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A WHOLE NEW WORLD
Some Key Issues
    Decisions ahead with big impacts
        Feed prices: High and going higher
    1
        Policy issues: Farm bill – COOL – Competition –
    2
        Budget cuts
        Trade Policy: Obama change – So. Korea –
✓   3
        Colombia – Panama – TPPA - DOHA
    4   Immigration reform: After 2012
        Food Industry: Labels – Dietary guidelines
    5
MEGA-TRENDS IN AGRICULTURE: Policy Impacts
 • Yield losses      • Prices          • Food demand
 • Export policy     • Biofuels        • Farmland
 • Food prices                         • Declining stocks
 • Acreage battle

 • Weather            • Energy           • Globalization
 • La Nina            • China            • Population
 • Russia, Ukraine    • Alternatives     • Growing wealth
                                         • GMO products
Market & Policy Volatility: Fasten Your Seat Belts
VISULIZE ACTIVITIES WITH TIMELINES!




           BEFORE                                     NOW                 FUTURE
          China impact                               Volatility          Risk Mgmt.



   2005      2006      2007     2008   2009   2010     2011       2012    2013   2014
Obama and Election Impacts
        Turning to the center

    1      Changes: White House
✓   2      State of Union address
           Obama FY ‘12 budget
    3      Congress: Fewer moderates

    4      Gridlock: Halting Obama
           – Or: Growth & Budget Cuts
The New House
GOP controls with net gain of 63 seats



                     -- Leaders:
                         GOP: Boehner
                         Dems: Pelosi

                     -- ‘New’ approach:
                         * Committee chairs: Power
                           - Markup sessions
                           - Floor amendments
House Committee Leaders
        New players, different approaches

    1     Ways and Means: Dave Camp (Mich.)
          • Tax Issues - Trade Policy
    2     Budget: Paul Ryan (Wis.)
          • Key role in coming budget-cut proposals
          Ag: Frank Lucas (Okla.) – 14 Dems lost; No GOP
✓   3     •Direct payments - conservation - equity - regs
          Appropriations: Hal Rogers (Ky.)
    4
          •No longer fun panel – cuts ahead
         Energy and Commerce: Fred Upton (Mich.)
    5
         • Supported proposed cut in ethanol payment rate
New Senate
Dems still in control, but weakened majority



                  Same leaders:
                   Dems: Reid GOP: McConnell

                   Election Math:
                   * 2012: Dems: 23 seats; GOP: 10
                     -- 8 Ag members up, only 1 GOP (Lugar)
                     -- Dems: Conrad, Stabenow, Nelson,
                        Brown, Casey, Klobuchar, Gillibrand
                    * 2014: Dems: 20; GOP: 13
New Leader for Senate Ag Panel
Impact of Sen. Lincoln’s reelection loss

 New Chair
                          Past two farm bills
   Stabenow (Mich.)
                           pushed fruit, vegetable
                           funding
 Ranking GOP
                          Other commodities in
    Roberts (Kan.)         Mich.: Sugar beets,
                           corn, soybeans, wheat,
 Keys                      dairy

    No./So. coalition     Up for reelection in ‘12
    - Conrad (N.D.)
How to cut deficit
Changes ahead
U.S. National Debt
In dollars and percent of GDP

  Trillions of dollars                                                                                                                                  Percent of GDP

  20                                   Eisenhower                                                                                                                         120




                                                                                                                                           G.W. Bush
                                                                                            Carter
                                                              Johnson




                                                                                                                H.W. Bush
                                                                             Nixon / Ford
                                                    Kennedy




                                                                                                      Reagan




                                                                                                                                 Clinton




                                                                                                                                                        Obama
                         Truman
            Roosevelt




  18                                                                                                                                                                      108

  16                                                                                                                                                                      96

  14                                                                                                                                                                      84

  12                                                                                                                                                                      72

  10                                                                                                                                                                      60

   8                                                                                                                                                                      48

   6                                                                                                                                                                      36

   4                                                                                                                                                                      24
                  National debt        Percent of GDP
   2                                                                                                                                                                      12

   0                                                                                                                                                                      0
       40




                         50




                                             60




                                                                        70




                                                                                            80




                                                                                                               90




                                                                                                                                    00




                                                                                                                                                       10




                                                                                                                                                                     20
                    45




                                  55




                                                        65




                                                                                   75




                                                                                                     85




                                                                                                                            95




                                                                                                                                           05




                                                                                                                                                                15
Passing Spending Cuts Will be Difficult
Eventually most programs will face cuts


                FY 2009                                        FY 2015
                                                         23%
                                                            $1,058 bil.
   35%                                                   Discretionary
            $1,246 bil.                   19%              and other
                                                          mandatory
                                                                                        21%
         Discretionary
           and other            Social                                       Social
          mandatory            Security                                     Security


                                Medicare /               Defense
                                Medicaid
                                                   19%
                                                                          Medicare /
                                                                          Medicaid
                Defense                      21%                 Net
                            Net                                Interest
                          Interest                                                     25%
          19%
                              5%                           12%


   Source: Congressional Budget Office, August 2010
Projected 10-Year Costs of Ag Programs
Only 2.15% of all federal government spending


                    FY 2009                                        FY 2015
                                                             23%
                                                                $1,058 bil.
       35%                                                   Discretionary
                $1,246 bil.                   19%              and other
                                                              mandatory
                                                                                            21%
             Discretionary
               and other            Social                                       Social
              mandatory            Security                                     Security


                                    Medicare /               Defense
                                    Medicaid
                                                       19%
                                                                              Medicare /
                                                                              Medicaid
                    Defense                      21%                 Net
                                Net                                Interest
                              Interest                                                     25%
              19%
                                  5%                           12%


       Source: Congressional Budget Office, August 2010
Agriculture’s 10-Year Projected Spending
Percentage breakdown of how $924 billion is spent
Farm Program Budget



       Breakdown of the $64 Billion in
            Commodity Support
              2%
       3%3%
 10%


                                Direct Payments
                                ACRE
5%


                                CCP
                                MLG
                                Disaster
                                Dairy
                       77%
Farm Program Budget


       Breakdown of the $89 Billion in Crop
              Insurance Spending
      13%




                                Farmer Premium
                                Subsidy
18%


                                Delivery Expenses

                                Underwriting
                                Gains
                        69%
Farm Program Budget


      Breakdown of the $65 Billion in
          Conservation Spending
         2% 6%
        3%



                                        CRP
                             37%

                                        CSP
                                        EQIP
26%


                                        FPP
                                        WRP
                                        Other
                 26%
Farm Policy Linkages




