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Global Market Dynamics
February 7, 2013
Commodity
Global Grain Prices
Volatile & High
3Grains
Live Hog Prices
4
15
25
35
45
55
65
75
85
95
105
115
125
135
145
Ja
n-0
8
Ma
r-0
8
Ma
y-0
8
Ju
l-0
8
Se
p-0
8
No
v-0
8
Ja
n-0
9
Ma
r-0
9
Ma
y-0
9
Ju
l-0
9
Se
p-0
9
No
v-0
9
Ja
n-1
0
Ma
r-1
0
Ma
y-1
0
Ju
l-1
0
Se
p-1
0
No
v-1
0
Ja
n-1
1
Ma
r-1
1
Ma
y-1
1
Ju
l-1
1
Se
p-1
1
No
v-1
1
Ja
n-1
2
Ma
r-1
2
Ma
y-1
2
Ju
l-1
2
Se
p-1
2
No
v-1
2
Ja
n-1
3
Ma
r-1
3
$/C
wt
Live Hog Prices - World MarketsChina: 118
EU: 76
Mexico: 75
Brazil: 74
Chile: 68
US: 64
Korea: 83
World Corn Prices
5
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
$9.00
$10.00
$11.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
$9.00
$10.00
$11.00
8/1
3/1
1
9/1
0/1
1
10
/8/1
1
11/5
/11
12
/3/1
1
12
/31
/11
1/2
8/1
2
2/2
5/1
2
3/2
4/1
2
4/2
1/1
2
5/1
9/1
2
6/1
6/1
2
7/1
4/1
2
8/1
1/1
2
9/8
/12
10
/6/1
2
11/3
/12
12
/1/1
2
12
/29
/12
1/2
6/1
3
$/B
us
he
l
Date
China $/bu US $/bu. Poland $/bu.
Romania $/bu Mexico $/bu Brazil $/bu.
World Soybean Meal Prices
6
$200
$250
$300
$350
$400
$450
$500
$550
$600
$650
$700
$200
$250
$300
$350
$400
$450
$500
$550
$600
$650
$700
08
/13
/11
09
/10
/11
10
/08
/11
11/0
5/1
1
12
/03
/11
12
/31
/11
01
/28
/12
02
/25
/12
03
/24
/12
04
/21
/12
05
/19
/12
06
/16
/12
07
/14
/12
08
/11
/12
09
/08
/12
10
/06
/12
11/0
3/1
2
12
/01
/12
12
/29
/12
01
/26
/13
Do
llars
pe
r S
ho
rt T
on
Date
Hamburg, Germany Sao Paulo, Brazil
Shandong,China Sonora, Mexico
Romania Central IL, U.S.
US Corn Price ($/bu) – Structural Shift
7
All Time High
$0
$1
$2
$3
$4
$5
$6
$7
$8
$9
'80 '82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12
EPA Biofuel Policy (Aug 2005)
2.75
6.50
5.50
2.00
4.75
3.50
What are the Factors Causing This?
• Low Grain Stocks
• Weather Problems in US & South America
• China Impact
• Government Bio-Fuel Policy
• Plateauing Yields
8Grains
Global Grain Stocks are Still Tight: Commodities to Remain High
* 2012
Source: USDA9
Ending Stocks Very Tight
Global Ending Stocks (mil bu) Stocks/Use Days of SuppliesCorn 4,617 13.7% 50Barley 908 14.8% 54Soybeans 2,115 22.2% 81Rice 102 21.8% 79Wheat 6,357 25.5% 93
U.S. Ending Stocks (mil bu) Stocks/Use Days of SuppliesCorn 619 5.6% 20Soybeans 130 4.4% 16Cotton 6 37.3% 136Wheat 654 26.3% 96
Feb 5, 2013
Feb 2012Feb 2011
July 2012
Major Change in US Weather Situation
10
Weather Extremes-- Global Warming or Extreme Event?
