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Vernon Crowder SVP, Senior Analyst
Economic Outlook For US Dried Fruit and Nut Export Destinations
May 9, 2016
2
Team of 94 professionals in 10 different countries; A truly Global Team
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Global Growth Outlook…Muddling Through
2015 2016 2017 2015 2016 2017 2015 2016 2017United States 2.4 2.0 2.6 0.1 0.9 2.2 5.3 4.8 4.5Japan 0.5 0.2 0.3 0.6 0.5 0.3 3.6 3.8 3.8China 7.0 6.5 6.0 1.4 1.7 1.7 na na naUnited Kingdom 2.2 2.1 2.1 0.1 0.4 1.4 5.5 5.1 5.2
Eurozone 1.5 1.2 1.5 0.0 0.2 1.4 10.9 10.2 9.6Germany 1.4 1.7 1.7 0.1 0.5 1.5 4.6 5.7 4.3France 1.1 1.0 1.0 0.2 0.2 1.0 10.5 10.5 10.3Italy 0.6 0.7 0.8 0.1 0.2 1.2 11.9 11.0 10.5Spain 3.2 2.5 2.3 -‐0.5 0.0 1.5 21.9 19.8 18.3Belg ium 1.4 1.0 1.5 0.6 1.5 1.7 8.3 8.0 8.0Netherlands 1.9 1.9 2.0 0.2 0.5 1.3 6.9 6.3 6.0
GDP Inflation Unemployment rate
Source: Financial Markets Research
4
Rabobank’s Global Strategic Framework
Incentives to weaken currency (Currency
Wars)
Commodity prices ↓ Global
disinflation
Low wage growth, more saving
Slow trade and economy
Too much debt Structural problems
Overcapacity
0
50
100
150
200
250
300
350
400
450
0
50
100
150
200
250
300
350
400
450
Percent of GDP Percen
t of G
DP
United States Japan Eurozone China (ex-‐ shadowbank sector)
Public and private debt (% GDP)
Source: Financial Markets Research
5
Stronger Dollar and Lower Commodity Prices
Source: Financial Markets Research
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Unprecedented Monetary Policy Stimulus...
0
2000
4000
6000
8000
10000
12000
14000
16000
18000
20000
0
2000
4000
6000
8000
10000
12000
14000
16000
18000
20000
2009 2010 2011 2012 2013 2014 2015 2016
USD
billion
Balance sheet totals major central banks(USD, cumulative)
ECB FED BOJ PBOC BOE
Source: Financial Markets Research
7
FX Wars Only Make Things Worse
China gets
weaker CNY
US needs weaker
USD
Europe needs weaker
EUR
Japan needs weaker
JPY
“The process...was one excessive depreciation after
another in which each country would emerge from its own deflationary problems at the expense of the system as a
whole.” Kindleberger (1984, p.399)
Talking about the 1930s
Source: Financial Markets Research
8
This Isn’t Working Anymore. It’s Even Self-‐defeating
Negative rates
World trade suffering from FX wars
Misallocation of capital and financial bubbles
Rising income and wealth inequality
Can we still cope with new shocks?
