Global Supply, Demand and Price Outlook on Palm & Lauric Oils, Impacts from Arg. Drought. Emphasis also be given on the Chinese Outlook

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1 Global Supply, Demand and Price Outlook on Palm & Lauric Oils, Impacts from Arg. Drought Emphasis also be given on the Chinese Outlook Presentation at POC 218 in KL on 7 March 218 Thomas Mielke, ISTA Mielke, Oil World, Global Market Research on Oilseeds, Oils and Meals Feel free to contact me for assistance at <thomas.mielke@oilworld.de> Company Profil and Services ISTAMielke GmbH publisher of OIL WORLD -was founded in 1958 ISTA = International STatistical Agricultural Information Leading private authority for global research and market analyses for oilseeds, oils & fats and oilmeals Independent, not involved in trading, unbiased information Providing monthly and quarterly world supply and demand balances Daily, weekly and monthly reports on oilseeds, oils and oilmeals. Also a Chinese Report in Mandarin. We want to be your provider for global analyses and forecasts Take a free 3-week trial at Source: ISTA Mielke GmbH, Oil World 1

2 Indian Government: Higher import taxes Retaliation? Governments US Government: Trade policies - - > Escallating retaliatory actions? Supply Demand there somebody to pick me up tomorrow at the airport Price Drought in Argentina and in the US Weather Financial Markets & Funds Currency values Your Information Provider - - Independent, Unbiased, Authoritative - - Since 1958 March 5, 218 On March 1 Indian import taxes raised againto44% forcrude and54% forref. PO, plus 1% surcharge!! Will this help to reverse -thenegative trendin domestic production? -andthewidening supplygap? Veg oil Imports 17/18: Total 15.6 (vs 15.4) Palm oil 9.5 vs Soyaoil 3.5 vs Sunfloil 2.25 vs INDIA: Oilseed Crops and Imports of Oils (Mn T) 1/2 3/4 Imports of Oils Crops 7/8 11/12 15/16 5/6 9/1 13/14 17/18F Source: ISTA Mielke GmbH, Oil World 2

3 Prices ofpalmoilunder pressure in Dec, falling to US $ 618 (Dec22). Very strong demand has kept prices well above thoseof215. World PO exports49.4 Mn T (+5.5) in Jan/Dec 217. Price recoveredslightlyin Jan andfebr 218, which was notunexpected. Bearish immediate responseatthebmd on Indian duty hike The outlookon palmoil prices in 218 follow later Monthly Prices Crude Palm Oil, fob Indonesia (US-$/T) Monthly averages until February / / / Oct Nov Dec Jan Feb Mar Apr May Jun Jly Aug Sep 3,4 3,2 3 2,8 2,6 2,4 2,2 2 1,8 1,6 1,4 1,2 1 Yields of Soybeans, Rapeseed & Sunfl.seed in Key Countries in Tonnes per Ha Rapeseed Soybeans Sunfl.seed 94/95 97/98 /1 3/4 6/7 9/1 13/14 17/18F YieldIncreasesin thepast15 years: Soybeans +18% Rapeseed +26% Sunflowerseed +53% (a) Berechnet mit 3-Jahres-Durchschnitten. Source: ISTA Mielke GmbH, Oil World 3

4 Severe Drought in Argentina SoybeanField in Argentina on March 1 (Pergamino North B. Aires) ARGENTINA: Soybean Area and Output Production (Mn T) year low 1 Harvested Area (Mn ha) Source: ISTA Mielke GmbH, Oil World 4

ARGENTINA: Soybean Area ( Mn ha ), Yields (T/ha) & Production (Mn T) 218F 217 216 215 212 29 Planted area 17.75* 19.1* 2.3* 19.9* 18.67 17.5* Lost area.75* 1.2* 1.5*.4* 1.9 1.* Harvest area 17.* 17.

