Globalization: Implications for U.S. and Oklahoma Agriculture

Stillwater , Oklahoma November 9, 2012

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“We Are Just One World Now”

Steve Jobs

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From Today Forward … ___________ will … Be a profitable growth industry Be an increasingly global industry Become increasingly high tech Be a high profile, public industry Experience rapid productivity growth

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From Today Forward … Agriculture will … Be a profitable growth industry Be an increasingly global industry Become increasingly high tech Be a high profile, public industry Experience rapid productivity growth

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I never dreamed this big!

Bubba Watson

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“Take Aways”

Drivers of the opportunity Meeting the demand growth Implications – macro and “at farm” Importance of trade and trade policy Virginia’s Governor’s Conference

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Globalization

Increasing Interdependence Among Countries Culture Economies Finance – banking and investment Food – security and safety Energy – security and price Infrastructure

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Globalization of Agriculture Commodity trading Financing Percent of production in world trade Foreign investment by individuals and firms Government investment in agricultural assets Free Trade Agreements Food security – food safety Will increase to fill demand – supply gap

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Agriculture Demand Drivers Population growth – where and how much Income growth – where and how much Urbanization Marketing channels Energy mandates/new technologies

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World Population – More and Less Developed Countries

0 1 2 3 4 5 6 7 8 9

1950

19

55

1960

19

65

1970

19

75

1980

19

85

1990

19

95

2000

20

05

2010

20

15

2020

20

25

2030

20

35

2040

20

45

2050

More Less

86

82

68

% Less Dev.

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Income and Food Consumption Income Level

< $1.25/day (1.2 billion) <$2.00/day (2.5 billion)

$2.00-10.00/day

>$10.00/day

Food Consumption Under-nutrition or hunger Most hunger (calorie) problems

solved More meat, dairy, fruits, veg

and edible oils. More processing, packaging

and variety

Based on presentation by Dr Robert Thompson –World Bank data 2010E 11

Global Income Distribution (%) Today

47

15

38 US-Europe China-India ROW

2050

20

40

40 US-Europe China-India ROW

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Urbanization 50+ percent of global population now urban Grows to 67 percent by 2050 Increases per capita food consumption Alters “product mix” Reduces labor force in rural areas

Market Channels Less “wet markets” More supermarkets More diverse source of products

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Rural & Urban Population 1950 – 2050 (mil)

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Urban kg/capita

Rural kg/capita

Difference Kg/capita

Pork 19.5 13.9 5.6

Beef and Mutton

3.7 1.4 2.3

Poultry 9.1 4.0 5.1

Total 32.3 19.3 13.0

China Urban-Rural Consumption

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Increase in Food Demand

Population Number Geography

Income Growth Urbanization

Doubling of Food Demand by 2050

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We Do Know

Will not Double Food Supply 1.1 Land < Water <Labor =Policies = Technology

1.1 Land < Water <Labor

= Policies =Technology

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Making 2X Possible

B

Will Require

New Technology

Wide Adoption of Tech. New Policies

Crop Production Locations Improved Infrastructure

Better Management

Per Acre Yields

Less Waste

Efficiency

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Macro Implications Greater Investment – public and private R & D Infrastructure Human capital

Increasing importance of agricultural trade Policy Changes – domestic and trade Greater emphasis on food safety and security Importance of competitiveness

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“At the Farm” Implications

Higher, more volatile prices Higher farm income - with greater risk Closer to customer – market don’t sell Understanding and practice Global and domestic

Policy leadership – proactive and visible Maintaining/increasing competitiveness Increasing consolidation

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Importance of Trade Demand and supply changes drive world trade No Growth in Exports and Profitable Growth in Ag Inconsistent Terms for American Agriculture

Opportunities Outside U. S. Where 95 percent of population is Where 96% of population growth will be 1.0 billion new middle class customers by 2030 Where per capita food consumption will grow

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U.S Agricultural Exports

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

1970

19

71

1972

19

73

1974

19

75

1976

19

77

1978

19

79

1980

19

81

1982

29

83

1984

19

85

1986

19

87

1988

19

89

1990

19

91

1992

19

93

1994

19

95

1996

19

97

1998

19

99

2000

20

01

2002

20

03

2004

20

05

2006

20

07

2008

20

09

2010

20

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U.S. Exports (mil)

