World Grain Marketing: Why the location of population & economic growth is crucial for long term planning

World Grain Marketing: Why the

location of population & economic growth is crucial for long-term

planning

Chris Ferris Senior Grains Analyst, Canada

www.twitter.com/chrisferris3

December 2, 2015 20th Annual

Fields on Wheels Conference

About Informa Economics

Informa Economics, Inc. (formerly known as Sparks Companies, Inc.) is a world leader in broad-based domestic and international agricultural and commodity/product market research, analysis, evaluation and consulting.

We analyze most major value chains in the crops, livestock sectors, along with transportation.

The company was founded in 1977. It was acquired by Informa plc ("Informa") in 2003.

Informa Economics, Inc. serves hundreds of firms, institutions and trade organizations worldwide. http://www.informaecon.com/aboutus.asp

Summary

3

1) Demand Pull A. Population Growth B. Economic Growth

2) Supply Implications 3) Some Logistics Implications 4) Implications

DEMAND PULL

4

Demand Pull

Factors:

Population

Urbanization

GDP per person

Income Distribution

Consumption per person

Many more

5

(1) World Population Growth

6

9 Billion People by 2035 – 2040!?

Slide 7

2015, 7.349

2035, 8.839

2040, 9.157

2100, 11.213

0.000

2.000

4.000

6.000

8.000

10.000

12.000W

orld

Pop

ulat

ion

(Bill

ions

)

WORLD World Median Forecast 9 Billion

Source: UNPD http://esa.un.org/unpd

This projection is too vague for those of you

making large, long-lived infrastructure

investments; UNLESS, ….

… We Understand the Location of This Growth!

… So where will the population growth be?

(2) World Population Projection to 2035; by Region and by Key Countries

9

World Population Projection (Millions) to 2035; Asia Dominates, Africa Growing Quickly (1)

10 Source: UNPD http://esa.un.org/unpd

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

2015 2020 2025 2030 2035

Popu

latio

n (M

illio

ns)

World Population Projection (Millions)

ASIA AFRICA LATIN AMERICA AND THE CARIBBEAN EUROPE NORTHERN AMERICA OCEANIA

World Population Projection (Millions) to 2035; Asia Dominates, Africa Growing Quickly (2)

11 Source: UNPD http://esa.un.org/unpd

4,3934,598

4,7754,923

5,045

1,1861,340

1,5041,679

1,866

0

1,000

2,000

3,000

4,000

5,000

6,000

2015 2020 2025 2030 2035

Popu

latio

n (M

illio

ns)

ASIA AFRICA LATIN AMERICA AND THE CARIBBEAN EUROPE NORTHERN AMERICA OCEANIA

World Population Projection (Millions) to 2035; Top 10 countries: India, China still dominate

12 Source: UNPD http://esa.un.org/unpd

0

200 000

400 000

600 000

800 000

1 000 000

1 200 000

1 400 000

1 600 000

1 800 000

2015 2035

Popu

latio

n (th

ousa

nds)

India China United States of AmericaIndonesia Nigeria PakistanBrazil Bangladesh MexicoEthiopia

(3) World Population Projection to 2100

13

World Population Projection (Millions) to 2100, Africa is the Projected Growth Story (1)

14 Source: UNPD http://esa.un.org/unpd

0

2,000

4,000

6,000

8,000

10,000

12,000

2015 2020 2025 2030 2035 2040 2045 2050 2055 2060 2065 2070 2075 2080 2085 2090 2095 2100

Popu

latio

n (M

illio

ns)

World Population Projection (Millions)

ASIA AFRICA LATIN AMERICA AND THE CARIBBEAN EUROPE NORTHERN AMERICA OCEANIA

World Population Projection (Millions) to 2100, Africa is the Projected Growth Story (2)

15

0

1,000

2,000

3,000

4,000

5,000

6,000

2015 2020 2025 2030 2035 2040 2045 2050 2055 2060 2065 2070 2075 2080 2085 2090 2095 2100

Popu

latio

n (M

illio

ns)

ASIA AFRICA LATIN AMERICA AND THE CARIBBEAN EUROPE NORTHERN AMERICA OCEANIA

Source: UNPD http://esa.un.org/unpd

World Population Projection (Millions) to 2100; Top 10 Countries, highlighting fast growth