    Crop Insurance   Safety Net   Economy   Ethanol
Next Farm Bill
        Key issues ahead

    1     Timing: 2012? Senate before House? – Funding
          No budget baseline: 38 programs, $9-$10 billion
    2     - Biggest program impacted: SURE
✓   3     Budget cuts ahead: When and where?
          Direct payments: Dems want reform, Lucas doesn’t
    4
          -Loan rates, target prices: Increases?
    5     Other Issues: Dairy - CRP - Crop insurance - Sugar

    6     Obama position: No bill, analyze options
THANK YOU!
Ag Outlook: Volatility Ahead
General Overview
•   Extremely tight grain and oilseed fundamentals
•   2010 US production hurt by adverse August
•   Shortfalls in world wheat production
•   La Nina undermines Argentine crops
•   Strong demand
    – High livestock and petroleum prices making it difficult to
      ration usage despite historically high grain prices
• Minimal 2010/11 corn and soybean ending stocks
• Intense competition for 2011 acreage
    – Outcome of South American crops and Chinese demand
      will determine how intense
• Limited prospects for stock building in 2011/12
  even with trend yields
Grains Outlook
•   Grain shortages in 2010/11 due to FSU drought, hot US 2010 August,
    strong bio-energy demand, record Chinese soybean imports
     – US and world stocks reduced to critically low levels for corn and oilseeds:
       wheat stocks relatively adequate
     – High gasoline prices and ethanol tax credit extension cause corn ethanol
       demand surge
     – Argentine 2011crops struggling with sporadic drought
     – US summer corn and soy supplies extremely tight
•   Price highs supported by central bank inflationary monetary policy
    and economic recovery
     – Demand rationing difficult with ethanol and China leading
•   Global crop production rebound in 2011 essential
     – US 2011 acreage battle as cotton demand rebounds; soy could fall short
     – La Nina Pacific weather cycle positive for N. Hemisphere crops
     – FSU crop yields should rebound from 2010 extreme drought
•   Prices likely to remain high and volatile until fall harvests in hand
     – Extreme spring and summer volatility expected as weather reaction
     – Late planting, summer heat, etc.
•   Economic excess in China, US could lead to next burst price bubble
Dairy Summary
• Milk production growth has topped out globally for this cycle, and
growth will be slowing worldwide. A lack of rain in New Zealand and
Argentina, too much rain in Australia, blizzards in Europe, and $6.50 corn in
the US are slowing milk production growth.

• Prices on the world market have responded to the lower supply by
shooting higher, and the next chance to bring those back down will be when
the new production season ramps up in New Zealand in August. US prices
have been along for the ride despite adequate inventories of most dairy
products (the exception being butter).

• US butter and cheese prices have jumped too high too fast and could
retrace a bit over the next two-three months before turning back higher
again. Prices for the various powders will trend higher until September or
October when the world market will potentially come under pressure.
Uneven Global Economic Rebound
                   Contains Downside Risks
Percent change in annual world growth (purchasing-power parity rates)


                         Advanced countries             Rest of world           China          India
6



4



2



0
               Advanced economies accounted for over half of
               world growth rate from 1970 to 2008. From 2010
-2
               to 2012 they will account for less than one-third.
     70
          72




                         78
                              80

                                   82




                                                  88
                                                       90
                                                            92




                                                                           98
                                                                                00
                                                                                     02




                                                                                                    08
                                                                                                         10
                                                                                                              12
               74
                    76




                                        84
                                             86




                                                                 94
                                                                      96




                                                                                          04
                                                                                               06
Dollar Erosion Has Boosted Foreign
             Buying Power and Commodity Prices
Indexes of major currencies/US$ (March 1973=100)
150
                                                           Competitive devaluations
140
                                                           and protectionism will be
130                                                       significant issues in 2011-12

120

110

100


 90

 80
                                                     From March 2009 ………. -14%
 70                                                  From 1997-03 average … -28%
        74   76   78   80   82   84   86   88   90   92   94   96   98   00   02   04   06   08   10
* Currencies weighted by relative market importance to total U.S. trade.
Oil Price Recovery Will Track Global
            Rebound and U.S. Dollar into 2011
Dollars per barrel; spot price West Texas Intermediate
$140
         Questions for oil:                                                2009 avg.
$130
           Middle East keeps uncertainties in the        2008 avg.           $62
$120       market.                                         $100
$110       US dollar value still a factor.
           OPEC: limited output adjustments
$100       Global recovery will set pace of price
 $90       rebound.
                                                    2007 avg.
 $80                                                  $72

 $70                                                                             2011-12 avg.
 $60                                                                               $90-100

 $50
 $40
                                                                     2010 avg.
 $30                                                                    $79
 $20
 $10
       19 1




       20 1




       20 1
       19 6
       19 7
       19 8
       19 9
       19 0


       19 2
       19 3
       19 4
       19 5
       19 6
       19 7
       19 8
       20 9
       20 0


       20 2
       20 3
       20 4
       20 5
       20 6
       20 7
       20 8
       20 9
       20 0

         12
         9




         0




         1
         8
         8
         8
         8
         9


         9
         9
         9
         9
         9
         9
         9
         9
         0


         0
         0
         0
         0
         0
         0
         0
         0
         1
    19
Strong Fourth Quarter in U.S. Signals
         Momentum For 2011 First Half
                        2009 ----------- 2010 -----------                 2011
                         IV     I       II  III      IV                     I
                            ---------- Percent change at annual rate ----------

Real Gross Domestic      5.0        3.7       1.7      2.6        3.2        4.0
Product (GDP)                  ---------- Percent change from year earlier ----------

                         0.2        2.4       3.0      3.2        2.8        2.9
                             Percent points of contribution at annual rate:

Personal Consumption     0.7        1.3       1.5      1.7        3.0        2.1
Fixed investment        - 0.1       0.4       2.1      0.2        0.5        0.6
    Nonresidential       -0.1        0.7       1.5      0.9        0.4        0.8
    Residential           0.0       -0.3       0.5     -0.8        0.1       -0.2
Change in Inventories    2.8        2.6       0.8      1.6       -3.7        2.0
Net exports              1.9       -0.3      -3.5 -1.7            3.4       -0.1
Government spending     -0.3       -0.3       0.8      0.8       -0.1       -0.6
Annual Sources of Growth: U.S. Economy
                                                                                  Forecast
                           2006 2007             2008 2009 2010                     2011
                                   ---------- Percent change at annual rate ----------

Real Gross Domestic        2.7          2.0         0.0       -2.6        2.9            3.1
Product (GDP)                     ---------- Percent change 4th qtr-to-4th qtr ----------

