Key global markets and suppliers impacting U.S. grain exports BRICs

Key global markets and suppliers impacting U.S. grain exports BRICs Levin Flake Senior Agricultural Economist, Global Policy Analysis Division, OGA/FAS/USDA TEGMA Annual Meeting January 23 rd, 2015

U.S. Grain/Oilseed Export Outlook 70 Corn Million Metric Tons 60 52 million ha Soybeans 50 40 14 million ha 123 million ha Share of Land With Travel Time to Market < 6 Hours 30 Latin America & Car. 76% Wheat 3 million ha 202 million ha Sub Saharan Africa 47% 20 M. East & N. Africa 87% E. Europe & C. Asia 83% 10 *1 acre = 0.4047 ha 2005/06 2008/09 2011/12 2014/15 East & South Asia 23% Source: USDA Baseline Source: World Bank 2017/18 2020/21 2023/24

Key countries BRICs 1. Russia 2. India 3. Brazil 4. China

Producción: Área se ha desplazado de trigo en últimos 20 años 100,000,000 90,000,000 80,000,000 área sembrada Russia: Expanding but Unreliable maíz Grain Supplier 70,000,000 soja 60,000,000 50,000,000 40,000,000 trigo 30,000,000 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 Source: NASS/USDA

Post USSR, Russia Shifts from Importer to Large Grain Exporter 30 1980s 1990s Net Grain Trade 2000s 2010s 20 Million Metric Tons 10 0 10 20 30 Less Feed Use Greater Productivity

Russia Strongly Impacts U.S. Wheat Sales in Mediterranean Markets 15 Wheat Exports to Middle East/North Africa Russia Million Metric Tons 10 5 United States 0 07/08 08/09 09/10 10/11 11/12 12/13 13/14 Data Source: U.S. Census Export Source: Data Global and Russian Trade Customs Atlas (GTA)

U.S. Wheat Exports Shifts to Latin America 50% % Share of U.S. Wheat Exports to Latin America/Caribbean 40% 30% 20% 10% 0% 89/90 93/94 97/98 01/02 05/06 09/10 13/14 Data Source: FAS/USDA GATS

Russian Wheat Exports to Continue to Take Share from U.S. 60 U.S. and Black Sea Wheat Exports 90 Total Black Sea Grain Exports 50 80 70 40 60 MMT 30 20 10 MMT 50 40 30 20 10 0 05/06 08/09 11/12 14/15 17/18 20/21 23/24 0 05/06 08/09 11/12 14/15 17/18 20/21 23/24 Source: USDA Baseline

Producción: Área se ha desplazado de trigo en últimos 20 años Why? Proximity to Key Markets, Low Costs of Production and Increased Productivity 100,000,000 90,000,000 área sembrada maíz 80,000,000 70,000,000 60,000,000 soja 50,000,000 40,000,000 trigo 30,000,000 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 Source: NASS/USDA

Producción: Área se ha desplazado de trigo en últimos 20 años But, Russia Expected to Continue to Be Unreliable Supplier 100,000,000 Extreme Weather/Production 90,000,000 Fluctuations área sembrada maíz 80,000,000 70,000,000 soja 60,000,000 Government 50,000,000 Policies: Bans and other Restrictions as 40,000,000 Gov t Supports Livestock at trigo 30,000,000 Expense of Grain Farmers 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 Source: NASS/USDA

Producción: Área se ha desplazado de trigo en últimos 20 años Uncertainty about Government Policy Makes Russian Exports Even More Frontloaded Pre Ban Post Ban área sembrada 100,000,000 18% Russia grain export ban was maíz August 90,000,000 2010 June 2011 16% 14% 80,000,000 In the 5 years before ban, 31% 12% of yearly 70,000,000wheat exports were 10% shipped in first 3 months of the soja 8% trade 60,000,000 year. After the ban, this 6% has jumped to 45%. 50,000,000 4% 2% trigo Russia implementing wheat 40,000,000 export tariff on February 2015. 0% However, impact this trade 30,000,000 year expected 1994 to be 1996 small 1998 since 2000 2002 2004 2006 2008 2010 2012 2014 most exportable supplies Source: NASS/USDA already shipped. But 2015/16? Source: GTA Pre Ban 2004 2010, Post Ban 2011 2014 % of Total Wheat Exports