11
China – Major Influence in Commodities
12China
China
Source: Financial Times, Morgan Stanley
13China
Industrial Commodity
China % of World
Food Commodity
China % of World
Cement 53.2% Pigs 46.4%Iron Ore 47.7% Eggs 37.2%Coal 46.9% Rice 28.1%Steel 45.4% Soybeans 24.6%Lead 44.6% Wheat 16.6%Zinc 41.3% Chickens 15.6%Aluminum 40.6% Cattle 9.5%Cotton 39.9% GDP 7.3%Copper 38.9% Population 19.2% (1.3 Billion)Nickel 36.3% Arable Land 9.0% (142 Million HA)Oil 10.3% Arable Land Per Capita .08 HA
% of World's Fresh Water 6%
China's Share of World Commodity Consumption
China Crop Dynamics
2000 2012Self-
Sufficiency
Area Harvested (1,000 HA) 23,056 34,300 Production (1,000 MT) 106,000 200,000 Yield (MT/HA) 4.6 5.83
Area Harvested (1,000 HA) 26,962 30,500 Production (1,000 MT) 131,536 143,000 Yield (MT/HA) 6.3 6.7
Area Harvested (1,000 HA) 26,650 24,300 Production (1,000 MT) 99,640 118,000 Yield (MT/HA) 3.74 4.86
Area Harvested (1,000 HA) 9,300 7,200 Production (1,000 MT) 15,400 12,600 Yield (MT/HA) 1.7 1.8
Area Harvested (1,000 HA) 4,058 5,000 Production (1,000 480 lb bales) 20,300.0 31,500.0 Yield (KG/HA) 1,089 1,372
88%
100%
101%
97%
17%
Cotton
Rice
Corn
Soybeans
Wheat
14China
China/Hong Kong Pork Imports
<2% 0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
0
200
400
600
800
1,000
1,200
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
000
MT
China/HK Pork Imports from Other
China/HK Pork Imports from the U.S
China/HK Pork Imports from the U.S % of Total Imports
China/HK Imports % of Total Consumption
Up 282% Since 2005
15
China
16
China’s Influence on Soybeans
0
500
1,000
1,500
2,000
2,500
3,000
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Mil
lio
n B
ush
els
World Ending Stocks China Soybean Imports114% of 2012 Ending Stocks
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Me
tric
To
nn
es
World Ending Stocks China Imports 114% of 2012 Ending Stocks
China
0
1,000
2,000
3,000
4,000
5,000
6,000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
1,0
00
Bu
US Corn Usage for Ethanol Production - 10% Blend
10% Blend40% of Corn Crop
Plateauing Out
Corn Usage for Ethanol – 10% Blend
17Gov’t needs to review mandate and modify it
Ethanol Mandate Hitting Blend Wall
18
0
5
10
15
20
25
30
35
110
115
120
125
130
135
140
145
150
1995 2000 2005 2010 2015
Etha
nol P
rodu
ction
(Bln
Gal
lons
)
Gas
olin
e Co
nsum
ption
(Bln
Gal
lons
)
US Gasoline Consumption 10% Blend Level US Ethanol Production
Gov't Ethanol Mandate (15 Bln Gal)
Surplus Ethanol -Need to change
blend rate
World Crude Demand
While US Moves toward Energy Independence, Asian Demand May Prevent Lower Prices
19
10
12
14
16
18
20
22
24
26
28
19
80
19
85
19
90
19
95
20
00
20
05
20
10
Mln
Ba
rre
ls
US Europe
Asia Rest of World
Asian Compound Annual Growth Rate: 3.0%
1979 Mideast Oil CrisisWhen oil prices spiked af ter the 1979 Iranian revolution, consumption fell sharply in the US and Europe and was f lat elsewhere in the world.
Recent High PricesCrude oil climbed to nearly $150 a barrel in 2008. The f inancial crisis in the US and Europe led to a sharp drop in consumption, but demand in the rest of the world has risen unabated.
50
55
60
65
70
75
80
85
90
95
100
1970 1975 1980 1985 1990 1995 2000 2005 2010 2015
Plan
ted
Acr
es (M
ln)
New Corn Planted Acres Range
Planted Corn Acres – Steady Increase
20
0
20
40
60
80
100
120
140
160
180
1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 2020
Bu/A
cre
40% increase in yield over 55 years
307% increase in yield over 50 years
A new trend?
