Global Oils & Fats Outlook - -Forecasts on Demand & Consumption

Global Oils & Fats Outlook - -Forecasts on Demand & Consumption Presentation given at POTS in Tehran on 20 Jan 2014 there somebody to pick me up tomorrow at the airport Thomas Mielke, Executive Director of ISTA Mielke, Oil World, Global Market Research on Oilseeds, Oils and Meals, E-mail <Thomas.Mielke@oilworld.de>

Company Profil and Services ISTA Mielke GmbH publisher of OIL WORLD - was founded in 1958 ISTA = International STatistical Agricultural Information Independent, not involved in trading Leading private there somebody authority to for pick global me up research tomorrow and at market analyses for oilseeds, oils the & airport fats and oilmeals unbiased information on the past and current global supply, demand and price developments as well as forecasts Daily, weekly and monthly publications on www.oilworld.de

Palm oil prices recovered by US $ 120 in the past 3 months until mid-dec But declined by US $ 60 since What is the further price trend? 1300 1200 1100 1000 900 800 700 600 500 400 300 200 Monthly Prices of Crude Palm Oil (US-$/T) 2003 Crude Palm Oil, cif Rott. 10-year average (1998-2007) 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 14 January 2003 until 14 Jan 2014

In Iran most veg oil imports consisted of soya and sun oil In future palm oil is likely to gain market share for price and quality reasons I will highlight the fundamentals of palm oil and other veg oils and discuss price prospects 1300 1200 1100 1000 900 800 700 Daily Prices of 3 Oils (in US-$/T) Palm olein, RBD, fob Malaysia Sun oil, fob Black Sea Soya oil, fob Arg. Jan12 Mar Jun Aug Oct Jan13 Mar May Jly Sep Nov Jan14 Daily prices from 3 Jan 2012 until 14 Jan 2014

Indonesia & Malaysia have exported 43.6 Mn T of oils & fats in 2012/13, 25 20 17 Oils & Fats: Exports of Major Countries (Mn T) Indonesia.. thus accounting for 15 there somebody to pick me up tomorrow Malaysia 58% of total world at the airport exports of all oils & 10 fats in 2012/13. World palm oil exports to drop in 2013/14 for first time in 16 years 5 0 Canada U.S.A. Ukraine Argentina 91/92 93/94 95/96 97/98 99/00 01/02 03/04 05/06 07/08 09/10 11/12 13/14

The Impact from Oilseeds

In past 25 years world oilseed production more than doubled (strong demand) Rising acreage and yields 500 460 420 10 Oilseeds: World Area and Production Production (Mn T) Area (Mn ha) About half of the acreage increased came from grains. But this shift will slow down. Agricultural land has become a limiting factor worldwide, big potential in Russia + Braz Land values more than doubled in past 6 years 380 340 300 260 220 180 140 88/89 91/92 94/95 97/98 00/01 04/05 07/08 10/11 13/14

Global Production of 10 Oilseeds 2013/14 = 497 Mn T Soybeans 58% 10 Oilseeds - - 497 Mn T India 8% China 10% Argentina 12% Other 3 Oilseeds 2% Brazil 19% Rapeseed 14% Copra & Palmkernels 4% Groundnuts 6% Cottonseed 9% Canada & U.S.A. 24% C.I.S. 7% EU-28 6% Other ctries 15% Sunflowerseed 8%

Trade Flows An increasing share of global import requirements is satisfied from a declining numbers of countries Logistics getting a constraint

LOGISTICS! In 13/14 USA and South America account for: - 80% of world exports of 10 oilseeds (131 Mn T) 45 40 35 30 10 OILSEEDS: Exports of Major Countries (Mn T) - 95% of world soybean 25 exports (total 109 Mn there T) somebody to pick me up tomorrow at the airport 20 In 2020: 15 Brazil + Arg will have to produce at least 162-167 10 Mn T of soybeans (vs Canada 5 130 in 2013). Australia 0 U.S.A. Brazil Oth. America Ukraine 89/90 92/93 95/96 98/99 01/02 04/05 07/08 10/11 13/14