5 ARGENTINA: Soybean Area ( Mn ha ), Yields (T/ha) & Production (Mn T) 218F Planted area 17.75* 19.1* 2.3* 19.9* * Lost area.75* 1.2* 1.5*.4* * Harvest area 17.* 17.9* 18.8* 19.5* * Yields (T/ha) 2.47* 3.5* 2.89* 3.8* 2.26* 1.91* Production * 54.6* 54.4* 6.* 39.8* 31.5* Precipitation Forecast March 7-13, 218 South America Source: ISTA Mielke GmbH, Oil World 5

Precipitation Forecast March 6-22, 218 South America SOUTH AMERICA : Soybean Production (Mn T) March 2 Dec 22 17/18F 17/18F 16/17 15/16 14/15 Brazil..... 113.* 19.5* 114.8 95.43 97.18 Argentina.. 42.

6 Precipitation Forecast March 6-22, 218 South America SOUTH AMERICA : Soybean Production (Mn T) March 2 Dec 22 17/18F 17/18F 16/17 15/16 14/15 Brazil * 19.5* Argentina.. 42.* 53.5* 54.6* 54.4* 6.* Paraguay.. 9.4* 9.75* 1.5* 9.4* 8.4* Bolivia * 2.65* 2.7* 2.9* 2.65 Uruguay * 3.3* 3.4* 2.48* 3.4* Total * 178.7* Drop of15.7 Mn T Source: ISTA Mielke GmbH, Oil World 6

7 Global soybean outputin 217/18 turning out considerably below potential. SOYBEANS : World Supply and Demand ( Mn T ) 17/18F 16/17 15/16 14/15 Opening stocks Production * U.S.A China, P.R India * 1.5* 7.1* 8.5* Argentina * 54.6* 54.4* 6.* Brazil * Total supply 433.5* Total soybean consumption seen risingto341 Mn T in 17/18. Ending stocks to declineby2-3 Mn. Crush (Sept/Aug). 293.* Other use * Ending stocks 92.6* U.S.A. Aug * Argentina Aug * 3.68* 28.6* 3.96* Brazil Aug * 3.6* 19.96* 24.1* Stocks/usage 27.2% 28.7% 24.6% 27.9% In 217/18 therewill be a global soybean productiondeficit, causedbythesouth American crop losses. There are still weather and productioin risks. Atthemomentwe forecastthatstockswill bedown by2-3 Mn T as of end-aug 218. Swing factors to watch: 1) Farmer selling 2) The crush economics 3)Chinese buying (timing and size) So ybean s: W o rld Sto cks as o f end -A u gu st (Mn T ) F Source: ISTA Mielke GmbH, Oil World 7

8 Imports of Soybeans (Mn T) China Rest of world /97 98/99 /1 2/3 4/5 6/7 8/9 1/11 12/13 14/15 16/ /96 97/98 99/ 1/2 3/4 5/6 7/8 9/1 11/12 13/14 15/16 17/18 O c t o b e r / S e p t e m b e r China imports likely to be boosted to 96 Mn T in 217/18. Soybeanimportsofall countries otherthanchina jumpedfrom38.2 Mn T in 212/13 andmayreach55.2 Mn T thisseason. CHINA: Oilseed Output & Crushings Production (Mn T) Crushings (Mn T) 2 99/ 2/3 5/6 8/9 11/12 14/15 17/18F Oil/Fat Imports 17/18: Total 9.1 (vs 8.7) Palm oil 5.5 vs. 5. Soyaoil.5 vs..7 Sunfloil.8 vs..7 Rapeoil.8 vs CHINA: Imports of 17 Oils & Fats (Mn T) Soya oil Palm oil Others 2 2/3 4/5 6/7 8/9 1/11 12/13 14/15 16/17 1/2 3/4 5/6 7/8 9/1 11/12 13/14 15/16 17/18F Source: ISTA Mielke GmbH, Oil World 8

9 Feed usageup3% in 216/17 Soya meal consumption jumpedby11% in 216/17, benefitting from the steep reduction of importsofddgs Further sizeable increase in Chinese soya meal demandin 217/18, partly due to high prices ofcornin China & Growing Importance of Soya Meal (Mn T) 9 Total Oilmeals 8 Soya Meal CHINA: Total Oilmeal Consumption 99/ 2/3 5/6 8/9 11/12 14/15 17/18F O c t o b e r / S e p t e m b e r Daily Soya Meal Futures (Dalian vs. CBOT) spot position -- in US-$/T Dalian CBOT Ja17 Mar May Jly Sept Nov Ja18 Mar Daily futures from 3 Jan 217 until 5 March 218 Source: ISTA Mielke GmbH, Oil World 9