      From 1998-2007       2.4          2.3        -2.8        0.2        2.8            3.2
  over 75% of growth was
   personal consumption           Percent points of contribution at annual rate:

Personal Consumption       2.0          1.7        -0.2       -0.8         1.3           2.3
Fixed investment           0.4         -0.3        -1.0       -2.7         0.5           1.0
    Nonresidential          0.8          0.8         0.0       -2.0         0.5          0.9
    Residential            -0.5         -1.1        -1.0       -0.7        -0.1          0.1
Change in Inventories      0.1         -0.2        -0.5       -0.6         1.4           0.0
Net exports                -0.1         0.6         1.2        1.1        -0.5        -0.1
Government spending        0.3          0.3         0.5        0.3         0.2        -0.1
Major Changes in the
             February WASDE
World / U.S. Wheat/ Soybean and Cotton Largely Unchanged
Coarse Grain Stocks:
World ….. -4.7 mmt
U.S. ……. -1.8 mmt (70 million bushels) (price range $5.05-5.75/bu.)
  (2010 ending stocks estimated 675 mil. bu.; Avg trade estimate = 725)
Foreign … -2.9 mmt (Brazil … -1.5 mmt; Mexico …. -0.5 mmt)

Small increases in meat and milk production for 2011.
Significant changes in prices:
       Steers ……… + $3 /cwt. ………. ($102-109 / cwt.)
       Hogs ………. + $4 /cwt. ………. ($58-61 / cwt.)
       Broilers …. - 1 cent/lb. ………. (80-85 cents/ lb.)
       Milk ……… + $1.60 / cwt. …….. $17.70-18.40 / cwt.)
A Deleveraging Consumer Will
           Temper Potential Demand Growth
Percent                                                                                                   Percent
150                                                                                                            30

140                                                                                                            28

130                                                                                                            26
                                                                   Debt-to-Income
120                                                                                                            24

110                                                                                                            22

100                                                                                                            20

90                                                                                                             18

80                                                                                                             16
                                                   Debt-to-Net Worth
70                                                                                                             14

60                                                                                                             12

50                                                                                                             10
      70
           72




                          78
                               80
                                    82




                                                   88
                                                        90
                                                             92




                                                                            98
                                                                                 00
                                                                                      02




                                                                                                     08
                                                                                                          10
                74
                     76




                                         84
                                              86




                                                                  94
                                                                       96




                                                                                           04
                                                                                                06
Budget Deficits Have Become Focus
              of Congress and Administration
   Deficit in billion dollars                                                                                                                        Percent of GDP

                     Reagan                      G.             Clinton                        G.W. Bush                          Obama
      200                                       Bush                                                                                                           2

         0                                                                          69 126
                                                                                           23628
                                                                                             1                                                                 0
                                                                          -108   -22

              -79
     -200           -128
                          -185
                       -208
                                      -150 -155 -153
                              -212 -221            -221
                                                                       -164
                                                                    -203                       -158                    -162
                                                                                                                    -248
                                                                                                                                                               -2
                                                      -269 -290 -255
                                                                                                                -318
                                                                                                      -375
     -400                                                                                                    -413                                              -4
                                                       -4.7%                                 -3.6%
     -600                                                                                                                                                      -6
                     -6%
                                 Deficit as
     -800                         percent                                                                                                                      -8
                                  of GDP

   -1000                                                                                                                                                       -10

   -1200                                                                                                                                                       -12
                  Assumptions:                                                                                -9.8 %

   -1400           4 year phase-out in Iraq/ Afghanistan                                                                                                      -14
                   Permanent extension of tax provisions
                                                                                                                              -1414




   -1600                                                                                                                                                       -16
             81




                                                   91




                                                                                        01




                                                                                                                                      11
                    83
                            85
                                   87
                                           89


                                                          93
                                                                  95
                                                                          97
                                                                                 99


                                                                                               03
                                                                                                        05
                                                                                                                    07
                                                                                                                           09


                                                                                                                                           13
                                                                                                                                                15
                                                                                                                                                     17
                                                                                                                                                          19
Source: Congressional Budget Office (January, 2011), BEA and Treasury Department and forecast
Declining Grain Stocks Will
       Drive Acreage Decisions in 2011
Million metric tons of wheat & coarse grains                                Stocks-to-use percentage
500                                                                                                            40



400                                                                                                            32



300                                                                                                            24



200                                                                                                            16



100                                                                                                            8


                                World stocks                  Total stocks-to-use
  0                                                                                                            0
      70
           72
                74
                     76
                          78
                               80
                                    82
                                         84
                                              86
                                                   88
                                                        90
                                                             92
                                                                  94
                                                                       96
                                                                            98
                                                                                 00
                                                                                      02
                                                                                           04
                                                                                                06
                                                                                                     08
                                                                                                          10
Acreage Shifts Will Favor Corn But
         Weather / Input Costs Will Play Role
                                                                                 Change
                   2007        2008         2009         2010            2011    10 to 11
                    ----------------- million acres -----------------

Corn                93.5        86.0         86.5         88.2           90-92   +2 to +4

Soybeans            64.7        75.7         77.5         77.7           76-79   -1 to +1

Wheat               60.5        63.2         59.2         53.6           56-58   +2 to +4

Upland Cotton       10.8          9.3          9.2        11.0           12-13   +1 to +3

7 other crops*     20.2        23.7          20.8         21.2           20-21   -1 to 0

Hay harvested       61.0        60.1         59.8         59.7           60-61   +0 to +1

CRP                 36.8        34.6         33.7         31.3            31     -1 to 0

Double crops         5.0          7.1          4.7          2.8           4-5    +1 to +2

 Total acreage 349.2           348.6        346.4        343.4          346-349 +3 to +6
* Barley, oats, sorghum, rice, sunflowers, peanuts and canola
Key Crop Input Prices Set Globally and
             Likely to Remain Volatile
Index (1990-92=100)


700        Feed   Nitrogen   Potash & Phosphate

                                                  Change
600                                                from
                                                   year
                                                    ago
500


400
                                                   +39%

300                                                +24%

                                                   +17%
200


100
              01




              11
      92
              93
              94
              95
              96
              97
              98
              99
              00


              02
              03
              04
              05
              06
              07
              08
              09
              10
           20




           20
  19
       19
           19
           19
           19
           19
           19
           19
           20


           20
           20
           20
           20
           20
           20
           20
           20
           20
World Wheat Stocks Fall As
                     Global Production Declines
Million metric tons of wheat                                                Stocks as percent of use
250                                                                                                       40



200                                                                                                       32



150                                                                                                       24



100                                                                                                       16



 50                                                                                                       8



  0                                                                                                       0
      72