Producción: Área se ha desplazado de trigo en últimos 20 años 100,000,000 90,000,000 80,000,000 área sembrada India: Competitor rather than maíz market for U.S. grain 70,000,000 soja 60,000,000 50,000,000 40,000,000 trigo 30,000,000 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 Source: NASS/USDA

India Flat While Chinese Imports from U.S. Soar 25 20 China Billion Dollars 15 10 5 0 India 2000 2002 2004 2006 2008 2010 2012 2014 Source: GATS, FY Agricultural Exports

Trade Balances Diverge in India and China Agricultural Trade Balance (Billion Dollars) 15 5 India +$20 b 5 15 25 China 35 45 55 65 $70 b 75 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 *Includes Wheat, Corn, Sorghum, & Barley Source: GTA

India Leads in Agricultural Export Growth Over Past Decade India Indonesia Brazil China Thailand Argentina Malaysia New Zealand Mexico EU Canada Australia United States 11.8 11.6 11.1 11.0 10.6 10.5 10.1 9.9 9.6 9.2 14.9 17.6 21.3% 0 4 8 12 16 20 24 Average Annual % Increase in Agricultural Export Value (2003 2013) Source: GTA

India Becomes Major Global Player For Key Products Million Tons 1.4 1.2 1 0.8 0.6 0.4 0.2 0 India 2 nd Largest Bovine Meat Exporter 2009 2013 3 India Brazil United States Million Tons 12 10 India 2 nd Largest Cotton Exporter 8 6 4 2 0 India Largest Rice Exporter 2009 2013 India Thailand United States Million Tons 2 1 India United States 0 2009 2013 Source: GTA

India Has Built Huge Government Grain Stockpiles Million Metric Tons (MMT) 70 60 50 40 30 20 10 Wheat and Rice Stocks Wheat and Rice Exports 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Source: GTA and Food Corporation of India Stock Data

Producción: Área se ha desplazado de trigo en últimos 20 años 100,000,000 90,000,000 80,000,000 área sembrada Brazil: New Area to Continue to maíz Boost Exports 70,000,000 soja 60,000,000 50,000,000 40,000,000 trigo 30,000,000 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 Source: NASS/USDA

Brazil Soybean Area Is Increasing 3.5 Soybean Yields Brazil is adding new area in the Center-West and in MaPiTo regions. 3 Soybean Area Tons/hectare 2.5 2 1.5 1 Brazil United States 2000 2002 2004 2006 2008 2010 2012 2014 Million Hectares 40 35 30 25 20 15 10 Brazil United States 5 Yields are about the same; farmers use the same technology package: GMO-soy varieties, direct-seeding, large farms using mechanized chemical applications and harvesting. 0 2000 2002 2004 2006 2008 2010 2012 2014 Source: PSD Online

Why is Area Increasing? 1. Economic returns are better in frontier regions than in traditional areas. 2. Soybean yields are more stable in frontier regions. Rains are more consistent in frontier. 3. Land is available. Land is less expensive in MaPiTo than in Center-West. Tons per hectare 3.5 3.0 2.5 2.0 1.5 Brazil Soybean Yields by Region 2000/2001 2001/2002 2002/2003 2003/2004 2004/2005 2005/2006 2006/2007 2007/2008 2008/2009 2009/2010 2010/2011 2011/2012 2012/2013 2013/2014 2014/2015F Center-West yield MaPiTo yield Traditional yield

