2012 CoBank PowerPoint Template - Landscape · Geo6poli9cal%challenges Russia/Ukraine’–se?ling’down…’Pu9n’winning.’ Euro’zone’–Greek’drama. Middle’East–ongoing;’Iran’issue’moves

Policy Updates…Washington & Global Issues Impacting Agriculture

What Others Are Saying

• “While some say sugar support is weakening in Congress, we always say in our office never bet against sugar until someone proves they can beat sugar even in ONE chamber.”

2

Corn Refiners Get Aggressive

• Hiring more lobbyists…• Pointing out while other crops “gave” in last farm

bill “cuts”… sugar did not. • But… groups don’t win when pitting one against

another.

3

Risk & Uncertainty Premiums Are S9ll High

Geo-‐poli9cal challenges Russia/Ukraine – se?ling down… Pu9n winning. Euro zone – Greek drama. Middle East – ongoing; Iran issue moves to front page. Global terrorism-‐ ongoing TPP and TTIP moves onto radar screen.



Divergent growth rates for mature, emerging economies.



Divergent growth rates for mature, emerging economies. Divergent central bank policies/financial market hangover

drives currency vola9lity and compe99ve devalua9ons.




drives currency vola9lity and compe99ve devalua9ons. China’s economic transi9on.





Changing energy paradigm – oil, natural gas, renewables.





Changing energy paradigm – oil, natural gas, renewables.

Commodity output gains outpacing weak demand growth.


Global Economy Reflects Guarded Op9mism; Cheaper Oil and U.S. Economy Are Main Catalysts

Global Economy Reflects Guarded Op9mism; Cheaper Oil and U.S. Economy Are Main Catalysts

PolicyRealignment2014-‐18???

RisingMiddleClass

2004-‐08Avg.=4.5%

EconomicTurmoil2009-‐13Avg.=2.9%

Disposable U.S. Personal Income Increases Should Begin to Boost Confidence

Energy Sector Was Investment Driver But Becomes Consump9on S9mulus in 2015

Energy Information Administration forecasts

Good news for consumers in impor0ng countries .. U.S. China, EU,

etc. Bad news for oil exporters.. Mexico, Venezuela, Middle East; Iran

nego0a0ons are wildcard.

From 2002 to 2011 ……….……...... -‐38 %From Aug. 2011 to June 2015 .... +30 %

Dollar declined by over 25% aJer floa0ng in 1973!

Volkerslide

U.S. Dollar Remains Strong Against Broad Range of Currencies

Currency to US dollar:

ChinaEuroJapanBrazil

AustraliaCanadaRussia

Argen9naMexico

Change from2014 2013-‐0.1 % -‐1.2 %-‐22 % -‐18 %-‐20 % -‐23 %-‐43 % -‐41 %-‐25 % -‐22 % -‐12 % -‐19 % -‐63 % -‐73 %-‐12 % -‐68 %-‐21 % -‐24 %

Growing Trade Deficit Will Par9ally Offset S9mulus From Oil Price Declines

Growing Trade Deficit Will Par9ally Offset S9mulus From Oil Price Declines

Creates momentum for Trans-‐Pacific Partnership (TPP) and Transatlan0c Trade

and Investment Partnership (TTIP)

Current Business Cycle is Now Fourth Longest Since World War II and Under Performing

2007-?? cycleFourth longestDeepest trough

Weakest recovery

60-‐70% of U.S. economic growth comes from consumer spending:

Sustaining U.S. Growth Momentum Wll Require Strong Consumer Spending

2.4%2.2%2.3%1.6%Annual average= 2.5%-‐2.8%

-‐0.2%

Net exports

Weather/consumer

Oil investmen

t

2.5%

US & Global Economy

• US economy tepid 1st half… more growth 2nd half

• US Fed policy shifts ahead

• Global outlook uncertain… Greece and China

12

Greece & China

• Neither will be game-changer for U.S. economy

• Greece woes more impt than China stock plunge

• As Greece goes, so goes some others (I-P-S)

• Greece dealing with huge debt

• Greece will eventually leave the euro… impacts

13

China

• ‘Great Fall of China’… perspective: 30%/115%

• Just a bubble bursting… China stock perspective

• Impact on China economy: not much

• Impact on world economy: not much

• Some impact on oil, metals, some U.S. firms

14

Chinese Growth Likely to Remain Subdued As Advanced Economies Remain Weak

Chinese Growth Likely to Remain Subdued As Advanced Economies Remain Weak

More fiscal s0mulus may be needed

China top market for U.S. agricultural exports18 percent of U.S. agricultural exports go to China

Source: ERS analysis of USDA/FAS GATS database.

