the outlook for food & ag: a global and local...
TRANSCRIPT
The Outlook for Food & Ag: A Global and Local Perspective
Agricultural Personnel Management Association 33rd Annual APMA Forum
Vernon Crowder Senior Vice President, Agricultural Economist Food & Agribusiness Research and Advisory Rabobank, N.A.
7 February 2013
2 Rabobank International Market Developments & Outlook
We invest in deep industry knowledge, which
we share with our clients
Food & Agribusiness Research and Advisory
• 80+ Analysts worldwide
Food & Agribusiness Research and Advisory (FAR): F&A Industry Expertise
Global Sector-Specialist Bankers
Animal Protein
Beverages
Crop Inputs
Dairy
Grains & Oilseeds
Sugar
Value Added Processing
blank Rabobank, N.A.
3 Rabobank International Market Developments & Outlook
Mission
To provide thought leadership on the global F&A
sector to create a unique competitive advantage
that positions Rabobank as the world’s leading
F&A bank.
blank Rabobank, N.A.
4 Rabobank International Market Developments & Outlook 4
FAR Global
A worldwide network of research professionals enthusiastic about F&A!
Over 80 people
in 13 different
countries
9 key global sectors
−Animal Protein
−Grains & Oilseeds
−Farm Inputs
−Sugar
−Dairy
−Beverages
−Clean Tech
−Food Processing
blank Rabobank, N.A.
5 Rabobank International Market Developments & Outlook
$0.00
$1.00
$2.00
$3.00
$4.00
$5.00
$6.001
95
0
19
52
19
54
19
56
19
58
19
60
19
62
19
64
19
66
19
68
19
70
19
72
19
74
19
76
19
78
19
80
19
82
19
84
19
86
19
88
19
90
19
92
19
94
19
96
19
98
20
00
20
02
20
04
20
06
20
08
20
10
Do
llars
/Bu
she
l
Corn Price per Unit Average Corn Price
What Happened to Prices
Rabobank, N.A.
Farm Liquidity
Rabobank, N.A. blank
6 Rabobank International Market Developments & Outlook
US corn used for ethanol has increased by roughly 100MMT since 2005, while world grain demand has risen by about 300MMT.
Biodiesel is a factor as well. World demand for vegetable oil is growing by about 5 million tons per year. About 2 of that, or 40%, has been going to feed biodiesel demand.
US Corn Used For Ethanol as a % of Global Grain Production
Source: USDA, 2012
Corn For Ethanol/US Has Been 1/3rd Of Global Grain Demand Since 2005
0%
1%
2%
3%
4%
5%
6%
7%
Rabobank, N.A. Rabobank, N.A. blank
7 Rabobank International Market Developments & Outlook
But corn hit $8.00 in 2012, no longer $2.50; THREE BIG CHANGES
The Basics Have Remained The Same
Agricultural land (1,000 ha) Global population (in millions)
-
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
10,000
Total population Rural population
Urban population
0.50
0.75
1.00
1.25
1.50
4,200
4,300
4,400
4,500
4,600
4,700
4,800
4,900
5,000
Agricultural land area
Agricultural land area per capita
Source: FAO Stat Source: FAO Stat, Rabobank
For many decades productivity gains outpaced demand growth. But things have changed.
Now due to GDP growth in the developing world, demand is accelerating.
Unfortunately, productivity from yield improvement is decelerating.
The world has changed from one of structural surplus to structural deficits.
Rabobank, N.A. Rabobank, N.A. blank
8 Rabobank International Market Developments & Outlook
GMO crops main impact has been to reduce pesticide use, not boost yields – though reduced insect damage helps.
Investment in genetic productivity fell as the world was managing surpluses in the 1980s and 1990s.
New land coming into production is less fertile.
Nature finds a way: weeds and insects are evolving faster than expected .
This is the big change, productivity now no longer is increasing faster than demand.
