dtn progressive farmer ag summit 2012
TRANSCRIPT
DTN-The Progressive Farmer Ag Summit 2012
December 11, 2012
Presentation by Terry N. Barr, Senior Director, Knowledge Exchange Division, CoBank 1
DTN‐Progressive Farmer Ag Summit
2012
“Hazards from Budget Crisis Here
and Abroad”
Presentation by: Terry Barr, Senior Director of Industry ResearchKnowledge Exchange Division, CoBank, ACBE-mail: [email protected]
DTN-The Progressive Farmer Ag Summit 2012
December 11, 2012
Presentation by Terry N. Barr, Senior Director, Knowledge Exchange Division, CoBank 2
-10 -8 -6 -4 -2 0Fiscal structural deficit as % of GDP
201120122013
201120122013
201120122013
201120122013
201120122013
0 35 70 105 140 175
Greece
Spain
Japan
Greece
U.S.
Maastricht Treaty = 3% Maastricht Treaty = 60%
U. K.
Japan
U.S.
U. K.
Debt and Fiscal Issues Will Challenge Major Advanced Economies Beyond Europe
Data source: International Monetary Fund, WEOGross government debt as percent of GDP
Greece
Spain
DTN-The Progressive Farmer Ag Summit 2012
December 11, 2012
Presentation by Terry N. Barr, Senior Director, Knowledge Exchange Division, CoBank 3
This is not just about a “fiscal cliff” in 2013:1. It is about beginning a multiyear transition with major fiscal
and monetary corrections in the U.S., Europe and Asia.2. It is about strategic choices regarding the role and size of
government.3. It is about fiscal drag, legislative and regulatory clarity for the
business sectors and financial market realignment.4. It is about currency realignments that will reflect the pace of
adjustments in the regions and impact trade flows.5. It is about a growing role for Asia in the global economy and the
realignment of their export dependent growth strategies.6. It is about agriculture’s domestic and global market potential
and the impacts of changes in farm and energy policy, regulation and tax code (estate taxes, 1031 like exchanges).
“Hazards from Budget Crisis Here and Abroad”
Chart source: Knowledge Exchange Division, CoBank, ACB (confidential and proprietary)
DTN-The Progressive Farmer Ag Summit 2012
December 11, 2012
Presentation by Terry N. Barr, Senior Director, Knowledge Exchange Division, CoBank 4
Confidential and Proprietary 4
70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14
-2
0
2
4
6
Percent change in annual world growth (purchasing-power parity rates)
Advanced countries Rest of world China India
Chart source: Knowledge Exchange Division, CoBank, ACB (confidential and proprietary)
A Global Rebound That Will Boost Trade Will Require Recovery in U.S./Europe
DTN-The Progressive Farmer Ag Summit 2012
December 11, 2012
Presentation by Terry N. Barr, Senior Director, Knowledge Exchange Division, CoBank 5
The Largest Chinese Trading Partners Drive China’s Economic Growth Potential
Region
European UnionUnited StatesHong KongASEANJapanSouth KoreaIndiaRussiaTaiwan
Exports
356.0324.5268.0170.1148.382.950.538.935.1
Imports
211.2122.215.5
192.8194.6162.723.440.3
124.9
Balance
+144.8+202.3+252.5‐22.7‐46.3‐79.8+27.1‐1.4‐89.8
Trade
DTN-The Progressive Farmer Ag Summit 2012
December 11, 2012
Presentation by Terry N. Barr, Senior Director, Knowledge Exchange Division, CoBank 6
Chart source: Knowledge Exchange Division, CoBank, ACB (confidential and proprietary)
U.S. Agriculture Export Destinations Have Increasing Asian Flavor
1.China2. Canada3. Mexico4. Japan5. EU‐276. South Korea7. Hong Kong8. Taiwan9. Indonesia10. Philippines11. Turkey12. Egypt13. Viet Nam14. Russia15. ThailandTotal all exports
23.420.018.913.88.96.23.43.12.52.31.91.81.51.51.3
135.8
Top 15 Markets 2012
1.Japan2. Canada3. EU‐274. Mexico5. South Korea6. Taiwan7. China8. Hong Kong9. Egypt10. Philippines11. Turkey12. Indonesia13. Russia14. Dominican Rep.15. Saudi ArabiaTotal all exports
9.37.56.56.32.52.01.51.21.10.90.70.70.70.50.5
50.8
Top 15 Markets 2000
Asian markets account for 45% of U.S. exports and occupy 9 of the top 15 market destinations. China has become the #1 market with Thailand and Viet Nam growing rapidly!
