2/22/2011 Commodities Outlook Virgin Virginia ia Sta State Fee Feed Asso Association / / Virgin Virginia ia Macro View Tech N Nutr trition ition Cow College ege February 2011 3 4 1
2/22/2011 Rising World Demand for Food Agflation – Agricultural prices in the past 2 decades • In Asia food makes up 34.5 percent of consumer prices versus 15 percent in the U.S. • In Mexico food makes up 22.7 per cent of the consumer price index – far lower than the percentage food weightings for Brazil (27), Russia (38), India (46) or China (33), while Ukraine has a weighting of more than 50 percent. • In countries such as India and Vietnam the cost of rice alone has a bigger impact on inflation levels than energy costs – A 20% increase in rice prices regionally adds 1.5 percentage points to inflation while a 50% jump adds 3.7 percentage points 5 6 Soybeans and Products Unemployment Rate in the US 7 8 2
2/22/2011 US Soybeans S&D US Soil Oil S&D 9 10 US Soybean Meal S&D Biodiesel Use Oct/Sep 11 12 3
2/22/2011 Soybeans Major Origins Production MMT Soybean Major Origins Stocks MMT 13 14 China Soybeans MMT Oct/Sep World Soymeal Consumption MMT Oct/Sep 175 15 16 4
2/22/2011 17 18 19 20 5
2/22/2011 Global Demand Predominately China to Meet Oil and Protein Needs • China accounted for 70 percent of US bean exports since Sep. 1 but private estimates see China bean imports slowing from 60 mmt to 55 mmt – China has been less active in looking for old crop beans as their domestic margins have weakened and they have ample stocks in port – Wild card could be Argentina if production drops, sending China back to US after Brazil is sold out this spring 21 22 Grains & Biofuels Chinese Needs Soybeans for Meal Consumption • China continues to build crush plants • China’s production of pork, poultry, and eggs grew by less than 50% from 1998-2008, while soybean imports grew more than six times over this period; inclusion of protein meal is critical factor behind soybean demand • Meal consumption grew 1 mmt from 1970-1990 – now at an estimated 31.7 mmt an increase of 3000% in 18 years • Chinese consumption in 2009 surpassed the EU-27 as the largest meal consuming market in the world, up 7.9% from 1996-2010/11 23 24 6
2/22/2011 US Corn vs. Soybean Acreage ‐ Mln Acres US Corn S&D MBU Source: USDA Source: USDA 25 26 25 26 US Ethanol Facilities US Ethanol Demand for Corn MBU Sep/Aug Source: USDA 27 27 28 7
2/22/2011 Dried Distillers Grains in Feed Rations • 5 - 6 years ago, inclusion near zero • Estimated average inclusion rates: Key Takeaways Beef Cattle 40% Dairy Cows 35% Going Forward Swine 30% Layers 15% Broilers 8% 29 30 • The The cheap U eap U.S.do doll llar, ar, Bio- o-Fuel dem el demand, hig high c crud ude oil e oil pr prices ices, inc increased w world-wide de ec economi onomic g grow owth, and and supply supply disr disruptions ons have have creat eated a d a near near per perfect ect stor storm of of hig high Questions? commodity pr prices ices, fueled fueled b by spec specul ulation, fear fear and and hoar hoarding. st corn a • The Mar The March h 31 31 st and soybean p n planting tings i s intentio ntion r n report will give us will give us our our fir first glanc glance at at the e ac acrea reage b e battle le t that at w we ar are e going ing t to exper experien ence t ce this is c crop year op year. • We We ne need to to ge get p t peop ople le back to back to work work and and ou our ec economy onomy b back on on its feet with its feet with r real job al jobs. • Per Per NOAA, NOAA, 2010 tied 2010 tied 2005 as 2005 as the the warm warmes est year on year on rec record, but 2010 was but 2010 was also also was was the the wett wettes est year year on on record. Meteor Meteorolo ologists and and clima imatolo ologists are are try trying to to exp explai lain how/ how/why this this La Nina La Nina year is so year is so diff differen ent and how and how they all they all missed missed p proje ojection ons. Some have me have moved moved on, on, citing a a long hist long histor ory of of 18 18 year year drou drough ght cycles es with with 2011 being 2011 being the the year for the year for the next next major major US US droug drought. Texa xas corn corn p planti lanting typ typically star starts in in Feb, but will be Feb, but will be delayed delayed till M till Marc rch due due to to cold s cold soil te il temp mps. We We cannot cannot afford afford any weathe any weather event this event this year. year. • Wor World pr d produ oduction on is is growi owing b but to t to rebuild stock sur d stock surpluses we we need need genet netic tec c technolo logy plus yield g plus yield grow owth b before w fore we see see any sig any significant r reduct ductions in in pr price volat ice volatility. Hig High pr prices ices ar are e here here for at leas for at least 2 t 2 more more ye years ars. • Weather Weather, p politi litics, world world ec economi onomies, sp spec ec money, money, fundam fundamentals, Chin China. a. batt battle for ac for acres, res, extrem ext emel ely t y tight endin ending st stoc ocks ks, and S and SA needs t needs to fini finish sh t thei eir c r crop op • We We cont ntinue ue to to analyz analyze “out of “out of contr ntrol” balanc balance sheets sheets, figh fight for ac for acres res, but if but if you you list listen en hard enough hard enough you you can n hear whis hear whispe pers of of 50 50 MMT MMT in Argen in Argentina a and 71.5 and 71.5 MMT in in Braz Brazil. We We shall see. shall see. 31 32 8
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