                     78
                          80

                               82




                                              88
                                                   90
                                                        92




                                                                       98
                                                                            00

                                                                                 02




                                                                                                08

                                                                                                     10
           74

                76




                                    84
                                         86




                                                             94

                                                                  96




                                                                                      04
                                                                                           06
Declining FSU-12 Wheat
                  Production Driving Markets
Million metric tons
125
                 Domestic use

100


 75


                               Production
                                                                                  27% of
 50
                                                                                 world trade

 25
                         Ending stocks

  0


(25)                   Net exports
       80

            82

                  84

                        86

                             88

                                  90

                                         92

                                              94

                                                   96

                                                        98

                                                             00

                                                                  02

                                                                       04

                                                                            06

                                                                                  08

                                                                                       10
Rebound in Global Wheat Production
             Could Push U.S. Stocks Higher in 2011
Billion bushels                               U.S. Winter wheat seedings: +3.7 mil. acres (+10%)
3.0
                                                                       Total use
           Production
2.5


2.0


1.5


1.0


0.5

                                Ending stocks
0.0
      70

           72

                74

                     76

                          78

                               80

                                    82

                                         84

                                              86

                                                   88

                                                        90

                                                             92

                                                                  94

                                                                       96

                                                                            98

                                                                                 00

                                                                                      02

                                                                                           04

                                                                                                06

                                                                                                     08

                                                                                                          10
Sharply Reduced Coarse Grain
                Stocks Push Markets Higher
Percent (stocks as a percent of use)
70
                    What if China develops                                                                    U.S.      World
60                  even a small appetite
                     for corn in 2011-12?
50


40
                                                                                                                Lowest in
                                                                                                              over 50 years
30


20


10


 0
     60
          62
               64
                    66
                         68
                              70
                                   72
                                        74
                                             76
                                                  78
                                                       80
                                                            82
                                                                 84
                                                                      86
                                                                           88
                                                                                90
                                                                                     92
                                                                                          94
                                                                                               96
                                                                                                    98
                                                                                                         00
                                                                                                              02
                                                                                                                   04
                                                                                                                        06
                                                                                                                             08
                                                                                                                                  10
Corn Stocks Remain Tight
                Even With Large Harvest
Billion bushels
14
          Production      Total Use       Free stks      Gov't stks
12


10


 8

                                                         Nearly 40 percent of the crop
 6
                                                             is utilized for ethanol.
                                                           Total corn use is now over
 4
                                                              13.5 billion bushels.
                                                         (need 89 mil. acres at trend yield)
 2


 0
     75    77   79   81   83   85   87   89   91   93   95   97   99   01   03   05   07   09   11
Corn Acreage and Yields Will
           be Strategic in 2011
             2011 Corn Planted Acreage (Mil. Acres)
             88    89     90     91     92       93
                      Harvested Acreage
             81    82     83     84     85       86             Need
                            Billion bushels
                                                               yield of
     154 12.47 12.63 12.78 12.94 13.09 13.24                    160 or
      160   12.96   13.12   13.28   13.44     13.60   13.76     above
                                                              even with
      161   13.04   13.20   13.36   13.52     13.69   13.85
                                                                92-93
      162   13.12   13.28   13.45   13.61     13.77   13.93    million
Yield 163   13.20   13.37   13.53   13.69     13.86   14.02     acres
      164   13.28   13.45   13.61   13.78     13.94   14.10
      165   13.37   13.53   13.70   13.86     14.03   14.19
      166   13.45   13.61   13.78   13.94     14.11   14.28
      167   13.53   13.69   13.86   14.03     14.20   14.36
South American Crop Size Will Set
            Tone for 2010 - 2011 Crop Years
Million metric tons


250


200
                                                                            World

150


100


 50                                                                                        United States

                                          Brazil and Argentina
  0
      70
           72


                     76
                          78
                               80
                                    82


                                              86
                                                   88
                                                        90
                                                             92


                                                                       96
                                                                            98
                                                                                 00
                                                                                      02


                                                                                                06
                                                                                                     08
                                                                                                          10
                74




                                         84




                                                                  94




                                                                                           04
Continued Large Global Soybean
          Stocks Offset by China Demand
Million metric tons of soybeans                                             Stocks-to-use percentage
70                                                                                                            35
          Ending stocks            Stocks-to-use
60                                                                                                            30


50                                                                                                            25


40                                                                                                            20


30                                                                                                            15


20                                                                                                            10


10                                                                                                            5


 0                                                                                                            0
     70
          72
               74
                    76
                         78
                              80
                                   82
                                        84
                                             86
                                                  88
                                                       90
                                                            92
                                                                 94
                                                                      96
                                                                           98
                                                                                00
                                                                                     02
                                                                                          04
                                                                                               06
                                                                                                    08
                                                                                                         10
China’s Appetite for Soybeans
                is Major Market Driver
Million metric tons
75
                                                                  Domestic use
60

45

30                                                                         Production

15

 0
                                                                        Ending stocks

-15

-30
           In last 10 years domestic consumption
                 has tripled with no significant             Net exports
-45            increase in domestic production.
-60         Increase of 8-9 mmt. in 2009 & 2010.
-75
      80

           82

                84

                     86

                          88

                               90

                                    92

                                         94

                                              96

                                                   98

                                                        00

                                                             02

                                                                   04

                                                                          06

                                                                                 08

                                                                                      10
U.S. Soybean Stocks Limited by Strong
         Demand and Acreage Competition
Million bushels
3,500
             Production      Total Use   Stocks
3,000

2,500

2,000

1,500

1,000

 500

    0
        79    81   83   85    87   89    91   93   95   97   99   01   03   05   07   09   11
Meat Industry Will Be Cautious
            About Expansion in 2011-12
Billion pounds
40
                              Change in
                            2010      2011
35
          Broilers         + 4.0 % 0 to +2%
          Beef             +1.3 %    -1 to -2%                                     Broilers
30
          Pork             - 2.4 %    0 to 1%
25
                                                                         Beef

20
                                                                                  Pork
15

10                                             Percent change in total meat output
5
                                           2007          2008      2009       2010        2011
                                           +2.2%         + 3%      -3.2%      1.3 %     -1 to 1 %
0
                                          88
                                               90
                                                    92




                                                                   98
                                                                        00
                                                                             02




                                                                                            08
                                                                                                 10
                 78
                      80
                           82




                                                                                  04
                                                                                       06
                                84
                                     86




                                                         94
                                                              96
     74
          76
Export Market Will Be Key to Positive
          Returns Through Mid-2011
Billion pounds (red meat: carcass weight; poultry: ready-to-cook)
15
                          Imports             Exports         Balance

