XVI Annual International Conference “Black Sea Grain and Oilseeds 2010/11”

.Moscow, Russia

9 September 2010

Vince PetersonVice President

of Overseas Operations

World Wheat Situation – A look into the Future.

and the

Role of Governments in the Grain Industry.

A note about 2010-11…US Wheat Situation…as of June, 2010

A note about 2010-11…US Wheat Situation…as of July, 2010

A note about 2010-11…US Wheat Situation…as of August, 2010

Will the US profit from the situation in Russia?

U.S. Crop Planted Area ComparisonCompetition for Land Area

World Wheat Consumption vs. Land Area

Million MT

__ Harvested Area (MHA)

(without scale)

__ Wheat Consumption (MMT)

Harvested Land Area by CropWorld Total 1960 to 2010

1,000 HA

Corn Land Area +57%

Wheat Land Area 1968 = 2010

Soybean Land Area +300%

---- ---- Russia/Ukraine

Wheat Corn/Oilseeds (without scale)

33.2 MHA31.8 MHA

7.2 MHA

16.1 MHA

Production by Crop World Total 1960 to 2010

1,000 MT

World Wheat Prodution Belts Northern and Southern Hemispheres

World wheat production occurs between approx. the 25 th and 55th degrees, N & S latitudes

FAO World Hunger Map

Mid-Latitude Hunger Concentration

Northern Hemisphere Wheat Belt

Southern Hemisphere Wheat Belt

World wheat production occurs between approx. the 25 th and 55th degrees, N & S latitudes

World wheat consumption World wheat harvested area

660+ MMT

30 year trend

+/- 900 MMTDemand in35 years

229 MMT

353 MMT 212 MHA

239 MHA

202MHA

Projected World Population Growth2010 to 2050 (From 6.9 to 9.5 billion?)

Southern Hemisphere Wheat Belt

Northern Hemisphere Wheat Belt

Mid-Latitude Demand Concentration

World wheat production occurs between approx. the 25 th and 55th degrees, N & S latitudes

World Wheat Trade

World Wheat Trade

World Wheat Trade

X

World Wheat Trade

X

World Wheat Trade

X

World Wheat Trade World trade to all

“others” has grown to 250% of 1980 levels

50 MMT

125 MMT

Trend in “other” importers denoted ( )

World Wheat Trade

... WHAT IF only 50% of the 240 MMT increased demand is traded internationally?

125 MMT

250 MMT

Trend in “other” importers denoted ( )

2020 2030 2040 2050

50 MMT

?

History… is a very good teacher

"Those who cannot remember the past are condemned to

repeat it.”

George Santayana, 20th C. PhilosopherReason in Common Sense, 1905

History: US Government Helps Put Brazil in the Soybean Business

In 1973, President Nixon suspended soybean export sales because of short US domestic supply.

MMTMHA

History: US Government Primes EU Exports

January 4, 1980 US President Carter embargos 17 MMT in open sales to USSR

51.8 MMT

25.0 MMT

1980-1985 Huge $$$ US government

spending for stocks and reserve ownership; and land set asides

1985-1995 $ Billion/year US government spending on export subsidies

___ European Union Wheat Exports US Wheat Stocks (without scale)

1974 and 1975 US President Ford

effectively slows exports to USSR; Ist

Grain Agreement

Governmental Distortion of Markets:WTO Agreement Negotiations

Doha Round

B. SCHEDULED EXPORT SUBSIDY COMMITMENTS

162. Developed country Members shall eliminate their remaining scheduled export subsidy entitlements by the end of 2013.

163. Developing country Members shall eliminate their export subsidy entitlements… by the end of 2016.

1970’s Wheat Import & Export STE’s“State (authorized) Trading Enterprises”

JapanFood Agency

PhilippinesNGA

ChinaCeroilfood

IndiaSTC

Soviet UnionExportkhleb

EgyptGASC

IndonesiaBulog

S. African Wheat Board

PeruENCI

MexicoCONASUPO

Brazilian Wheat Board

Sri LankaCWE

N. AfricaONICCuba

ALIMPORT

PolandRolimpex

PortugalEPAC

EcuadorEcuagran

IranGTC

IraqIGB

SudanCIDCO

Norwegian & Finnish Grain Boards

TurkeyTMO

Canadian Wheat Board

Australian Wheat Board

ArgentinaJunta

EXPORT STE IMPORT STE

2000 Wheat Import & Export STE’s“State (authorized) Trading Enterprises”

JapanMAFF

CubaALIMPORT

IranGTC

IraqIGB

Canadian Wheat Board

Australian Wheat Board

EXPORT STE IMPORT STE

ChinaCOFCO

TurkeyTMO

N. AfricaONIC Egypt

GASCIndiaSTC

2010 Wheat Export STE’s“State (authorized) Trading Enterprises”

Canadian Wheat Board

Russia United Grain

Company

ChinaCOFCO

TurkeyTMO

WTO Agreement NegotiationsDoha Round

3. In order to ensure the elimination of trade-distorting practices with respect to agricultural exporting state trading enterprises…Members shall:

(a) Eliminate…all forms of export subsidies including those related to food aid and export credits:

(ii) government financing of agricultural exporting state trading enterprises, preferential access to capital… with respect to government financing or re-financing facilities…

(iii) government underwriting of losses…by agricultural exporting state trading enterprises on their export sales.

(iv) by 2013, the use of agricultural export monopoly powers for such enterprises.

Will I have access to the market?

Importers natural fear:

Export restrictions…due to short supplies

… export license controls? …

… imposed export levies and taxes? …

… administratively restricted supplies? …

Governmental Intervention in the Markets

Agricultural Embargoes and Contract Sanctity

THE UNITED STATES CONSTITUTION Article. I., Section 9., Clause 5:

“No Tax or Duty shall be laid on Articles exported from any State.”

The Food and Agriculture Act of 1977:

If export sales are suspended for reasons of short supply, domestic wheat price support would by mandate be raised to $533/MT (today’s calculation).

Agricultural Embargoes and Contract Sanctity

Food Security Act of 1985:

Declares it U.S. policy to encourage agricultural exports and not to restrict exports except under

the most compelling circumstances.

The Food, Agriculture, Conservation, and Trade Act of 1990:

Contracts to export agricultural commodities, which were agreed upon before any prohibition, should not be abrogated.

Export Administration Act of 1999:

Prohibition on agricultural exports can only be imposed when the President declares a national emergency. (high prices do not qualify as an emergency)

Thank you for your invitation to speak and share some topics of vital importance to the wheat industries in both Russia and

the United States.