3.5% GDP / 2.6% pop)The Central and Eastern Europe

market represents 3.5 percent of world economy and 3 percent of world population. The Commonwealth of Independent States market represents 4.2 percent of world economy and 4.2 percent of world population.


Net Financial Flows to CIS and Central and Eastern Europe Still Weak


North America


93-02 2005 2006 2007 2008 2009 2010 2011 2012-3

-2

-1

0

1

2

3

4


Canada(2% GDP / 0.5% pop)

93-02 2005 2006 2007 2008 2009 2010 2011 2012-6

-4

-2

0

2

4


Mexico(2% GDP / 1.6% pop)

93-02 2005 2006 2007 2008 2009 2010 2011 2012-4

-3

-2

-1

0

1

2

3


United States

(20% GDP / 5% pop)

The North American market represents 23 percent of world economy and 7 percent of world population.


Recovery Shaped by CautiousConsumer and Financial Headwinds

75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 11

-2

0

2

4

6

Percent change Gross Domestic Product (Chained 2005$)

This recession began in financial sector and the recovery is heavily reliant on a consumer

sector that is now facing significant challenges in debt, jobs and home prices!


-8

-6

-4

-2

0

2

4

6

8Percent change in quarterly Gross Domestic Product (Chained 2005$)*

* Seasonally adjusted at annual rate2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 20122010 2011

Double Dip Concerns Have Eased But Growth Remains Weak

3rd qtr was driven by consumer

saving less!


70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 1050

60

70

80

90

100

110

120

130

140

150Percent (debt-to-income)

10

12

14

16

18

20

22

24

26

28

30Percent (debt-to-net worth)

Debt-to-Income

Debt-to-Net Worth

Consumption growth will track income growth unaided by credit

expansion. When will consumer be comfortable with debt level, jobenvironment and home prices?

A Deleveraging Consumer Will Temper Potential Demand Growth


-750

-500

-250

0

250

500

Change in nonfarm payrolls (thousand)

Monthly change 12-month moving average

82 84 86 88 90 92 94 96 98 00 02* Busines cycle troughs: Nov 1982, March 1991, November 2001 and June 2009.

04 06 08 10

Unemployment rate = 9.1%Underemployment = 16.5%Participation rate= 64.2% Average duration= 40.3 weeks

Job Gains Remain Weak and Consumer is Uneasy With High Unemployment

103,000 jobs created in September!(137,000 in private sector)


Home Prices: Is the Decline Coming to an End?

75

100

125

150

175

200

225Monthly S&P/Case-Shiller 20-City Home Price Index

2001 2002 2003 2004 2005 2006 2007 2008 2009 20102000 2011

August prices were 3.8% below a year ago, 32% below the peak in 2006!

Is housing no longer an investment and being priced as shelter?

IL IN OH

PA

NY

NC

ND

SDMN

MIWI

WVVA

SC

GA

FL

ALMS

KY

TN

MO

IANE

KS

MT

WY

CO

NM

TX

OK AR

LA

UT

AZ

CA

NV

OR

WA

ID

MD

VT

NH

ME

MA

RI

DENJ

CT

AtlantaYear ago …….... -6%From peak .... -27%From 2000 …… +0%

Case-Schiller Home Price Indexes20-city (through August 2011):

Year ago ………….... -3.8%From peak ……….... -32% From Jan. 2000 …. +40%

Home Prices Continuing to Fall in Many Regions of the Country

CharlotteYear ago …….. -3%From peak .... -17%From 2000 …. +10%

Minneapolis Year ago …….. -9%From peak .... -35%From 2000 …. +12%

DallasYear ago …….... -2%From peak ..... -9%From 2000 …. +14%

Chicago Year ago …….... -6%From peak ..... -31%From 2000 …. +16%

Denver Year ago …….... -2From peak .... -12%From 2000 …. +22%

Seattle Year ago …….. -6%From peak .... -29%From 2000 …. +34%

PhoenixYear ago ………. -8%From peak .... -57%From 2000 ….. -1%

Los AngelesYear ago ………. -4%From peak .... -39%From 2000 …. +66%

DetroitYear ago ……… +2%From peak .... -44%From 2000 …. -29%

TampaYear ago ………. -6%From peak .... -47%From 2000 …. +28%


Business Investment Lags Corporate Profit Growth; Housing Weak

91 93 95 97 99 01 0390 92 94 96 98 00 02 0504 06 07 08 09 10200

400

600

800

1000

1200

1400

1600

1800Billion dollars in profits; investment at annual rates

200

400

600

800

1000

1200

1400

1600

1800

Business fixed investment

Corporate profits (after tax)

Residential investment

11 12


U.S. Economic Policy Transitions Will Create Headwinds for Recovery!

U.S. is proposing to undertake major policy reform:

Virtually every sector of the economy will be impacted and risk management and investment strategies will have to reflect the growing uncertainties

Financial sector Financial sector regulatory reform implementation

Energy sector Comprehensive energy policy/climate change ; transition from fossil fuels!