12
        Export share of
      2011 U.S. production
 9      Broilers ….. 18%
        Beef ………. 9%
        Pork ……… 21%
 6
        All meat .......16%

 3


 0


-3
     80   82   84   86   88    90   92   94    96   98   00   02   04   06   08   10
Cow Calf Returns Likely to Remain
       Positive As Inventory Continues Decline
Dollars per cow                                                                           Million head
200                                                                                                    125


150                                                                                                    120
                                                 Cow-calf returns

100                                                                                                    115


 50                                                                                                    110


  0                                                                                                    105


 -50                                                                                                   100


-100                                                                                                   95
            Cattle inventory
              (January 1)
                                                                        Lowest since 1958
-150                                                                                                   90
       81




                                     91




                                                                   01




                                                                                                  11
             83

                   85

                         87

                               89




                                           93

                                                 95

                                                       97

                                                             99




                                                                         03

                                                                               05

                                                                                     07

                                                                                            09
   19




                                    19




                                                                  20




                                                                                                 20
            19

                  19

                        19

                              19




                                          19

                                                19

                                                      19

                                                            19




                                                                        20

                                                                              20

                                                                                    20

                                                                                          20
Meat Exports at Plateau
         Following Strong Upward Trend
Billion pounds (1999-2011)
7


6


5


4


3


2


1


0   99   02   03   05   07   09   11   99   02   03   05   07   09   11   99   02   03   05   07   09   11
               Beef                               Pork                              Broilers
Recovering Export Markets
                     Will Help U.S. Dairy Sector
Million metric tons
400
       NFDM          Cheese         Butter & Milkfat         Whole Milk powder
350

300

250

200

150

100

 50

  0
           91




                                                             01




                                                                                                               11
      90


                92
                     93
                          94
                               95
                                    96
                                         97
                                              98
                                                   99
                                                        00


                                                                  02
                                                                       03
                                                                            04
                                                                                 05
                                                                                      06
                                                                                           07
                                                                                                08
                                                                                                     09
                                                                                                          10
Milk Feed Ratios Likely To Be
               Pressed Lower in 2011
  Quarterly ratio: pounds of feed equal to value of one pound of all milk
  4.5

  4.0

  3.5

  3.0

  2.5

  2.0

  1.5

  1.0
         86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11
                                       quarterly data
* Number of pounds of 16% protein Mixed Dairy Feed (C51/S8/AH41) equal in value to 1 lb all milk.
Livestock and Dairy Prices Must
               Move Higher to Catch Grains
 Index (1990-92=100)
 200
                                                                       Prices paid*

 180


 160

                                      Prices received: crops
 140


 120


 100

                                                                      Prices received: livestock
   80
                     01




                     11
        92

             93



                     95

                     96

                     97

                     98

                     99

                     00



                     02

                     03



                     05

                     06

                     07

                     08

                     09

                     10
                     94




                     04
                  20




                  20
      19

           19



                  19

                  19

                  19

                  19

                  19

                  20



                  20

                  20



                  20

                  20

                  20

                  20

                  20

                  20
                19




                  20


*Prices paid commodities & services, interest, taxes and wage rates
Farm Income: Agriculture
             Continues Strong Performance
Billion dollars
100
               Net cash income in agriculture is now              Record high
                 averaging around $80 billion a year
 80
            compared with an average of $60 billion for
                                             Net Farm Cash Income
             the previous decade….. but more volatility
 60



 40



 20


                                                     Direct government payments*
   0
       75    77   79   81   83   85   87   89   91   93   95   97   99   01   03   05   07   09   11
* emergency payments are striped area of government payments)
Farm Debt Leveraging Has Not
         Followed Land Prices Higher
Billion dollars                                                                                   Billion dollars
2500                                                                                                            500
            Change 1970-1980         Change 1980-1990         Change 1990-2000         Change 2000-2010
             Assets ... +259%         Assets ... -16%          Assets ... +43%          Assets ... +74%
             Debt ....... +235%       Debt ....... -19%        Debt ....... +25%        Debt ....... +43%

2000                                                                                                            400




1500                                                                                                            300

                                                               Farm assets
                                                                (left scale)
1000                                                                                                            200

                                                                                        Farm debt
                                                                                       (right scale)
 500                                                                                                            100




   0                                                                                                            0
       70
            72
                 74
                      76
                           78
                                80
                                     82
                                          84
                                               86
                                                    88
                                                         90
                                                              92
                                                                   94
                                                                        96
                                                                             98
                                                                                  00
                                                                                       02
                                                                                            04
                                                                                                 06
                                                                                                      08
                                                                                                           10