While most yield improvements are decelerating
Source: USDA Source: USDA
Source: USDA Source: USDA
World corn yield % change, 5 yr moving avg World wheat yield % change, 5 yr moving avg
World soybean yield % change, 5 yr moving avg World rice yield % change, 5 yr moving avg
Demand Is Accelerating While Productivity Growth Is In Decline
-2%
0%
2%
4%
6%
8%
19
65
19
68
19
71
19
74
19
77
19
80
19
83
19
86
19
89
19
92
19
95
19
98
20
01
20
04
20
07
20
10
0%
1%
2%
3%
4%
5%
19
65
19
68
19
71
19
74
19
77
19
80
19
83
19
86
19
89
19
92
19
95
19
98
20
01
20
04
20
07
20
10
-2%
0%
2%
4%
6%
8%
19
65
19
68
19
71
19
74
19
77
19
80
19
83
19
86
19
89
19
92
19
95
19
98
20
01
20
04
20
07
20
10
-2%
0%
2%
4%
6%
8%
19
69
19
72
19
75
19
78
19
81
19
84
19
87
19
90
19
93
19
96
19
99
20
02
20
05
20
08
Rabobank, N.A. Rabobank, N.A. blank
9 Rabobank International Market Developments & Outlook
Population Growth Engines
Source: IMF, Rabobank
0
2000
4000
6000
8000
10000
12000
14000
16000
18000
19
80
19
81
19
82
19
83
19
84
19
85
19
86
19
87
19
88
19
89
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
Billion USD
Brazil China Germany India Japan United Kingdom United States
Rabobank, N.A. Rabobank, N.A. blank
10 Rabobank International Market Developments & Outlook
… and are all in the “sweet spot” where consumer demand for animal protein grows at an accelerating pace – with GDP between $3-5000 per year.
While economic growth in Asia may be slowing, it is at very high levels of absolute growth.
Asia is also a grain deficit region – they will need to import grain, or animal protein
China, India and Indonesia alone represent 40% of world population
Source: Bloomberg, IMF, CIA, 2012
GDP Growth Is Accelerating Meat Demand
Higher GDP growth Higher protein consumption Higher grain demand
Country 2011 GDP
Growth Rate
2012 Forecast GDP Growth
Rate
2013 Forecast GDP Growth
Rate Population
China 9.20% 7.80% 8.20% 1,331,460,000
India 6.80% 4.90% 6.00% 1,155,348,000
Indonesia 6.50% 6.00% 6.30% 229,965,000
Rabobank, N.A. Rabobank, N.A. blank
11 Rabobank International Market Developments & Outlook
Income growth is fastest in countries with large populations, this is driving demand growth
BUT WHICH MOSTLY ARE IN GRAIN DEFICIT REGIONS
Source: USDA, 2011
Poultry Consumption Developing Markets Developed Markets
Most Of Which Will Come From Developing Markets
Source: USDA, 2011
-40%
-20%
0%
20%
40%
60%
80%
100%
120%
140%
Argentina Brazil
China India
Iran Mexico
Russia South Africa
-40%
-20%
0%
20%
40%
60%
80%
100%
120%
140%
United States EU-27 Japan
Rabobank, N.A. Rabobank, N.A. blank
12 Rabobank International Market Developments & Outlook
Developed Economies Have More Inelastic Demand For Meat
Tight conditions in raw grain supplies eventually leads to meat rationing through higher prices in developing countries
Rabobank, N.A. Rabobank, N.A. blank
13 Rabobank International Market Developments & Outlook
KFC is adding almost one new store per day in China. MCD also growing rapidly.
Suppliers are struggling to keep up.
+ hard to secure an assemblage of land
+ labor costs are rising rapidly, labor availability in decline
+ biosecurity a huge challenge (disease, antibiotics)
+ these chains only use about 20% of the bird
KFC and McDonald’s Restaurants in China
Source: Company data, Bloomberg, Reuters, 2011
The Struggle For Supply Growth In China
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
2008 2009 2010 2011f 2012f 2013f
KFC McDonald's
Rabobank, N.A. Rabobank, N.A. blank
14 Rabobank International Market Developments & Outlook
Even with only 2% pork
production growth, China
could be importing 25
MM MT of corn per year by
2015 due to industrialization
China’s corn balance sheet
Source: MOA, USDA, FAPRI, Rabobank estimates
China Consumption To Continue Driving Commodity Prices
-70
-60
-50
-40
-30
-20
-10
0
10
20
1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020
Actual EstimateMT
Rabobank estimate
Rabobank, N.A. Rabobank, N.A. blank
15 Rabobank International Market Developments & Outlook
What Does All of This Make Agricultural Markets???