Bil. US$ Bil. US$
DTN-The Progressive Farmer Ag Summit 2012
December 11, 2012
Presentation by Terry N. Barr, Senior Director, Knowledge Exchange Division, CoBank 7
Chart source: Knowledge Exchange Division, CoBank, ACB (confidential and proprietary)
Grains, Meats & Dairy Exports Focused on Markets That Rely on U.S. / European Growth
DTN-The Progressive Farmer Ag Summit 2012
December 11, 2012
Presentation by Terry N. Barr, Senior Director, Knowledge Exchange Division, CoBank 8
New energy paradigm will reshape geopolitical realities and facilitate structural
economic transformations.
Chart source: Knowledge Exchange Division, CoBank, ACB (confidential and proprietary)
Sovereign Debts and Fiscal Cliffs Will Dominate Global Economy for Many Years!
Sovereign debt will drive financial and structural transitions in Euro zone!
Fiscal cliff and national debt decisions will shape U.S. policies
and economy for years!
China has new leadership and an economy strongly linked to U.S. & Euro trade.
DTN-The Progressive Farmer Ag Summit 2012
December 11, 2012
Presentation by Terry N. Barr, Senior Director, Knowledge Exchange Division, CoBank 9
Chart source: Knowledge Exchange Division, CoBank, ACB (confidential and proprietary)
A New Energy Paradigm and Geopolitics Will Mean Major Market and Policy Shifts
DTN-The Progressive Farmer Ag Summit 2012
December 11, 2012
Presentation by Terry N. Barr, Senior Director, Knowledge Exchange Division, CoBank 10
Jens WeidmannPresident Bundesbank
Angela MerkelGerman Chancellor
Mario DraghiECB President
Xi JinpingNew President of ChinaBlack Swans
Strategic Decisions Lead by These Political Leaders Will Shape Global Growth Path
M. AhmadinejadIranian President
Bashar al‐ AssadSyrian President
Benjamin NetanyahuIsrael Prime Minister
Ben BernankeFED President
John BoehnerMajority Leader
Harry ReidSenate Leader
U.S. President ?
DTN-The Progressive Farmer Ag Summit 2012
December 11, 2012
Presentation by Terry N. Barr, Senior Director, Knowledge Exchange Division, CoBank 11
Confidential and Proprietary 11
Euro Region Struggling to Transition
Chart source: Knowledge Exchange Division, CoBank, ACB (confidential and proprietary)
Jens WeidmannPresident Bundesbank
Limit the German burden!
Angela MerkelGerman Chancellor
A state vote in January and Federal elections in September
Mario DraghiECB President
ECB will do whatever it takes
DTN-The Progressive Farmer Ag Summit 2012
December 11, 2012
Presentation by Terry N. Barr, Senior Director, Knowledge Exchange Division, CoBank 12
Euro Zone Country Debt Levels Still Rising; Will Austerity Hold? France?
-10 -8 -6 -4 -2 0
Data source: International Monetary Fund, WEOFiscal structural deficit as % of GDP
Italy
Greece
Spain
201120122013
201120122013
201120122013
201120122013
201120122013
0 35 70 105 140 175Gross government debt as percent of GDP
Italy
Spain
Maastricht Treaty = 3% Maastricht Treaty = 60%
Greece
France France
Germany Germany
DTN-The Progressive Farmer Ag Summit 2012
December 11, 2012
Presentation by Terry N. Barr, Senior Director, Knowledge Exchange Division, CoBank 13
Confidential and Proprietary 13
Euro Region Struggling to Transition
Monetary Union Fiscal Union Banking Union
No shortcut
Chart source: Knowledge Exchange Division, CoBank, ACB (confidential and proprietary)
No quick solutionRecent actions have calmed waters…… but reality is a 3 to 5 year volatile transition!
