EconomicOutlook’’ - Safe Food Alliance · Vernon&Crowder& SVP,&Senior&Analyst&...

Vernon Crowder SVP, Senior Analyst

Economic Outlook For US Dried Fruit and Nut Export Destinations

May 9, 2016

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Team of 94 professionals in 10 different countries; A truly Global Team

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Global Growth Outlook…Muddling Through

2015 2016 2017 2015 2016 2017 2015 2016 2017United States 2.4 2.0 2.6 0.1 0.9 2.2 5.3 4.8 4.5Japan 0.5 0.2 0.3 0.6 0.5 0.3 3.6 3.8 3.8China 7.0 6.5 6.0 1.4 1.7 1.7 na na naUnited Kingdom 2.2 2.1 2.1 0.1 0.4 1.4 5.5 5.1 5.2

Eurozone 1.5 1.2 1.5 0.0 0.2 1.4 10.9 10.2 9.6Germany 1.4 1.7 1.7 0.1 0.5 1.5 4.6 5.7 4.3France 1.1 1.0 1.0 0.2 0.2 1.0 10.5 10.5 10.3Italy 0.6 0.7 0.8 0.1 0.2 1.2 11.9 11.0 10.5Spain 3.2 2.5 2.3 -‐0.5 0.0 1.5 21.9 19.8 18.3Belg ium 1.4 1.0 1.5 0.6 1.5 1.7 8.3 8.0 8.0Netherlands 1.9 1.9 2.0 0.2 0.5 1.3 6.9 6.3 6.0

GDP Inflation Unemployment rate

Source: Financial Markets Research

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Rabobank’s Global Strategic Framework

Incentives to weaken currency (Currency

Wars)

Commodity prices ↓ Global

disinflation

Low wage growth, more saving

Slow trade and economy

Too much debt Structural problems

Overcapacity

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Percent of GDP Percen

t of G

DP

United States Japan Eurozone China (ex-‐ shadowbank sector)

Public and private debt (% GDP)


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Stronger Dollar and Lower Commodity Prices


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Unprecedented Monetary Policy Stimulus...

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2009 2010 2011 2012 2013 2014 2015 2016

USD

billion

Balance sheet totals major central banks(USD, cumulative)

ECB FED BOJ PBOC BOE


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FX Wars Only Make Things Worse

China gets

weaker CNY

US needs weaker

USD

Europe needs weaker

EUR

Japan needs weaker

JPY

“The process...was one excessive depreciation after

another in which each country would emerge from its own deflationary problems at the expense of the system as a

whole.” Kindleberger (1984, p.399)

Talking about the 1930s


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This Isn’t Working Anymore. It’s Even Self-‐defeating

Negative rates

World trade suffering from FX wars

Misallocation of capital and financial bubbles

Rising income and wealth inequality

Can we still cope with new shocks?


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1m 3m 6m 9m 12m EUR/USD 1.137 1.12 1.10 1.08 1.07 1.07 USD/JPY 112.2 112.0 114.0 115.0 116.0 116.0 GBP/USD 1.434 1.42 1.39 1.46 1.49 1.53 USD/CHF 0.961 0.97 0.99 1.01 1.02 1.02 USD/CAD 1.304 1.31 1.33 1.35 1.33 1.30 AUD/USD 0.766 0.75 0.73 0.71 0.70 0.69 NZD/USD 0.690 0.67 0.65 0.63 0.62 0.61 USD/NOK 8.285 8.44 8.64 8.89 8.88 8.83 USD/SEK 8.127 8.26 8.36 8.33 8.74 8.22 USD/DKK 6.554 6.65 6.77 6.90 6.96 6.96 DXY 94.69 95.8 97.5 98.3 98.8 98.0

CEE 1m 3m 6m 9m 12m EUR/CZK 27.04 27.1 27.1 27.0 27.0 26.8 EUR/HUF 313.9 306 304 302 300 302 EUR/PLN 4.245 4.26 4.24 4.22 4.20 4.18 EUR/RON 4.470 4.45 4.40 4.36 4.32 4.30 EUR/TRY 3.211 3.20 3.17 3.13 3.12 3.15 EUR/RUB 76.36 73.9 74.8 75.6 77.0 74.9 USD/HUF 276.10 273 276 280 280 282 USD/PLN 3.734 3.80 3.85 3.91 3.93 3.91 USD/RUB 67.08 66.0 68.0 70.0 72.0 70.0 USD/TRY 2.823 2.86 2.88 2.90 2.92 2.94 RUB basket 71.10 69.6 71.1 72.5 74.3 72.2 LatAm 3m 6m 9m 12m USD/BRL 3.592 3.50 3.30 3.50 3.75 4.00 USD/CLP 667.7 690 720 735 750 760 USD/COP 3,002 3,000 3,200 3,350 3,400 3,500 USD/MXN 17.34 17.5 18.0 18.5 19.0 19.8 USD/PEN 3.313 3.45 3.50 3.60 3.70 3.80 USD/ARS 14.705 14.50 15.00 15.50 16.00 17.00 EUR/BRL 4.088 3.92 3.63 3.78 4.01 4.28 EUR/MXN 19.71 19.6 19.8 20.0 20.3 21.2