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The Business of Agriculture

  • 1. A WHOLE NEW WORLD
  • 2. Some Key Issues Decisions ahead with big impacts Feed prices: High and going higher 1 Policy issues: Farm bill – COOL – Competition – 2 Budget cuts Trade Policy: Obama change – So. Korea – ✓ 3 Colombia – Panama – TPPA - DOHA 4 Immigration reform: After 2012 Food Industry: Labels – Dietary guidelines 5
  • 3. MEGA-TRENDS IN AGRICULTURE: Policy Impacts • Yield losses • Prices • Food demand • Export policy • Biofuels • Farmland • Food prices • Declining stocks • Acreage battle • Weather • Energy • Globalization • La Nina • China • Population • Russia, Ukraine • Alternatives • Growing wealth • GMO products
  • 4. Market & Policy Volatility: Fasten Your Seat Belts VISULIZE ACTIVITIES WITH TIMELINES! BEFORE NOW FUTURE China impact Volatility Risk Mgmt. 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
  • 5. Obama and Election Impacts Turning to the center 1 Changes: White House ✓ 2 State of Union address Obama FY ‘12 budget 3 Congress: Fewer moderates 4 Gridlock: Halting Obama – Or: Growth & Budget Cuts
  • 6. The New House GOP controls with net gain of 63 seats -- Leaders: GOP: Boehner Dems: Pelosi -- ‘New’ approach: * Committee chairs: Power - Markup sessions - Floor amendments
  • 7. House Committee Leaders New players, different approaches 1 Ways and Means: Dave Camp (Mich.) • Tax Issues - Trade Policy 2 Budget: Paul Ryan (Wis.) • Key role in coming budget-cut proposals Ag: Frank Lucas (Okla.) – 14 Dems lost; No GOP ✓ 3 •Direct payments - conservation - equity - regs Appropriations: Hal Rogers (Ky.) 4 •No longer fun panel – cuts ahead Energy and Commerce: Fred Upton (Mich.) 5 • Supported proposed cut in ethanol payment rate
  • 8. New Senate Dems still in control, but weakened majority Same leaders: Dems: Reid GOP: McConnell  Election Math: * 2012: Dems: 23 seats; GOP: 10 -- 8 Ag members up, only 1 GOP (Lugar) -- Dems: Conrad, Stabenow, Nelson, Brown, Casey, Klobuchar, Gillibrand * 2014: Dems: 20; GOP: 13
  • 9. New Leader for Senate Ag Panel Impact of Sen. Lincoln’s reelection loss New Chair Past two farm bills Stabenow (Mich.) pushed fruit, vegetable funding Ranking GOP Other commodities in Roberts (Kan.) Mich.: Sugar beets, corn, soybeans, wheat, Keys dairy No./So. coalition Up for reelection in ‘12 - Conrad (N.D.)
  • 10. How to cut deficit Changes ahead
  • 11. U.S. National Debt In dollars and percent of GDP Trillions of dollars Percent of GDP 20 Eisenhower 120 G.W. Bush Carter Johnson H.W. Bush Nixon / Ford Kennedy Reagan Clinton Obama Truman Roosevelt 18 108 16 96 14 84 12 72 10 60 8 48 6 36 4 24 National debt Percent of GDP 2 12 0 0 40 50 60 70 80 90 00 10 20 45 55 65 75 85 95 05 15
  • 12. Passing Spending Cuts Will be Difficult Eventually most programs will face cuts FY 2009 FY 2015 23% $1,058 bil. 35% Discretionary $1,246 bil. 19% and other mandatory 21% Discretionary and other Social Social mandatory Security Security Medicare / Defense Medicaid 19% Medicare / Medicaid Defense 21% Net Net Interest Interest 25% 19% 5% 12% Source: Congressional Budget Office, August 2010
  • 13. Projected 10-Year Costs of Ag Programs Only 2.15% of all federal government spending FY 2009 FY 2015 23% $1,058 bil. 35% Discretionary $1,246 bil. 19% and other mandatory 21% Discretionary and other Social Social mandatory Security Security Medicare / Defense Medicaid 19% Medicare / Medicaid Defense 21% Net Net Interest Interest 25% 19% 5% 12% Source: Congressional Budget Office, August 2010
  • 14. Agriculture’s 10-Year Projected Spending Percentage breakdown of how $924 billion is spent
  • 15. Farm Program Budget Breakdown of the $64 Billion in Commodity Support 2% 3%3% 10% Direct Payments ACRE 5% CCP MLG Disaster Dairy 77%
  • 16. Farm Program Budget Breakdown of the $89 Billion in Crop Insurance Spending 13% Farmer Premium Subsidy 18% Delivery Expenses Underwriting Gains 69%
  • 17. Farm Program Budget Breakdown of the $65 Billion in Conservation Spending 2% 6% 3% CRP 37% CSP EQIP 26% FPP WRP Other 26%
  • 18. Farm Policy Linkages Crop Insurance Safety Net Economy Ethanol
  • 19. Next Farm Bill Key issues ahead 1 Timing: 2012? Senate before House? – Funding No budget baseline: 38 programs, $9-$10 billion 2 - Biggest program impacted: SURE ✓ 3 Budget cuts ahead: When and where? Direct payments: Dems want reform, Lucas doesn’t 4 -Loan rates, target prices: Increases? 5 Other Issues: Dairy - CRP - Crop insurance - Sugar 6 Obama position: No bill, analyze options
  • 22. General Overview • Extremely tight grain and oilseed fundamentals • 2010 US production hurt by adverse August • Shortfalls in world wheat production • La Nina undermines Argentine crops • Strong demand – High livestock and petroleum prices making it difficult to ration usage despite historically high grain prices • Minimal 2010/11 corn and soybean ending stocks • Intense competition for 2011 acreage – Outcome of South American crops and Chinese demand will determine how intense • Limited prospects for stock building in 2011/12 even with trend yields
  • 23. Grains Outlook • Grain shortages in 2010/11 due to FSU drought, hot US 2010 August, strong bio-energy demand, record Chinese soybean imports – US and world stocks reduced to critically low levels for corn and oilseeds: wheat stocks relatively adequate – High gasoline prices and ethanol tax credit extension cause corn ethanol demand surge – Argentine 2011crops struggling with sporadic drought – US summer corn and soy supplies extremely tight • Price highs supported by central bank inflationary monetary policy and economic recovery – Demand rationing difficult with ethanol and China leading • Global crop production rebound in 2011 essential – US 2011 acreage battle as cotton demand rebounds; soy could fall short – La Nina Pacific weather cycle positive for N. Hemisphere crops – FSU crop yields should rebound from 2010 extreme drought • Prices likely to remain high and volatile until fall harvests in hand – Extreme spring and summer volatility expected as weather reaction – Late planting, summer heat, etc. • Economic excess in China, US could lead to next burst price bubble