Assuming normal weather in South America: Ample oilseed supplies ahead in 2013/14. Biggest increases in soybeans, sunflowerseed, rapeseed and palmkernels In 2013/14 world production seen surging by 28 Mn T and opening stocks up 8 Mn T, 10 OILSEEDS: World Production (Mn T) 13/14F 12/13 11/12 10/11 Avg.Change 15 Years to 12/13 Soybeans.... 287.59* 267.12 240.69 264.93 +3.5% Cottonseed... 43.40* 45.04 47.17 43.55 +1.8% Grdnuts,shelled 28.77* 28.02 27.25 27.75 +2.1% Sunflowerseed 40.19* 35.57 39.51 33.60 +2.8% Rapeseed.... 69.09* 63.91 61.46 61.83 +4.5% Sesameseed.. 3.93* 3.74 3.83 3.83 +2.3% Palmkernels.. 14.66* 13.92 13.30 12.54 +7.4% Copra....... 5.33* 5.38 5.26 4.80 +0.4% Linseed...... 2.30* 2.01 2.13 1.82-1.0% Castorseed... 1.37* 1.48 2.04 1.56 +0.7% Total........ 496.63* 466.19 442.64 456.20 +3.3% boosting world supplies by 36 Mn T - - > BEARISH!

Soybean Prices Overvalued Relative to Fundamentals Firmness in the nearby huge Chinese imports US soybean exports frontloaded (84% already in Sep/Feb) 1400 1350 1300 1250 1200 CBOT: Daily Soybean Futures (c/bu) Jan 2014 May 2014 US soybean stocks low 1150 1100 Nov 2014 1050 Aug'13 Sep Oct Nov Dec Ja'14 Daily futures from 1 Aug 2013 until 14 Jan 2014

Growing dependence on South America - - but supply risks owing to weather, strikes, infrastructure shortages + political issues (Argentina!) Record plantings should boost S. Amer. soybean output to a new high in early 2014 (up 14 Mn T) In 2013/14 S. American soya crop almost 70 Mn T above US crop! Favorable crop outlook in Brazil, Paraguay & Uruguay. In Argentina renewed concern about dry weather in Jan (& Feb?) Soybean Crop Trend Since 74/75 (Mn T) 160 140 120 100 80 60 40 20 U.S.A. Argentina, Brazil & Paraguay 0 75/76 81/82 87/88 93/94 99/00 05/06 13/14

Limi$ng Factors Inland Transport Soybean Transportation Matrix Brazil Argentina USA Barges 7% 4% 61% Train 33% 13% 23% Trucks 60% 83% 16% Ave distance to Port in Km 950 300 980 In Argen(na and in Brazil truck remains the main form of transport from the farm to the port More expensive, more pollu(ng, and less efficient than barges and train

Limi$ng Factors Inland Transport Bo?lenecks in Rosario area in Argen(na during April/May Roadblocks and protests further complicate inland transporta(on Line of trucks wai$ng to unloading soybeans at Brazil s ports created long wai(ng (me in March 2013 U$S/ton 152 freight cost to transport beans from Mato Grosso to Paranaguá

Significant improvement in production in most countries in 2013/14 Big increases in Argentina, Brazil and the C.I.S. 10 Oilseeds: Estimated Production Change in 2013/14 Annual Change from 2012/13 ( in Mn T) 8 6 4 India: Higher oilseed output in 2013/14; slowdown of veg. oil import needs; but some crop damage Major exception is China. Much higher import needs. 2 0-2 -4 EU-28 C.I.S. Can USA Arg Bra India Australia China

CHINA: Rapidly rising import requirements Mainly of soybeans, but also of rapeseed and other agri commodities Big jump in oilseed imports by 9-10 Mn T is likely in 2013/14 China building stocks of oilseeds, oils & grains 70 60 50 40 30 20 10 CHINA: Imports of Oilseeds and Oils & Fats Mn T Oilseeds Oils & Fats 0 92/93 95/96 98/99 01/02 04/05 07/08 10/11 13/14

CHINA: to account for 64% of world soybean imports in 2013/14 Longer term: China set to import 90 Mn T of soybeans in 2020 70 60 50 40 30 20 10 0 Imports of Soybeans (Mn T) China Rest of world 91/92 93/94 95/96 97/98 99/00 01/02 03/04 05/06 07/08 09/10 11/12 13/14F 90/91 92/93 94/95 96/97 98/99 00/01 02/03 04/05 06/07 08/09 10/11 12/13 O c t o b e r / S e p t e m b e r

Rapeseed and Canola

World production of rapeseed & canola set to increase by 5.2 Mn T to a record 69.1 Mn T Biggest jump in Canada 18.0 (vs 14.0) Severe shortage of logistics in Canada RAPESEED & CANOLA World Production (Mn T) and Area (Mn ha) 70 65 60 Production 55 50 45 40 35 30 25 Area 20 15 94/95 96/97 98/99 00/01 02/03 04/05 06/07 08/09 10/11 12/13 93/94 95/96 97/98 99/00 01/02 03/04 05/06 07/08 09/10 11/12 13/14