U.S. is leading supplier of China’s agricultural imports

Source: ERS analysis of China customs sta9s9cs reported by Global Trade Atlas.

Trade Issues • TPP – Timeline

• TPP – Dairy | Meat | Sugar | Autos | Biologicals

• US-EU – TTIP

• Bird flu

• COOL – Retaliation unless Senate acts

• Cuba – Slow going but changes ahead

18

Cuba’s agricultural imports from the world during 2012-‐14were concentrated in grains, animal products, and oilseeds

19

Source: Export data of na9onal governments, as cited by Global Trade Informa9on Services.

Regula9ons

• EPA, White House regulation thrust ahead

• Rail regulations

• Waters of the US (WOTUS) rule

• GMO framework update

• RFS and EPA announcements

20

2014 Farm Bill Decisions

21

Percent of Farms Elec9ng ARC/PLCBY CROP

22

Sec9on 179 expensing, with $500K limit

50% bonus deprecia9on

Biodiesel credit… Grassley change

Further extensions likely for 2015, possibly 2016

Tax Extenders

Shipping and Transporta9on

• Highway Trust Fund extension

• No consensus for long-term funding

• Final plan may wait until tax reform, elections

• Chance plan could come end of 2015

24

Legisla9ve progress on tax policy, en9tlements, trade policy, immigra9on and

energy are uncertain in the 114th Congress !!!

Regulatory Agenda Will Accelerate Under

Administra9ve Authori9es in 2015-‐16!!!

(expect legisla9ve/legal challenges)

Fiscal and Monetary Policy in Transi9onWhite House

CongressU.S. Treasury Department

U.S. Federal Reserve

Legisla9ve progress on tax policy, en9tlements, trade policy, immigra9on and

energy are uncertain in the 114th Congress !!!

Regulatory Agenda Will Accelerate Under

Administra9ve Authori9es in 2015-‐16!!!

(expect legisla9ve/legal challenges)

Fiscal and Monetary Policy in Transi9onWhite House

Congress

Over 11,500 people per day could qualify for Medicare over the next 14 years!

Short Term Deficit Relief Means Long Term Revenue and Spending Changes Are Post-‐2016

First budget of next President

Congress and the White House are “Just Playing Through”

Crisis needed before they see the clubhouse!

Data source: World bank

Old Normal

Transi9

on2004-‐2008

Transi9

on

RisingGlobal

Middle class

EconomicTurmoil2009-‐13

PolicyRealignment2014-‐18

Mother nature, global growth, financial liquidity and geo-‐poli9cs will

drive market

Commodity Market Realignments S9ll Underway in Uneasy Global Marketplace

29

Farm Income Likely To Be Under Downward Pressure As Commodity Prices Decline Into 2015

Over the last five years net cash farm income has averaged 69 percent higher

than previous decade!

Balance Sheet of Agriculture is Be?er Prepared for Vola9lity and Transi9on

Change 2008-2014Assets …. +37%Debt ……....+21%

31

Sharp Drop in Net Returns Have Domino Effects on Land Values, Rental Rates and Input Prices

Net per acre returns for wheat, corn, soybeans and co\on weighted by planted acreage.

Who Isn’t Running for President?

32

QUESTIONS

Documents

2012 CoBank PowerPoint Template - Landscape · Geo6poli9cal%challenges Russia/Ukraine’–se?ling’down…’Pu9n’winning.’ Euro’zone’–Greek’drama. Middle’East–ongoing;’Iran’issue’moves