Global Protein Update. February 9, 2017 Brett Stuart

Transcription

1 Global Protein Update February 9, 2017 Brett Stuart

2 Macro Factors Outline Commodity cycles, currency, TRUMP Sectors and Global Risk Outlook Beef Dairy Pork Poultry Watchlist

3 Macro Factors Global Economy Currencies Commodity Deflation TRUMP

4 Global Economy Global income growth fuels demand The Low-Growth Trap : OECD nations struggled for 2% growth (8 years) Developing nations struggling also (think BRIC) Some remain in recession Monetary expansion? Negative interest rates? Global GDP trimmed to 3.3% growth for 2017 Central Banks

5 Dollar Weakness Dollar Strengthens Source: Pacific Exchange

6 Source: UN/FAO

7 Possible 2017 shifts: China friction Trump Impacts No beef deal? None yet. China cracks down on U.S. beef via Hong Kong? 11% of exports in 2016 U.S. poultry restrictions continue (ad/cvd duties, HPAI ban) More stringent pork measures, testing? NAFTA (Mexico; 2.5 bil net lbs of meat/poultry)

8 Trump Impacts Possible 2017 shifts (cont): Cuba policy reversed? (#2 U.S. chicken market in 2016; 368 mil lbs) Russia sanctions may be lifted, but no change likely for U.S. meat and poultry Brazil beef import rule overturned?

9 In the past year, there s been plenty of people warning that the answer is a trade war and that that would be terrible for the U.S. But its also a possibility that protectionism just might cause our most important trade partners to adjust their policies to America s benefit. - Forbes A copy of the local Chinese magazine Global People with a cover story that translates to "Why did Trump win" is seen with a front cover portrait of US president-elect Donald Trump at a news stand in Shanghai on November 14, 2016.

10 NAFTA Meat & Poultry Trade Percent of Total EXPORTS Going to NAFTA (in tonnage) Origin Beef Pork Poultry TOTAL U.S. 30% 44% 31% 35% Canada 78% 47% 53% 54% Mexico 90% 12% 60% 61% Percent of Total PRODUCTION Going to NAFTA Origin Beef Pork Poultry TOTAL U.S. 3% 9% 5% 5% Canada 28% 31% 6% 23% Mexico 10% 1% 0% 3% Source: USDA/FAS, Canada Customs, Mexico Customs, 2015 data; percent of exports includes variety meats, percent of production does not.

11 Source: GTIS, AgriTrends

12 Source: USDA/FAS

13 Beyond Trump Globalization: The flow of goods and services across borders Globalism: Ideology that globalization is natural and good 2 Ideologies: Globalism vs. Nationalism Brexit Trump Le Pen and French elections Xi Jinping

14 Sectors and Global Risk Outlook Beef Dairy Pork Poultry

15 Beef: Global Risk Outlook Cattle cycle is alive and well (but its been 18 years since we saw one) Driven by profits and (typically) losses; not there yet Higher breakevens: higher capital cost base over the past 3 years Strong competitive position versus Australia in 2017/2018; good export demand to Japan/Korea Is there another price beef bubble?

16 Source: UN/FAO

17 Source: USDA/FAS, UN/FAO

18 Dairy: Global Risk Outlook Rising prices driven by global supply/demand Stabilizing production (N.Z., Europe) and rising demand (China) Cheaper hay? Drought broken in N. California But rising export demand..

19 Source: USDA, CME, Global Dairy Trade

20 Source: USDA/FAS

21 Source: USDA/FAS +530,418 mt, +27% in 2016

22 Pork: Global Risk Outlook Expansion basically everywhere TOO MUCH PORK China slowdown?

23 Source: China Customs

24 Source: USDA

25 Source: USDA/FAS, WASDE

26 Poultry: Global Risk Outlook Feed costs to remain low Expansion? Not yet aggressive HPAI

27 HPAI Flaring UP! Cases: Since November Korea: 16 million culled thus far, 20% (mostly layers) Source: OIE (World Animal Health Organization)

28 Global Waterfowl Migration Source: EAAFP Secretariat

29 Trump: Meat to MX Watchlist Trump: No China call yet; but China less relevant to meat, poultry, dairy (SOYBEANS) Trump: Russia - Former largest meat importer globally Pence hints at lifting sanctions for ISIS help But 2017 Russia is not 2014 Russia (recession, low energy prices much larger meat production)

30 30 Thank You Brett Stuart