Considerable price pressure in Canadian canola, due to the huge crop and the prospects of record Can. stocks of 2.5-3.0 Mn T at the end of the 2013/14 season Logistical bottlenecks Exporters hesitant to sell (lack of rail cars) Farmers the big losers 685 660 635 610 585 560 535 510 485 460 435 410 385 360 Daily Rapeseed & Canola Futures Nearest Forward Position (US-$/T) Euronext Rapeseed Winnipeg Canola Jan12 Mar May Jly Sep No v Jan13 Mar May Jly Sep Prices from 1 Jan 2012 until 14 Jan 2014 Jan14

In 2013/14 record crops of sunflowerseed EU 8.6 Mn T (vs 7.1) Russia 9.5 Mn T (vs 8.0) Ukraine 10.0 Mn (vs 8.4) World output up 4.7 Mn T - - creating price discounts 42 40 38 36 34 32 30 28 26 24 22 20 18 16 SUNFLOWERSEED World Production (Mn T) and Area (Mn ha) Production Area 94/95 96/97 98/99 00/01 02/03 04/05 06/07 08/09 10/11 12/13 93/94 95/96 97/98 99/00 01/02 03/04 05/06 07/08 09/10 11/12 13/14

Argentine sunflowerseed crop only at 2.3-2.4 Mn T in early 2014 Argentine crush and sun oil export supplies much smaller than expected 7,5 6 4,5 3 1,5 Sunseed: Crushings in Key Countries (Mn T) 9 0 October / September EU-28 Russia Ukraine Argentina 95/96 97/98 99/00 01/02 03/04 05/06 07/08 09/1011/12 13/14

Black Sea sun oil prices have fallen below soya oil 1300 1200 Daily Prices of 3 Oils (in US-$/T) Sun oil, fob Black Sea World sun oil output +1.6 Mn T Export supplies +1.2 Mn T in 2013/14 1100 1000 900 800 Palm olein, RBD, fob Malaysia Soya oil, fob Arg. 700 Jan12 Mar Jun Aug Oct Jan13 Mar May Jly Sep Nov Jan14 Daily prices from 3 Jan 2012 until 14 Jan 2014

Imports of sun oil in 13/14 in 1000 T: India : 1100 (vs 940) China : 500 (vs 342) EU-28 : 920 (vs 960) Turkey: 670 (vs 650) Iran : 250 (vs 180) 1400 1200 1000 800 600 400 200 0 Sunflower Oil Imports 1000 T EU-28 Algeria, Egypt, Morocco India China 99/00 01/02 03/04 05/06 07/08 09/10 11/12 13/14

The Impacts from Oilmeals

700 650 600 550 500 450 400 350 300 250 200 150 100 Monthly Prices of Soya Meal, 48%, Brazil with 10-year average Jan 1998 - Dec 2007 (in US-$/T) Soya pellets, 48%, Brazil, cif Rott. Average 1998-2007: US-$ 220 '97'98 '99 '00 '01 '02 '03 '04 '05 '06'07 '08 '09 '10 '11 12 '13 From Oct 1997 until mid-jan 2014

450 400 350 300 250 200 150 100 50 10 Oilseeds : World Crushings Total and Annual Change (Mn T) World Crushings Annual change 35 30 25 20 15 10 5 0-5 0 92/93 95/96 98/99 01/02 04/05 07/08 10/11 13/14-10

Soya meal is the most dominant oilmeal with production set to increase by 9 Mn T in 2013/14 12 Oilmeals: World Production (Mn T) 200 190 180 170 Soyameal 160 150 140 130 120 110 Other 11 oilmeals 100 90 80 70 95/96 97/98 99/00 01/02 03/04 05/06 07/08 09/10 11/12 13/14

6.5 6 5.5 5 4.5 4 3.5 3 2.5 2 1.5 1 0.5 0 Mn T INDIA: Production of Poultry Meat Production Growing 7-10% Annually '91 '93 '95 '97 '99 '01 '03 '05 '07 '09 '11 '13 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 2020