The Dog That Has Finally Caught the Car!
Rabobank, N.A. Rabobank, N.A. blank
16 Rabobank International Market Developments & Outlook
California Agricultural Outlook
Rabobank, N.A.
Total receipts $ 43,500,000,000
Fruits $ 9,249,000,000
Milk $ 7,681,000,000
Nuts $ 6,069,000,000
Vegetables $ 6,018,000,000
Nursery & Floriculture $ 3,687,000,000
Cattle & Calves $ 2,825,000,000
Hay $ 1,735,000,000
Cotton $ 894,000,000
Processing tomatoes $ 887,000,000
Rice $ 774,000,000
2011 USDA/NASS data
Rabobank, N.A. blank
17 Rabobank International Market Developments & Outlook
Fruits
Crop Value 2011 acreage
2001 to 2011 acreage change
2001 to 2011 price change
All Grapes $3,861,000,000 796,000 -1% +30%
Wine Grapes $2,161,000,000 506,000 +5% +7%
Raisin Grapes $865,000,000 205,000 -13% +118%
Table Grapes $835,000,000 85,000 -3% +33%
Rabobank, N.A.
Total Value $9,249,000,000
Grapes
Rabobank, N.A.
18 Rabobank International Market Developments & Outlook
…Other major fruits
Crop Value 2011 acreage
2001 to 2011 acreage change
2001 to 2011 price change
Strawberries $1,948,000,000 38,000 +44% +26%
Oranges $656,000,000 180,000 -9% +66%
Avocados $460,000,000 52,200 -12% +105%
Lemons $436,000,000 45,000 -11% +36%
Peaches $289,000,000 47,500 -27% +27%
Cherries $197,250,000 29,000 +31% +91%
Rabobank, N.A. Rabobank, N.A.
19 Rabobank International Market Developments & Outlook
Rabobank, N.A.
2011 production
2001 to 2011 production change
2001 to 2011 price change
2001 to 2011 herd change
41,462,000,000 lbs +25% +32% +14%
•Despite growth and higher milk prices,
expensive feed is hurting margins
•However, world demand is relatively
strong and growing
Milk
Total Value $7,681,000,000
Rabobank, N.A. blank
20 Rabobank International Market Developments & Outlook
Tree Nuts
Crop Value 2011 acreage
2001 to 2011 acreage change
2001 to 2011 price change
All Nuts $6,069,000,000 1,162,000 +43% N/A
Almonds $3,867,000,000 760,000 +39% +111%
Walnuts $1,323,000,000 245,000 +20% +156%
Pistachios $879,000,000 153,000 +96% +96%
Rabobank, N.A. blank
21 Rabobank International Market Developments & Outlook
Vegetables
Rabobank, N.A.
Crop Value 2011 acreage
2001 to 2011 acreage change
2001 to 2011 price change
All Vegetables* $6,018,000,000 800,000 -24% N/A
Lettuce $1,513,000,000 209,000 -1% -14%
Broccoli $684,000,000 126,000 +3% +32%
Carrots $670,000,000 67,000 -7% +93%
Fresh Tomatoes $378,000,000 35,500 -13% +22%
Rabobank, N.A.
*Does not include processing tomatoes
22 Rabobank International Market Developments & Outlook
Nursery, Greenhouse & Floriculture
Crop Value 2001 to 2011 change in value
Total $3,687,000,000 +19%
Nursery Products $2,676,000,000 +28%
Flowers and Foliage $1,011,000,000 +1%
Cut Flowers $278,000,000 -5%
Potted Flowering plants $243,000,000 +19%
Bedding/garden plants $247,000,000 -18%
Foliage for indoors $110,000,000 -2%
Rabobank, N.A. Rabobank, N.A. blank
23 Rabobank International Market Developments & Outlook
Rabobank, N.A.