DTN-The Progressive Farmer Ag Summit 2012
December 11, 2012
Presentation by Terry N. Barr, Senior Director, Knowledge Exchange Division, CoBank 14
Building fiscal union: ECB defines Outright Monetary Transactions (OMT)
Purchases short term sovereign debt (1‐3year maturities) with no fund limit on ECB. Countries must approach EFSF/ESM for assistance and agree to structural reforms to improve fiscal positions and enhance labor competitiveness. Forfeiting sovereignty.
Building banking union: ECB would have authority over Europe’s 6000 banks
• Single depository insurer.• Standard practices in winding down bankrupt banks.• Authority for EFSF/ESM to recapitalize banks directly.
Euro Region Struggling
Chart source: Knowledge Exchange Division, CoBank, ACB (confidential and proprietary)
EFSF (European Financial Stability Facility) ESM (European Stability Mechanism)
DTN-The Progressive Farmer Ag Summit 2012
December 11, 2012
Presentation by Terry N. Barr, Senior Director, Knowledge Exchange Division, CoBank 15
The Competitiveness of Weak Sovereigns is Structural Problem That Must be Fixed
DTN-The Progressive Farmer Ag Summit 2012
December 11, 2012
Presentation by Terry N. Barr, Senior Director, Knowledge Exchange Division, CoBank 16
1.72
2.92.4
0.5
-2.8
0.70.3
-1.3
0.3
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013-4
-3
-2
-1
0
1
2
3
4Percent growth rate per year
Chart source: Knowledge Exchange Division, CoBank, ACB (confidential and proprietary)
Weak Euro Zone Growth Rates Unlikely to Improve Dramatically Over Next Three Years
DTN-The Progressive Farmer Ag Summit 2012
December 11, 2012
Presentation by Terry N. Barr, Senior Director, Knowledge Exchange Division, CoBank 17
Confidential and Proprietary 17
China Is Undergoing a Once‐in‐a‐Decade Leadership Transition
Chart source: Knowledge Exchange Division, CoBank, ACB (confidential and proprietary)
Xi JinpingNew President of China
DTN-The Progressive Farmer Ag Summit 2012
December 11, 2012
Presentation by Terry N. Barr, Senior Director, Knowledge Exchange Division, CoBank 18
Confidential and Proprietary 18
9.8
11.3
12.7
14.2
9.6 9.2
10.4
9.2
8
9.5
93-02 2005 2006 2007 2008 2009 2010 2011 2012 20130
2.5
5
7.5
10
12.5
15Percent growth rate per year
7 .5 - 9 .5
Chart source: Knowledge Exchange Division, CoBank, ACB (confidential and proprietary)
Growth in China Has Slowed as the Once‐in‐a‐Decade Leadership Transition Begins
DTN-The Progressive Farmer Ag Summit 2012
December 11, 2012
Presentation by Terry N. Barr, Senior Director, Knowledge Exchange Division, CoBank 19
Modest Inflation Gives China’s New Leadership More Stimulus Options
-2
0
2
4
6
8
10Percent change from year earlier
Ch in a
A d van ced e conom ie s
2 0 0 2 2 0 0 3 2 0 0 4 2 0 0 5 2 0 0 6 2 0 0 7 2 0 0 8 2 0 0 9 2 0 1 0 2 0 1 1 2 0 1 2
China will now focus on internal growth as export markets weaken!
