Food & Inflation

Food & Inflation: Truth & Consequences February 8, 2012

Growth in agriculture is mostly driven by food needs Population is growing fast in developing countries Global Population by Type of Economy (M)

World is urbanizing Global Population by Type of Community (M)

Global middle class is growing rapidly Population earning between $1020/day (M)

+770

Source: UN

2 2

Food & Inflation: Truth & Consequences

GDP Purchasing Power Parity, Thousands

Worldwide GDP Growth 103

105

97 92 87

85

79

83

74 66

Global economic expansion driven by BRIC

61

65

45

70 70

57

46 42 44

49

52

OECD modest growth in spite of Eurozone troubles Rise in rest of world supported by Asia, Mideast, and Africa

25

(15) BRIC

OECD

Source: IMF World Economic Outlook 3

Food & Inflation: Truth & Consequences

Rest of World

2016

2015

2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

5

Consumption growth driven by GDP and population China accounts for about 18% of world growth consumption and is the main driver for growth China Consumption

World Consumption (MMT) 2,500

500

2,400 450 2,300 2,200

400

2,100 2,000

350

1,900 300 1,800 1,700

250

1,600 1,500

Source: Food and Agriculture Policy Research Institute, Iowa State University 4

Food & Inflation: Truth & Consequences

200

Which means the consumption gap narrows Meat Consumption

Oil Consumption 18

17

US at 36 KG Per Person

US at 117 KG Per Person

60 51

16 50 14

13

13

42 40

12 10

11

KG Per Person

10

8 6

6

35 32 30

27 23

20

4 10 2 0

0 1990

2000

India, per cap

World, per cap

Source: USDA & UN Population Division 5

2010

Food & Inflation: Truth & Consequences

1990

China, per cap

2000

2010

World, per cap

Biofuel also drives demand for agricultural commodities Biodiesel and corn based ethanol 30

Biodiesel production 25

growth phase

MMT

20

15

10

5

0 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20

Vegoil Required to Meet Mandates 6

Food & Inflation: Truth & Consequences

Biodiesel Forecast

Biodiesel demand: A significant share of veg oil production and trade 250

200

MMT

150

100

50

0

Veg Oil Production

Veg Oil Trade

Major Oilseeds: Soybean, Rapeseed, Sunflower Seed, Palm Source: Food and Agriculture Policy Research Institute, University of Iowa.

7

Food & Inflation: Truth & Consequences

Biodiesel Production

Trend is for world Stocks-to-Use to remain tight Corn, soybeans and wheat

Source: Food and Agriculture Policy Research Institute, University of Iowa.

8

Food & Inflation: Truth & Consequences

World Consumption by Type (MMT) Growth in consumption is in feed grains (mostly corn) and oilseeds, while food grains stay steady.

1,400

1,200

1,000

800

600

400

200

-

Food Grains

Source: Food and Agriculture Policy Research Institute, Iowa State University 9

Food & Inflation: Truth & Consequences

Feed Grains

Oilseeds

Acreage Expansion 700

600

500

440 431 433 434

457 479 456 458 470 485

507

501

485 492

504

515

519

523

528

532

510

Global acreage expansion to address demand increase

400

300

Acres’ supply increase derived from the US, Argentina, Brazil.

200

100

0

BRIC

OECD

Source: USDA 10

Food & Inflation: Truth & Consequences

Rest of World

Global Acreage remains flat, gains will come via yield improvements Global Grain and Oilseed Production 700,000

3.80 3.60 3.40

650,000

3.20 3.00 2.80

600,000

2.60 2.40 2.20

550,000

2.00

Yield Source: Food and Agriculture Policy Research Institute, Iowa State University 11

Food & Inflation: Truth & Consequences

All Acres

Growth in Global Grain and Oilseed Production MMT 68

2,334

From Yield

2020 Production

263

170

2,003

From Yield

2010 Production

225

1,607

2000 Production

From Acres

Source: Food and Agriculture Policy Research Institute, Iowa State University 12

Food & Inflation: Truth & Consequences

From Acres

Meeting the World’s Demand How will the needs be met…

1.16 Billion MT increase from Yield advances 210 MMT increase from more intense cropping 135 MMT increase from acreage expansion

Source: Bruinsma, Jelle. “The Resource Outlook to 2050.” FAO Expert Meeting on How to Feed the World in 2050

13

Food & Inflation: Truth & Consequences

14

Food & Inflation: Truth & Consequences

Ag Biotechnology Supply / Demand balance has shifted Change from production push to consumer pull Sustainability & Food Security have become core values Ag Biotechnology requires increased management & oversight in Global Supply chains Functional Characteristics – Specific food / feed usage specific starch properties – Product purity Zero Tolerance poses huge risk / problems Cross contamination of export grains / oilseeds Contamination of transportation means – truck, rail, barge, vessel Coexistence is imperative for US to grow destination options Connectivity across the globe provides a consumer that we want to better educate, sell grains, oilseeds, and their respective by products.

The US competitive situation will continue to deteriorate as other origination points show they can produce a competitive food/feed source at these price levels 15

Food & Inflation: Truth & Consequences