1
© 2011 CHS Inc.
Who controls the kingdom?
Exploring Food Sovereignty
Mark Palmquist
Executive Vice President &
Chief Operating Officer
Ag Business
© 2011 CHS Inc.
What in the world is the world going to eat?
A look at:
• The world’s growing and evolving population
• Why hungry nations want “food sovereignty”
• Impacts on U.S. agribusiness
• CHS system strategy
Welcome, Baby 7 Billion
 The world’s population hit 7 billion on
October 31, according to the U.N.
population division
 Accelerating growth
•
•
•
•
•
•
•
•
1804
1927
1960
1974
1987
1999
2011
–
–
–
–
–
–
–
1
2
3
4
5
6
7
billion (after 250,000 years)
billion
billion
billion
billion
billion
billion
2050 – projected 9.3 billion
© 2011 CHS Inc.
Market Drivers: Demographics
Market Drivers: Grain supply and demand outlook
Net grain imports in developing countries
Global grain production
Source: FAO
Feeding the world: Global Challenges




Geopolitical risks
Government intervention/distortion
World economy/capital
Food safety
For growing nations, it’s
about “Food Sovereignty”
© 2011 CHS Inc.
What do we mean by “Food Sovereignty?”
• The ability of a nation to dependably access food to meet
its citizens’ dietary requirements either by internal
production or dependable imports
© 2011 CHS Inc.
The issues: Geopolitical Risks
 “Arab Spring” – What happens next?
 Ongoing Iraq/Iran/Turkey turmoil
 Unpredictable Pakistan
9
© 2011 CHS Inc.
The issues: Government intervention/distortion
In challenging times, we
want to safeguard food
supply:
•
•
•
•
•
•
10
Russia
Ukraine
Argentina
China
European Union
United States
© 2011 CHS Inc.
The issues: World
economy/capital
 Slowing world growth
 European financial
crisis
 Inflation in emerging
countries
 Currency manipulation
11
© 2011 CHS Inc.
Controlling food destiny is name of the game
Nations want to ensure:
• Supply
• Distribution
• Price
• Safety
If you can’t raise it, control the source!
12
© 2011 CHS Inc.
The headlines tell the story
 Saudi investors put $100 million into Ethiopian
farm
 UAE stepping up agricultural investment in Sudan
 Pakistan offers farmland to foreign investors
 Korea’s Daewoo leases Madagascar land for
feed, fuel
 Short of food? Rent half a country
 Asian nation’s invest in Brazilian production
13
© 2011 CHS Inc.
Food safety poses challenges
 2009 Hola Pops from Mexico contaminated
with lead
 2008 baby milk scandal with melamine from the
contaminated protein working into the food chain
a year later
 2007 pet food recalls, another result of Chinese
protein export contamination resulting from
melamine as an adulterant
14
© 2011 CHS Inc.
Impact on U.S. agriculture?
A new competitive world
15
© 2011 CHS Inc.
The world we live in today
Old World
 U.S. agribusiness sources
inputs domestically and
globally
 U.S. originated grain
moves to the domestic
and global marketplace
New World
 Global players originating
grain from U.S. producers
 U.S. players sourcing grain
globally
 Crop nutrients imported
and exported
 Global growth creates
tighter crude oil and
energy supply/demand
 Outside investors invest in
commodity businesses
Aggressive market rationalization
Asian influence in grain
China
 Chongqing Grains
 COFCO
 Sino Grain
South Korean
 Government
17
© 2011 CHS Inc.
Japan
 Marubeni
 Mitsui
 Itochu
 Mitsubishi
 Sumitomo
 Zen-Noh
A look at two multinationals
Tokyo, Japan
Omaha, NE
Actively investing in U.S.
agriculture
 Gavilon was formed in
2008 by investment funds:
 35% of the Marubeni Group
is owned in common stock
by Financial Institutions
 Grain: Columbia Grain
 Crop Nutrients: Helena
18
© 2011 CHS Inc.
 Ospraie Special
Opportunities Fund
 General Atlantic
 Soros Fund Management
 Gavilon Management
New export players converge on PNW
TEMCO; Tacoma
(11.7%)
(CHS, Cargill)
LDC; Seattle(12.2%)
AGP; Grays Harbor
(3.8%)
(AGP)
EGT; Longview
(16.9%)
(Bunge, Itochu, Pan Ocean)
KEC; Kalama (18.3%)
(ADM, Gavilon, MSK)
CHS; Kalama
(14.1%)
CGI; T-5, Portland(7.7%)
UGC; Vancouver
(Marubeni)
(8.5%)
(Mitsui )
CLD; Irving, Portland
CLD; O-Dock, Portland
(4.3%)
(Cargill,
LDC)
(2.4%)
(Cargill, LDC)
Bunge Port of Longview Facility in PNW






Joint Venture between Bunge, Itochu, and Pan Ocean (EGT, LLC)
State-of-the-art export grain terminal
First export terminal built in the U.S. in more than two decades
Capable of holding four 110-car unit trains at any given time
Shuttle train and barge unloading capabilities on the Columbia River
Can handle 8 million metric tons annually
© 2011 CHS Inc.
Regional Market Dynamics






21
Aggressive pursuit of assets
Overvalue pricing for assets
Intimidation with new sites
Approaching key personnel
Conversion funding for business
Retro-fitting asset base to next generation assets
© 2011 CHS Inc.
Closer to home: Shuttle Expansion
Proposed Shuttles
Announced
Rumor
© 2011 CHS Inc.
Multinational “go-to-market” strategy
 Partner
• “We would like to partner with you.”
 Buy
• “We would like to buy you.”
 Build
• “We will build next to you.”
23
© 2011 CHS Inc.
The CHS system addresses global food needs
CHS system strategy
 Domestic investments
 Strengthening U.S. origination
through strong cooperative system
alignment
 Building out global grain and crop
nutrient origination capability
25
© 2011 CHS Inc.
PNW export investments





Additional CHS PNW capacity
Combination cargo loading capability
Alternative rail destination for corn and soybeans
Bulk products capability
Top-tier loading speed
CHS U.S. Business Operations
CHS System Locations
Each dot represents a CHS location, member company or business affiliation
Country Operations Locations
29
29
© 2011 CHS Inc.
Stronger cooperative alignment
 Traditional buy/sell relationships
 Specific formal relationships including JVs and
LLCs
 Opportunity to become fully part of CHS through
Country Operations
30
© 2011 CHS Inc.
Growing CHS global origination footprint
 Diversify origination
• Be a reliable food source for global customers
• Market knowledge
• Risk diversification
• Increase/diversify fertilizer supply
• Additional profit opportunities
 Expand demand base
• Increase market share of our producers’ products
• Mitigate risk
• Additional profit opportunities for member-owned
system
31
© 2011 CHS Inc.
CHS Global grain/CN footprint
Tacoma
Kalama
Friona
Geneva
Duluth/Superior
Barcelona
Collins
Romania,
Hungary,
Bulgaria,
Serbia
Myrtle Grove
Mexico
Kiev
Krasnodar
Amman
Shanghai
Hong Kong
Brazil
Australia
Argentina
Main Black Sea ports
Constanta
33
The cooperative advantage
As growing nations seek food
sovereignty, cooperative
relationships are attractive:
• Farmer ownership
• Dependability
• Transparency
• Integrity
34
© 2009 CHS Inc.
Questions?
© 2011 CHS Inc.
36
© 2011 CHS Inc.