Situation and Outlook For Global Food and Agricultural Trade

September 29, 2010

Michael J. Dwyer, Director Global Trade and Biofuels Analysis Office of Global Analysis Foreign Agricultural Service/USDA

Booming Exports Are A Major Growth Factor For the U.S. Food and Agricultural Sector
Exports rebound to near record $113 billion in 2011 on rising demand in developing countries, falling dollar, and higher prices
U.S. agricultural trade ($ billion)
Exports in 2011 up 65% since 2006

120 100 80 60 40 20
Imports Exports Ag trade surplus to grow to $31.5 billion in 2011 one of few U.S. industries that still has a surplus

0 1975 1978 1981 1984 1987 1990 1993 1996 1999 2002 2005 2008 2011 (f)
Fiscal years
2

Top U.S. Export Items Surge in Past 5 Years

Among the Top 10 export sectors, most see significant growth over the past five years -- despite the worst global recession in decades
Total increase for the top 10 export items since 2006 is 76%, or $33 billion
Soybeans Coarse Grains Red Meats Fresh Fruit & Veg Proc. Fruit & Vegetables Wheat Feeds & Fodders Cotton Poultry Tree Nuts

6.3 6.8 4.6 4.4 3.9 4.2 3.1 4.7 2.9 3.0 5.0 4.5 6.0 6.0 6.2 6.2 8.1 FY 2006 FY 2011 8.7 11.4

15.2

8
Billion $

10

12

14

16
3

Recent Export Gains Have Been Strongest to NAFTA and Non-Japan Asia
Exports to Canada, Mexico, China, and SE Asia have responded to rapid economic growth and/or trade liberalization. In 2011, biggest gains are to Asia

US Ag Exports ($ Bil) 120 110 100 90 80 70 60 50 40 EU-27 30 20 10 0 '86 '91 '96 '01

Share of Exports (%)

50
Rest of World Asia

40 30
NAFTA

20
Other Asia Japan Mexico Canada

10
EU-27

06

11f '86

'91

'96

'01

06

11f

Top Markets Export Performance

Exports in $ billions, FY basis
2001 2011f $16.8 $15.0 $14.6 $11.5 $8.6 $5.0 $3.2 $2.5 $2.1 $2.1 % 110 689 100 29 32 100 60 108 133 250

Canada CHINA Mexico Japan EU-27 South Korea Taiwan Hong Kong Indonesia Turkey

$8.0 $1.9 $7.3 $8.9 $6.5 $2.5 $2.0 $1.2 $0.9 $0.6

5
2010 forecasts are from Outlook for U.S. Agricultural Trade, Aug 2010

U.S. Is Not Only Major Exporter Seeing Gains

S. America and S.E. Asia increased the most (%) -- EU and Australia saw slowest growth
After relinquishing top spot to EU in 2005 and 2006, the U.S. regained the No. 1 position since 2007

United States EU-27 Brazil Canada Argentina China Australia Thailand Indonesia 0

65.5 67.3 31.0 21.6 18.1 19.1 19.4 21.8 12.7 10.8 21.2 20.8 30.1 26.9 28.3 53.2 91.5

98.6

2005

2009

10

20

30

40

50

60

70

80

90

100
6

Total Agricultural Exports (bil $)

Source: GTIS using Global Trade Atlas. Definition of ag differs somewhat from Bureau of Census so U.S. stats not same as reported by FAS in BICO reports

U.S. Processed Food Exports At Record Highs Expected To Exceed $50 Billion In 2011
Exports have doubled, growing more than 7% a year since 2001

U.S. Processed Food Exports (Billion $)

50 40 30 20 10 0 2001

2002

2003

2004

2005

2006

2007

2008

2009 2010(f)

Leading Exports of U.S. Processed Products Have Surged Since 2005

Meat and Poultry Food Ingredients Consumer Pack. Prod. Beverages, Liquid Frozen Foods Snack Foods Dairy Vegetables
1.0 2.6 0.9 1.6 1.9 2.9 3 4.9 2.9 4.5 2.7 3.5

6.1 6.4

11.4

10.9

2005 2010 (f)

6
Billion $

10

12
8

Top U.S. Processed Product Export Markets

Exports in billion $
2000 2010f $11.3 $6.2 $5.1 $4.9 $1.8 $1.7 $1.5 $1.1 $0.9 $0.8 % 136 131 -3 77 56 92 390 121 109 77

Canada Mexico Japan EU-27 South Korea Hong Kong CHINA CAFTA-DR Taiwan Russia

$4.8 $2.7 $5.2 $2.8 $1.2 $0.9 $0.3 $0.5 $0.4 $0.5

Note: % change based on unrounded figures

U.S. Processed Food Product Exports Focused in Higher Income Markets

But the best growth has been in developing country markets

$1.5 $4.6 $16.8 $1.7 $0.6 $1.6 $0.5 $0.8 $0.7 $2.1 $1.6 $8.1

$1.0 $0.9

U.S. exports of processed food products in 2009 ($ billion)

10

Longer Term Global Trade Outlook

Strong global economic growth and rising incomes and populations, especially in emerging markets,will lead to rapid growth in middle class households, boosting foreign demand for food products. This, coupled with a competitively priced U.S. dollar and strong support from the U.S. government, should lead to a significant increase in the value of U.S. ag exports.

11

What Is The Long Term Outlook For U.S. Agricultural Exports?

USDA conservatively projects exports will reach $119 billion by 2019, up $22.3 billion from 2009 levels
U.S. agricultural exports ($ billion)

160 140 120 100 80 60 40 20 0

USDAs NEI Goal * 2010 Outlook

2009 Outlook

Projections (2010-19)

1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 Fiscal Year
NOTE: * NEI goal is only 5 years. This has been projected out to 10 years here for the purpose of comparison Source: USDA Agricultural Projections to 2019, February 2010

12

8 Factors Impacting Global Food and Agricultural Markets Over the Next Decade
Net takeaway: strong demand growth, especially from emerging markets, will be the central megatrend over the next decade, boosting global trade

Global economic growth Value of the U.S. dollar Worldwide biofuels production Role of trade and trade liberalization Policy errors by governments Energy prices Biotech developments Additional crop land
13

Middle Class Outside the U.S. Expected to Double By 2020 Approaching 1 Billion Households
Worldwide food consumption will be impacted
Foreign households w/real PPP incomes greater than $20,000 a year (in millions of households)

1000

800

600

Middle class in developing countries projected to increase 138% during 2009-2020 vs. just 15% in developed countries

400

Developing countries

200
Developed countries (ex US)

0 1990

1994

1998

2002

2006

2010

2014

2018
14

Source: Global Insights Global Consumer Markets data as analyzed by OGA

Middle Class in Developing Countries Could Reach 616 Million Households By 2020, Up 138% From 2009 Levels
25% of households in these countries are middle class. By 2020, this could increase to 49% and the impact on food consumption will be large
Developing countries with fastest growing middle class
China India 12 Brazil 9 Indonesia Russia 7 Egypt Thailand 6 5 Mexico 4 Turkey Vietnam 3 Philippines 3 2 Iran 2 Poland Nigeria 1
234 60

2009 levels

Proj gains by 2020

25

50

75

100 125 150 175 200 225 250 275 300 325 350

Households with real PPP incomes greater than $20,000 (in millions)
15

Source: Global Insights Global Consumer Markets data as analyzed by OGA

Questions?

16