The Outlook for Oils & Fats

World Production of 17 Oils & Fats 2013/14 - - 196.3 Mn T 1991/92 - - 83.5 Mn T Palm Oil 29,8% Palm Oil 14,2% Soya Oil 22,5% Rape Oil 11,4% Sun Oil 9,9% Soya Oil 20,1% Rape Oil 13,0% PKO&CNO 5,2% Sun Oil 7,7% Others/An.Fats 22,0% Others/An.Fats 39,2% PKO&CNO 5,0%

Palm oil has become the most important veg. oil worldwide Palm oil production was boosted by more than 4 times in the past 20 years from 14 Mn T in 1993/94 and is estimated to reach 58.5 Mn T in 2013/14, Thereof: Malaysia 19.7 Mn and Indonesia 29.8 Mn T 60 55 50 45 40 35 30 25 4 Animal Fats 20 15 10 5 17 Oils & Fats: World Production (Mn T) Rape oil Sun oil Palm oil 9 Other oils Soya oil 0 91/92 93/94 95/96 97/98 99/00 01/02 03/04 05/06 07/08 09/10 11/12 13/14

Growing Dominance of Palm Oil & Palmkernel Oil Worldwide World consumption of all oils & fats more than doubled in the latest 20 years to 188 Mn T in 12/13 Palm oil and Pkernel oil: annual growth rates were more than double of those of other oils & fats. 200 Mn T 150 100 World Consumption of 17 Oils & Fats palm oil + palmkernel oil 15 other oils & fats Today both oils account worldwide for : - - 33% of consumption - - 63% of exports 50 0 98/99 01/02 04/05 07/08 10/11 13/14

3,400 Ha of UP s advanced planting materials yielded an average of 7.6 Tonnes of CPO per Ha

Palm oil yields per ha are much above soya and rape oils 5 4 T/ha Indonesia Vegetable Oil Output per ha Malaysia 4,5 3,8 3 2 1 0 U.S.A. Brazil 0,53 0,51 Palm oil Soya oil Rape oil Source: ISTA Mielke GmbH, OIL WORLD EU 1,3 Germany 1,6

Global Palm Oil Outlook in 2013/14 (in Mn T): Production +2.65 (vs +3.45) Op.stocks -0.67 (vs +1.26) Supplies +1.98 (vs +4.71) 5 4 3 2 1 0 Palm Oil : World Production Annual Change (Mn T) -1 99/00 01/02 03/04 05/06 07/08 09/10 11/12 13/14 O c t o b e r / S e p t e m b e r

14 12 10 Palm Oil : World Output and Consumption Growth Rates in % 8 6 4 2 Production Consumption 0 03/04 05/06 07/08 09/10 11/12 13/14 O c t o b e r / S e p t e m b e r

Rising Dependence on Palm Oil 1997/98-2012/13: Palm oil exports (blue line) almost quadrupled Exports of all 16 other oils & fats + 48% In Oct/Sept 2013/14: Palm oil exports (blue line) are set for the 1st year-onyear decline in 16 years Combined exports of soya, sun & rapeseed oils (red) are likely to reach a record 45 40 35 30 25 20 15 10 5 17 Oils & Fats World Exports in Mn T Soy, Rape, Sun Oils 4 Animal Fats Palm Oil 9 Other 0 97/98 99/00 01/02 03/04 05/06 07/08 09/10 11/12 13/14

PALM OIL: Quarterly World Imports Change from year ago (in 1000 T) 1500 1000 500 0 there somebody to pick me up tomorrow at the airport -500-1000 A/J J/S O/D J/M A/J J/S O/D J/M A/J J/S O/D J/M 2011/12 2012/13 2013/14

PALM OIL: Market Share in Sel. Countries 50 40 30 20 in % of 17 Oils & Fats China India EU-28 there somebody to pick me up tomorrow at the airport 10 0 93/94 97/98 01/02 05/06 09/10 13/14 91/92 95/96 99/00 03/04 07/08 11/12

The Success Story of the past 30 Years Substantial growth in world production of palm oil In 1980: 4.6 Mn T or 8% of 17 oils & fats In 1990: 11.0 Mn T or 14% In 2000: 21.9 Mn T or 19% In 2010: 46.1 Mn T or 27% (only 6% of area) there somebody to pick me up tomorrow at the airport In 2011: 50.8 Mn T or 28% (57% of exports) In 2012: 53.7 Mn T (plus 5.9 Mn T of Palmkern oil) In 2013: 56.1 Mn T In 2020 at least 78 Mn T of palm oil required