  • 24. Dairy Summary • Milk production growth has topped out globally for this cycle, and growth will be slowing worldwide. A lack of rain in New Zealand and Argentina, too much rain in Australia, blizzards in Europe, and $6.50 corn in the US are slowing milk production growth. • Prices on the world market have responded to the lower supply by shooting higher, and the next chance to bring those back down will be when the new production season ramps up in New Zealand in August. US prices have been along for the ride despite adequate inventories of most dairy products (the exception being butter). • US butter and cheese prices have jumped too high too fast and could retrace a bit over the next two-three months before turning back higher again. Prices for the various powders will trend higher until September or October when the world market will potentially come under pressure.
  • 25. Uneven Global Economic Rebound Contains Downside Risks Percent change in annual world growth (purchasing-power parity rates) Advanced countries Rest of world China India 6 4 2 0 Advanced economies accounted for over half of world growth rate from 1970 to 2008. From 2010 -2 to 2012 they will account for less than one-third. 70 72 78 80 82 88 90 92 98 00 02 08 10 12 74 76 84 86 94 96 04 06
  • 26. Dollar Erosion Has Boosted Foreign Buying Power and Commodity Prices Indexes of major currencies/US$ (March 1973=100) 150 Competitive devaluations 140 and protectionism will be 130 significant issues in 2011-12 120 110 100 90 80 From March 2009 ………. -14% 70 From 1997-03 average … -28% 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 * Currencies weighted by relative market importance to total U.S. trade.
  • 27. Oil Price Recovery Will Track Global Rebound and U.S. Dollar into 2011 Dollars per barrel; spot price West Texas Intermediate $140 Questions for oil: 2009 avg. $130 Middle East keeps uncertainties in the 2008 avg. $62 $120 market. $100 $110 US dollar value still a factor. OPEC: limited output adjustments $100 Global recovery will set pace of price $90 rebound. 2007 avg. $80 $72 $70 2011-12 avg. $60 $90-100 $50 $40 2010 avg. $30 $79 $20 $10 19 1 20 1 20 1 19 6 19 7 19 8 19 9 19 0 19 2 19 3 19 4 19 5 19 6 19 7 19 8 20 9 20 0 20 2 20 3 20 4 20 5 20 6 20 7 20 8 20 9 20 0 12 9 0 1 8 8 8 8 9 9 9 9 9 9 9 9 9 0 0 0 0 0 0 0 0 0 1 19
  • 28. Strong Fourth Quarter in U.S. Signals Momentum For 2011 First Half 2009 ----------- 2010 ----------- 2011 IV I II III IV I ---------- Percent change at annual rate ---------- Real Gross Domestic 5.0 3.7 1.7 2.6 3.2 4.0 Product (GDP) ---------- Percent change from year earlier ---------- 0.2 2.4 3.0 3.2 2.8 2.9 Percent points of contribution at annual rate: Personal Consumption 0.7 1.3 1.5 1.7 3.0 2.1 Fixed investment - 0.1 0.4 2.1 0.2 0.5 0.6 Nonresidential -0.1 0.7 1.5 0.9 0.4 0.8 Residential 0.0 -0.3 0.5 -0.8 0.1 -0.2 Change in Inventories 2.8 2.6 0.8 1.6 -3.7 2.0 Net exports 1.9 -0.3 -3.5 -1.7 3.4 -0.1 Government spending -0.3 -0.3 0.8 0.8 -0.1 -0.6
  • 29. Annual Sources of Growth: U.S. Economy Forecast 2006 2007 2008 2009 2010 2011 ---------- Percent change at annual rate ---------- Real Gross Domestic 2.7 2.0 0.0 -2.6 2.9 3.1 Product (GDP) ---------- Percent change 4th qtr-to-4th qtr ---------- From 1998-2007 2.4 2.3 -2.8 0.2 2.8 3.2 over 75% of growth was personal consumption Percent points of contribution at annual rate: Personal Consumption 2.0 1.7 -0.2 -0.8 1.3 2.3 Fixed investment 0.4 -0.3 -1.0 -2.7 0.5 1.0 Nonresidential 0.8 0.8 0.0 -2.0 0.5 0.9 Residential -0.5 -1.1 -1.0 -0.7 -0.1 0.1 Change in Inventories 0.1 -0.2 -0.5 -0.6 1.4 0.0 Net exports -0.1 0.6 1.2 1.1 -0.5 -0.1 Government spending 0.3 0.3 0.5 0.3 0.2 -0.1
  • 30. Major Changes in the February WASDE World / U.S. Wheat/ Soybean and Cotton Largely Unchanged Coarse Grain Stocks: World ….. -4.7 mmt U.S. ……. -1.8 mmt (70 million bushels) (price range $5.05-5.75/bu.) (2010 ending stocks estimated 675 mil. bu.; Avg trade estimate = 725) Foreign … -2.9 mmt (Brazil … -1.5 mmt; Mexico …. -0.5 mmt) Small increases in meat and milk production for 2011. Significant changes in prices: Steers ……… + $3 /cwt. ………. ($102-109 / cwt.) Hogs ………. + $4 /cwt. ………. ($58-61 / cwt.) Broilers …. - 1 cent/lb. ………. (80-85 cents/ lb.) Milk ……… + $1.60 / cwt. …….. $17.70-18.40 / cwt.)
  • 31. A Deleveraging Consumer Will Temper Potential Demand Growth Percent Percent 150 30 140 28 130 26 Debt-to-Income 120 24 110 22 100 20 90 18 80 16 Debt-to-Net Worth 70 14 60 12 50 10 70 72 78 80 82 88 90 92 98 00 02 08 10 74 76 84 86 94 96 04 06
  • 32. Budget Deficits Have Become Focus of Congress and Administration Deficit in billion dollars Percent of GDP Reagan G. Clinton G.W. Bush Obama 200 Bush 2 0 69 126 23628 1 0 -108 -22 -79 -200 -128 -185 -208 -150 -155 -153 -212 -221 -221 -164 -203 -158 -162 -248 -2 -269 -290 -255 -318 -375 -400 -413 -4 -4.7% -3.6% -600 -6 -6% Deficit as -800 percent -8 of GDP -1000 -10 -1200 -12 Assumptions: -9.8 % -1400  4 year phase-out in Iraq/ Afghanistan -14  Permanent extension of tax provisions -1414 -1600 -16 81 91 01 11 83 85 87 89 93 95 97 99 03 05 07 09 13 15 17 19 Source: Congressional Budget Office (January, 2011), BEA and Treasury Department and forecast
  • 33. Declining Grain Stocks Will Drive Acreage Decisions in 2011 Million metric tons of wheat & coarse grains Stocks-to-use percentage 500 40 400 32 300 24 200 16 100 8 World stocks Total stocks-to-use 0 0 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10
  • 34. Acreage Shifts Will Favor Corn But Weather / Input Costs Will Play Role Change 2007 2008 2009 2010 2011 10 to 11 ----------------- million acres ----------------- Corn 93.5 86.0 86.5 88.2 90-92 +2 to +4 Soybeans 64.7 75.7 77.5 77.7 76-79 -1 to +1 Wheat 60.5 63.2 59.2 53.6 56-58 +2 to +4 Upland Cotton 10.8 9.3 9.2 11.0 12-13 +1 to +3 7 other crops* 20.2 23.7 20.8 21.2 20-21 -1 to 0 Hay harvested 61.0 60.1 59.8 59.7 60-61 +0 to +1 CRP 36.8 34.6 33.7 31.3 31 -1 to 0 Double crops 5.0 7.1 4.7 2.8 4-5 +1 to +2 Total acreage 349.2 348.6 346.4 343.4 346-349 +3 to +6 * Barley, oats, sorghum, rice, sunflowers, peanuts and canola
