Global Supply, Demand and Price Outlook for Oilseeds, Oils and Meals

Global Supply, Demand and Price Outlook for Oilseeds, Oils and Meals Presentation at the Australian Grains Industry Conference on 2 Aug 2017 in Melbourne there somebody to pick me up tomorrow at the airport Thomas Mielke, ISTA Mielke, Oil World, Global Market Research on Oilseeds, Oils and Meals Please feel free to contact me for assistance at <thomas.mielke@oilworld.de>

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Palm oil is theprice Leader for Oils and Fats Worldwide 1600 Monthly Prices of 2 Oils cif Rotterdam in US-$ / MT 1400 1200 1000 Palm oil crude Rape oil 800 600 400 200 0 '74 '76 '78 '80 '82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 Monthly Prices from Jan 1973 until 20 July 2017

The Global Market The Overall Target is the Satisfaction of Demand (mainly for food; biodiesel may have to be curbed) The major drivers for production are to be seen in the demand and in prices. Prices have to be sufficiently attractive for producers to invest and expand.

Governments Demand Supply Price there somebody to pick me up tomorrow at the airport Financial Markets & Funds Media Weather

Many Uncertainties and Swing Factors will determine Prices Global Impacts from Oilseeds Ample supplies currently primarily of soybeans, and also in 2017/18, Global Production of 10 Oilseeds 2017/18 -- 557.3 Mn T 10 Oilseeds - - 557.3 Mn T India 6% China 8% Soybeans 62% Argentina 11% Unless US drought damage aggravates Other 3 Oilseeds 2% Brazil 20% Copra & Palmkernels 4% Canada & U.S.A. 27% Groundnuts 5% C.I.S. 8% EU-28 6% Rapeseed 11% Sunseed 9% Cottonseed 7% Other ctries 14%

Most of the growth in soybeans In 20 years world soybean output more than doubled from 158 Mn T in 1996/97 to an estimated 349 Mn T in 2016/17 600 550 500 450 400 350 300 250 200 150 100 10 Oilseeds: World Area and Production Production (Mn T) Area (Mn ha) 91/92 94/95 97/98 00/01 03/04 06/07 09/10 13/14 17/18F

10 Oilseeds: World Production (Mn T) In 2016/17 boost in Soybean production: World 349 Mn T (+38) USA 117 Mn T (+10) S. America 186 Mn (+21) Decline aniticipated for 2017/18. But it is, of course, still uncertain by how much? 340 320 Soybeans 300 280 260 240 220 200 180 Other 9 oilseeds 160 140 120 100 99/00 01/02 03/04 05/06 07/08 09/10 11/12 13/14 15/16 17/18F

High likelihood that world production of soybeans will decline in 2017/18. But even if world output declines by about 5 Mn T to around 343 Mn T next season, it would still be enough to cover prospective consumption. 350 325 300 275 250 225 SOYBEANS World Production (Mn T) and Area (Mn ha) there somebody 200 to pick me up tomorrow at the airport 175 150 125 100 75 50 97/98 01/02 05/06 95/96 99/00 03/04 07/08 Production Harvested Area 09/10 11/12 13/14 17/18F 15/16

Soybeans have lost attractiveness in South America. In Argentina planted area may decline to a 6-year low of 18.9 Mn ha in 2017/18. Reduced production anticipated in the USA and S.America in 2017/18 200 Mn T 180 160 140 120 100 80 U.S.A. 60 Soybean Crop Trend Argentina, Brazil & Paraguay 40 20 0 83/84 89/90 95/96 01/02 07/08 13/14 80/81 86/87 92/93 98/99 04/05 10/11 16/17

US soybean production is forecast to decline to around 113 Mn T (down 4.2 Mn T). We expect an average yield of 3.15 T/ha in 2017 (or 46.8 bu/acre), off 10%. On Jly 30 about 59% G/E versus 72% last year. USDA release on Aug 10. US exports to decline in Sept/Febr 2017/18, due to record S. Amer. supplies U.S.A. : Soybean Supply & Demand ( Mn T ) S e p t e m b e r / A u g u s t 17/18F 16/17 15/16 14/15 13/14 Op. stocks... 11.50* 5.35 5.19 2.50 3.83 Crop........ 113.00* 117.21 106.86 106.88 91.39 Imports......70*.67*.66.93 2.10 Exports..... 56.00* 56.90* 52.92 50.20 44.65 Crushings... 52.80* 51.30* 51.33 51.16* 47.38* Other use 3.40* 3.53* 3.10 3.77* 2.77* End. stocks.. 13.00* 11.50* 5.35 5.19 2.50 Stocks/usage 11.6% 10.3% 5.0% 4.9% 2.6%

1060 CBOT: Daily Soybean Futures (c/bu) 1040 1020 1000 980 960 940 920 900 Nov 2017 50-day moving average Ja17 Feb Mar Apr May Jun Jly Daily futures from 2 Jan 2017 until 25 July 2017