1.7% inflationIn October; food prices up 1.8%
Chart source: Knowledge Exchange Division, CoBank, ACB (confidential and proprietary)
DTN-The Progressive Farmer Ag Summit 2012
December 11, 2012
Presentation by Terry N. Barr, Senior Director, Knowledge Exchange Division, CoBank 20
Confidential and Proprietary 20
5.0
5.5
6.0
6.5
7.0
7.5
8.0Central bank policy rate
2 0 0 7 2 0 0 8 2 0 0 9 2 0 1 0 2 0 1 1 2 0 1 2 2 0 1 3
Subdued Inflation and Weak Export Sector May Signal More Financial Stimulus
6.00%
Chart source: Knowledge Exchange Division, CoBank, ACB (confidential and proprietary)
DTN-The Progressive Farmer Ag Summit 2012
December 11, 2012
Presentation by Terry N. Barr, Senior Director, Knowledge Exchange Division, CoBank 21
Confidential and Proprietary 21
U.S. Recovery Remains SubduedBut Policy Uncertainties Pose Challenge!
UnitedStates
Chart source: Knowledge Exchange Division, CoBank, ACB (confidential and proprietary)
Ben BernankeFED President
John BoehnerMajority Leader
Harry ReidSenate Leader
U.S. President ?
DTN-The Progressive Farmer Ag Summit 2012
December 11, 2012
Presentation by Terry N. Barr, Senior Director, Knowledge Exchange Division, CoBank 22
22
Current Focus on Fiscal Cliff Detracts From Broader Challenges Ahead
Chart source: Knowledge Exchange Division, CoBank, ACB (confidential and proprietary)
$528 billion = 3.3% of U.S. economy in 2013(currently projected growth is 3.7%)
Expiration of: certain income tax cuts, reduced rates for estate and gift tax provisions, and the indexing of the AMT for inflation.
Expiration of the payroll tax holiday.
Defense cuts mandated by sequester
Non‐defense spending cuts mandated by sequester
Expiration of emergency unemployment insurance benefits.
Doc fix
Expiring tax extenders
Cost of the expiring tax provisions and spending cuts for fiscal 2013.(billion dollars)
Sources; Congressional Budget Office, Bipartisan Policy Center and Eurasia Group
DTN-The Progressive Farmer Ag Summit 2012
December 11, 2012
Presentation by Terry N. Barr, Senior Director, Knowledge Exchange Division, CoBank 23
Fiscal Cliff Impacts on Consumers Will Vary By Type of Revenue Generator
Payroll tax cutUpper Income tax rate expirationAffordable Care Act Personal taxesEmergency Unemployment benefits
Total
$126
$56
$24
$12
$218
Estimated Impact
60%
30%
30%
60%
51%
Marginal Propensity to consume
Estimatedspending Impact
$126
$56
$24
$12
$218
% change in retail
sales from 2012
‐1.5%
‐0.3%
‐0.2%
‐0.2%
‐2.3%
(bil. $)(bil. $)
Source: Bureau of Economic Analysis, Census and Goldman Sachs
DTN-The Progressive Farmer Ag Summit 2012
December 11, 2012
Presentation by Terry N. Barr, Senior Director, Knowledge Exchange Division, CoBank 24
-8
-6
-4
-2
0
2
4
6
8Percent change in quarterly Gross Domestic Product (Chained 2005$)*
* S e a s o n a lly a d ju s te d a t a n n u a l ra te2 0 0 0 2 0 0 1 2 0 0 2 2 0 0 3 2 0 0 4 2 0 0 5 2 0 0 6 2 0 0 7 2 0 0 8 2 0 0 9 2 0 1 22 0 1 0 2 0 1 1 2 0 1 3
60‐70% of U.S. economic growth comes from consumer spending:
Debt, unemployment, home values and political uncertainty will limit 2012 and 2013
growth!Assumes no fiscal cliff!
