Emerging Markets, Agric Trade & Canada s Relative Performance

Transcription

1 Emerging Markets, Agric Trade & Canada s Relative Performance Growing Canada s Agricultural Economy: The Role of Trade Colin A. Carter & Sandro Steinbach Dept of Agric and Resource Economics Univ. of California, Davis January 25, 2013 Colin A. Carter & Sandro Steinbach Emerging Markets 1 / 22

2 Outline How will rising economic opportunity in Emerging Markets (EMs) drive Canada s agricultural trade? Key Points: EMs & Developing countries expected to grow at double the rate of Adv countries for next 5 yrs. EMs will lead shift in global food demand & trade towards high valued, high processed products. Is Canadian Agric well positioned for the new dynamics of international markets? contribution to global growth China 37% China & India 50% EMs & Developing 80% Table Source: Conference Board, Global Econ Outlook Colin A. Carter & Sandro Steinbach Emerging Markets 2 / 22

3 Top 10 Emerging Markets: BRIC is now BRIICS EMs are nations undergoing rapid growth & industrialization. China Brazil India Russia Indonesia South Africa Mexico Argentina Vietnam Turkey Source: Global Intelligence Alliance Colin A. Carter & Sandro Steinbach Emerging Markets 3 / 22

4 GDP Growth Rates % Real Economic Growth Emerging 6.2% World 3.7% Advanced 1.8% Source: IMF Colin A. Carter & Sandro Steinbach Emerging Markets 4 / 22

5 Per Capita GDP BRIICS $12,000 Per capita GDP (in real ppp) $US RU 1.2 x $10,000 $8,000 BR 1.4 x $6,000 CN 6.7 x ZA 1.3 x $4,000 IN 2.6 x $2,000 ID 1.9 x $ Source: IMF Colin A. Carter & Sandro Steinbach Emerging Markets 5 / 22

6 Previous Studies Anita Regmi et. al. (USDA, ERS, 2005). Trade in processed foods is stable as % of world agric trade. Pete Liapis (OECD, 2011). Ag imports by Emerging Markets-EMs is growing as share of global trade. Imports of Processed Agric Commodities-PACs are growing fastest among EMs. Brisk trade in meats, sugar, dairy, fats & oils, & beverages. Processed products account for 50% of value of ag trade. Zahoor Haq and Karl Meilke (JAE, 2010). China & Russia (among the BRICs) are the agrifood import growth markets of the future. Rick Barichelllo (CJAE, 1999); Danielle Goldfard (Conf. Board., 2009) WTO ruling that Canada was dumping dairy exports (1999) cost the Canadian industry. Colin A. Carter & Sandro Steinbach Emerging Markets 6 / 22

7 Notable EM Agric Importers 2011 Bil. $ per year China Russia 40.8 Mexico 29.2 India 22.6 Indonesia 22.4 Source: Compiled from UN Comtrade database Colin A. Carter & Sandro Steinbach Emerging Markets 7 / 22

8 Top Exporters of Processed Ag. Commodities (PACs), excluding intra-eu trade, avg Country Exports in Bil. $US Share (%) EU U.S Brazil China New Zealand Canada Australia Source: Compiled from UN Comtrade database Colin A. Carter & Sandro Steinbach Emerging Markets 8 / 22

9 Canada s Exports of Processed Agricultural Commodities (PACs) in 2011 Canada s PAC exports to all destinations valued at $13.7 B (USD) USA (71%), Japan(9%) & Russia (3%) account for >80% of Canadian PAC exports Product Share Product Share Fresh, chilled meats 29.2% Sugar, sweeteners 6.6% Other preparations 14.4% Beverages 4.2% Extracts, essences, broths 11.2% Processed grains 3.7% Prepared vegetables 7.3% Flour preparations 3.1% Chocolates 7.1% Prepared fruit 2.2% Source: Compiled from UN Comtrade database (2012) Colin A. Carter & Sandro Steinbach Emerging Markets 9 / 22

