November 9, 2012

U.S. Ag Exports – China Focus

15th Annual Farmer Cooperatives Conference

Outline

• Global Demand for Food

• China Ag Situation

• U.S. Ag Exports to China

• Key Issues

• Outlook

The Economist

Global Population Density

Bottom Line:

Source: “Food Economics and Consumer Choice”, Jeff Simmons www.plentytothinkabout.org

Source: UN/FAO, deflated prices

What are these

markets telling us?

The world’s

poor bear

the brunt of

global food

inflation

Source: USDA, Euromonitor, *% of spending on food consumed at home

1 in 6

are

hungry

today UN/FAO

When Will Food Shortages Begin?

• They already have; an estimated 1 billion are considered “food insecure” today.

• 13,600 children perish every day due to malnourishment

This is unacceptable.

CHINA AG SITUATION

Source: China National Bureau of Statistics

Source: Weekly average of Chinese regional markets, USDA

CHINA PORK PRICES

With per-capita income doubling

every 6 years (over the past 18 years),

consumers can effectively pay twice

as much for pork every 6 years

without affecting their income…

Source: USDA/FAS

Source: USDA/FAS

Source: USDA/ERS

U.S. AGRICULTURE EXPORTS TO CHINA

Source: USDA/FAS

Source: USDA/FAS

Source: USDA/ERS

China/HK bought 7% of U.S.

pork production in Nov. 2011

KEY ISSUES

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Key China Ag Issues

Internal: • Acreage constraints, technology, self-sufficiency • Inflation – the “right” level • Regulation – food safety • Food safety scandals are building the brand of

“Imported Food” External: • WTO Cases (dumping/countervailing on US

poultry) • SPS (Sanitary/Phyto-Sanitary) Issues

– beta-agonist use in meat – genetically modified crops

An Inconsistent Triad

China’s Food

Self-

Sufficiency

China’s Food

Inflation (above

world prices)

Unfettered

Access for Ag

Imports

Pick any two, but only two…

China Ag Outlook

• China is losing grip on food self-sufficiency and will allow some import growth

• Rising incomes will continue shift diets; China will need more corn, pork, oilseeds, and dairy

• Economic growth will slow, yet likely remain around 7% in 2012; that rate will double incomes in 10 years. Where will our commodity prices be then?

We are living in extraordinary times!

What does this tell us about agriculture the past 100 years?

What about the next 100 years?

Source: US Department of Commerce, plus other published estimates

Cooperatives Perspectives

• Cooperatives have growing opportunities overseas due to the diverse demand for a wide variety of ag products

– Niche markets are growing around the globe

– Production / safety / consumer attributes are seeing rising demand globally

• Overseas companies often seek company-partnership-suppliers (possibly from U.S. companies)

Denver, Colorado

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Brett Stuart, Founding Partner bstuart@globalagritrends.com

303-803-8716

Other reports:

• Japan • China/HK • S. Korea • Australia • Mexico • Russia • Denmark

and Canada (exports)