Globalization: Implications for U.S. and Oklahoma Agriculture
Stillwater , Oklahoma November 9, 2012
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“We Are Just One World Now”
Steve Jobs
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From Today Forward … ___________ will … Be a profitable growth industry Be an increasingly global industry Become increasingly high tech Be a high profile, public industry Experience rapid productivity growth
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From Today Forward … Agriculture will … Be a profitable growth industry Be an increasingly global industry Become increasingly high tech Be a high profile, public industry Experience rapid productivity growth
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I never dreamed this big!
Bubba Watson
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“Take Aways”
Drivers of the opportunity Meeting the demand growth Implications – macro and “at farm” Importance of trade and trade policy Virginia’s Governor’s Conference
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Globalization
Increasing Interdependence Among Countries Culture Economies Finance – banking and investment Food – security and safety Energy – security and price Infrastructure
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Globalization of Agriculture Commodity trading Financing Percent of production in world trade Foreign investment by individuals and firms Government investment in agricultural assets Free Trade Agreements Food security – food safety Will increase to fill demand – supply gap
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Agriculture Demand Drivers Population growth – where and how much Income growth – where and how much Urbanization Marketing channels Energy mandates/new technologies
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World Population – More and Less Developed Countries
0 1 2 3 4 5 6 7 8 9
1950
19
55
1960
19
65
1970
19
75
1980
19
85
1990
19
95
2000
20
05
2010
20
15
2020
20
25
2030
20
35
2040
20
45
2050
More Less
86
82
68
% Less Dev.
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Income and Food Consumption Income Level
< $1.25/day (1.2 billion) <$2.00/day (2.5 billion)
$2.00-10.00/day
>$10.00/day
Food Consumption Under-nutrition or hunger Most hunger (calorie) problems
solved More meat, dairy, fruits, veg
and edible oils. More processing, packaging
and variety
Based on presentation by Dr Robert Thompson –World Bank data 2010E 11
Global Income Distribution (%) Today
47
15
38 US-Europe China-India ROW
2050
20
40
40 US-Europe China-India ROW
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Urbanization 50+ percent of global population now urban Grows to 67 percent by 2050 Increases per capita food consumption Alters “product mix” Reduces labor force in rural areas
Market Channels Less “wet markets” More supermarkets More diverse source of products
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Rural & Urban Population 1950 – 2050 (mil)
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Urban kg/capita
Rural kg/capita
Difference Kg/capita
Pork 19.5 13.9 5.6
Beef and Mutton
3.7 1.4 2.3
Poultry 9.1 4.0 5.1
Total 32.3 19.3 13.0
China Urban-Rural Consumption
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Increase in Food Demand
Population Number Geography
Income Growth Urbanization
Doubling of Food Demand by 2050
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We Do Know
Will not Double Food Supply 1.1 Land < Water <Labor =Policies = Technology
1.1 Land < Water <Labor
= Policies =Technology
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Making 2X Possible
B
Will Require
New Technology
Wide Adoption of Tech. New Policies
Crop Production Locations Improved Infrastructure
Better Management
Per Acre Yields
Less Waste
Efficiency
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Macro Implications Greater Investment – public and private R & D Infrastructure Human capital
Increasing importance of agricultural trade Policy Changes – domestic and trade Greater emphasis on food safety and security Importance of competitiveness
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“At the Farm” Implications
Higher, more volatile prices Higher farm income - with greater risk Closer to customer – market don’t sell Understanding and practice Global and domestic
Policy leadership – proactive and visible Maintaining/increasing competitiveness Increasing consolidation
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Importance of Trade Demand and supply changes drive world trade No Growth in Exports and Profitable Growth in Ag Inconsistent Terms for American Agriculture