Chart source: Knowledge Exchange Division, CoBank, ACB (confidential and proprietary)
Too Much Uncertainty to Build Base for Rapid Recovery in U.S. Economy
DTN-The Progressive Farmer Ag Summit 2012
December 11, 2012
Presentation by Terry N. Barr, Senior Director, Knowledge Exchange Division, CoBank 25
Chart source: Knowledge Exchange Division, CoBank, ACB (confidential and proprietary)
Congress Must Eventually Choose A Path Between No Action and Kick‐the‐ Can
81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 11 13 15 17 19 21
-1600
-1400
-1200
-1000
-800
-600
-400
-200
0
200
Deficit in billion dollars
R e a g a n C lin to nG . B u s h
G .W . B u s h
S o u rc e : C o n g re s s io n a l B u d g e t O ff ic e (A u g u s t , 2 0 1 2 ) , B E A a n d T re a s u ry D e p a r tm e n t a n d fo re c a s t
O b a m a
No action
Extend tax cuts; no sequestration
$7.8 trillion in deficit reduction
Debt‐to‐GDP*
58.5%
89.7%
* National debt held by the public as percent of GDP
DTN-The Progressive Farmer Ag Summit 2012
December 11, 2012
Presentation by Terry N. Barr, Senior Director, Knowledge Exchange Division, CoBank 26
Taking No Action Would Put Budget on Path to Limit National Debt Increases
40 45 50 55 60 65 70 75 80 85 90 95 00 05 10 15 20
0
2
4
6
8
10
12
14
16
18
20
22Trillions of dollars
0
12
24
36
48
60
72
84
96
108
120
132
Percent of GDP
National debt Percent of GDP
Eise
nhow
er
Ken
nedy
John
son
Nix
on /
Ford
Car
ter
Rea
gan
H.W
. Bus
h
Clin
ton
G.W
. Bus
h
Oba
ma
Trum
an
Roo
seve
lt
No debt ceiling vote required!
Chart source: Knowledge Exchange Division, CoBank, ACB (confidential and proprietary)* National debt held by the public as percent of GDP
DTN-The Progressive Farmer Ag Summit 2012
December 11, 2012
Presentation by Terry N. Barr, Senior Director, Knowledge Exchange Division, CoBank 27
By Extending Tax Cuts and Eliminating Spending Cuts The National Debt Doubles
40 45 50 55 60 65 70 75 80 85 90 95 00 05 10 15 20
0
2
4
6
8
10
12
14
16
18
20
22Trillions of dollars
0
12
24
36
48
60
72
84
96
108
120
132
Percent of GDP
National debt Percent of GDP
Eise
nhow
er
Ken
nedy
John
son
Nix
on /
Ford
Car
ter
Rea
gan
H.W
. Bus
h
Clin
ton
G.W
. Bus
h
Oba
ma
Trum
an
Roo
seve
lt
Debt ceiling would need to be increased regularly!
Chart source: Knowledge Exchange Division, CoBank, ACB (confidential and proprietary)* National debt held by the public as percent of GDP
DTN-The Progressive Farmer Ag Summit 2012
December 11, 2012
Presentation by Terry N. Barr, Senior Director, Knowledge Exchange Division, CoBank 28
Debt Ceiling Debate Will Be Part of Fiscal Cliff Patch and Final Deficit Reduction Debate
Debt ceiling applies to debt held by the public and intergovernmental debt (e.g. social security trust fund invested in treasuries).
DTN-The Progressive Farmer Ag Summit 2012
December 11, 2012
Presentation by Terry N. Barr, Senior Director, Knowledge Exchange Division, CoBank 29
The Budget Debate Will Likely Continue For Several Years!
70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 20 22
10
15
20
25
30Revenue and outlays as percent of GDP
Outlays
Revenues
Oba
ma
G.W
. Bus
h
Nix
on /
Ford
Car
ter
Rea
gan
H.W
. Bus
h
Clin
ton
What combination
of tax increases & spending cuts will close this gap? Any path will
create fiscal drag!
Chart source: Knowledge Exchange Division, CoBank, ACB (confidential and proprietary)
DTN-The Progressive Farmer Ag Summit 2012
December 11, 2012
Presentation by Terry N. Barr, Senior Director, Knowledge Exchange Division, CoBank 30
30
U.S. Economic Policy Transitions Will Create Headwinds for Recovery!
U.S. is proposing to undertake major policy reform:
Virtually every sector of the economy will be impacted and risk management and investment strategies cannot deal with uncertainties. Companies can measure and adjust to risk based on a set of rules. Can’t assess uncertainty!