16 Source: UNPD http://esa.un.org/unpd

0

200 000

400 000

600 000

800 000

1 000 000

1 200 000

1 400 000

1 600 000

1 800 000

2015 2035 2100

Popu

latio

n (th

ousa

nds)

India China Nigeria

United States of America Democratic Republic of the Congo Pakistan

Indonesia United Republic of Tanzania Ethiopia

Niger

African countries forecast to have strong population growth and population count to 2100: 2100 Rank: (3) Nigeria (5) D.R. of the Congo (8) Tanzania (10) Niger

World Population Projection (Millions) to 2100; Top 3 Countries: China, India & Nigeria

17 Source: UNPD http://esa.un.org/unpd

India1,659,786

China

1,004,392

Nigeria

752,247

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1,600,000

1,800,000

2,000,000

2015 2020 2025 2030 2035 2040 2045 2050 2055 2060 2065 2070 2075 2080 2085 2090 2095 2100

Popu

latio

n (th

ousa

nds)

India China Nigeria

United States of America Democratic Republic of the Congo Pakistan

Indonesia United Republic of Tanzania Ethiopia

Niger

(4) World Population: Forecast Changes to Fertility Rates

18

Fertility Rate: 2015

Slide 19 Source: UNPD

Africa has the highest fertility rates

Fertility Rate: forecast for 2035

Slide 20 Source: UNPD

Africa has the highest fertility rates, but expect it to slow

Fertility Rate: forecast for 2050

Slide 21 Source: UNPD

Africa has the highest fertility rates, but expect it to slow more

Fertility Rate: forecast for 2100

Slide 22 Source: UNPD

Africa has the highest fertility rates, but expect it to slow to around the replacement rate

(5) Urbanization

23

Urbanization & Large Cities: 1970s

Slide 24 Source: UNPD

Urbanization & Large Cities: 1990

Slide 25 Source: UNPD

Urbanization & Large Cities: 2014

Slide 26 Source: UNPD

Urbanization & Large Cities: 2030 F

Slide 27 Source: UNPD

Share Urban: 2014 by Income Categories

Slide 28 Source: UNPD

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

90.0

Share Urban

Urbanization Rates vs 54% World Average

Slide 29 Source: UNPD

(6) Some Challenges for GDP/Person Growth

30

Key Challenges

Need to grow GDP/person: ◊ This requires the building of infrastructure ◊ the improvement of education (although literacy has improved markedly in many

countries ◊ Faster and easier business formation, with strong respect for private property

(ILD) ◊ Improved freedoms of various types (Heritage Foundation):

In some cases, the world has made fairly good progress. In others, there is substantial room for improvement

31 Source: qqq

2015 Economic Freedom Index - Overall

32 Source: Heritage Foundation, in Partnership with the Wall Street Journal

Note: The following indexes were created by the Heritage Foundation and represent their methods & judgements. They are being used as illustrations only.

2015 Economic Freedom Index - Business Freedom

33 Source: Heritage Foundation, in Partnership with the Wall Street Journal

2015 Economic Freedom Index - Trade Freedom

34 Source: Heritage Foundation, in Partnership with the Wall Street Journal

2015 Economic Freedom Index - Fiscal Freedom

35 Source: Heritage Foundation, in Partnership with the Wall Street Journal

2015 Economic Freedom Index - Government Spending

36 Source: Heritage Foundation, in Partnership with the Wall Street Journal

2015 Economic Freedom Index - Monetary Freedom

37 Source: Heritage Foundation, in Partnership with the Wall Street Journal

2015 Economic Freedom Index - Investment Freedom

38 Source: Heritage Foundation, in Partnership with the Wall Street Journal

There is room for improvement

2015 Economic Freedom Index - Financial Freedom

39 Source: Heritage Foundation, in Partnership with the Wall Street Journal

There is room for improvement

2015 Economic Freedom Index - Property Rights

40 Source: Heritage Foundation, in Partnership with the Wall Street Journal

According to this Index, there is substantial room for improvement

2015 Economic Freedom Index - Freedom From Corruption

41 Source: Heritage Foundation, in Partnership with the Wall Street Journal

According to this Index, there is substantial room for improvement

2015 Economic Freedom Index - Labor Freedom

42 Source: Heritage Foundation, in Partnership with the Wall Street Journal

According to this Index, there is room for improvement

Why is Economic Freedom Important?