Opportunities Outside U. S. Where 95 percent of population is Where 96% of population growth will be 1.0 billion new middle class customers by 2030 Where per capita food consumption will grow
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U.S Agricultural Exports
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
1970
19
71
1972
19
73
1974
19
75
1976
19
77
1978
19
79
1980
19
81
1982
29
83
1984
19
85
1986
19
87
1988
19
89
1990
19
91
1992
19
93
1994
19
95
1996
19
97
1998
19
99
2000
20
01
2002
20
03
2004
20
05
2006
20
07
2008
20
09
2010
20
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U.S. Exports (mil)
CAGR 1970 – 2000 = 6.9%
CAGR 2000-2011 = 9.5%
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Share of U.S. Production that is Exported
Period Wheat Corn Rice Soybeans Cotton
1960-69 53.8% 12.3% 51.0% 37.9% 34.4%
1970-79 57.8% 24.6% 58.9% 38.0% 44.1%
1980-89 58.9% 26.2% 52.5% 38.8% 47.6%
1990-99 48.7% 20.8% 46.0% 34.4% 39.8%
2000-2010 49.5% 17.6% 49.3% 38.9% 70.3%
2011-20 20 1/
46.0% 14.9% 53.0% 47.3% 81.3%
1/ USDA Long-Term Agricultural Projections, Feb. 2011 23
Share of U.S. Production that is Exported
Period Beef Pork Broilers
1960-69 0.2% 0.7% 2.0%
1970-79 0.4% 1.5% 2.3%
1980-89 1.8% 1.3% 4.3%
1990-99 6.9% 4.2% 3.1%
2000-2010 6.8% 13.1%
16.5%
2011-2020 1/
10.3% 22.0% 16.9%
1/ USDA Long-Term Agricultural Projections, Feb. 2011 24
US Agricultural Exports: Top 5 Dest.
0
2
4
6
8
10
12
14
16
18
20
2007 2008 2009 2010 2011
Canada Mexico Japan EU China
Bil $
25
World Beef Exports: Top 4
0.67
1.68
2.16
1.8
1.4 1.45 1.41 1.38 1.41
0.91 1.12 1.11
0
0.5
1
1.5
2
2.5
2007 2012 2013
India Brazil Australia USA
Million Metric Tons
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Trade Risks for Agriculture Importance of trade for U.S. ag – never greater Risks have increased World economy Protectionism – tariff and NTBs Value of dollar Export bans Relative competitive decline – policy/other Lagging behind in bilateral and regional FTAs
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Trade Strategy Defense increases in relative importance Against protectionism – import and export Protect negotiated gains
Offense Push to negotiate bilateral agreements should be
relentless Opportunities within monitoring and enforcement Nurture multilateral system
TPA is a must !! 28
Benefits of Bi-Lateral Agreements Increase competitiveness of US products Relative to in-country production Relative to exports from other countries
Reduction of non tariff barriers SPS agreements Consultative mechanisms
Level playing field with other FTAs Address specific bilateral issues Benefits accrue quickly
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Est. $ Million Tariff Reductions KORUS
Commodity
Corn Wheat Soybeans Poultry Beef Oranges Pork Dairy Total
Savings @ Full Implementation
$5.0 $5.0 $8.0 $16.0 $300.0 $50 $50 $50 $500
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Keeping the Competitive Lead IP Investing in R&D, people and infrastructure Trade policy – keep playing field level Reliable supplier (preferred not residual) Meeting customer requirements Safety Security Specifications/service
Management
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Va. Governor’s Ag. Trade Conf Organizing partners Virginia Tech Virginia Farm Bureau Federation Virginia Department of Agriculture and Consumer
Services Virginia Port Authority
Financing Registration fee $55.00 Sponsorships
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Governor’s Ag. Trade Conference
Objectives Hear from U.S. and state policy makers Input to policy makers Better global competitor and customer
understanding “How to” trade Commercial and policy net working Enhance visibility of the importance of Ag. trade
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Governor’s Ag. Trade Conference Attendees USDA, USTR, DOC, Hill staff Bankers, insurance Exporters, food processors and manufactures Embassy representatives Transportation and logistics (RR, Trucking, Storage) Educators, extension, students Farmers and agricultural trade associations
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Governor’s Ag. Trade Conference Results Greater visibility of agriculture in Virginia Spillover effects of the cooperative efforts of the
organizers Address specific Virginia issues with policy makers,
customers and competitors Better understanding of the how and importance of
trade to agriculture Commercial and policy networking
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Capturing the Opportunity
Meeting global customer expectations Increasing competitiveness in global market Ensuring food safety Enhancing food security Comprehensive risk management Being a policy player
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“We Are Just One World Now”
Steve Jobs
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