CAGR 1970 – 2000 = 6.9%

CAGR 2000-2011 = 9.5%

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Share of U.S. Production that is Exported

Period Wheat Corn Rice Soybeans Cotton

1960-69 53.8% 12.3% 51.0% 37.9% 34.4%

1970-79 57.8% 24.6% 58.9% 38.0% 44.1%

1980-89 58.9% 26.2% 52.5% 38.8% 47.6%

1990-99 48.7% 20.8% 46.0% 34.4% 39.8%

2000-2010 49.5% 17.6% 49.3% 38.9% 70.3%

2011-20 20 1/

46.0% 14.9% 53.0% 47.3% 81.3%

1/ USDA Long-Term Agricultural Projections, Feb. 2011 23

Share of U.S. Production that is Exported

Period Beef Pork Broilers

1960-69 0.2% 0.7% 2.0%

1970-79 0.4% 1.5% 2.3%

1980-89 1.8% 1.3% 4.3%

1990-99 6.9% 4.2% 3.1%

2000-2010 6.8% 13.1%

16.5%

2011-2020 1/

10.3% 22.0% 16.9%

1/ USDA Long-Term Agricultural Projections, Feb. 2011 24

US Agricultural Exports: Top 5 Dest.

0

2

4

6

8

10

12

14

16

18

20

2007 2008 2009 2010 2011

Canada Mexico Japan EU China

Bil $

25

World Beef Exports: Top 4

0.67

1.68

2.16

1.8

1.4 1.45 1.41 1.38 1.41

0.91 1.12 1.11

0

0.5

1

1.5

2

2.5

2007 2012 2013

India Brazil Australia USA

Million Metric Tons

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Trade Risks for Agriculture Importance of trade for U.S. ag – never greater Risks have increased World economy Protectionism – tariff and NTBs Value of dollar Export bans Relative competitive decline – policy/other Lagging behind in bilateral and regional FTAs

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Trade Strategy Defense increases in relative importance Against protectionism – import and export Protect negotiated gains

Offense Push to negotiate bilateral agreements should be

relentless Opportunities within monitoring and enforcement Nurture multilateral system

TPA is a must !! 28

Benefits of Bi-Lateral Agreements Increase competitiveness of US products Relative to in-country production Relative to exports from other countries

Reduction of non tariff barriers SPS agreements Consultative mechanisms

Level playing field with other FTAs Address specific bilateral issues Benefits accrue quickly

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Est. $ Million Tariff Reductions KORUS

Commodity

Corn Wheat Soybeans Poultry Beef Oranges Pork Dairy Total

Savings @ Full Implementation

$5.0 $5.0 $8.0 $16.0 $300.0 $50 $50 $50 $500

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Keeping the Competitive Lead IP Investing in R&D, people and infrastructure Trade policy – keep playing field level Reliable supplier (preferred not residual) Meeting customer requirements Safety Security Specifications/service

Management

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Va. Governor’s Ag. Trade Conf Organizing partners Virginia Tech Virginia Farm Bureau Federation Virginia Department of Agriculture and Consumer

Services Virginia Port Authority

Financing Registration fee $55.00 Sponsorships

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Governor’s Ag. Trade Conference

Objectives Hear from U.S. and state policy makers Input to policy makers Better global competitor and customer

understanding “How to” trade Commercial and policy net working Enhance visibility of the importance of Ag. trade

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Governor’s Ag. Trade Conference Attendees USDA, USTR, DOC, Hill staff Bankers, insurance Exporters, food processors and manufactures Embassy representatives Transportation and logistics (RR, Trucking, Storage) Educators, extension, students Farmers and agricultural trade associations

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Governor’s Ag. Trade Conference Results Greater visibility of agriculture in Virginia Spillover effects of the cooperative efforts of the

organizers Address specific Virginia issues with policy makers,

customers and competitors Better understanding of the how and importance of

trade to agriculture Commercial and policy networking

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Capturing the Opportunity

Meeting global customer expectations Increasing competitiveness in global market Ensuring food safety Enhancing food security Comprehensive risk management Being a policy player

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“We Are Just One World Now”

Steve Jobs

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