10 China increasing exports of soya meal in comingmonths. In Oct/Sept exports Mn T (vs1.1) Daily Soya Meal & Corn Futures Prices Dalian Exchange -- spot position Soya meal Corn Ja17 Mar May Jly Sept Nov Ja18 Mar Daily price ratios from 3 Jan 217 until 5 March 218 S. American soybean crop to plunge in early 218 (our current estimateisfora dropof16 Mn T) It could get worse. Arrival of needed rains not forecast Soybean Crop Trend Since 74/75 (Mn T) U.S.A. Uncertainties Increasing dependenceon newus soyacrop 4 2 Argentina, B razil & Paraguay 75/76 81/82 87/88 93/94 99/ 4/5 1/11 17/18F Source: ISTA Mielke GmbH, Oil World 1

11 11 CBOT: Daily Soybean Futures (c/bu) March day moving average 9 Ja17Feb Mar Apr May Jun Jly Aug Sept Oct Nov DecJa18 FebMar Daily futures from 2 Jan 217 until 5 March 218 World soybean production to drop by 9 Mn T in 217/18 Soybean production currently estimated to be2-3 Mn T below projected consumption in 217/18 Production of 9 other oilseeds +8 Mn T Sunfl.seed -1.6 Rapeseed +3.1 Cottonseed Oilseeds: World Production (Mn T) Soybeans Other 9 oilseeds / 1/2 3/4 5/6 7/8 9/1 11/12 13/14 15/16 17/18F Source: ISTA Mielke GmbH, Oil World 11

12 Price Impacts of the Production Losses in Argentina CB OT: Daily Indices o f So ybean Comp lex 2 J an uary 218 = 1 Soya Meal March Soybeans M arch Soya Oil March Jan2 Jan16 Feb2 Feb13 Mar 5 Daily indices from 2 Jan 218 until 5 March 218 CBOT: Daily Spot Futures Soybeans & Soya Meal (US-$/T) Soybeans 42 Soya meal Ja17FebMar Apr May Jun Jly Aug Sept Oct Nov Dec Ja18 Mar Daily prices from 3 Jan 217 until 5 March 218 Source: ISTA Mielke GmbH, Oil World 12

13 6 % Argentine Exports in Percent of World Exports in Jan/Dec % 48% 4 35% % 7% Soybeans Soya oil 8 Oils Soya meal 8 Meals Weekly Prices of Soya Pellets, 47% Arg., fob (US-$/T) / / /18 216/17 25 Oct Nov Dec Jan Feb Mar Apr May Jun Jly Aug Sep Prices from 1 Oct 214 until 1 March 218 Source: ISTA Mielke GmbH, Oil World 13

14 Strong demand increase for oilmeals from the livestock industry has boosted world productionofoilmeals by15% in 25 years Global dependence of soya meal increasing Declining supplies offishmealandof sunflowermealin 217/18 12 Oilmeals: World Production (Mn T) Soyameal Other 11 oilmeals 7 3/4 5/6 7/8 9/1 11/12 13/14 15/16 17/18F O c t o b e r / S e p t e m b e r PRICE RESPONSES to Argentine Droughts 6% Soya meal, fob Arg % Soybeans, US, cif Rott. 5 Soya oil, Arg. fob 45 Palm oil, fob Mal % +3% % -1 Jan2 to June 3 Jan 3 to June 29 Jan 2 to March Source: ISTA Mielke GmbH, Oil World 14

15 PRICE RESPONSES to Argentine Droughts 6% Soya meal, fob Arg % Soybeans, US, cif Rott. 5 Soya oil, Arg. f ob 45 Palm oil, fob Mal. 4 Mineral oil (Brent) 35 +3% 3 +27% % -2 Jan2 to June 3 Jan 3 to June 29 Jan 2 to March Weekly Prices of Palm oil & Gas Oil (US-$/T) Crude palm oil, cif Rott. ICE Gas Oil (Spot) 2 Ja12 Jly Ja13 Jly Ja14 Jly Ja15 Jly Ja16 Jly Ja17 Jly Ja18 Weekly prices from January 212 until 5 March 218 Source: ISTA Mielke GmbH, Oil World 15