Immigration Reform groundwork being laid for 2012

Health care sector Uninsured, medicare / medicaid reform?

Regulatory oversight Clean air & water, Food safety

Deficit reduction

Tax policy; entitlement programs (including farm and food programs).


Monetary Policy: Setting Stage for 2011 and Beyond

U.S. Federal Reserve

U.S. Treasury Department


Federal Reserve Will ContinueTo Promote Growth into 2013

0

1

2

3

4

5

6

7

8

9Percent

10-year Treasuries

FederalFunds Rate

90 91 92 93 94 95 96 97 98 99 00 01 02 0403 05 06 07 0908 1210 11 13

Fed commits to holding rates low through mid-2013!


Federal Reserve Announces Operation Twist and More

Fed holds $515 billion in 0-3 year maturities; they will sell $400 billion and purchase longer term maturities. Likely purchase pattern:

Maturity Total outstanding Fed purchases6-7 years $353 bil. $140 bil.7-10 years $581 bil. $160 bil.10-30 years $521 bil. $100 bil.Total $1,455 bil. $400 bil.

Fed will sell $400 billion of short duration assets and replace with longer term maturities.Reinvest the principal of maturing agency and agency-backed mortgaged backed securities (mbs) into longer term agency-backed mbs debt.


0

1

2

3

4

5

6Percent rate

June, 2011

June, 2009

10year

7year

5year

3yr

2yr

1yr

30year

20year

June, 2010

June, 2007

Week ending Oct. 21, 2011

Sept. 9, 2011

Operation Twist Has Been Offset By Global Financial Uncertainties


Fiscal Policy: An Ongoing Debate for 2011, 2012, 2013…..

Congress

White House


Budget Control Act Will Trim $2 Trillion From Future Budget Deficits

81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 11 13 15 17 19 21-1600

-1400

-1200

-1000

-800

-600

-400

-200

0

200

Deficit in billion dollars

-16

-14

-12

-10

-8

-6

-4

-2

0

2

-6%

-4.7% -3.6%

Reagan ClintonG. Bush

G.W. Bush

Source: Congressional Budget Office (August, 2011), BEA and Treasury Department and forecast

Deficit aspercentof GDP

Percent of GDP

Obama

-10.0%Assumptions: 4 year phase-out in Iraq/ Afghanistan Permanent extension of tax provisions


Debt ceiling at $16.4-16.7 trillion

Congress approves Congress disapproves

President vetoes

By Dec. 31, 2011 Congress must vote up or down on joint committee plan

Implement Congressionally approved plan or by Jan 15, 2012 begin the sequestration process that will achieve $1.2-1.5 trillion in reductions over 10 years equally divided between domestic and defense national security spending. But cuts wouldn’t occur until 2013.

January 2013 ….. Debt ceiling would need to raised again by Congress, sequestration cuts would begin and tax cuts would expire without Congressional action.

Super Committee, Lame Duck or 2012 Elections ????

November 2012 ….. Presidential and Congressional Elections

Is $2 trillion enough and does it address structural problem?


Economic Conditions Increasingly Diverse in Agriculture


World Grain Stocks Will Likely Continue to Decline in 2011/12


Reduced Global Harvest Boosts Prospects for Wheat market


World Wheat Stocks Remaining Stable With Growing Demand

72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 100

50

100

150

200

250Million metric tons of wheat

0

8

16

24

32

40Stocks as percent of use


80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10

-25

0

25

50

75

100

125Million metric tons

Ending stocks

Domestic use

Production

Net exports

Rebound in FSU-12 Exportable Supplies Will Impact Wheat Markets

28% of world trade

-29%

Increase in exportable supplies.


70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 100.0

0.5

1.0

1.5

2.0

2.5

3.0Billion bushels

Ending stocks

Total useProduction

U.S. Wheat Stocks to Decline as Drought Reduces Yields and Offsets Acreage Gains


U.S. Corn Market Assesses 2011/12 Crop Prospects


Coarse Grain Stocks Moving to Record Low Levels Relative to Use

60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 100

10

20

30

40

50

60

70Percent (stocks as a percent of use)

U.S. World

Near record low stocks for both world &

U.S.!


Rate of Increase in Ethanol Slowing; Crop Size is Now Key Factor

70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 100.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

Billion bushels of corn

Feed and residual

Exports

Food, seed & industrial

Ethanol use is key driver!

(40% of use)(25% adjusted for

feed use)

Ethanol

DDG's


Corn Stocks Remain Tight Throughout 2011/12

75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 110

2

4

6

8

10

12

14Billion bushels

Production Total Use Free stks Gov't stks

Smaller corn crop will force usage below 13 billion

bushels!!Still need large 2012/13 crop!


