Globalization: Implications for U.S. and Oklahoma Agriculture Stillwater, Oklahoma November 9, 2012 1
We Are Just One World Now Steve Jobs 2
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 3
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 4
I never dreamed this big! Bubba Watson 5
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 6
Globalization Increasing Interdependence Among Countries Culture Economies Finance banking and investment Food security and safety Energy security and price Infrastructure 7
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 8
Agriculture Demand Drivers Population growth where and how much Income growth where and how much Urbanization Marketing channels Energy mandates/new technologies 9
9 8 7 6 5 4 3 2 1 0 68 World Population More and Less Developed Countries % Less Dev. 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 82 86 More Less 10
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 2050 38 US-Europe 15 47 China-India ROW 20 40 US-Europe China-India ROW 40 12
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 13
Rural & Urban Population 1950 2050 (mil) 14
China Urban-Rural Consumption Urban kg/capita Rural kg/capita Pork 19.5 13.9 5.6 Difference Kg/capita Beef and Mutton 3.7 1.4 2.3 Poultry 9.1 4.0 5.1 Total 32.3 19.3 13.0 15
Increase in Food Demand Population Number Geography Income Growth Urbanization Doubling of Food Demand by 2050 16
We Do Know 1.1 Land 1.1 < Land Water < Water <Labor =Policies = Policies =Technology Will not Double Food Supply 17
Making 2X Possible B Per Acre Yields Less Waste Efficiency Will Require New Technology Wide Adoption of Tech. New Policies Crop Production Locations Improved Infrastructure Better Management 18
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 19
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 20
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 21
U.S Agricultural Exports 160,000 140,000 CAGR 2000-2011 = 9.5% 120,000 100,000 80,000 U.S. Exports (mil) 60,000 CAGR 1970 2000 = 6.9% 40,000 20,000 0 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 2983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 22
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
Bil $ 20 18 16 14 12 10 8 6 4 2 0 US Agricultural Exports: Top 5 Dest. Canada Mexico Japan EU China 2007 2008 2009 2010 2011 25
World Beef Exports: Top 4 2.5 Million Metric Tons 2.16 2 1.5 1 0.5 0.67 1.8 1.68 1.41 1.4 1.38 1.451.41 0.91 1.12 1.11 India Brazil Australia USA 0 2007 2012 2013 26
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 27
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 29
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 30
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 31
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 32
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 33
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 34
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 35
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 36
We Are Just One World Now Steve Jobs 37