  • 35. Key Crop Input Prices Set Globally and Likely to Remain Volatile Index (1990-92=100) 700 Feed Nitrogen Potash & Phosphate Change 600 from year ago 500 400 +39% 300 +24% +17% 200 100 01 11 92 93 94 95 96 97 98 99 00 02 03 04 05 06 07 08 09 10 20 20 19 19 19 19 19 19 19 19 20 20 20 20 20 20 20 20 20 20
  • 36. World Wheat Stocks Fall As Global Production Declines Million metric tons of wheat Stocks as percent of use 250 40 200 32 150 24 100 16 50 8 0 0 72 78 80 82 88 90 92 98 00 02 08 10 74 76 84 86 94 96 04 06
  • 37. Declining FSU-12 Wheat Production Driving Markets Million metric tons 125 Domestic use 100 75 Production 27% of 50 world trade 25 Ending stocks 0 (25) Net exports 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10
  • 38. Rebound in Global Wheat Production Could Push U.S. Stocks Higher in 2011 Billion bushels U.S. Winter wheat seedings: +3.7 mil. acres (+10%) 3.0 Total use Production 2.5 2.0 1.5 1.0 0.5 Ending stocks 0.0 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10
  • 39. Sharply Reduced Coarse Grain Stocks Push Markets Higher Percent (stocks as a percent of use) 70 What if China develops U.S. World 60 even a small appetite for corn in 2011-12? 50 40 Lowest in over 50 years 30 20 10 0 60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10
  • 40. Corn Stocks Remain Tight Even With Large Harvest Billion bushels 14 Production Total Use Free stks Gov't stks 12 10 8 Nearly 40 percent of the crop 6 is utilized for ethanol. Total corn use is now over 4 13.5 billion bushels. (need 89 mil. acres at trend yield) 2 0 75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 11
  • 41. Corn Acreage and Yields Will be Strategic in 2011 2011 Corn Planted Acreage (Mil. Acres) 88 89 90 91 92 93 Harvested Acreage 81 82 83 84 85 86 Need Billion bushels yield of 154 12.47 12.63 12.78 12.94 13.09 13.24 160 or 160 12.96 13.12 13.28 13.44 13.60 13.76 above even with 161 13.04 13.20 13.36 13.52 13.69 13.85 92-93 162 13.12 13.28 13.45 13.61 13.77 13.93 million Yield 163 13.20 13.37 13.53 13.69 13.86 14.02 acres 164 13.28 13.45 13.61 13.78 13.94 14.10 165 13.37 13.53 13.70 13.86 14.03 14.19 166 13.45 13.61 13.78 13.94 14.11 14.28 167 13.53 13.69 13.86 14.03 14.20 14.36
  • 42. South American Crop Size Will Set Tone for 2010 - 2011 Crop Years Million metric tons 250 200 World 150 100 50 United States Brazil and Argentina 0 70 72 76 78 80 82 86 88 90 92 96 98 00 02 06 08 10 74 84 94 04
  • 43. Continued Large Global Soybean Stocks Offset by China Demand Million metric tons of soybeans Stocks-to-use percentage 70 35 Ending stocks Stocks-to-use 60 30 50 25 40 20 30 15 20 10 10 5 0 0 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10
  • 44. China’s Appetite for Soybeans is Major Market Driver Million metric tons 75 Domestic use 60 45 30 Production 15 0 Ending stocks -15 -30 In last 10 years domestic consumption has tripled with no significant Net exports -45 increase in domestic production. -60 Increase of 8-9 mmt. in 2009 & 2010. -75 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10
  • 45. U.S. Soybean Stocks Limited by Strong Demand and Acreage Competition Million bushels 3,500 Production Total Use Stocks 3,000 2,500 2,000 1,500 1,000 500 0 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 11
  • 46. Meat Industry Will Be Cautious About Expansion in 2011-12 Billion pounds 40 Change in 2010 2011 35 Broilers + 4.0 % 0 to +2% Beef +1.3 % -1 to -2% Broilers 30 Pork - 2.4 % 0 to 1% 25 Beef 20 Pork 15 10 Percent change in total meat output 5 2007 2008 2009 2010 2011 +2.2% + 3% -3.2% 1.3 % -1 to 1 % 0 88 90 92 98 00 02 08 10 78 80 82 04 06 84 86 94 96 74 76
  • 47. Export Market Will Be Key to Positive Returns Through Mid-2011 Billion pounds (red meat: carcass weight; poultry: ready-to-cook) 15 Imports Exports Balance 12 Export share of 2011 U.S. production 9  Broilers ….. 18%  Beef ………. 9%  Pork ……… 21% 6  All meat .......16% 3 0 -3 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10
  • 48. Cow Calf Returns Likely to Remain Positive As Inventory Continues Decline Dollars per cow Million head 200 125 150 120 Cow-calf returns 100 115 50 110 0 105 -50 100 -100 95 Cattle inventory (January 1) Lowest since 1958 -150 90 81 91 01 11 83 85 87 89 93 95 97 99 03 05 07 09 19 19 20 20 19 19 19 19 19 19 19 19 20 20 20 20
  • 49. Meat Exports at Plateau Following Strong Upward Trend Billion pounds (1999-2011) 7 6 5 4 3 2 1 0 99 02 03 05 07 09 11 99 02 03 05 07 09 11 99 02 03 05 07 09 11 Beef Pork Broilers
  • 50. Recovering Export Markets Will Help U.S. Dairy Sector Million metric tons 400 NFDM Cheese Butter & Milkfat Whole Milk powder 350 300 250 200 150 100 50 0 91 01 11 90 92 93 94 95 96 97 98 99 00 02 03 04 05 06 07 08 09 10
  • 51. Milk Feed Ratios Likely To Be Pressed Lower in 2011 Quarterly ratio: pounds of feed equal to value of one pound of all milk 4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 quarterly data * Number of pounds of 16% protein Mixed Dairy Feed (C51/S8/AH41) equal in value to 1 lb all milk.
  • 52. Livestock and Dairy Prices Must Move Higher to Catch Grains Index (1990-92=100) 200 Prices paid* 180 160 Prices received: crops 140 120 100 Prices received: livestock 80 01 11 92 93 95 96 97 98 99 00 02 03 05 06 07 08 09 10 94 04 20 20 19 19 19 19 19 19 19 20 20 20 20 20 20 20 20 20 19 20 *Prices paid commodities & services, interest, taxes and wage rates
  • 53. Farm Income: Agriculture Continues Strong Performance Billion dollars 100 Net cash income in agriculture is now Record high averaging around $80 billion a year 80 compared with an average of $60 billion for Net Farm Cash Income the previous decade….. but more volatility 60 40 20 Direct government payments* 0 75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 11 * emergency payments are striped area of government payments)
  • 54. Farm Debt Leveraging Has Not Followed Land Prices Higher Billion dollars Billion dollars 2500 500 Change 1970-1980 Change 1980-1990 Change 1990-2000 Change 2000-2010 Assets ... +259% Assets ... -16% Assets ... +43% Assets ... +74% Debt ....... +235% Debt ....... -19% Debt ....... +25% Debt ....... +43% 2000 400 1500 300 Farm assets (left scale) 1000 200 Farm debt (right scale) 500 100 0 0 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10