Soybean Market Riding Export Wave to China


Continued Large Global SoybeanStocks Offset by China Demand

70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 100

10

20

30

40

50

60

70Million metric tons of soybeans

0

5

10

15

20

25

30

35Stocks-to-use percentage

Ending stocks Stocks-to-use


80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10-75

-60

-45

-30

-15

0

15

30

45

60

75Million metric tons

Ending stocks

Domestic use

Production

Net exports

China’s Appetite for Soybeans is Major Market Driver

In last 10 years domestic consumption has tripled with no significant increase in domestic

production! Usage has increase by over 40% in last 4 years!


U.S. Soybean Stocks Limited by Strong Demand and Acreage Competition

75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 110

1

1

2

2

3

3

4

4Billion bushels

Production Total Use Stocks


Cotton Market Reflecting Low Stocks and China Appetite


World Cotton Stocks Rebounding But Supplies Still Tight

72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 100

10

20

30

40

50

60

Million 480-pound bales of cotton

0

10

20

30

40

50

60

Stocks-to-use percent

Stocks Stocks-to-use


80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10-20

-10

0

10

20

30

40

50

60Million 480 lb. bales

Ending stocks

Domestic use

Production

Net exports

China Will Likely Rebuild Stocks in 2011/12 With Production Gains

45% of world trade


Meat and Dairy Industries Squeezed by Two Volatile Forces

ExportMarkets

Export Reliance:Emerging marketsDisease (FMD)U.S. $ weaknessRising competitionTrade disputes

Feed Costs:Low stocksRising price volatilityYield/weather issuesEthanolU.S. $ weakness

Are balance Sheets Strong Enough with Sufficient Liquidity to Match Risks?

ExportMarkets

Export Reliance:Emerging marketsDisease (FMD)U.S. $ weaknessRising competitionTrade disputes

Feed Costs:Low stocksRising price volatilityYield/weather issuesEthanolU.S. $ weakness


Meat Industry Sees Reduced Grain Harvests and Weak U.S. Economy!

74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 120

5

10

15

20

25

30

35

40Billion pounds

Beef

Pork

Broilers - 1 % -4 to -5% + 1.0 % +1 to 2%

Change in 2011 2012 + 1.4 % 0 to 1%

BeefPork

Broilers

2008 2009 2010 2011 2012 + 3% -3.2% 1.3 % 0.7 % -1 to -2 %

Percent change in total meat output


Export Market Will Be Key to Positive Returns Through 2012

80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12-3

0

3

6

9

12

15

Billion pounds (red meat: carcass weight; poultry: ready-to-cook)

Imports Exports Balance

Export share of 2012 U.S. production Broilers ….. 18% Beef ………. 10% Pork ……… 22% All meat .......16%


Red Meat Exports Continuing to Increase; Broilers Still Stagnant

Beef Pork Broilers0

1

2

3

4

5

6

7Billion pounds (2000-2012)

00 02 04 06 08 1210 00 02 04 06 08 1210 00 02 04 06 08 1210


Milk Production Responding to Record Export Demand

120130140150160170180190200210220Million pounds milkfat basis

Commercial supply Commercial disappearance

80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 1205

10152025

Ending stocks

Market keys 2011-12:Domestic consumer?International market volatility;Feed cost/liquidation


Export Market Will Be Key to Sustaining Returns Through 2012

1999 2001 2003 2005 2007 2009 2011-1

0

1

2

3

4

5Billion dollars

Imports Exports Balance


Milk Prices Boosted by U.S. Consumer and Strong Export Markets

79 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 118

10

12

14

16

18

20

22Dollars per hundredweight

Price support

All milk price

1 to 2 percent increases in milk production in 2011 and 2012 in the face of rising feed and forage costs and weaker economy could prove

challenging !


Prices Received and Paid by Farmers Have Reached Record Levels

19921993

19941995

19961997

19981999

20002001

20022003

20042005

20062007

2008

2009

2010

2011 2012

75

100

125

150

175

200

225Index (1990-92=100)

Prices received: crops

Prices paid*

*Prices paid commodities & services, interest, taxes and wage rates

Prices received: livestock

Sector is operating at higher price and cost levels with greater volatility …… more working capital to play, less leverage permitted and more emphasis on well-

defined risk management policies!


75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 110

20

40

60

80

100

120Billion dollars

Net Farm Cash Income

Direct government payments*

* emergency payments are striped area of government payments)

Net cash income in agriculture is projected to reach $115 billion in 2011, an increase of 24% over the

record set in 2010!

Farm Income: Agriculture Continues Strong Performance

Record high

Presented by: Terry Barr, Senior Director of Industry ResearchKnowledge Exchange Division, CoBank, ACBE-mail: [email protected]

14th Annual Farmer Cooperatives ConferenceNovember 3, 2011

Trends in the Global Marketplace: Volatility and Opportunity

trends in the global marketplace: volatility and … · iv i iv i ii iii iv i ii iii iv i ii iii iv...

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