10 Colin A. Carter Source: & Sandro Compiled Steinbach from UN Comtrade Emerging database Markets (2012) 10 / 22 PAC Exports to EMs $25 Australia Canada New Zealand USA $20 $Bil (USD) $15 $10 $5 $0

11 Canada s Relative Trade Performance Canada s Ag exports lagged behind growth in world trade, partly due to its focus on bulk commodities, the slowest growing category. Supply Managed Cdn agric sectors have focused on rel. small domestic market, foregoing global markets. World PAC exports to World (EMs) 45% (36%) of total Ag exports in Canada PAC exports to World (EMs) 33% (11%) of total Ag exports in Colin A. Carter & Sandro Steinbach Emerging Markets 11 / 22

12 Animal Products account for relatively large share of Processed Agric Commodity Trade: Lets turn to that USDA & OECD trade forecasts for animal products are similar. Drivers include population growth, income growth & urbanization. Global demand for poultry will remain strong - trade expected to expand by 30% by 2021 (USDA). Dairy- trade in SMP is expected grow 34% by 2021, while global cheese & butter trade is projected to increase by 27% and 20%, respectively (OECD). Colin A. Carter & Sandro Steinbach Emerging Markets 12 / 22

13 Outlook for Consumption Growth to 2021 OECD Developing countries World % Beef Pigmeat Poultry Sheep Butter Cheese WMP SMP Fish Source: OECD FAO, 2012 Colin A. Carter & Sandro Steinbach Emerging Markets 13 / 22

14 Outlook for Meat Production to 2021 Mt % Beef Pork Poultry Sheep Beef Pork Poultry Sheep Total Increase 77% Developing Developed Total Source: OECD FAO, 2012 Colin A. Carter & Sandro Steinbach Emerging Markets 14 / 22

15 Meat Trade Forecast to ,000 mt 16,000 Beef Pork Poultry 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 Source: OECD FAO Agric Outlook 2012 Colin A. Carter & Sandro Steinbach Emerging Markets 15 / 22

16 Canada v U.S. Poultry Exports to EMs Canada United States Millions of Current US$ Source: Compiled from UN Comtrade database Colin A. Carter & Sandro Steinbach Emerging Markets 16 / 22

17 Projected Poultry Net Exports to ,000 4,500 1,000 mt Canada U.S. Brazil 4,000 3,500 3,000 2,500 2,000 1,500 1, Source: USDA Colin A. Carter & Sandro Steinbach Emerging Markets 17 / 22

18 Historic Milk Production 90 mmt Canada U.S. New Zealand % growth % growth 10 No growth Source: OECD Colin A. Carter & Sandro Steinbach Emerging Markets 18 / 22

19 Canada v U.S. Nonfat Milk Powder Production ,000 MT Canada United States Increased 1.4 times since No growth 0 Source: PS&D View, USDA Colin A. Carter & Sandro Steinbach Emerging Markets 19 / 22

20 Canada v U.S. Dairy Exports to EMs 3,000 80% In Millions of Current US$ 2,500 2,000 1,500 1, % 60% 50% 40% 30% 20% 10% 0 0% Canadian Dairy Exports to EMs US Dairy Exports to EMs Share in Total for Canada Share in Total for the US Source: Compiled from UN Comtrade database Colin A. Carter & Sandro Steinbach Emerging Markets 20 / 22

21 Basic Economics of Supply Management with Foregone Export Opportunities Price Canadian industry gives up blue shaded area (T) in order to capture red shaded area (D). Cdn Demand P d Cdn Supply D P W T World Demand P A Quantity Colin A. Carter & Sandro Steinbach Emerging Markets 21 / 22

22 Conclusions BRICs account for 40% of the world s consumers. Their growing middle class will create dynamic ag trade markets. Canada s export performance in Processed Ag to Emerging Markets is virtually stagnant. Despite an apparent comp adv in industrial animal agric, Canada is not positioned to expand exports of poultry & dairy. What are the challenges & opportunities facing Canada in EMs? Is domestic policy holding back Canada s agric. export performance? Colin A. Carter & Sandro Steinbach Emerging Markets 22 / 22