USA (43%) Soybean Trade Flows in 2016 China (62%) EU-28 (11%) Ukraine (2%) Brazil (38%) Mexico (3%) Other Asia (17%) Paraguay & Uruguay (6%) Argentina (7%) Exports Imports

Chinese soybean imports will probably not increase in 2017/18, because 1) Current stocks are record large and 2-3 Mn T above a year ago, and 2) this year s domestic output is seen at 15.0 Mn T, up 3.2 Mn T CHINA: Soybean Demand and Share of Imports 100 Mn T 90 Total Use (a) 80 70 60 there 50somebody to pick me up tomorrow at the airport 40 Imports 30 20 10 0 01/02 04/05 07/08 10/11 13/14 16/17 (a) Crushings, food and other use in Aug/July.

Ample world soybean supplies, if our current crop estimates materialize. Record stocks. But weather uncertainties One additional swing factor to watch: Farmer selling Farmers have built larger storage. New market factor Soybeans: World Stocks as of end-august (Mn T) 120 100 80 60 40 20 0 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018F

Further boost in world soybean crushings required in 2016/17 and in 2017/18 (up 12-13 Mn T in each year), mainly because of 1) rising demand 2) insufficient supplies of other seeds, and 3) low stocks of veg oils This is creating a surplus in oilmeals Argentine and Indian crushings curbed by lack of meal demand 10 Oilseeds : World Crushings (Mn T) 300 280 260 240 220 200 180 160 140 120 100 80 Soybeans 01/02 03/04 05/06 07/08 09/10 11/12 13/14 15/16 17/18F 00/01 02/03 04/05 06/07 08/09 10/11 12/13 14/15 16/17 O c t o b e r / S e p t e m b e r 9 other seeds

60 7 Oilseeds: World Production Change from a Year Ago (Mn T) 50 40 30 20 10 0-10 -20 08/09 09/10 10/11 11/12 12/13 13/14 14/15 15/16 16/17 17/18

7 OILSEEDS: World Supply and Demand ( Mn T ) Forecast Change 2017/18F to 16/17 16/17 15/16 14/15 Opening stocks 114.0 +21.5 92.5 97.2 77.5 Production........ thereof soybeans 548.2* 343.1* - 3.3-6.4 551.5 501.7 521.7 349.5 311.2 320.0 Sunseed........ 48.1* - 0.9 49.0 42.9 41.3 Rapeseed....... 63.4* +0.1 63.3 64.2 67.0 Cottonseed...... 41.5* +2.3 39.2 37.1 45.3 Groundnuts (b)... 30.4* +0.1 30.3 28.0 27.8 Palmkern & Copra 21.7* +1.6 20.1 18.4 20.2 Total supplies..... 662.2* +18.2 644.0 598.9 599.2 Disappearance..... 548.2* +18.2 530.0* 506.4 502.0 thereof soybeans 343.1* +14.3 328.8* 315.6 298.7 Sunseed........ 48.1* - 0.6 48.7* 42.6 41.2 Rapeseed....... 63.8* +0.3 63.5* 64.1 68.5 Ending stocks..... 114.0* +/- 0 114.0* 92.5 97.2 thereof soybeans 100.4* +/- 0 100.4* 79.7 84.0

World supplies of rapeseed & canola will remain tight in 2017/18, contrary to earlier expectations of a recovery Rapeseed production only at 63-64 Mn T in 2017/18 In Europe farmers losing interest in rapeseed. Biggest losses in -Canada 18.6 Mn (vs 19.25) -Australia at best 3.9 (4.4) -China less than 6.0 Mn T 70 65 60 55 50 45 40 35 30 25 20 15 10 95/96 97/98 99/00 RAPESEED & CANOLA World Production (Mn T) and Area (Mn ha) 01/02 Production 03/04 Harvested Area 05/06 09/10 13/14 07/08 11/12 17/18F 15/16

Canada: Canola Disposals (Mn T) 24 Exports Crush 22 20 18 16 14 12 10 8 6 4 2 0 01/02 04/05 07/08 10/11 13/14 16/17 A u g u s t / J u l y CANADA : Supply & Demand of Canola ( Mn T ) A u g u s t / J u l y 17/18F 16/17 15/16 14/15 13/14 Op. stocks.95* 2.02 2.54 2.82*.59 Output..... 18.60* 19.25* 18.38 16.41 18.55 Imports.....09*.09*.10.08.07 Exports.... 9.60* 10.90* 10.30* 9.14 9.18 Crushings.. 8.70* 9.11* 8.32 7.36 6.98 Other use....34*.39*.38*.26*.23* End.stocks.. 1.00*.95* 2.02 2.54 2.82*

All-time records in world supplies of sunflowerseed and oil helped to moderate the impact of insufficient supplies of palm oil in Oct/June 2016/17, In Oct/Sept 2016/17 world exports of sun oil set to be boosted by 1.8 Mn T to a record 10.2 Mn T Sun oil prices below those of soy oil in past 10 months. This is likely to change in 2017/18 50 45 40 35 30 25 20 15 10 SUNFLOWERSEED World Production (Mn T) and Area (Mn ha) Production Harvested Area 97/98 01/02 05/06 09/10 13/14 17/18F 95/96 99/00 03/04 07/08 11/12 15/16