Financial sector Financial sector regulatory reform implementation
Energy sector New energy paradigm; Fracking technology changes landscape! Comprehensive reassessment
Immigration Reform groundwork being laid for 2013
Health care sector Uninsured, medicare / medicaid reform?
Regulatory oversight Clean air & water, Food safety
Deficit reduction
Changing tax policy and entitlement programs (including farm and food programs).
Chart source: Knowledge Exchange Division, CoBank, ACB (confidential and proprietary)
DTN-The Progressive Farmer Ag Summit 2012
December 11, 2012
Presentation by Terry N. Barr, Senior Director, Knowledge Exchange Division, CoBank 31
Removing $2‐3 Trillion in Stimulus Over Next Decade Will Create Fiscal Drag
76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 20
-4
-2
0
2
4
6
Percent change Gross Domestic Product (Chained 2005$)
Subdued growth expectations
reflect major policy uncertainty!
Chart source: Knowledge Exchange Division, CoBank, ACB (confidential and proprietary)
DTN-The Progressive Farmer Ag Summit 2012
December 11, 2012
Presentation by Terry N. Barr, Senior Director, Knowledge Exchange Division, CoBank 32
32
Monetary Policy Will Adjust to Fiscal Policy Wild Card and Economic Growth
White House U.S. Federal Reserve
CongressU.S. Treasury Department
Chart source: Knowledge Exchange Division, CoBank, ACB (confidential and proprietary)
DTN-The Progressive Farmer Ag Summit 2012
December 11, 2012
Presentation by Terry N. Barr, Senior Director, Knowledge Exchange Division, CoBank 33
33Chart source: Knowledge Exchange Division, CoBank, ACB (confidential and proprietary)
0
1
2
3
4
5
6
7
8
9Percent
1 0 -y e a r T re a s u rie s
F e d e ra lF u n d s R a te
9 0 9 1 9 2 9 3 9 4 9 5 9 6 9 7 9 8 9 9 0 0 0 1 0 2 0 40 3 0 5 0 6 0 7 0 90 8 1 21 0 1 1 1 3 1 4
Federal Reserve Will Continue To Promote Growth in 2012‐15: QE3 / Operation Twist
Extend near‐zero rate guidance through mid‐2015 QE3 of $40 bil. per month in mortgage‐backed
securities. Continue Operation Twist and reinvestment of principal payments from holdings through yearend. (total of $85 bil. per month through yearend)
Federal Reserve actions:
DTN-The Progressive Farmer Ag Summit 2012
December 11, 2012
Presentation by Terry N. Barr, Senior Director, Knowledge Exchange Division, CoBank 34
34
World’s Central Banks Have Injected $6 Trillion into the Global Economy …
Current actions may add another $1 trillion to central bank balance sheets!
Data and chart source: Cumberland Advisors, Oct. 12
DTN-The Progressive Farmer Ag Summit 2012
December 11, 2012
Presentation by Terry N. Barr, Senior Director, Knowledge Exchange Division, CoBank 35
35
Supply Concerns Will Drive Markets in Short Term But Demand Will be Longer Term Issue
Chart source: Knowledge Exchange Division, CoBank, ACB (confidential and proprietary)
DTN-The Progressive Farmer Ag Summit 2012
December 11, 2012
Presentation by Terry N. Barr, Senior Director, Knowledge Exchange Division, CoBank 36
36
World Grain Stocks Decline is Accelerating With Reduced Harvests
Chart source: Knowledge Exchange Division, CoBank, ACB (confidential and proprietary)
70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12
0
100
200
300
400
500Million metric tons of wheat & coarse grains
0
8
16
24
32
40Stocks-to-use percentage
World stocks Stock/use
DTN-The Progressive Farmer Ag Summit 2012
December 11, 2012
Presentation by Terry N. Barr, Senior Director, Knowledge Exchange Division, CoBank 37
37Chart source: Knowledge Exchange Division, CoBank, ACB (confidential and proprietary)
70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12
0
10
20
30
40
50
60
70Million metric tons of soybeans