MATOPIBA Brings New Production Growth

Potential Availability of Uncultivated Land Globally 446 million hectares of uncultivated land (1.1 billion acres*) 52 million ha Share of Land With Travel Time to Market < 6 Hours 123 million ha 3 million ha 14 million ha Latin America & Car. 76% 202 million ha Sub Saharan Africa 47% M. East & N. Africa 87% E. Europe & C. Asia 83% East & South Asia 23% *1 acre = 0.4047 ha Source: World Bank

Brazilian Soybean Exports to Continue to Soar 20 Estimated Export Change from 2014/15 to 2023/24 Brazil U.S. Million Metric Ton Change 15 10 5 0 Soybeans Source: USDA Baseline Corn

What is Preventing Brazil from Even More Expansion? Roads are poorly maintained and treacherous during rainy season. There is not enough grain storage in Mato Grosso for their large crops.

Challenges Abound In Brazil Soybean Transportation Cost to Shanghai, China ($/ton) 180 160 140 120 100 80 60 40 20 0 Brazil Brazil s transport costs account for 28% of the landed costs vs. 14% for U.S. soybeans $157 $87 U.S.A. but, Brazil transportation rates have fallen $30/mt in past 3 years 2013 Davenport, Iowa & Sorriso, Mato Grosso Data Source: USDA/AMS

Brazil has by far the worst quality of ports of the BRICs 7 World Bank Port Quality Index 6 United States World Bank Index 5 4 3 2 China India Russia Brazil United States United States 1 0 2010 2011 2012 2013 2014 Data Source: U.S. Census Export Data and Russian Customs

Producción: Área se ha desplazado de trigo en últimos 20 años 80,000,000 área sembrada China: 100,000,000 Importance for Global Grain maíz 90,000,000 Markets to Increase 70,000,000 soja 60,000,000 50,000,000 40,000,000 trigo 30,000,000 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 Source: NASS/USDA

China Largest U.S. Agricultural Market 30 25 U.S. Agricultural Exports to Canada, China, & Mexico China Canada Billion Dollars 20 15 10 Mexico 5 0 *Includes Wheat, Corn, Sorghum, & Barley 2007 2008 2009 2010 2011 2012 2013 2014 Source: GTA

U.S. Ag Exports to China $ Billion 20 18 16 14 12 10 8 6 4 2 0 Consumer-Oriented Intermediate Bulk 199920002001200220032004200520062007200820092010 2011 201220132014 Source: FAS/GATS

250 200 150 100 50 0 Chinese Middle Class Growth Source: Global Insights +160 Million Households Million households w/real PPP incomes over $20,000/yr

Chinese Middle Class Continues Rapid Expansion China India Brazil Russia Mexico Indonesia Thailand Turkey Philippines Egypt South Korea Colombia 2 5 3 3 Households w/ Real PPP incomes greater than $20,000 (millions) 5 2 4 6 13 12 2013 Proj. gains by 2023 99 160 0 50 100 150 200 250 Source: Global Insight s Global Consumer Markets data as analyzed by OGA

Urban Household Per Capita Expenditure on Food USD 400 350 300 250 200 150 Grains Dairy Aquatic Meat & Poultry 100 50 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Meat Consumption Drives Chinese Imports 80 Chinese Meat Consumption 70% Chinese Soybean Imports/Global Soybean Trade 64% 70 Beef 60% Million Tons 60 50 40 30 20 Poultry Pork China Imports/Global Trade 50% 40% 30% 20% 10 0 1986 1990 1994 1998 2002 2006 2010 2014 Source: PSD Online 10% 0% 10%

Chinese Feed Consumption Growth Fastest In World Changes in Grains and Oilseed Meals in Feed Consumption 2004 vs 2014 China SE Asia South Asia S. America 56% 60% 74% 87% MENA 43% FSU 20% Mexico 11% EU E. Asia ( China) 0% 2% USA Canada 13% 16% -25% 0% 25% 50% 75% Source: PSD Online

