Global Agriculture Markets Today and Tomorrow: Insights from AgriEvolution Summit

Delve into the shifting market structures and macroeconomic trends affecting global agriculture. Explore the historic reviews, key drivers of prosperity, and potential market transitions discussed at the Fourth World Summit on Agriculture Machinery in New Delhi, India.

• Agriculture Markets
• AgriEvolution Summit
• Macro Trends
• Market Transitions
• Global Economy

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1. Global Agriculture Markets: Today and Tomorrow AgriEvolution Summit New Delhi, India JB Penn Chief Economist December 5, 2013 Fourth World Summit on Agriculture Machinery December 5-6, 2013 ~ New Delhi, India 1

2. Global Agriculture Markets: Today and Tomorrow Global Agriculture Markets: Today and Tomorrow Brief Historic Review (2000 Brief Historic Review (2000- -2013) 2013) Subtle Market Structure Shifts Occurring Subtle Market Structure Shifts Occurring Looking Beyond 2013 Looking Beyond 2013 Concluding Observations Concluding Observations Fourth World Summit on Agriculture Machinery December 5-6, 2013 ~ New Delhi, India 2

3. Brief Historic Review Fourth World Summit on Agriculture Machinery December 5-6, 2013 ~ New Delhi, India 3

4. Brief Historic Review Global Agriculture Markets Global Agriculture Markets Period of unprecedented prosperity in developed country agriculture Key drivers: population and income growth, urbanization - Dietary shifts - Renewed attention to developing country agriculture Now, another market transition? Fourth World Summit on Agriculture Machinery December 5-6, 2013 ~ New Delhi, India 4 4

5. Global Macro Economy World GDP growth rates World GDP growth rates 12 Annual % Change Developed Developing 8 4 0 1998 2000 2002 2004 2006 2008 2010 2012 2014F 2016F 2018F -4 Source: International Monetary Fund (IMF), World Economic Outlook , October 08, 2013 Fourth World Summit on Agriculture Machinery December 5-6, 2013 ~ New Delhi, India 5 5

6. GDP Growth Rates % change 10 5 0 1995 2000 2005 2010 2014F -5 European Union Central and eastern Europe Commonwealth of Independent States ASEAN-5 Latin America and the Caribbean Sub-Saharan Africa United States -10 Source: International Monetary Fund (IMF), World Economic Outlook , October 08, 2013 Fourth World Summit on Agriculture Machinery December 5-6, 2013 ~ New Delhi, India 6 6

7. Population Growth and Distribution 2000 to 2013 2050 More Developed Regions* Less Developed Regions Least Developed Regions Billions 10 2013 2000 9.6B 5 7.2B 6.1B 0 1950 1975 2000 2025 2050 1.1B 1.2% 4% 56% 30% 9% Source: International Monetary Fund (IMF), World Economic Outlook , October 08, 2013 Fourth World Summit on Agriculture Machinery December 5-6, 2013 ~ New Delhi, India 7

8. Urbanization: Rural-Urban Population Shift Population in Billion 7 Urban Rural 6 5 4 3 2 1 0 1970 1980 1990 2000 2010 2020 2030 2040 2050 Source: UN World Urbanization Prospects, The 2009 Revision Population Database Fourth World Summit on Agriculture Machinery December 5-6, 2013 ~ New Delhi, India 8

9. Commodity Index Prices, Jan 1990 Nov 2013 300 USD Nominal Food Metals Fuel 250 200 150 100 50 0 1991 1995 2000 2005 2010 2013 Commodity Metals Price Index, 2005 = 100, includes Copper, Aluminum, Iron Ore, Tin, Nickel, Zinc, Lead, and Uranium Price Indices Commodity Fuel (energy) Index, 2005 = 100, includes Crude oil (petroleum), Natural Gas, and Coal Price Indices Commodity Food Price Index, 2005 = 100, includes Cereal, Vegetable Oils, Meat, Seafood, Sugar, Bananas, and Oranges Price Indices Source: IMF Primary Commodity Prices Fourth World Summit on Agriculture Machinery December 5-6, 2013 ~ New Delhi, India 9

10. Subtle Market Structure Shifts Occurring Fourth World Summit on Agriculture Machinery December 5-6, 2013 ~ New Delhi, India 10