16 Monthly Prices of Palm Oil & Crude Mineral Oil (US-$/T) Palm oil, crude, Rott. Crude mineral oil, Brent Premium palm oil vs crude oil Ja16 Mar May Jly Sep Nov Ja17 Mar May Jly Sep Nov Ja18 Monthly prices from Jan 216 until Febr BIODIESELand HVO: World Production ( Mn T ) J a n u a r y / D e c e m b e r EU * U.S.A Argentina * Brazil Colombia....53* Singapore.. 1.5* Indonesia * 3.18* Malaysia Thailand * 1.16* Oth. ctries * 2.95* 2.89* 2.94* 2.65* Total * Change in ( Mn T ) +1.6* Source: ISTA Mielke, Feb Source: ISTA Mielke GmbH, Oil World 16

17 The Outlook for Palm Oil Manychallenges: - Lack of replanting(age profile) - Labour shortage(malaysia) - Below potential yields -Acreagelimitations(slowdown in new plantings) The strong recovery in world palm oil production in 217 and 218 istemporary. From219 onward there will be smaller annual increases in palm oil production and supplies. 216: -6% = -3.7 Mn T 1998: -5% = -.8 MnT Palm Oil Production in Major Countries (Mn T) Malaysia EffectsofElNino Indonesia Rest of World Source: ISTA Mielke GmbH, Oil World 17

18 Monthly Prices Crude Palm Oil, fob Indonesia (US-$/T) Monthly averages until February / Supply& Demand of17 oils& fats: Currentvegoilsuppliesarelarge. World stocksup2 Mn fromlast year Production of vegetable oils and animalfatsincreasedby15.2 Mn T from a year agoin Jan/Dec The global situation changed from 217/18 deficitin 216 tosurplusin 217. Part ofthesurpluswas usedto replenish stocks /16 J a n / D e c 5 17 Oils/Fats: Production (+15.2) 25.9 Oct Nov Dec Jan Feb Mar Apr May Jun Jly Aug Sep Consumption 219. (+7.3) Surplus/Deficit +2.1 Mn T -5.8 Looking on Palm Oil alone: World palmoiloutputjumpedby8.6 Mn T fromlast yearin Jan/Dec217. Also the PO situation changed from deficitin 216 tosurplusin 217. But pricesdidnot collapsein 217. Part ofthesurpluswas neededto replenish depleted stocks. J a n / D e c Palm Oil (Mn T ) Production 67.8 (+8.6) 59.2 Consumption 65.4 (+2.6) 62.8 Surplus/Deficit +2.4 Mn T -3.6 Supply& Demand of17 oils& fats: Currentvegoilsuppliesarelarge. World stocksup2 Mn fromlast year Production of vegetable oils and animalfatsincreasedby15.2 Mn T from a year agoin Jan/Dec217. The global situation changed from deficitin 216 tosurplusin 217. Part ofthesurpluswas usedto replenish stocks. J a n / D e c 17 Oils/Fats: Production (+15.2) 25.9 Consumption 219. (+7.3) Surplus/Deficit +2.1 Mn T -5.8 Source: ISTA Mielke GmbH, Oil World 18

19 PALM OIL : World Production ( Mn T ) and Yields ( T/ha ) ) P r o d u c t i o n Y i e l d s 218F F Indonesia 38.8* 36.8* 32.4* 33.53* 3.87* 3.81* 3.54* 3.89* Malaysia 2.76* * 3.93* 3.51* 4.18* Thailand 2.45* 2.58* * 3.15* 2.34* 2.76* America 4.8* 4.71* * 3.26* Africa 2.65* 2.55* * 1.68* Oth ctrs. 1.38* 1.31* * 2.38* WORLD 7.84* 67.87* * 3.56* Bullish or bearish? +3. Mn T +8.6 Mn T My expectation is that world palm oil supplies will be comfortably large in Jan/Sep 218: J a n / Sept Palm Oil (Mn T ) Opening stocks Production World Supplies PALM OIL : World Production ( Mn T ) a P r o d u c t i o n 218F Indonesia 38.8* 36.8* 32.4* 33.53* Malaysia 2.76* Thailand 2.45* 2.58* America 4.8* 4.71* Africa 2.65* 2.55* Oth ctrs. 1.38* 1.31* WORLD 7.84* 67.87* Consumption +3.7 Palm oilstocks -1.6 Mn T in Jan/Mar 18 but +2.2 Mn T in Apr/Sept Mn T +8.6 Mn T Source: ISTA Mielke GmbH, Oil World 19