Grain Consumption Growth Focused on Feed 600 Million Metric Tons 500 52 million ha 400 Feed Consumption 300 14 million ha 123 million ha Share of Land With Travel Time to Market < 6 Hours 200 Latin America & Car. 76% 3 million ha 202 million ha Food Consumption Sub Saharan Africa 47% 100 M. East & N. Africa 87% E. Europe & C. Asia 83% 0 East & South Asia 23% *1 acre = 0.4047 ha 1994/95 1998/99 2002/03 2006/07 Source: PSD Online Source: World Bank 2010/11 2014/15

Chinese Grain Production Expected to Be Unable to Meet Growing Demand 21 percent of the world s population 9 percent of the world s supply of arable land 6 percent of the world s freshwater resources 11 persons to feed per hectare of arable land, more than twice the world average of 4.4 Nearly 20 percent of China s arable land is polluted. 3 percent moderately or seriously polluted 8.2 million acres arable land unsuitable for agriculture (337 million acres total arable land)

Source: Ministry of Water Resources via World Bank China s Water Situation Depletion by Province

Limited Arable Land!

Chinese Net Grain Imports to Climb 20 10 Net Grain Trade Projections 2000s 2010s 2020s Million Metric Tons 0 10 20 30 40 Source: USDA Baseline

Chinese Soybean Imports Also to Continue to Soar 120 Soybean Import Projections 100 Million Metric Tons 80 60 40 20 0 2002/03 2005/06 2008/09 2011/12 2014/15 2017/18 2020/21 2023/24 Source: USDA Baseline

Total Grain and Soybean Imports Projections for China 160 Million Metric Tons 140 52 million ha Food Grain Imports 120 Feed Grain Imports 100 80 14 million ha Soybean Imports 123 million ha Share of Land With Travel Time 60 to Market < 6 Hours Latin America & Car. 76% 40 3 million ha 202 million ha Sub Saharan Africa 47% 20 M. East & N. Africa 87% E. Europe & C. Asia 83% 0 2006/07 East & South Asia 23% *1 acre = 0.4047 ha 2010/11 2014/15 2018/19 Source: USDA Baseline Source: World Bank 2022/23

How Big is China? China s GDP is equivalent to Brazil, Russia, India, Turkey and Taiwan... COMBINED ATO/Beijing = Brazil Libya Total GDP: $1,982 Billion Brazil GDP: $2,024 Billion Czech Republic Ukraine Qatar UAE Philippines ATO/Shenyang = Turkey Total GDP: $709 Billion Turkey GDP: $729 Billion Ethiopia Hungary Malta ATO/Chengdu = Taiwan Total: $550 Billion Taiwan: $427 Billion Bolivia Croatia Malaysia Vietnam Algeria Qatar Libya Kuwait Kenya Thailand Nigeria Singapore Kuwait Indonesia Switzerland Panama (Macau) Switzerland Finland ATO/Shanghai = Russia ATO/Guangzhou = India Total: $1,294 Billion India: $1,430 Billion Total: $1,761 Billion Russia: $1,477 Billion FAS/China Office coverage by region and GDP

Impact of BRICs on U.S. Export Outlook 70 Corn Growing Chinese Demand 60 52 million ha 50 40 Soybeans Strong Brazilian Competition 14 million ha 123 million ha Share of Land With Travel Time to Market < 6 Hours 30 Latin America & Car. 76% 3 million ha 202 million ha Sub Saharan Africa 47% Wheat Continued Russian Competition, No Major Demand Drivers (India) 20 M. East & N. Africa 87% E. Europe & C. Asia 83% 10 *1 acre = 0.4047 ha East & South Asia 23% 2005/06 2008/09 2011/12 2014/15 Source: USDA Baseline Source: World Bank 2017/18 2020/21 2023/24

Producción: Área se ha desplazado de trigo en últimos 20 años 100,000,000 90,000,000 área sembrada maíz 80,000,000 70,000,000 Thank You soja 60,000,000 50,000,000 40,000,000 trigo 30,000,000 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 Source: NASS/USDA