Trends in Corn Yields Since 1900
21
Down 17% from 2011
Corn Balance Sheet Changes
22
USDA USDA Jan USDA Dec USDA Jan YoY %2010/11 2011/12 2012/13 2012/13 Change
Planted (mil. ac) 88.2 91.9 96.9 97.2 6%Harvested (mil. ac) 81.4 84 87.7 87.4 4%
Yield (bpa) 152.8 147.2 122.3 123.4 -16%Beginning Stocks (mbu) 1,708 1,128 988 989
Production (mbu) 12,447 12,360 10,725 10,780 -13%Imports (mbu) 28 29 100 100 245%
Total Supply (mbu) 14,182 13,516 11,814 11,869 -12%Feed & Residual (mbu) 4,795 4,548 4,150 4,450 -2%
Industrial Use (mbu) 1,407 1,426 1,367 1,367 -4%Ethanol for Fuel (mbu) 5,019 5,011 4,500 4,500 -10%
Total Domestic Use (mbu) 11,221 10,985 10,017 10,317 -6%Exports (mbu) 1,834 1,543 1,150 950 -38%
Total Use (mbu) 13,055 12,527 11,167 11,267 -10%Ending Stocks (mbu) 1,128 989 647 602 -39%
Stocks to Use Ratio 8.6% 7.9% 5.8% 5.3%Days Supply 32 29 21 20
USDA Est. Farm Price ($/bu) $5.18 $6.22 6.80 - 8.00 6.80 - 8.00
Corn
30
35
40
45
50
55
60
65
70
75
80
1970 1975 1980 1985 1990 1995 2000 2005 2010 2015
Plan
ted
Acr
es (M
ln)
Soybean Planted Acres Range
Soybean Planted Acres – Stuck In Neutral
23
Trends in Soybean Yields Since 1990
24
35.3 USDA
Down 19% from 2011
0
5
10
15
20
25
30
35
40
45
50
1925 1930 1935 1940 1945 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020
Bu/
Acr
e
Approximately 3% increase in yield per year over 85 years.
US Soybean Balance Sheet--- Heading to zero
25
USDA USDA Jan USDA Dec USDA Jan YoY %2010/11 2011/12 2012/13 2012/13 Change
Planted (mil. ac) 77.4 75.0 77.2 77.2 3%Harvested (mil ac) 76.6 73.8 75.7 76.1 3%
Yield (bpa) 43.5 41.9 39.3 39.6 -5%Beginning Stocks (mbu) 151 215 169 169
Production (mbu) 3,329 3,094 2,971 3,015 -3%Imports (mbu) 14 16 20 20 25%
Total Supply (mbu) 3,495 3,325 3,160 3,204 -4%Crush (mbu) 1,648 1,703 1,570 1,605 -6%Seed (mbu) 87 90 89 89 -1%
Residual (mbu) 43 1 26 30Total Domestic Use (mbu) 1,778 1,794 1,685 1,724 -4%
Exports (mbu) 1,501 1,362 1,345 1,345 -1%Total Use (mbu) 3,280 3,155 3,031 3,070 -3%
Ending Stocks (mbu) 215 169 130 135 -20%Stocks to Use 6.6% 5.4% 4.3% 4.4%
Days Supply 24 20 16 16
USDA Est. Farm Price ($/bu) $11.30 $12.50 13.55 - 15.55 13.50 - 15.00
Soybeans
Outlook
SOI Values -- El Nino / La Nina Update
-30
-20
-10
0
10
20
30
401/
1/20
10
4/1/
2010
7/1/
2010
10/1
/201
0
1/1/
2011
4/1/
2011
7/1/
2011
10/1
/201
1
1/1/
2012
4/1/
2012
7/1/
2012
10/1
/201
2
1/1/
2013
2013/14 Corn Balance Sheet Scenarios
Planted (1,000 acres) 97,200 97,200 97,200 97,200 98,500 98,500 98,500 100,000 100,000Harvested (1,000 acres) 88,452 88,452 88,452 88,452 89,635 89,635 89,635 91,000 91,000 Yield (bu/acre) 135.0 142.0 146.0 154.0 142.0 144.0 154.0 142.0 154.0
Beginning Stocks (mln bu) 602 602 602 602 602 602 602 602 602 Production (mln bu) 11,941 12,560 12,914 13,622 12,728 12,907 13,804 12,922 14,014 Imports (mln bu) 25 25 25 25 25 25 25 25 25 Total Supply (mln bu) 12,568 13,187 13,541 14,249 13,355 13,534 14,431 13,549 14,641
