FAPRI Outlook Prospects for the Next Decade: The New Ag/Energy Nexus William H. Meyers Professor of...
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FAPRI Outlook Prospects for the Next Decade: The New Ag/Energy Nexus William H. Meyers Professor of Agricultural Economics and Co-Director, FAPRI University of Missouri LINK Meeting Saint Petersburg, Russia 4 June 2009
FAPRI Outlook Prospects for the Next Decade: The New Ag/Energy Nexus William H. Meyers Professor of Agricultural Economics and Co-Director, FAPRI University
FAPRI Outlook Prospects for the Next Decade: The New Ag/Energy
Nexus William H. Meyers Professor of Agricultural Economics and
Co-Director, FAPRI University of Missouri LINK Meeting Saint
Petersburg, Russia 4 June 2009
Slide 2
Outline A new and market environment with stronger agriculture
and energy linkages Recent grain market developments FAPRI
projections of global market prospects Highlights of results Key
movers and shakers Main uncertainties Challenges and opportunities
Policy priorities Short term Long term
Slide 3
Slide 4
Why did prices rise, then decline? Can it ALL happen again? Why
prices rose Reduced grain production in Europe, Australia Economic
growth in Asia and elsewhere Weaker dollar Higher petroleum prices
Rapid biofuel expansion Policy interventions Speculation rose Why
prices fell Sharp increase in global grain production in 2008
Financial crisis and world economic slowdown Stronger dollar Lower
petroleum prices Slower biofuel growth Many interventions stop
Speculation declined
Slide 5
Corn and petroleum prices
Slide 6
Grain production, million metric tons (WASDE May 12, 2009)
Slide 7
Grain stocks, million metric tons (WASDE May 12, 2009)
Slide 8
Grain stocks to use ratios (WASDE May 12, 2009)
Slide 9
World grain stocks and real prices, Oct 2008
Slide 10
World grain stocks and real prices (WASDE May 12, 2009)
Slide 11
FAPRI-Missouri/ISU - Consortium University of Missouri U.S.
Agriculture ___FAPRI est. 1984____ Iowa State University CARD World
Agriculture United Nations- Project LINK Global Macro IHS Global
Insight U.S. and Global Macro Texas A&M University AFPC
Representative Farms - 1989 Texas Tech Cotton - 2003 University of
Arkansas AFAPC World Rice - 1990 Arizona State NFAPP Fruit &
Veg. - 1995 Univ. of Wisconsin Dairy - 2003
Slide 12
Historical and projected real commodity prices, 2007$
Slide 13
Why do projections differ?
Slide 14
Key elements of baseline assumptions Macroeconomic Variables
Agricultural Policies Technology Normal Weather
Slide 15
Macroeconomic drivers: GDP 2009 recession and rapid recovery
(IHS GI) Strong global outlook from 2011 onward 3.3 % average
annual GDP growth rate India and China average 7.8 and 8.2%,
respectively
Slide 16
Real GDP growth rates
Slide 17
Macroeconomic drivers: exchange rate U.S. Dollar strengthens in
2009 Real depreciation of $ resumes in 2010 against many currencies
Most Asian currencies appreciate in real terms against the U.S.
dollar China experiences significant real appreciation
Slide 18
Exchange rate, major trading partners, FC/US$
Slide 19
Macroeconomic drivers: oil price Projected petroleum prices in
the near term are well below forecasts made in 2008 Below
$60/barrel through 2010 then increases to $80/barrel as global
economy recovers and demand grows
Slide 20
Petroleum price forecasts from IHS Global Insight *NYMEX July
futures, 5/27/09
Slide 21
Global macro drivers: income Economic recovery fuels next 10
years growth Dairy product consumption increases 13 kg per capita
(milk equivalent) from 2008 to 2018 Per capita meat increases 5.6
kg Per capita vegetable oil increases 3.1 kg Food grain consumption
per capita declines Production of meats increases 38.6 mmt or 18%
Trade in meats increases 4.1 mmt or 24.3%
Slide 22
Changes in per capita food consumption 2008-2018
Slide 23
World meat production and trade
Slide 24
Dairy product consumption in Asia
Slide 25
Meat production and feed use
Slide 26
World grain prices
Slide 27
Crop outlook: world feed grain outlook overview Growth in
livestock sector drives the increase in demand for feed grains.
Feedstock use for ethanol production boosts demand Stronger prices
increase area and, with yield growth, production increases.
Increase in area grows supply in the short-run, while yield
improvement is the major source of growth in the long-run.
Slide 28
World corn use and per capita consumption
Slide 29
World corn area and yield
Slide 30
World corn stocks-to-use ratio vs. price
Slide 31
World food grain outlook overview Food grain per capita
consumption declines with growth in income as consumers trade- up
to protein rich products. With declining per capita consumption,
demand growth comes mainly from population growth. Growth in
consumption in regions such as Asia, Africa, and the Middle East
fuels growth in trade and strengthen food grain prices. Long-run
production growth driven by yield improvement.
Slide 32
World wheat feed and food consumption
Slide 33
World wheat area and yield
Slide 34
World wheat stocks-to-use ratio vs. price
Slide 35
World rice production, use, and per capita consumption
Slide 36
World rice area and milled yield
Slide 37
World oilseed outlook overview Oilseed sector grows with strong
demand for both oil and meal products driven by population and
income growth, expansion of the livestock sector China soybean
imports grow by nearly 60 % from 2008 to 2018 Increasing interest
in renewable fuels and biodiesel mandates drives increase in
industrial use of vegetable oil and their prices. Room for area
expansion in South America dampens price growth in the next
decade.
Slide 38
World vegetable oil consumption
Slide 39
World soybean area and yield
Slide 40
World oilseed prices
Slide 41
World vegetable oil prices
Slide 42
World Protein Meal Prices
Slide 43
FOB Northern European dairy product prices
Slide 44
Movers, shakers and uncertainties Good weather and yields in
08/09, but costs and poor weather dampen 09/10 growth, except
soybeans Price surge has abated, but NOT in some LIFDCs Trade
safeguard interventions mostly gone Biofuel growth slowed, but
policies remain Strong influence of energy markets continue Major
uncertainties (stochastic analysis) Oil price US dollar The global
financial crisis and impacts on demand growth, trade financing
Weather
Slide 45
Oil price distribution
Slide 46
Maize US farm price uncertainty
Slide 47
Wheat US farm price uncertainty
Slide 48
A more uncertain future 1. Road to economic recovery? 2. Timing
and size of oil price volatility? 3. Will biofuel policies change?
4. Will other policies be unstable? 5. Wider range of possible
outcomes 6. Farmers and agribusiness can easily get on wrong side
of output and/or input markets 7. Complicated decision making and
planning 8. Larger impacts on low income consumers
Slide 49
Challenge and Opportunity 1. Challenge - how to provide safety
net measures for the most vulnerable populations 2. Opportunity -
higher prices can increase incomes from food production in rural
areas where agriculture is the main source of income and employment
3. National and international policy actions need to be considered
Short run Long run