0
5
10
15
20
25
30
35Stocks-to-use percentage
Ending stocks Stocks-to-use
Global Soybean Stocks Rely on Record S. American Crop Now Being Planted
DTN-The Progressive Farmer Ag Summit 2012
December 11, 2012
Presentation by Terry N. Barr, Senior Director, Knowledge Exchange Division, CoBank 38
38Chart source: Knowledge Exchange Division, CoBank, ACB (confidential and proprietary)
70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12
0
10
20
30
40
50
60
70
Million metric tons of U.S. exports
Wheat Soybeans Coarse grains
Growth in U.S. Grain Exports Will Be Vital As Stocks Rebuild and Competitors Expand
DTN-The Progressive Farmer Ag Summit 2012
December 11, 2012
Presentation by Terry N. Barr, Senior Director, Knowledge Exchange Division, CoBank 39
Export Market Will Be Key to Positive Animal Protein and Dairy Returns
80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 -3
0
3
6
9
12
15
18Billion pounds (red meat: carcass weight; poultry: ready-to-cook)
Imports Exports BalanceExport share of
2012 U.S. production Broilers ………... 20% Beef ………….…. 10% Pork …………..… 23%All meat …….....17%Dairy (skim solids)… 17%
Chart source: Knowledge Exchange Division, CoBank, ACB (confidential and proprietary)
DTN-The Progressive Farmer Ag Summit 2012
December 11, 2012
Presentation by Terry N. Barr, Senior Director, Knowledge Exchange Division, CoBank 40
40
Farm Bill and Final Deficit Reduction Packages Will Impact Agriculture Sector
Chart source: Knowledge Exchange Division, CoBank, ACB (confidential and proprietary)
Farm bill:Fiscal cliff down payment could include new farm bill or simply score savings, extend current farm bill and direct committees to achieve required savings. Movement from direct payments to insurance programs likely for 2014.
Magnitude and composition of required savings will change as full deficit reduction package evolves!
Tax code changes:Fiscal cliff down payment will include some tax code changes that could impact consumer demand for meat and dairy but full deficit reduction package will address estate taxes, 1031 like exchanges, capital gains, depreciation allowances, etc.
DTN-The Progressive Farmer Ag Summit 2012
December 11, 2012
Presentation by Terry N. Barr, Senior Director, Knowledge Exchange Division, CoBank 41
41Chart source: Knowledge Exchange Division, CoBank, ACB (confidential and proprietary)
Farm Income Remains Strong But Protein and Dairy Remain Under Pressures
75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 110
25
50
75
100
125
150Billion dollars
N e t F a rm C a s h In c o m e
D ire c t g o v e rn m e n t p a y m e n ts *
* e m e rg e n c y p a y m e n ts a re s tr ip e d a re a o f g o v e rn m e n t p a y m e n ts )
Income gains in 2012 will be sustained despite below normal harvest and weak global
economy! However, dramatic regional and commodity diversity in income and balance
sheets!
DTN-The Progressive Farmer Ag Summit 2012
December 11, 2012
Presentation by Terry N. Barr, Senior Director, Knowledge Exchange Division, CoBank 42
Farm Debt Leveraging Has Not Followed Land Prices Higher
70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12
0
500
1000
1500
2000
2500
Billion dollars
0
100
200
300
400
500
Billion dollars
C h a n g e 1 9 7 0 -1 9 8 0A s s e ts ... + 2 5 9 %D e b t ....... + 2 3 5 %
C h a n g e 1 9 8 0 -1 9 9 0A s s e ts ... -1 6 %D e b t ....... -1 9 %
C h a n g e 1 9 9 0 -2 0 0 0A s s e ts ... + 4 3 %D e b t ....... + 2 5 %
C h a n g e 2 0 0 0 -2 0 1 0A s s e ts ... + 8 2 %D e b t ....... + 5 3 %
F a rm a s s e ts(le ft s c a le )
F a rm d e b t(r ig h t s c a le )
Chart source: Knowledge Exchange Division, CoBank, ACB (confidential and proprietary)