11. Global Grain Market Dynamics Major shifts underway since 2000 not widely recognized Competitiveness among producing regions slowly shifting due to: On farm technology cost/ton at farm gate Infrastructure investment cost/ton at export location Government policies shifting: Subsidies policies shifting in developed and developing Fourth World Summit on Agriculture Machinery December 5-6, 2013 ~ New Delhi, India 11

12. Major Grain Exporter Market Shares Shifting 40% 1990s Avg. 2000s Avg. 2010s Avg. 20% 0% United States Canada EU-27 Other 10% 5% 0% Argentina Australia Ukraine Brazil Russia India Kazakhstan Source: Foreign Agricultural Service, Official USDA Estimates , September 2013 Fourth World Summit on Agriculture Machinery December 5-6, 2013 ~ New Delhi, India 12

13. US Dominant Role Declining Sharply 400 60% US Grain Exports MMT Share of Global Exports 300 40% 200 20% 100 0 0% 1980 1985 1990 1995 2000 2005 2010 2013 US Exports Global Export Total US Exports as % of Global Exports (right axis) Source: Foreign Agricultural Service, Official USDA Estimates , September 2013 Fourth World Summit on Agriculture Machinery December 5-6, 2013 ~ New Delhi, India 13

14. Soy Market Shares Also Shifting Share of World Export 80% 70% 60% 50% % of exports 40% 30% 20% 10% 0% 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 U.S. Argentina Brazil All Others Source: Informa Economics, Weekly Soybean Complex, June 2013 Fourth World Summit on Agriculture Machinery December 5-6, 2013 ~ New Delhi, India 14

15. Non-traditional Exporters Are Less Stable Production Regions coefficient of variation 30 Russia Kazakhstan Argentina & Brazil Australia Ukraine 25 20 US Canada 15 World Average 10 EU-28 5 0 Growing market instability likely as importance of non-traditional suppliers grows price volatility, political instability, trade disruptions Source: Informa Economics, Weekly Soybean Complex, June 2013 Fourth World Summit on Agriculture Machinery December 5-6, 2013 ~ New Delhi, India 15

16. Global Grain Market Dynamics - In addition to new consumers 1.1B since 2000 mostly in lower latitudes - New export producers also emerged Fourth World Summit on Agriculture Machinery December 5-6, 2013 ~ New Delhi, India 16

17. China Emerges As Major Soy Importer (circa 2000) World Share MMT 80 45% Imports 40% 70 35% % of Global Soy Exports 60 30% 50 25% 40 20% 30 15% 20 10% 10 5% 0 0% 1980 1985 1990 1995 2000 2005 2010 2013 Source: Foreign Agricultural Service, Official USDA Estimates , September 2013 Fourth World Summit on Agriculture Machinery December 5-6, 2013 ~ New Delhi, India 17

18. China Leaves Global Wheat Market Trade Balance MMT 0 1985 1990 1995 1999 -10 -20 MMT 5 0 2000 2005 2010 2013 -5 Forecast to import 8.5 MMT in 2013/2014 -10 Source: Foreign Agricultural Service, Official USDA Estimates , September 2013 Fourth World Summit on Agriculture Machinery December 5-6, 2013 ~ New Delhi, India 18

19. Whither China and the Global Corn Market? MMT Trade Balance 14 4 1980 1985 1990 1995 2000 2005 2010 2013 -6 Corn: from 3 MMT (2012) to 20 - 30 MMT (2022) Forecast 7 MMT for 2013/2014 Will corn be added to soy as a basic import? Or import pork? Source: Foreign Agricultural Service, Official USDA Estimates , September 2013 Fourth World Summit on Agriculture Machinery December 5-6, 2013 ~ New Delhi, India 19

20. Brazil Gains Preeminence as Global Agriculture Exporter (circa 2000) Captures much of global soy trade growth Rapidly expands grain, meat, poultry export sales Third-largest agricultural exporter (value) after US and EU #1 exporter: coffee, soy, beef, sugar, ethanol and frozen chickens MMT 120 30% Grain Exports 80 20% Soy Exports Global Grain/Soy Share (right axis) 40 10% 0 0% 1980 1985 1990 1995 2000 2005 2010 2013 Source: Foreign Agricultural Service, Official USDA Estimates , September 2013 Fourth World Summit on Agriculture Machinery December 5-6, 2013 ~ New Delhi, India 20