◊ With rapid population growth, rapid economic growth is needed to prevent food insecurity, food riots and things like the Arab Spring. Crises like this can degenerate into failed states, terrorism, civil war and/or mass starvation.

◊ Corruption, slow processes, unclear property rights – all these things slow down economic growth.

While not everyone would agree with how the Indexes above are defined, they illustrate several problems. ◊ A lack of economic freedom, freedom to rapidly form businesses, a lack of

recognition of property rights, and unclear operating environments make it harder for entrepreneurs to build their small businesses up from small “grey economy” /1 business into bigger ones than generate jobs for others. Some of the businesses can then grow into medium and large businesses.

43 1/ “Grey Economy” - Hernando de Soto, of the Institute of Liberty & Democracy, Peru

(7) Example: Nigeria Wheat + Rice

44

Nigeria, Wheat Consumption: Actual & Forecast

Slide 45

02000400060008000

100001200014000160001800020000

2005

2010

2015

2030

2035

2040

2045

2050

2055

2060

2065

2070

2075

2080

2085

2090

2095

2100

Wheat: Food Use

The Most Recent Commodities Super-cycle: Oil, Grains, Oilseeds

46

Monthly World Crude Surplus/Deficit vs OPEC Price

47

Growth in Canadian Crude Oil Production

48

Canada’s monthly Crude Oil Total Net Withdrawals (roughly equivalent to production) rose sharply from 2010 onwards. With strong oil prices, & the application of frakking, we saw rising supplies.

Growth in Canadian Crude Oil Exports

49

Much of the growth was exported to the USA, with a portion of it being delivered by rail, given the lack of pipeline capacity to carry the new supplies.

Fuel Oils and Crude Petroleum by Rail

50 Source: Statistics Canada

On a Crop Year basis, you can see crude by rail dipped slightly in 2014-15, after surging 300% from 2010-11. Expect 2015-16 to flat to lower.

Expanded Oil-by-Rail

0

25

50

75

100

125

150

175

200

225

250

275

300

400450500550600650700750800850900950

1,0001,050

90/9

191

/92

92/9

393

/94

94/9

595

/96

96/9

797

/98

98/9

999

/00

00/0

101

/02

02/0

303

/04

04/0

505

/06

06/0

707

/08

08/0

909

/10

10/1

111

/12

12/1

313

/14

14/1

515

/16

16/1

7

Endi

ng S

tock

s

Prod

uctio

n &

Use

World Corn Production, Use and Ending Stocks

Million Tonnes ProductionUseEnding StocksEnding Stocks Ex. China

0

2

4

6

8

10

12

14

1619

9319

9419

9519

9619

9719

9819

9920

0020

0120

0220

0320

0420

0520

0620

0720

0820

0920

1020

1120

1220

1320

1420

1520

16

Bill

ion

Gal

lons

US Ethanol Production and RFS Ethanol ProductionImplied Domestic DisappearanceRenewable Fuel Standard

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

8.00

9.00

10.00

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

75/7

677

/78

79/8

081

/82

83/8

485

/86

87/8

889

/90

91/9

293

/94

95/9

697

/98

99/0

001

/02

03/0

405

/06

07/0

809

/10

11/1

213

/14

15/1

6

Dol

lars

/Bus

hel

Mill

ion

Bus

hels

US Corn Ending Stocks and Prices

Ending Stocks

Farm Price

World Soybean Supply and Demand (Million Tonnes)

