1. Agricultural Trade Outlook August 2011 Philip Abbott

2. USDA Ag Trade Forecast as of May, 2011 (new trade forecast 8/26) Exports -- $ 137 billion Imports – $ 93 billion (also a record) Ag Trade Balance -- $ 44 billion

4. Ag Exports

5. Ag Imports = $90.1 billion in 2011 based on May data

6. World Prices, 2006-2011

7. Prices Up, but Export demand is Inelastic

8. WASDE has 2011-12 US Exports (volume) down somewhat in most recent report August forecast reduced exports from July– trade forecast due next week

9. U.S. Weekly Corn Exports - World Total 2010-11 corn exports (volume) at 6 year low WASDE projects corn exports (volume) down further next year ROW may feed wheat as a substitute But advance sales of 2011-12 crop 68% larger than last year!

10. Chinese stock holding (and trade) policy can have a major influence on world prices –differs by commodity From 2006-07 to 2010-11, the Chinese stocks-to-use ratio for soybeans went from 4% to 23%. This radical shift in stocks accounts for much of the U.S. additional soybean area being needed to satisfy Chinese imports. Implications: –Food grain Price and quantity disconnected from world markets –Income growth and dietary transition effects –Relevance of world stocks –Chinese shocks & world markets (wheat shortfall & drought Look at Chinese stocks when PS&D is updated! Chinese Policy & Soybean Imports

11. Chinese policy for soybeans different from that for other agricultural commodities? Soybean imports continue to grow, but more slowly if stock-building is done Corn imports small, at 1-2 mmt, relative to Chinese domestic and world markets

12. Exchange rates Volatility persists? –$/Euro 2009 -- Jul 1.40 Nov 1.49 – 2010 -- Jun 1.20 July 1.29 – 2011 -- April 1.45 August 1.44 Trade deficit increasing recently Low interest rate policy of Fed persists Economic performance expected abroad? –Weak in Europe, U.S. –Stronger in emerging economies $ is weak now, and sets a background for high agricultural prices European debt crisis has kept $ stronger (but not so much) Commodity boom stalled – weak dollar means higher commodity prices, agricultural prices lag $ is a proxy for other macroeconomic factors – global growth, inflationary expectations

14. Bilateral exchange rates matter Chinese Yuan and Brazilian real appreciating

15. European Debt Crisis also matters to world growth, Austerity measures likely to exacerbate slowdown

16. Global Economic Growth Growth stronger for emerging economies than Europe, Japan or US Projections down everywhere in 2011 Emerging economies fighting inflation

18. Growth in Europe and Asia slower in recent news Euro area – 2 nd Quarter 0.2% Q/Q 1.7%Y/Y –1 st Quarter 0.8% for EU –Germany 2 nd quarter 0.1% against expectations of 0.5% –France at 0% Q/Q –UK 0.2% in Q2, 0.5% in Q1, 0.7% Y/Y China 9.5% Y/Y in 2nd Q –10.3% in 2010, 9.2% in 2009 (recession) Japan -1.3% Q2 Y/Y- better than expected!

19. GDP has influenced trade volume, including agricultural trade, more so than prices World total exports:

20. Quarterly US exports – Total, Ag, Corn and Soybeans – 2005 to 2011:I

21. Trade Agreements on Hold WTO negotiations stalled – no real progress since 2008 Ministerial –2011 December Geneva Ministerial (and 2009) not about Doha US bilateral agreements with Korea, Columbia, Panama still not ratified –USDA/FAS, Obama administration have recently pushed to move these forward without success

22. WTO, Disputes and the Farm Bill Trucking dispute with Mexico (NAFTA) finally resolved – benefits ag exports At high prices we are now in compliance with WTO commitments –But recent safety net policy conflicts with WTO decoupling concept Brazil Cotton dispute led to payoff to Brazil, commitments for reform in new Farm bill –Technical assistance fund criticized in budget debate! Trade title in 2008 – focused only on export promotion –SPS, Technical assistance, Market access, Capacity building programs, Disputes

23. Closing Thoughts Strong (record) year for US ag exports, could be even stronger if short crop in 2011 –Export demand has been inelastic –WASDE cuts in export quantities may not happen? 2 nd commodity boom stalled? –Global recession would dampen export demand –International economic performance impacts dollar, prices, US exports, recovery Eventually trade deficit and low interest rates should mean weak dollar –European debt keeping $ “stronger” – but not so much? –Bilateral rates show more effect (Brazil, even China) Brazil WTO cotton dispute may influence farm bill – WTO not entirely ignored