20 What is the Price Outlook? The growth in world production is slowing down. Whataretheeffectson stocksandprices? O c t / S e p t Production of 17/18 16/ oils& fats Of which: Palm oil Lauric oils Soya oil Rape/canola oil Sunflower oil Grd+cotton oils Other oils/fats OILS & FATS : World Supply & Demand ( Mn T ) Forecast O c t o b e r / S e p t e m b e r 17/18F 16/17 15/16 14/15 13/14 Op'g stocks Production * Change Imports * Exports * Consumption * Change End stocks * Stocks/usage % 12.5% 12.7% 15.7% 15.2% Source: ISTA Mielke GmbH, Oil World 2

21 RapidlyRisingWorld Demand ofoils& Fats Averagedemandgrowthin past 5 seasons: Total per year +6.5 Mn T Biofuel +1.7 Mn T Food/other +4.8 Mn T /9 17 Oils & Fats : World Consumption 92/93 biofuel 95/96 Total Usage in Mn T 98/99 1/2 food and other 4/5 7/8 1/11 13/14 16/17 17 OILS & FATS: Consumption Change (in Mn T) O c t o b e r / S e p t e m b e r 17/18F 16/17 15/16 14/15 EU * U.S.A * Argentina * Brazil * China, PR. +.47* India * Indonesia.. +.9* Malaysia * Others * World * Source: ISTA Mielke GmbH, Oil World 21

22 Production deficit of soybeans in 217/18 cannotbeoffsetby otheroilseeds. Extentofthedeclinein South Americastill unclear. Oilseed stocks still sufficient but increaseddependenceon US soybeans in 218. World stocksofoils& fats have increased, but arenot burdensome Weforecasta recoveryofoils& fatsstocksby Mn T in 217/18 World Stocks in Percent of Annual Usage (%) oils & fats 1 oilseeds F At the end of the season MALAYSIA: Crude Palm Oil Futures Close Third position in Malaysian Ringgit/T 22 Nov Dec Jan Feb Mar Apr May Jun Jly Aug Sep Oct Nov DecJa18 Feb Prices from 1 Nov 216 until 5 March 218 Source: ISTA Mielke GmbH, Oil World 22

23 1 Daily Prices of 2 Oils (in US-$/T) Soya oil, fob Argentina (y1) Crude palm oil, fob Indonesia (y1) Premiums soya oil vs palm oil (y2) Jly Aug Sep Oct Nov Dec Ja18 Feb Mar Daily prices from 3 July 217 until 5 March 218 Prices ofpalmoilandsoyoillikelyto tradesidewaysorslightlyhigherin thenext3-5 weeks. But a newpriceweaknesslikelyto emerge from Apr 218 onward Average Apr/Sept 218: Crude palmoil(indon.) 63 (low 6) Soya oil(fob Arg.) 75 (low 71) Sunfl oil(fob Ukraine) 78 Crude palm oil(rott) 655 (low 625) Monthly Prices Crude Palm Oil, fob Indonesia (US-$/T) Monthly averages until February / / / Oct Nov Dec Jan Feb Mar Apr May Jun Jly Aug Sep Dutch soya oil 845 Dutch Rape oil 82 Source: ISTA Mielke GmbH, Oil World 23