54

02468101214161820222426

0255075

100125150175200225250275300325350

80/8

181

/82

82/8

383

/84

84/8

585

/86

86/8

787

/88

88/8

989

/90

90/9

191

/92

92/9

393

/94

94/9

595

/96

96/9

797

/98

98/9

999

/00

00/0

101

/02

02/0

303

/04

04/0

505

/06

06/0

707

/08

08/0

909

/10

10/1

111

/12

12/1

313

/14

14/1

515

/16

US

Endi

ng S

tock

s

Wor

ld P

rodu

ctio

n an

d U

se

World ProductionWorld UseUS Ending Stocks

4

5

6

7

8

9

10

11

12

13

14

15

16

0

50

100

150

200

250

300

350

400

450

500

550

60080

/81

81/8

282

/83

83/8

484

/85

85/8

686

/87

87/8

888

/89

89/9

090

/91

91/9

292

/93

93/9

494

/95

95/9

696

/97

97/9

898

/99

99/0

000

/01

01/0

202

/03

03/0

404

/05

05/0

606

/07

07/0

808

/09

09/1

010

/11

11/1

212

/13

13/1

414

/15

15/1

616

/17

Dol

lars

/Bus

hel

Mill

ion

Bus

hels

US Soybean Ending Stocks and Prices

Farm Price

Ending Stocks

0102030405060708090

100110120130140

90/9

191

/92

92/9

393

/94

94/9

595

/96

96/9

797

/98

98/9

999

/00

00/0

101

/02

02/0

303

/04

04/0

505

/06

06/0

707

/08

08/0

909

/10

10/1

111

/12

12/1

313

/14

14/1

515

/16

16/1

7

Mill

ion

Tonn

es

Sep/Aug

Soybean Exports by Major Exporters

UkraineCanadaParaguayArgentinaBrazilUS

0

5

10

15

20

25

30

35

40

45

50

55

60

65

98/9

9

99/0

0

00/0

1

01/0

2

02/0

3

03/0

4

04/0

5

05/0

6

06/0

7

07/0

8

08/0

9

09/1

0

10/1

1

11/1

2

12/1

3

13/1

4

14/1

5

15/1

6

MIll

ion

Tonn

es

Vegetable Oil Import Demand

FSUW. HemisEuropeAfricaChinaIndiaOther Asia

North American Grain Logistics

59

Agricultural Supply Chain

60

Comparing the Modes: One 15-Barge Tow Equals 216 Rail Cars or 1,050 Trucks

61

216 Rail Cars + 6 Locomotives

1,050 Large Semi Tractor-Trailers One 15-Barge Tow

62

Comparing the Modes:

Ton-miles Traveled per Gallon of Fuel

576

413

155

Super-B trucks improve the relative economics somewhat more that this.

Multi-Client Study North American Commodity Constraints

63

North America’s Commodity Constraints

The Modal Requirements Transporting North America’s Commodities in a Highly Utilized

Modal Environment A Three Segment

Multi-Client Study Effort:

Grains, Oilseeds & Products

Fertilizer (N, P & K) Coal

Key Issues to be Addressed in the Study

Presented by a Premier Industry Intelligence Team :

Through a combination of higher commodity flow patterns, insufficient equipment, inadequate infrastructure investment, weather and congestion, the North American transport logistics enterprise has been strained. Yet, the outlook for commodities is very strong in context of an expanding global population and higher consumption levels. However, those higher demand volumes will further strain an already congested transport system. An understanding of the scope, scale and requirements of moving expected higher volumes of North American commodities and products is needed. A premier team has launched this important study. Be sure to sign up today by visiting www.informaecon.com.

Prepared and Organized by: informa economics, inc. www.informaecon.com Enroll Today

Freight Movements at all Time Highs

Freight a Leading Indicator on the Economy

Multi-Modal Economy

Freight Movements Running Strong

64

Coal Consumption Dominates Flow Patterns

Grain Prominent in Canada

Fertilizer Relatively Small but Important in Reach

Commodity Composition Skewed to Agriculture and Energy

65

Canada53%

Canada4%

Canada43%

U.S.32%

U.S.2%

U.S.66%

Total33%

Total2%

Total65%

North American Commodity ConsumptionShare by Country and Total

Grains and Oilseeds Fertilizer Coal

Abundant Supplies of Commodities to be Moved

Crop Production as an Example

Challenges on Horizon

Demand still Strength

Abundant Supplies

66

0

100

200

300

400

500

600

700

1975

1976

1977

1978

1979

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

Cro

p Pr

oduc

tion

(mill

ion

met

ric to

ns)

Crop Year

U.S. and Canada Crop Production

CanadaUnited States

Questions and Answers, and Discussion

68

World Grain Marketing: Long term planning implications

of the location of population &

economic growth

Chris Ferris Senior Grains Analyst, Canada

www.twitter.com/chrisferris3

December 2, 2015 20th Annual

Fields on Wheels Conference