Others 1m 3m 6m 9m 12m USD/ZAR 14.765 15.20 15.40 15.80 16.00 16.20 EUR/ZAR 16.785 17.02 16.94 17.06 17.12 17.33 Asian FX 1m 3m 6m 9m 12m USD/CNY 6.465 6.65 6.80 7.20 7.40 7.60 USD/HKD 7.755 7.76 7.76 7.76 7.76 7.76 USD/IDR 13,195 13,600 13,750 13,900 14,100 14,200 USD/INR 66.2 68.0 68.0 68.0 68.5 68.7 USD/KRW 1,149 1,220 1,250 1,275 1,300 1,325 USD/MYR 3.90 4.25 4.50 4.52 4.55 4.55 USD/PHP 46.1 48.0 48.5 48.8 48.9 49.0 USD/SGD 1.350 1.420 1.470 1.480 1.500 1.500 USD/THB 35.1 36.0 36.8 37.6 38.2 38.8 USD/TWD 32.3 33.8 34.5 35.2 35.3 36.0 USD/VND 22,280 22,632 22,882 23,032 23,182 23,332

1m 3m 6m 9m 12m Brent 40 37 33 35 35 38 WTI 38 35 31 33 33 35

FX Forecast—1 April 2016

Source: Rabobank

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2015 Nuts and Dried Fruit Exports Destinations & Value

Crop Export Value

Almonds 4.7 Billion

Walnuts 1.5 Billion

Pistachios 850 Million

Pecans 470 Million

Raisins 334 Million

Hazelnuts 111 Million

Dates 50 Million

Figs 17 Million

China & Hong Kong 12%

India 7%

Japan 6%

Other Asia 5%

South East Asia 5%

Spain 9% Germany

9%

Other Europe 18%

Canada 7%

Mexico 3%

Middle East 12%

Others 7%

Source: USDA, GATS, Rabobank, 2016

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GDP Growth in the Eurozone


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Will the Eurozone Hold Under Renewed Stress?

•  Combination of income inequality and long-term unemployment a fertile soil for populist parties and calls for self-determination

•  Migrant flows a risk as well as an opportunity to fight demographic challenges

at

defr

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nl

be

fi

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gr

cymt

pt

uk

sedk

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20 25 30 35 40

% long-‐term une

mployed

Gini coefficient of income unequality


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Japan—Economic Forecast

Yearly Quarterly 2015 2016 2017 Q4/2015 Q1/2016 Q2/2016 Q3/2016

GDP 0.5 0.2 0.3 0.7 0.0 0.1 0.4

Consumption -1.2 -0.3 0.6 -1.1 -1.2 -0.1 -0.5

Investment 1.1 2.0 0.7 2.2 2.0 2.3 1.9

Government 1.2 1.2 1.2 1.4 1.4 1.2 1.3

Trade 0.4 0.0 0.0 0.0 0.0 0.0 0.0

Inventories 0.5 -0.1 -0.4 0.5 0.0 -0.5 0.1

CPI (% YoY) 0.6 0.5 0.3 0.3 0.4 0.5 0.6

Unemp. %rate

3.6 3.8 3.8 3.6 3.7 3.7 3.8

Source: Rabobank

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Japanese Yields have Fallen Dramatically

Source: Bloomberg

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India—Economic Forecast

Yearly Quarterly 2015 2016 2017 Q4/2015 Q1/2016 Q2/2016 Q3/2016

GDP 7.3 7.6 7.3 7.3 7.7 7.6 7.2

Consumption 3.5 3.8 3.7 3.6 3.9 4.0 4.0

Investment 1.7 2.2 2.6 0.9 2.3 2.8 2.2

Government 0.2 1.0 0.8 0.5 -0.2 0.7 1.4

Trade 0.1 0.7 0.3 0.5 2.1 1.3 -0.5

Inventories 0.5 -0.1 -0.1 0.5 0.6 -0.3 -0.4

CPI (% YoY) 5.1 5.3 5.2 5.5 5.7 5.4 5.1

Source: Rabobank

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Indian vs. Chinese FX Reserves

Source: Bloomberg

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One Could Certainly Call This Model a Success!

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14,000

16,000

18,000

20,000

1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014

Nom

inal

GD

P,

US

Db

n

China Euro area Japan US Australia


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Investment Driven By ‘Financial Repression’

Keep savings rates below inflation

(i.e., banks tax households)

Keep lending rates below nominal GDP growth

(i.e., banks subsidize firms)

...et volia! USD 3 trillion available to

invest


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To All Things There is Was a Season...

STRUCTURAL PROBLEMS

Way too much debt

too much investment

too many houses

overcapacity,

deflation

...in...

Source: Bloomberg, Financial Markets Research

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In Short, No Easy Path for China Ahead

MARKET REFORMS?

Mass bankruptcy

Banking crisis

Recession

MORE STIMULUS?

Growth keeps

slowing

Debt-to-GDP keeps rising

Japan scenario or debt crisis

EXPORT WAY OUT?

No global demand

CNY over-valued

Trade wars to follow?


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Mexico: USD/MXN Forecasts

Source: Rabobank

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-‐5

-‐4

-‐3

-‐2

-‐1

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1

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5

'03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '14 '15

GDP growth y/y, % CPI inflaTon y/y, % Core CPI inflaTon y/y, %

Canadian Growth and Inflation

MeeLng Probability of 25bp cut

4/13/2016 5.9%

5/25/2016 10.5%

7/13/2016 10.4%

9/7/2016 13.1%

10/19/2016 19.8%

12/7/2016 22.1% -‐1

0

1

2

3

4

5

Jan-‐10 Jul-‐11 Jan-‐13 Jul-‐14 Jan-‐16

Source: Bloomberg

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We are USD Bulls for 2016

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105

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'05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16

BBG USD index (larger basket that includes EM) DXY USD index

Source: Bloomberg

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The Bigger Picture

4) EM are slowing and China will be forced to allow greater currency depreciaTon.

3) US growth is fragile and will likely be subdued this year.

2) FX Wars will rage globally.

1) There is currently no obvious, strong driver of global growth.

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Contact Details

Rabobank N.A.

Vernon Crowder

Senior Vice President, Senior Analyst

Food & Agribusiness Research and Advisory

[email protected]

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