24 Prices oflauric Oilsareseendecliningin 218 World Output ofthe2 Lauric Oils+.8 Mn T in 217/18 (against+.54 in 16/17) Palmkernel Oil : World Supply & Demand (Mn T) O c t o b e r / S e p t e m b e r 17/18F 16/17 15/16 14/15 Op'g stocks Production * Change Imports * Exports * Disappear.(a) 7.33* Change End. stocks * Coconut Oil : World Supply & Demand (Mn T) O c t o b e r / S e p t e m b e r 17/18F 16/17 15/16 14/15 Op'g stocks Production * Change Imports * Exports * Disappear.(a) 2.67* Change End. stocks...42* (a)residual of the balance. Sizeably risingstocksin > Narrowingofpricepremiumslikely Daily Prices of 3 Oils in Rotterdam (US-$/T) Coconut oil,phil/indo,cif Rott Palmkern oil, Mal./Indo., cif Rott. Palm oil crude, cif N.W. Eur Jly14 Sep NovJan15 Mar May Jly Sep Nov Ja16 Mar May Jly Sep Nov Ja'17 Mar May Jly Sep DecJa18 Mar Daily prices from July 214 until 5 March 218 Source: ISTA Mielke GmbH, Oil World 24

25 Price Outlook Average July/Dec 218: Palmkernel oil(rott) 9 (Price low83 or8) Coconut oil(rott) avg 1 (Price low95 or92) Monthly Prices of Palm & Lauric Oils (in US-$/T) Palm oil, crude cif Rott. Palmkernel oil, Mal/Indo., cif Rott. Coconut oil, Phil/Indo. cif Rott '13 '14 '15 '16 '17 '18 January 213 until February 218 OIL PALMS and 3 OILSEEDS: World Area (Mn ha) 14 Oil Palm Mature Area 12 Soybeans 1 Rapeseed & Canola Sunflowerseed Some Concluding Statements From Jan/Dec 1976 until 217 Source: ISTA Mielke GmbH, Oil World 25

Significant global demand growth: World production of 1 oilseeds doubling in the past 25 years Strong demand. Demand and prices are the drivers for production increases Limited acreage for expansion.

26 Significant global demand growth: World production of 1 oilseeds doubling in the past 25 years Strong demand. Demand and prices are the drivers for production increases Limited acreage for expansion. Oilseeds, grains and other crops are competing for area Oilseeds: World Area and Production Production (Mn T) Area (Mn ha) It is of utmost importance that yields are increased 15 1 worldwide 91/92 94/95 97/98 /1 3/4 6/7 9/1 13/14 17/18F Palm oil challenged by many constraints A labour shortage in Malaysia, despite rapidlyrisingwages. Longer harvest intervals, less loosefruit collection Declingyieldtrendin last 1 years Acreage limitations. Lack ofreplanting. MALAYSIA: Annual Palm Oil Yields (T/ha) 4, ,6 4,4 4,2 4 3,8 3,6 3,4 3,2 T/ha Source: ISTA Mielke GmbH, Oil World 26

27 MALAYSIA: Age Profile of Oil Palms (1 ha) (Total Area 5738 Thd ha as of Dec 216) -2years 3-5y 6-1y 11-15y 16-2y 21-25y over 25y PALM OIL: World Consumption (Mn T) From Jan/Dec 197 until 217 Source: ISTA Mielke GmbH, Oil World 27

28 PALM OIL: World Consumption, by Category Jan/Dec 217 total: 65. Mn T 45.5 Mn (7.%) 11.6 Mn (17.8%) 5.7 Mn (8.8%) 2.2 Mn (3.4%) Food use Chemicals Other (animal feed, etc.) Energy (biofuels) Thank you for your attention! More marketinforequired? Just getin touchwithme: Thomas.Mielke@oilworld.de fon OIL WORLD marketinformationisavailabledaily, weekly and monthly Signupfora 3-week trialperiod Source: ISTA Mielke GmbH, Oil World 28

7 March 2018 ISTA Mielke GmbH, OIL WORLD, Hamburg - 1

7 March 2018 ISTA Mielke GmbH, OIL WORLD, Hamburg - 1 7 March 218 ISTA Mielke GmbH, OIL WORLD, Hamburg - 1 Global Price Outlook for Palm & Lauric Oils and Impacts from the Severe Argentine Drought Losses Summary of key messages given by Thomas Mielke in his