Source: Financial Markets Research
9
1m 3m 6m 9m 12m EUR/USD 1.137 1.12 1.10 1.08 1.07 1.07 USD/JPY 112.2 112.0 114.0 115.0 116.0 116.0 GBP/USD 1.434 1.42 1.39 1.46 1.49 1.53 USD/CHF 0.961 0.97 0.99 1.01 1.02 1.02 USD/CAD 1.304 1.31 1.33 1.35 1.33 1.30 AUD/USD 0.766 0.75 0.73 0.71 0.70 0.69 NZD/USD 0.690 0.67 0.65 0.63 0.62 0.61 USD/NOK 8.285 8.44 8.64 8.89 8.88 8.83 USD/SEK 8.127 8.26 8.36 8.33 8.74 8.22 USD/DKK 6.554 6.65 6.77 6.90 6.96 6.96 DXY 94.69 95.8 97.5 98.3 98.8 98.0
CEE 1m 3m 6m 9m 12m EUR/CZK 27.04 27.1 27.1 27.0 27.0 26.8 EUR/HUF 313.9 306 304 302 300 302 EUR/PLN 4.245 4.26 4.24 4.22 4.20 4.18 EUR/RON 4.470 4.45 4.40 4.36 4.32 4.30 EUR/TRY 3.211 3.20 3.17 3.13 3.12 3.15 EUR/RUB 76.36 73.9 74.8 75.6 77.0 74.9 USD/HUF 276.10 273 276 280 280 282 USD/PLN 3.734 3.80 3.85 3.91 3.93 3.91 USD/RUB 67.08 66.0 68.0 70.0 72.0 70.0 USD/TRY 2.823 2.86 2.88 2.90 2.92 2.94 RUB basket 71.10 69.6 71.1 72.5 74.3 72.2 LatAm 3m 6m 9m 12m USD/BRL 3.592 3.50 3.30 3.50 3.75 4.00 USD/CLP 667.7 690 720 735 750 760 USD/COP 3,002 3,000 3,200 3,350 3,400 3,500 USD/MXN 17.34 17.5 18.0 18.5 19.0 19.8 USD/PEN 3.313 3.45 3.50 3.60 3.70 3.80 USD/ARS 14.705 14.50 15.00 15.50 16.00 17.00 EUR/BRL 4.088 3.92 3.63 3.78 4.01 4.28 EUR/MXN 19.71 19.6 19.8 20.0 20.3 21.2
Others 1m 3m 6m 9m 12m USD/ZAR 14.765 15.20 15.40 15.80 16.00 16.20 EUR/ZAR 16.785 17.02 16.94 17.06 17.12 17.33 Asian FX 1m 3m 6m 9m 12m USD/CNY 6.465 6.65 6.80 7.20 7.40 7.60 USD/HKD 7.755 7.76 7.76 7.76 7.76 7.76 USD/IDR 13,195 13,600 13,750 13,900 14,100 14,200 USD/INR 66.2 68.0 68.0 68.0 68.5 68.7 USD/KRW 1,149 1,220 1,250 1,275 1,300 1,325 USD/MYR 3.90 4.25 4.50 4.52 4.55 4.55 USD/PHP 46.1 48.0 48.5 48.8 48.9 49.0 USD/SGD 1.350 1.420 1.470 1.480 1.500 1.500 USD/THB 35.1 36.0 36.8 37.6 38.2 38.8 USD/TWD 32.3 33.8 34.5 35.2 35.3 36.0 USD/VND 22,280 22,632 22,882 23,032 23,182 23,332
1m 3m 6m 9m 12m Brent 40 37 33 35 35 38 WTI 38 35 31 33 33 35
FX Forecast—1 April 2016
Source: Rabobank
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2015 Nuts and Dried Fruit Exports Destinations & Value
Crop Export Value
Almonds 4.7 Billion
Walnuts 1.5 Billion
Pistachios 850 Million
Pecans 470 Million
Raisins 334 Million
Hazelnuts 111 Million
Dates 50 Million
Figs 17 Million
China & Hong Kong 12%
India 7%
Japan 6%
Other Asia 5%
South East Asia 5%
Spain 9% Germany
9%
Other Europe 18%
Canada 7%
Mexico 3%
Middle East 12%
Others 7%
Source: USDA, GATS, Rabobank, 2016
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GDP Growth in the Eurozone
Source: Financial Markets Research
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Will the Eurozone Hold Under Renewed Stress?