Feed & Residual (mln bu) 4,598 4,598 4,598 4,598 4,598 4,598 4,598 4,598 4,598 Exports (mln bu) 1,442 1,442 1,442 1,442 1,442 1,442 1,442 1,442 1,442 FSI Consumption (mln bu) 6,243 6,243 6,243 6,243 6,243 6,243 6,243 6,243 6,243 Total Demand (mln bu) 12,283 12,283 12,283 12,283 12,283 12,283 12,283 12,283 12,283
Ending Stocks (mln bu) 285 904 1,258 1,966 1,072 1,251 2,148 1,266 2,358
Stocks/Use Ratio 2.3% 7.4% 10.2% 16.0% 8.7% 10.2% 17.5% 10.3% 19.2%Days Supply 8 27 37 58 32 37 64 38 70
2013/14 Soybean Balance Sheet Scenarios
Planted (1,000 acres) 77,198 77,198 77,198 78,000 78,000 78,000 79,000 79,000 79,000Harvested (1,000 acres) 76,194 76,194 76,194 76,986 76,986 76,986 77,973 77,973 77,973 Yield (bu/acre) 39 41 43 39 41 43 39 41 43
Beginning Stocks (mln bu) 135 135 135 135 135 135 135 135 135Production (mln bu) 2,972 3,124 3,276 3,002 3,156 3,310 3,041 3,197 3,353 Imports (mln bu) 15 15 15 15 15 15 15 15 15Total Supply (mln bu) 3,122 3,274 3,426 3,152 3,306 3,460 3,191 3,347 3,503
Crush (mln bu) 1,652 1,652 1,652 1,652 1,652 1,652 1,652 1,652 1,652 Exports (mln bu) 1,403 1,403 1,403 1,403 1,403 1,403 1,403 1,403 1,403 Seed & Residual (mln bu) 114 114 114 114 114 114 114 114 114 Total Demand (mln bu) 3,168 3,168 3,168 3,168 3,168 3,168 3,168 3,168 3,168
Ending Stocks (mln bu) (47) 106 258 (16) 138 292 23 179 335
Stocks/Use Ratio -1.5% 3.3% 8.2% -0.5% 4.4% 9.2% 0.7% 5.6% 10.6%Days Supply (5) 12 30 (2) 16 34 3 21 39
Mexico Economy Snapshot
Source: USDA, EIA 30
GDP $1.155 TrillionGDP Growth Rate 3.3%GDP Per Capita $15,100Unemployment Rate 4.5%Inflation Rate 3.6%Population 115,000,000Trade Balance $962 mlnCurrent Account Balance - $8.8 Bln
Mexico Agriculture Snapshot
Source: USDA, EIA
2011Production Consumption
Net Export (Import)
Chicken (Mln Lbs) 6,442 7,698 (1,257) Swine (Mln Lbs CWE) 2,579 3,803 (1,224) Cattle (Mln Lbs CWE) 4,034 4,167 (132) Wheat (Mln bu) 139 263 (125) Corn (Mln bu) 807 1,193 (382) Sorghum (Mln bu) 260 341 (63) Fruit (Mln Lbs) 13,316 10,260 472 Oil Production (Barrels/day) 2,983,000 2,073,000 910,000
31
Protein
Global Protein Consumption
7.9
11.6
0.7
14.8
0
25
50
75
100
125
150
175
200
225
250
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
20
12
Mill
ion
MT
Beef
Turkey
Chicken
Pork
*Source: USDA
1980 kg per Capita: 25
2012 kg per Capita: 35
33Pork
Per Capita Pork Consumption
34Pork
U.S. Pork Exports – Significant Demand Factor
*China includes: China/HK and Taiwan *Includes pork and pork variety meats
Estimated 24% of Production
35
Japan21%
Other12%
Russia5%
China19%
Korea7%
Canada11%
Mexico25%
Japan22%
Other11%
Russia2%
China22%
Korea8% Canada
9%
Mexico25%
2011: 4,892 Million Pounds Jan-Nov 2012: 4,502 Million Pounds
Jan – Nov 2012
Up 2%2011
Up 18%
23% of Production
2012 Exports will be key in sustaining current prices
2012 USDA Forecast: 3%
US Pork Exports
0
100
200
300
400
500
600
700
800
900
1000
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%1
99
0
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
Mill
ion
Po
un
ds
% o
f U
.S.