21. Increasing Reliance on South American Exports MMT World Share 70 70% 60 50 40 35% 30 20 10 0 0% 1980 1985 1990 1995 2000 2005 2010 2013 Corn Soy Corn (% of world) Soy (% of world) Source: Foreign Agricultural Service, Official USDA Estimates , September 2013 Fourth World Summit on Agriculture Machinery December 5-6, 2013 ~ New Delhi, India 21

22. Black Sea Sector Stabilizes After USSR Breakup and Late 1990s Crisis Enormous Potential MMT 200 12% World Share Production Exports Share Of World Production 150 8% 100 4% 50 0 0% 1990 1995 2000 2005 2010 2013 Source: Foreign Agricultural Service, Official USDA Estimates , November 2013 Fourth World Summit on Agriculture Machinery December 5-6, 2013 ~ New Delhi, India 22 22

23. Looking Beyond 2013 Fourth World Summit on Agriculture Machinery December 5-6, 2013 ~ New Delhi, India 23

24. Looking Beyond 2013: Global Grains 2,500 (MMT) Production Consumption 2,300 2,100 1,900 1,700 00 01 02 03 04 05 06 07 08 09 10 11 12 13F Source: USDA/WASDE, November 2013 Fourth World Summit on Agriculture Machinery December 5-6, 2013 ~ New Delhi, India 24

25. Global Grains Stocks to Use: 74 Days Stocks to Use: 74 Days (MMT) 600 32% Ending Stocks Stocks/Use Ratio 28% 500 24% 10 Yr Avg. = 20% 400 20% 300 16% 200 12% 00 01 02 03 04 05 06 07 08 09 10 11 12 13F Source: USDA/WASDE, November 2013 Fourth World Summit on Agriculture Machinery December 5-6, 2013 ~ New Delhi, India 25

26. Northern Hemisphere Harvesting Large Grain Crops Country EU 28 China USA Russia Canada Ukraine 2012 (mmt) 281 477 354 67 52 45 2013F (mmt) 304 480 436 88 59 60 Change 8% 1% 23% 31% 15% 32% India produced 239 MMT in 2012/13, and 240 MMT in 2013/14 1% increase Large Large Southern Hemisphere Crops Again in Prospect Southern Hemisphere Crops Again in Prospect for for 2013/2014 2013/2014 Argentina (mmt) Corn Soy 26.5 49.4 26 53.5 -2 8 Brazil (mmt) Corn Soy 81 82 72 88 -11 7 Planting conditions in Southern Hemisphere Now Market Focus Temperature, moisture, and soil conditions dominate next few weeks Source: USDA PSD report, November, 2013. Fourth World Summit on Agriculture Machinery December 5-6, 2013 ~ New Delhi, India 26

27. Ag Commodity Prices Seeking New Trading Range US Wheat Prices Received by Farmers, 1908 - 2013 300 $280/mt $/MT $220/mt 200 1970 to 2005 Average = $115.8 1940 to 1969 Average = $61.8 1908 to 1939 Average = $38.8 100 0 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 Source: USDA Feed Grains Database, November 2013 Fourth World Summit on Agriculture Machinery December 5-6, 2013 ~ New Delhi, India 27

28. Ag Commodity Prices Seeking New Trading Range US Corn Prices Received by Farmers, 1900 - 2012 $/MT 250 $220/mt 200 $160/mt 1970 to 2005 Average = $89.6 150 1940 to 1969 Average = $48 1900 to 1939 Average = $26.2 100 50 0 1900 1920 1940 1960 1980 2000 2020F Source: USDA Feed Grains Database, October 2013 Fourth World Summit on Agriculture Machinery December 5-6, 2013 ~ New Delhi, India 28

29. Observations Fourth World Summit on Agriculture Machinery December 5-6, 2013 ~ New Delhi, India 29

30. Concluding Observations Period of unprecedented prosperity driven by largely external forces Sector structure/markets changed significantly still not widely recognized calls for new mental models After 2013 few parallels entirely new situation Ag commodity markets seeing new trading range worldwide weather will be key determinant for 2014 Fourth World Summit on Agriculture Machinery December 5-6, 2013 ~ New Delhi, India 30

31. Global Agriculture Markets: Today and Tomorrow AgriEvolution Summit New Delhi, India JB Penn Chief Economist December 5, 2013 Fourth World Summit on Agriculture Machinery December 5-6, 2013 ~ New Delhi, India 31