• Combination of income inequality and long-term unemployment a fertile soil for populist parties and calls for self-determination
• Migrant flows a risk as well as an opportunity to fight demographic challenges
at
defr
it
es
nl
be
fi
ie
gr
cymt
pt
uk
sedk
0
10
20
30
40
50
60
70
80
20 25 30 35 40
% long-‐term une
mployed
Gini coefficient of income unequality
Source: Financial Markets Research
13
Japan—Economic Forecast
Yearly Quarterly 2015 2016 2017 Q4/2015 Q1/2016 Q2/2016 Q3/2016
GDP 0.5 0.2 0.3 0.7 0.0 0.1 0.4
Consumption -1.2 -0.3 0.6 -1.1 -1.2 -0.1 -0.5
Investment 1.1 2.0 0.7 2.2 2.0 2.3 1.9
Government 1.2 1.2 1.2 1.4 1.4 1.2 1.3
Trade 0.4 0.0 0.0 0.0 0.0 0.0 0.0
Inventories 0.5 -0.1 -0.4 0.5 0.0 -0.5 0.1
CPI (% YoY) 0.6 0.5 0.3 0.3 0.4 0.5 0.6
Unemp. %rate
3.6 3.8 3.8 3.6 3.7 3.7 3.8
Source: Rabobank
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Japanese Yields have Fallen Dramatically
Source: Bloomberg
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India—Economic Forecast
Yearly Quarterly 2015 2016 2017 Q4/2015 Q1/2016 Q2/2016 Q3/2016
GDP 7.3 7.6 7.3 7.3 7.7 7.6 7.2
Consumption 3.5 3.8 3.7 3.6 3.9 4.0 4.0
Investment 1.7 2.2 2.6 0.9 2.3 2.8 2.2
Government 0.2 1.0 0.8 0.5 -0.2 0.7 1.4
Trade 0.1 0.7 0.3 0.5 2.1 1.3 -0.5
Inventories 0.5 -0.1 -0.1 0.5 0.6 -0.3 -0.4
CPI (% YoY) 5.1 5.3 5.2 5.5 5.7 5.4 5.1
Source: Rabobank
16
Indian vs. Chinese FX Reserves
Source: Bloomberg
17
One Could Certainly Call This Model a Success!
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
20,000
1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014
Nom
inal
GD
P,
US
Db
n
China Euro area Japan US Australia
Source: Financial Markets Research
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Investment Driven By ‘Financial Repression’
Keep savings rates below inflation
(i.e., banks tax households)
Keep lending rates below nominal GDP growth
(i.e., banks subsidize firms)
...et volia! USD 3 trillion available to
invest
Source: Financial Markets Research
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To All Things There is Was a Season...
STRUCTURAL PROBLEMS
Way too much debt
too much investment
too many houses
overcapacity,
deflation
...in...
Source: Bloomberg, Financial Markets Research
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In Short, No Easy Path for China Ahead
MARKET REFORMS?
Mass bankruptcy
Banking crisis
Recession
MORE STIMULUS?
Growth keeps
slowing
Debt-to-GDP keeps rising
Japan scenario or debt crisis
EXPORT WAY OUT?
No global demand
CNY over-valued
Trade wars to follow?
Source: Financial Markets Research
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Mexico: USD/MXN Forecasts
Source: Rabobank
22
-‐5
-‐4
-‐3
-‐2
-‐1
0
1
2
3
4
5
'03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '14 '15
GDP growth y/y, % CPI inflaTon y/y, % Core CPI inflaTon y/y, %
Canadian Growth and Inflation
MeeLng Probability of 25bp cut
4/13/2016 5.9%
5/25/2016 10.5%
7/13/2016 10.4%
9/7/2016 13.1%
10/19/2016 19.8%
12/7/2016 22.1% -‐1
0
1
2
3
4
5
Jan-‐10 Jul-‐11 Jan-‐13 Jul-‐14 Jan-‐16
Source: Bloomberg
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We are USD Bulls for 2016
70
75
80
85
90
95
100
105
900
950
1000
1050
1100
1150
1200
1250
1300
'05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16
BBG USD index (larger basket that includes EM) DXY USD index
Source: Bloomberg
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The Bigger Picture
4) EM are slowing and China will be forced to allow greater currency depreciaTon.
3) US growth is fragile and will likely be subdued this year.
2) FX Wars will rage globally.
1) There is currently no obvious, strong driver of global growth.
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Contact Details
Rabobank N.A.
Vernon Crowder
Senior Vice President, Senior Analyst
Food & Agribusiness Research and Advisory
Vernon.Crowder@Rabobank.com
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