Global Ag Developments

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1 Global Ag Developments Implications for Canada Presented by: Chuck Penner July 2015

2 PRESENTATION OUTLINE Viewing change Consumption side developments Production side developments Risks Opportunities Actions? 1

3 KNOWNS & UNKNOWNS There are known knowns. These are things we know that we know. There are known unknowns. That is to say, there are things that we know we don't know. But there are also unknown unknowns. There are things we don't know we don't know. Donald Rumsfeld Agriculture has all these things Known knowns consumption & production trends Known unknowns the weather Unknown unknowns government interference, economic crises 2

4 HOW WE VIEW CHANGE Tend to focus on the present & recent past Attach weight to things we agree with Fearful Oblivious Eager Categories of change Sure things, just wait for it Likely trends, good odds it will happen Possible events, flip a coin Out of the blue, can t be predicted 3

5 NET TRADE IN WHEAT SOVIET UNION 4

6 WESTERN CANADIAN ACREAGE --?? 5

7 WESTERN CANADIAN ACREAGE

8 HOW TO APPROACH CHANGE Anticipate it and get ahead of it Wait for the bleeding edge to pass Hope it won t happen 7

9 LET S LOOK AHEAD 8

10 CONSUMPTION SIDE DEVELOPMENTS Demographic Economic Changing tastes 9

11 GLOBAL POPULATION OUTLOOK Growing but slowing ½ is urban now 7 Billion people Rural Urban

12 POPULATION SHIFTS Other Asia 23% Africa 14% Other Asia 25% Africa 22% Europe 11% India 18% China 20% Latin America 9% North America 5% India 18% China 15% Europe 7% Latin America 8% North America 5% 6.6 Billion 9.1 Billion

13 GROSS NATIONAL INCOME Over the past 10 years

14 FOOD CONSUMPTION BY SOURCE Cereals 1391 Fruits, Vegetables & Roots 1020 Oils & Fats Pulses 427 Animal Products Developed Countries Developing Countries Sugar Unit: Cal/Percap/Day Consumption

15 CHANGING FOOD TASTES

16 FOOD CHOICES

17 GLOBAL FOOD EXPENDITURES US: Revis family of North Carolina Weekly food expenditure = $ Chad: Aboubakar family of Breidjing Camp Weekly food expenditure = $1.23 A bit of a contrast

18 IMPACTS OF CONSUMPTION TRENDS Population 40-50% higher within a generation Simply more mouths to feed Fastest growth in Africa (where income is lowest) Increased urbanization Change in consumption patterns More processed foods, quicker-cooking, convenience foods, snacks

19 IMPACTS OF CONSUMPTION TRENDS Higher incomes More meat, dairy products, fruits, vegetables, and processed foods (including vegetable oils) Shifting away from simple grain, roots and tubers Increased demand for feed and high-value food products. Share of dietary energy from cereals is 50%, but becoming less preferred in middle-income countries

20 PRODUCTION SIDE DEVELOPMENTS Economic Technology Climate 19

21 GLOBAL ACREAGE TRENDS 20

22 FOOD SUPPLY INVESTMENTS

23 TRADE INVESTMENTS Kazakhstan to Spend $20 Billion on Silk Road Project: Zhenis Kasymbek, Kazakhstan s Deputy Minister of Investment and Development recently reported that Kazakhstan plans to invest over $20 billion by 2020 into its transportation industry to become the main transit country between the booming Chinese market and Europe. In 2013, Chinese President Xi Jinping brought up the idea of building a new Silk Road that would connect China with Europe and strengthen cooperation between Asia and Africa. territory.

24 GLOBAL CROP PRODUCTION & AREA CAGR 2.2% = 3.74 bln more tonnes CAGR 0.5% = 200 mln more ha 23

25 ACHIEVING HIGHER PRODUCTION Any issues with this? 24

26 PLANT BREEDING ADVANCES

27 DISRUPTIVE TECHNOLOGY WHAT IF?

28 STRESS TOLERANT SOYBEANS

29 GAME CHANGERS?

30 PRESSURES ON FARMING

31 EMERGING COMPETITORS

32 EMERGING COMPETITORS Result of high price environment Encourages private and public investment Plant breeding Transportation and storage infrastructure Encourages production To capitalize on export potential To reduce dependence on imports

33 EMERGING COMPETITORS Black Sea Region Russia, Ukraine, Kazakhstan, Belarus Potential from larger land base and increased productivity Also eastern Europe South America Africa the next competitor? Needs to overcome challenges

34 POLITICAL INTERVENTION China Top Rapeseed-Producing Province Launches Incentives To Boost Output Starting this year, the government will reward counties with increasing rapeseed area and give farmers subsidies for machinery and seeds, the local agricultural department said Food subsidy bill shoots up by a whopping of Rs 34,738 cr Kenya May Impose Price The Centre's food subsidy bill, incurred Controls on Essential Goods mainly on account of reimbursemnet of economic costs to the Food Corporation Kenyan Finance Minister Uhuru of India for grain procurement, Kenyatta holding may impose price caps on and transportation, has shot up. essential goods to cushion the effects of accelerating inflation, Business Daily reported, citing draft legislation.

35 POLITICAL INTERVENTION Production incentives Subsidies and support prices Trade restrictions Import and export tariffs Bilateral negotiations Non-tariff barriers Phytosanitary Biofuel policies

36 CLIMATE CHANGE Types and scale of outcomes uncertain Possibility of more extremes Increased market volatility Southern climates hotter and drier Increased import demand

37 CLIMATE CHANGE Frost-free season 5 days longer every 10 years A lot more open falls Would climate change the crop mix? Will corn and soybeans dominate? Will diversification continue? Hemp, fababeans, carinata, camelina, quinoa

38 SHORT-TERM RISKS Chinese stockpiles Brazilian transportation fixes Argentina government change Very complex market interactions Energy, financial markets, etc

39 LONG-TERM RISKS More land brought into production Needs higher prices to encourage production Less room for adverse weather Population pressure Agriculture hijacked by activists/big business Climate change volatility Transportation constraints

40 SHORT-TERM OPPORTUNITIES Plant breeding advances Stress tolerance Days to maturity Disease resistance Technology innovations More tailored & precise Food consumption fads If positioned properly

41 LONG-TERM OPPORTUNITIES Food is top-of-mind For public, government, investors Increased food demand overall More feed and meat demand Production of non-dominant crops Pulses and other special crops Climate change opportunity(?)

42 ACTIONS Get out in front of trends Develop and capture markets Ramp up plant breeding efforts High-value opportunities needed To compete with commodity countries Niche & specialized production (healthy, sustainable, branded)

43 GENERAL THEMES Economic laws have not been repealed Prices are still cyclical Ground will continue to shift Some unforeseen events Quantum changes in technology The market will adapt

44 MARKET TRANSPARENCY Need to define it What pieces are missing? What to do with it The so what aspect How to cause change

45 PRICE TRANSPARENCY

46 PRICE TRANSPARENCY

47 BASIS TRANSPARENCY

48 BASIS TRANSPARENCY

49 LOGISTICS TRANSPARENCY CGC data Export sales reporting Vessel lineup information Rail performance

50 HOW TO CAUSE CHANGE Use existing information Keep pressure on line companies Prices, basis levels Go up the food chain Make requests from the CGC Talk to MPs about information Add resources to CGC stats group and StatsCan Get existing data released from Quorum

51 THANK YOU!