United States Agribusiness Report Q1 2012

BMI View: We see the US remaining the world's largest agricultural producer over the long term, even though some of its sectors may decline in global importance. This is true for the country's livestock and dairy sector, for which the US has lost competitiveness compared to other large producers (particularly Brazil). Nevertheless, we believe the country will maintain its dominance in grain output. In 2011/12, even though wheat, corn and soybean production were affected by severe droughts, the country has maintained strong exports in value thanks to elevated grain prices. Also, we expect strong production growth over the long term, supported by strong demand (particularly due to poultry and ethanol production growth). This will help ensure sufficient supply on global markets.
Key Trends
?? Corn production growth to 2015/16: 18.8% to 375.6mn tonnes. This will be due partly to consumption growth (much of which is going towards livestock but also some ethanol production). The export market will also be a significant growth driver for domestic production. Base effects are a key reason why the growth rate is not higher.
?? Poultry consumption growth to 2016: 21.3% to 19.9mn tonnes. This will be driven by consumer preference for poultry over red meat because it is a healthier option. Also, the Introduction of new poultry-based convenience products is fuelling demand.
?? Soybean production growth to 2015/16: 10.4% to 100.0mn tonnes. This will come on the back of increasing demand from the livestock sector both domestically and globally. In fact, with livestock production expanding across the globe, the US, currently the world's largest soybean exporter, should benefit from increasing export opportunities in the long term, mainly from China.
?? 2012 Real GDP Growth: 2.0% (up from 1.8% in 2011; predicted to average 2.3% from 2011 until 2016).
?? Consumer Price Inflation: 2.1% year-on-year in 2012 (down from 3.0% in 2011; predicted to average 2.3% from 2011 until 2016).
Industry Developments
We maintain our view for grains export volume from the US to be lower in 2011/12, based on several downward revisions to our forecasts for US wheat, corn and soybean production. Indeed, we forecast US grains production to decrease slightly by 2.6% to 456.7mn tonnes y-o-y in 2011/12, with wheat production to decrease by 8.1% to 55.2mn tonnes, corn production to decrease 0.7% to 315.0mn tonnes and soybean production to decrease 5.7% to 86.5mn tonnes. This subdued grains output is due to severe droughts in the country's major growing regions, which caused area devastation and yields to decrease. Thus, the USDA forecasts total grains exports from the US to be at 103.3mn tonnes, 15.7% lower in 2011/12 than in 2010/11, with corn exports decreasing the most, by 12.8% y-o-y to 40.6mn tonnes.
Sugar production in the US is tightly regulated. The US sugar program uses price supports, domestic marketing allotments and tariff-rate quotas to affect the amount of sugar available to the domestic market. The program's origins can be traced to legislation in the Agriculture and Food Act of 1981 (as part of the 1981 Farm Act). Imports are restricted and domestic prices supported by the USDA's Commodity Credit Corporation (CCC). Processors are also given quotas for how much sugar they are allowed to produce under the marketing allotment system. This complicated and costly system means, in an average year, US consumers pay far more for sugar than consumers in other countries. Domestic prices are supported by loans given by the CCC to sugar processors. The loans must be paid off within one season and sugar is used as collateral.
As we have revised down our US GDP growth and domestic consumption forecasts, we maintain our view for dairy production to stagnate in the coming years. Indeed, we forecast milk production to increase 0.8% y-o-y in 2010/11, while butter and cheese production are set to increase 3.0% and 0.4% y-o-y. This is because higher feed and fuel costs are significantly weighing on farmer margins, making it unprofitable to produce milk and encouraging production of higher value dairy products. Also, lower credit availability since the 2008 subprime crisis renders it difficult for farmers to invest in increased production capacity. Finally, continued consolidation in the US dairy industry is reducing milking cow numbers and production yields.

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Executive Summary 5
SWOT Analysis 7
United States Agricultural SWOT 7
United States Political SWOT 8
United States Economic SWOT 8
United States Business Environment SWOT 9
Supply Demand Analysis 10
United States Grains Outlook 10
Table: UNITED STATES Wheat Production & Consumption,2011-2016 11
Table: UNITED STATES Corn Production & Consumption, 2011-2016 11
Table: UNITED STATES Barley Production & Consumption, 2011-2016 11
Table: United States Corn Production & Consumption 18
Table: United States Corn Production & Consumption, 2008-2012 18
Table: United States Barley Production & Consumption,2008-2012 18
United States Dairy Outlook 20
Table: UNITED STATES Milk Production & Consumption,2011-2016 21
Table: UNITED STATES Butter Production & Consumption, 2011-2016 21
Table: UNITED STATES Cheese Production & Consumption, 2011-2016 21
Table: UNITED STATES Milk Production & Consumption,2008-2012 25
Table: UNITED STATES Butter Production & Consumption, 2008-2012 26
Table: UNITED STATES Cheese Production & Consumption, 2008-2012 26
United States Soybean Outlook 27
Table: UNITED STATES Soybean Production & Consumption,2011-2016 27
Table: UNITED STATES Soybean Production & Consumption,2008-2012 31
United States Sugar Outlook 33
Table: UNITED STATES Sugar Production & Consumption,2011-2016 33
Table: UNITED STATES Sugar Production & Consumption,2008-2012 37
United States Livestock Outlook 38
Table: UNITED STATES Poultry Production & Consumption,2011-2016 39
Table: UNITED STATES Pork Production & Consumption, 2011-2016 39
Table: UNITED STATES Beef & Veal Production & Consumption, 2011-2016 39
Table: UNITED STATES Poultry Production & Consumption, 2008-2012 42
Table: UNITED STATES Pork Production & Consumption, 2008-2012 43
Table: UNITED STATES Beef & Veal Production & Consumption,2008-2012 43
Company Profiles 44
Bunge Ltd 44
Technical analysis 50
Financials 52
Commodity Price Analysis 55
Monthly Grains Update 55
Corn 55
Rice 56
Soybean 57
Wheat 58
Monthly Softs Update 59
Cocoa 59
United States Agribusiness Report Q1 2012
© Business Monitor International Ltd Page 4
Coffee 60
Palm Oil 61
Sugar 62
Industry Forecast 63
Consumer Outlook 63
Food 65
Consumption 65
Table: Food Consumption Indicators -- Historical Data & Forecasts 66
Confectionery 67
Table: Confectionery Value/Volume Sales -- Historical Data & Forecasts 68
Table: Confectionery 69
Canned Food 70
Table: Canned Food Value/Volume Sales -- Historical Data & Forecasts,2008-2015 70
Dairy 71
Table: Dairy Volume Sales -- Historical Data & Forecasts 71
Mass Grocery Retail 74
Table: Mass Grocery Retail Sector Sales Value by Format -- Historical Data & Forecasts,2008-2015 75
Table: Sales Breakdown By Retail Format Type (%) 75
Economic Analysis - Bracing For External Shocks 76
Table: United States - GDP By Expenditure, Real Growth % 77
United States - GDP Contribution To Growth 87
Macroeconomic Outlook 88
Table: United States - GDP Contribution To Growth 91
Company News Alert 92
Discount Retailers Still Outperforming But Signs That Growth Could Be Harder To Come By 92
Industry Trend Analysis 94
US Firms Struggling With Commodity Costs But BMI Anticipates Easier 2012 94
Table: Agricultural Commodity Prices 95
BMI Forecast Modelling 96
How We Generate Our Industry Forecasts 96
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