Price Prospects

Palm oil generated huge demand in energy sector Daily Prices of Crude Palm Oil & Brent Oil (US-$/T) 950 900 850 800 Palm Oil, cif R dam Biofuel use of palm oil outside the mandates comes to standstill 750 700 Brent Crude Oil Jun Jly Aug Sep Oct Nov Dec Jan Prices from 1 June 2013 until 10 Jan 2014

17 Oils & Fats : World Consumption 195 180 165 150 135 120 105 90 75 60 45 30 15 Total Usage in Mn T biofuel food and other 0 89/90 92/93 95/96 98/99 01/02 04/05 07/08 10/11 13/14 26 Mn T for biofuels à 13% of total consumption Total oils/fats use: India 20.5 Mn T China 36.2 Mn T EU 29.7 Mn T US 18.5 Mn T.. World 194.8 Mn T

Rising biodiesel mandates 2014 2013 10% 8% 7% 5% 10% 17 Oils & Fats: Consumption Growth In Mn T 13/14 12/13 11/12 10/11 China +1.00 +1.10 +1.04 +1.09 India +0.90 +0.87 +0.75 +0.48 EU -0.30 +0.26-0.33-0.87 U.S.A. +0.10 +0.49 +1.19 +0.90 Argentina +0.10-0.93 +0.53 +0.55 Brazil +0.76 +0.04 +0.15 +0.60 Indonesia +1.50 +1.00 +0.99 +1.02 Others +2.34 +2.39 +2.47 +2.49 World +6.40 +5.22 +6.79 +6.26 CPO, $/T 900-950 835 1053 1150

8 7 6 5 4 3 2 1 0 Veg. Oil Stocks in Key Countries Indo PO Mal PO US SBO 2010 2011 2012 2013 2014 J a n u a r y 1 Stocks of palm oil in Malaysia/Indonesia and of soya oil in US reduced sharply in 2013... But China replenished veg. oil stocks probably curbing Chinese import requirements in 2013/14...

17 OILS & FATS Annual Stocks / Usage Ratios (%) 22 Palm Oil Sun Oil 20 18 16 14 12 10 Soya Oil 17 Oils/Fats 8 99/00 01/02 03/04 05/06 07/08 09/10 11/12 13/14

1500 1400 1300 1200 1100 4 Veg. Oils: Quarterly Average Prices US-$/T Price lows already established by the four major veg. oils. Bearish oilseed supply outlook now largely discounted? 1000 900 800 700 SBO fob Arg SFO fob BS RSO Dutch CPO cif Rdam A/J11 O/D11 A/J12 O/D12 A/J13 O/D13

1500 1400 1300 1200 1100 1000 900 800 700 4 Veg. Oils: Quarterly Average Prices SBO fob Arg SFO fob BS RSO Dutch CPO cif Rdam A/J11 O/D11 A/J12 O/D12 A/J13 O/D13 J/J14 US-$/T $/T vs OD Av. Jan/June14 O/D13 J/S13 SBO fob Arg CPO cif Rdm SFO fob BS RSO Dutch +4% 960* 930-990 917 883 +5% 945* 920-970 897 827 +3% 920* 890-950 893 940 +2% 1040* 1020-1060 1016 1001

2500 2000 1500 Monthly Prices of 4 Veg. Oils (US-$/T) Palm oil crude, cif N.W. Eur Palm olein RBD, Mal, fob Palmkern oil,mal/indo,cif Rott Coconut oil,phil/indo,cif Rott Widening premium of lauric oil prices 1000 500 Jan'11 Jan'12 Jan'13 Dec Monthly prices from Jan 2011 until 12 Dec 2013

In the longer term First of all, there is a volume problem that needs to be solved globally in soybeans and products, other oilseeds, oils, meals and grains Limitation of land and water More focus to raise yields. (They stayed behind expectations in the past 10 years.) GMO needed A small numbers of countries provide supplies Higher investments to improve logistics Oil and meal demand strong (food + biofuels)

1600 1400 1200 1000 800 600 400 200 Soya Oil & Palm Oil: Monthly Prices (US-$/MT) Palm oil, crude cif Rott. Soya oil, Dutch fob ex-mill New price range 0 72 77 82 87 92 97 02 07 13 Monthly prices from Jan 1972 until Dec 2013

Thank You for Your Kind Attention! If I can be of assistance to you in the future, you are invited to contact me any time. More details and background information are given in the Oil World Weekly & Monthly Reports, which can all be obtained from the Internet. Thomas.Mielke@oilworld.de

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