Ha
m P
rod
uc
tio
n E
xp
ort
ed
U.S. Ham Exports % of U.S. Ham Production Exported
Jan-Nov 2012 up 25% YOY
US Ham Exports
37
0
100
200
300
400
500
600
700
800
900
1000
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%1
99
0
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
Mill
ion
Po
un
ds
% o
f U
.S.
Ha
m P
rod
uc
tio
n E
xp
ort
ed
U.S. Ham Exports % of U.S. Ham Production Exported
Jan-Aug 2012 up 48% YOY
US Monthly Ham Exports to Mexico
38
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
0
10
20
30
40
50
60
70J
an
-07
Ma
r-0
7M
ay
-07
Ju
l-0
7S
ep
-07
No
v-0
7J
an
-08
Ma
r-0
8M
ay
-08
Ju
l-0
8S
ep
-08
No
v-0
8J
an
-09
Ma
r-0
9M
ay
-09
Ju
l-0
9S
ep
-09
No
v-0
9J
an
-10
Ma
r-1
0M
ay
-10
Ju
l-1
0S
ep
-10
No
v-1
0J
an
-11
Ma
r-11
Ma
y-1
1J
ul-
11S
ep
-11
No
v-1
1J
an
-12
Ma
r-1
2M
ay
-12
Ju
l-1
2S
ep
-12
No
v-1
2
% o
f U
.S.
Ha
m E
xp
ort
s
Mill
ion
Po
un
ds
U.S. Ham Exports to Mexico % of Total U.S. Ham Exports
2007-2011 Monthly Average:Sept-Jan 38.5 million poundsFeb-May: 30.2 million pounds
US Hog Breeding Herd – SeptStabilized – Moderate Expansion
0
2,000
4,000
6,000
8,000
10,000
12,0001
980
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
(1,0
00
He
ad
)
40% Decline
USDA
PPL = 7.88
PPL = 10.03
PPL = +27%
39
Lowest Cattle Inventory Since Truman
40
0
25,000
50,000
75,000
100,000
125,000
150,000
1920 1930 1940 1950 1960 1970 1980 1990 2000 2010
US Jan 1 Cattle Inventory (1,000 hd)
Truman Presidency - (1945 - 1953) 2012: US Population: 310+ mil
US Cattle Inventory: 91 mil
* Since Truman, Population has Doubled
Avg Cattle Inv.: 83 milAvg US Pop.: 150 mil
Global Protein Outlook
• Cutback in EU pork of 3 – 5%• Stable pork production in US and Canada• China +/- 0.5% ???• Global beef production down 3 – 5%• Global chicken production up 1 – 2%• Global pork production flat to down 0.5%
Social Media & Public Concerns
• LFTB Beef• Cage Free• No Antibiotics• No Hormones• Gestation Crate Free
These changes in current production systems will add cost and reduce supply
42
Key Takeaways
• US needs good weather for ideal crop on largest acreage since 1930s. Corn could approach $4 - $5/bu
• South American soybean crop important to keep meal prices in check.
• China to be the wildcard
United States China India Brazil
Total Actual Renewable Water Resources per Capita (m3/inhab/yr)
9,974 2,080 1,582 42,604
Percent of Freshwater Resources Withdrawn
15.6% 19.5% 39.8% 0.7%
Agricultural Water Withdrawal as a Percent of Total Withdrawal
40.2% 64.6% 90.4% 54.6%
Water….The New Oil• Total volume of water on Earth is 1.4 billion km3
• 97.5% saltwater, 2.5% freshwater• 70% of freshwater in icecaps or permanent snow cover• 30% of freshwater is stored underground, < 1% in rivers and lakes
• 70% of water used for irrigations, 22% for industry, 8% for domestic use• By 2025, 1.8 bln people will be living in regions with absolute water scarcity• By 2025, 66% of world population living under water stress conditions
Water Resources
Water Uses
(m3/inhab/yr) = Cubic meters per inhabitant per yearTotal Actual Renewable Water = maximum yearly amount of water available for a country at a given moment% of Freshwater Resources Withdrawn = % of freshwater withdrawn from total actual renewable water resourcesAg Water Withdrawal = Amount of water withdrawn by ag sector as a % of all water withdrawn
Water Scarcity