Economic Outlook For US Dried Fruit and Nut Export Destinations

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1 Economic Outlook For US Dried Fruit and Nut Export Destinations Vernon Crowder SVP, Senior Analyst May 9, 2016

2 Team of 94 professionals in 10 different countries; A truly Global Team 2

3 Global Growth Outlook Muddling Through GDP Inflation Unem ploym ent rate United States Japan China na na na United King dom Eurozone Germ any France Italy Spain Belg ium Netherlands Source: Financial Markets Research 3

4 Rabobank s Global Strategic Framework Public and private debt (% GDP) Too much debt Structural problems Overcapacity Incentives to weaken currency (Currency Wars) Percent of GDP Percent of GDP Slow trade and economy Commodity prices Global disinflation 0 United States Eurozone 0 Japan China (ex- shadowbank sector) Low wage growth, more saving Source: Financial Markets Research 4

5 Stronger Dollar and Lower Commodity Prices Source: Financial Markets Research 5

6 Unprecedented Monetary Policy Stimulus Balance sheet totals major central banks (USD, cumulative) USD billion ECB FED BOJ PBOC BOE Source: Financial Markets Research 6

7 FX Wars Only Make Things Worse China gets weaker CNY 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) Japan needs weaker JPY US needs weaker USD Talking about the 1930s Europe needs weaker EUR Source: Financial Markets Research 7

8 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? Source: Financial Markets Research 8

9 FX Forecast 1 April m 3m 6m 9m 12m EUR/USD USD/JPY GBP/USD USD/CHF USD/CAD AUD/USD NZD/USD USD/NOK USD/SEK USD/DKK DXY Others 1m 3m 6m 9m 12m USD/ZAR EUR/ZAR Asian FX 1m 3m 6m 9m 12m USD/CNY USD/HKD USD/IDR 13,195 13,600 13,750 13,900 14,100 14,200 USD/INR USD/KRW 1,149 1,220 1,250 1,275 1,300 1,325 USD/MYR USD/PHP USD/SGD USD/THB USD/TWD USD/VND 22,280 22,632 22,882 23,032 23,182 23,332 CEE 1m 3m 6m 9m 12m EUR/CZK EUR/HUF EUR/PLN EUR/RON EUR/TRY EUR/RUB USD/HUF USD/PLN USD/RUB USD/TRY RUB basket LatAm 3m 6m 9m 12m USD/BRL USD/CLP USD/COP 3,002 3,000 3,200 3,350 3,400 3,500 USD/MXN USD/PEN USD/ARS EUR/BRL EUR/MXN m 3m 6m 9m 12m Brent WTI Source: Rabobank 9

5 Billion 850 Million Canada 7% Other Asia 5% Pecans Raisins 470 Million 334 Million Other Europe 18%

10 2015 Nuts and Dried Fruit Exports Destinations & Value Mexico 3% Middle East 12% Others 7% China & Hong Kong 12% India 7% Japan 6% Crop Almonds Walnuts Pistachios Export Value 4.7 Billion 1.5 Billion 850 Million Canada 7% Other Asia 5% Pecans Raisins 470 Million 334 Million Other Europe 18% Germany 9% Spain 9% South East Asia 5% Hazelnuts Dates Figs 111 Million 50 Million 17 Million Source: USDA, GATS, Rabobank,

11 GDP Growth in the Eurozone Source: Financial Markets Research 11

Will the Eurozone Hold Under Renewed Stress?

unemployment a fertile soil for populist parties and

well as an opportunity to fight demographic challenges

fi se mt at dk fr it ie de uk pt es cy 10 0 20 25 30 35

12 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 gr % long- term unemployed be nl fi se mt at dk fr it ie de uk pt es cy Gini coefficient of income unequality Source: Financial Markets Research 12

13 Japan Economic Forecast Yearly Quarterly Q4/2015 Q1/2016 Q2/2016 Q3/2016 GDP Consumption Investment Government Trade Inventories CPI (% YoY) Unemp. %rate Source: Rabobank 13

14 Japanese Yields have Fallen Dramatically Source: Bloomberg 14

15 India Economic Forecast Yearly Quarterly Q4/2015 Q1/2016 Q2/2016 Q3/2016 GDP Consumption Investment Government Trade Inventories CPI (% YoY) Source: Rabobank 15

16 Indian vs. Chinese FX Reserves Source: Bloomberg 16

17 One Could Certainly Call This Model a Success! 20,000 Nominal GDP, USDbn 18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2, China Source: Financial Markets Research Euro area Japan US Australia 17

18 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 Source: Financial Markets Research 18

19 To All Things There is Was a Season......in... too many houses too much investment Way too much debt overcapacity, deflation STRUCTURAL PROBLEMS Source: Bloomberg, Financial Markets Research 19

20 In Short, No Easy Path for China Ahead Mass bankruptcy MARKET REFORMS? Banking crisis Recession Growth keeps slowing MORE STIMULUS? Debt-to-GDP keeps rising Japan scenario or debt crisis No global demand EXPORT WAY OUT? CNY overvalued Trade wars to follow? Source: Financial Markets Research 20

21 Mexico: USD/MXN Forecasts Source: Rabobank 21

22 Canadian Growth and Inflation 5 GDP growth y/y, % CPI inflaton y/y, % Core CPI inflaton y/y, % MeeLng Probability of 25bp cut 4/13/ % 5 5/25/ % 4 7/13/ % 3 9/7/ % /19/ % 0 12/7/ % - 1 Jan- 10 Jul- 11 Jan- 13 Jul- 14 Jan- 16 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '14 '15 Source: Bloomberg 22

23 We are USD Bulls for '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 ' BBG USD index (larger basket that includes EM) DXY USD index Source: Bloomberg 23

The Bigger Picture 1) There is currently no

24 The Bigger Picture 1) There is currently no obvious, strong driver of global growth. 2) FX Wars will rage globally. 3) US growth is fragile and will likely be subdued this year. 4) EM are slowing and China will be forced to allow greater currency depreciaton. 24

Contact Details Rabobank N.A. Vernon Crowder Senior Vice President, Senior Analyst Food & Agribusiness Research and Advisory Vernon.Crowder@Rabobank.

25 Contact Details Rabobank N.A. Vernon Crowder Senior Vice President, Senior Analyst Food & Agribusiness Research and Advisory The financial link in the global food chain DISCLAIMER This presentation has been prepared exclusively for the benefit and internal use of Rabobank International and does not carry any right of publication or disclosure other than to Rabobank International. Neither this presentation nor any of its contents may be used for any other purpose without the prior written consent of the Coöperatieve Centrale Raiffeisen- Boerenleenbank B.A. ( Rabobank ). The information in this presentation reflects prevailing market conditions and our judgment as of this date, all of which may be subject to change. This presentation is based on public information. The information and opinions contained in this document have been compiled or arrived at from sources believed to be reliable, but no representation or warranty, express or implied is made as to their accuracy, completeness or correctness. The information and opinions contained in this document are wholly indicative and for discussion purposes only. No rights may be derived from any potential offers, transactions, commercial ideas et cetera contained in this presentation. This presentation does not constitute an offer or invitation. This document shall not form the basis of or be relied upon in connection with any contract or commitment whatsoever 25

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