Herd Inventory
2001 to 2011 inventory change
2001 to 2011 price received change
Cattle & Calves 5,350,000 +1% +59%
•California cattle industry highly influenced by dairy industry
• 73% of CA cow/heifer herd (weighing 500 lbs or more) is from dairies, 59%
20 years ago
• Beef cow sector hurt by drought, high feed costs
• Expect high beef prices as US tries to rebuild cattle stocks
Cattle & Calves
Total Value $2,825,000,000
Rabobank, N.A. blank
24 Rabobank International Market Developments & Outlook
Hay
Crop Value 2011 acreage
2001 to 2011 acreage change
2001 to 2011 price change
All Hay $1,735,000,000 1,390,000 -11% +94%
Alfalfa $1,439,000,000 880,000 -13% +99%
Other hay $296,000,000 510,000 -7% +72%
Rabobank, N.A.
•Acreage is competing with other high value crops
•Dairies are the largest user of alfalfa hay
•However, hay exports are still very strong (doubled over
last 15 years)
Rabobank, N.A. blank
25 Rabobank International Market Developments & Outlook
Cotton
•CA produces 92% of US pima (which is 60% of state’s cotton) •There will be significant downward pressure on US acreage due to competition from alternative crops, such as corn and soybeans.
Rabobank, N.A.
Crop Value 2011 acreage
2001 to 2011 acreage change
2001 to 2011 price change
All Cotton $893,952,000 456,000 -47% N/A
Pima $614,000,000 273,000 +14% +92%
Upland $296,000,000 182,000 -71% +160%
Rabobank, N.A. blank
26 Rabobank International Market Developments & Outlook
Processing tomatoes
Rabobank, N.A.
Crop Value 2011 acreage
2001 to 2011 acreage change
2001 to 2011 price change
Processing tomatoes $887,000,000 255,000 -1% +29%
Rabobank, N.A. blank
27 Rabobank International Market Developments & Outlook
Rice
•CA produces primarily Calrose medium grain rice (about 80% of production), with the rest short grain and organics •California’s rice varieties have fared better than the larger Southern US rice industry in recent years •High input cost and volatile world markets remain a challenge
Rabobank, N.A.
Crop Value 2011 acreage
2001 to 2011 acreage change
2001 to 2011 price change
All Rice $774,000,000 585,000 +24% +201%
Rabobank, N.A. blank
28 Rabobank International Market Developments & Outlook
Water: Tapping Out
Permanent plantings are fastest growing CA crop sector
Water has become more difficult to obtain
Requires more reliance on water markets
Long term solutions will require significant investment
Strained water supplies are exposing permanent planting sector to shortages
Rabobank, N.A. blank
29 Rabobank International Market Developments & Outlook
California Farmland Values Rise at More Modest Pace
Rabobank, N.A. blank
California Farmland values have appreciated at much lower rate compared to Midwest.
Few properties have been changing hands, but when they do it is well capitalized operators buying
The majority of interest is in permanent crops such as pistachios, almonds, walnuts, mandarins, grapes, and ground suitable for these purposes
Most of the land appreciation will likely happen in the San Joaquin Valley, but could slow in coming years
Land values will be highly influenced by profitability of specific sectors
30 Rabobank International Market Developments & Outlook
Confidence:
The feeling just before you completely understand the situation
• 2012 a good case for new normal
• Has enough rationing happened?
• Which sectors will be rationed?
• How will China respond to 2012 market conditions?
• How will competition for acres shape up in 2013?
• Reverse grain flow
• What will drive speculators back into the markets?
Rabobank, N.A. blank
“The financial link in the
global food chain”™
Contact Details
Rabobank N.A. Vernon Crowder Senior Vice President, Agricultural Economist Food & Agribusiness Research and Advisory [email protected]
DISCLAIMER Professional advice is recommended for all financial and strategic decisions. However, this information is not professional advice and has not been prepared to be used as the
basis for, and should not be used as the basis for, any such decisions. This information is general in nature only and does not take into account an individual’s personal
circumstances. No representation is made that any forecast or projected information is correct or will eventuate. Although reasonable efforts have been taken to ensure the
accuracy of the contents of this publication, no warranty is given in regard to the total accuracy of the printed contents. The persons involved in the preparation and
distribution of this information and their related persons disclaim all liability for any loss or damage suffered due to any use of or reliance on the information.