Substantial Growth in World Demand of Oils/Fats!! Average demand growth in past 5 seasons: Total per year Biofuel Food/other +6.5 Mn T +1.7 Mn T +4.8 Mn T 220 200 180 160 140 120 100 80 60 40 20 0 89/90 17 Oils & Fats : World Consumption 92/93 biofuel 95/96 Total Usage in Mn T 98/99 01/02 food and other 04/05 07/08 10/11 13/14 16/17F

(Kg) 80 Per capita consumption of Oils & Fats 2016 70 60 50 64.4 67.2 Inflated by biofuel usage 40 43.1 30 28.4 kg 20 26.5 25.2 24.5 10 17.5 15.6 15 14 0

Outlook Biodiesel and HVO 40 35 30 25 20 15 10 5 0 World Production of Biodiesel (Mn T) 2005 2007 2009 2011 2013 2015 2017 12 10 8 6 4 2 0 Biodiesel Use of Major Feedstock (Mn T) Palm oil Soya oil Rape oil Used oil Tallow Others 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

1450 1300 1150 1000 850 700 550 400 250 100 Monthly Prices (US-$/T) RBD palm olein, fob Malaysia Soya oil, Arg., fob Crude mineral oil Ja03 Ja04Ja05 Ja06 Ja07Ja08 Ja09 Ja10Ja11 Ja12Ja13 Ja14 Ja15Ja16 Ja17 Monthly prices from Jan 2003 until 20 July 2017

World Production of 17 Oils & Fats 2016/17 -- 215.9 Mn T 1996/97 -- 100.0 Mn T Palm Oil 30,3% Rape Oil 11,6% Soya Oil 24,6% Palm Oil 17,5% Rape Oil 11,5% Soya Oil 20,9% Sun Oil 9,1% PKO&CNO 5,3% Sun Oil 8,5% Others/An.Fats 20,6% Others/An.Fats 35,7% PKO&CNO 4,4%

Palm oil Importance of palm oil in global oils & fats market

Current labour shortage is likely to reduce palm oil yields and OER s (oil extraction rates) below potential: Longer harvest intervals, less loose-fruit collection and delayed replanting In the 10 years to 2016 wages for Malaysian plantation employees have increased by about 100-130%, significantly raising production costs!

2016: -6% = -3.9 Mn T 1998: -5% = -0.8 Mn T 70 60 50 40 30 20 10 Palm Oil Production 1980-2017 in Major Countries (Mn T) Malaysia Indonesia Effects of El Nino Rest of World 0 1982 1986 1990 1994 1998 2002 2006 2010 2014 1980 1984 1988 1992 1996 2000 2004 2008 2012 2016

16 14 12 10 8 6 4 2 0-2 -4 17 OILS & FATS: Output, Supplies & Use Change From Year Ago in Mn T 09/10 Production Consumption 10/11 12/13 14/15 11/12 13/14 O c t o b e r / S e p t e m b e r Supplies (op. stocks+prod.) 15/16 16/17

17 Oils & Fats: Stocks & Stocks/Usage 32 28 24 Stocks/Usage (%) 16 14 12 Replenishment of veg oil stocks will take time 20 16 Stocks Mn T 10 8 and will not be possible in 2016/17 12 6 8 4 4 2 2001 2003 2005 2007 2009 2011 2013 2015 2017F E n d - S e p t e m b e r

The Dominance of Palm Oil - - grown on only 5% of Global Veg Oil Area 17 OILS & FATS : World Production (Mn T) 70 Palm oil 60 50 40 Soya oil 30 4 Animal Fats 20 9 Other oils Rape oil 10 Sun oil 0 95/96 98/99 01/02 04/05 07/08 10/11 13/14 16/17F 50 45 40 35 30 25 20 15 10 5 17 OILS & FATS : World Exports (Mn T) Soy, Rape, Sun Oils 4 Animal Fats Palm Oil 9 Other 0 01/02 04/05 07/08 10/11 13/14 16/17F

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: 46.2 Mn T or 27% In 2015: 62.8 Mn T or 30% (only 5% of area) In 2016: 58.9 Mn T (plus 6.4 Mn T of Palmkern oil) In 2025 about 85 Mn T of palm oil required globally (of which Malaysia 24.0 and Indonesia 47.0 Mn T)

Trade of 17 Oils & Fats in 2016 EU-28 (14%) USA (6%) North Africa (5%) Russia & Ukraine (8%) China (10%) India (18%) Malaysia (22%) Indonesia (32%) Argentina (8%) Exports Imports

PALM OIL: Quarterly World Production & Us 18 Mn T 17 16 15 14 13 12 11 10 Production Consumption J/M A/J J/SO/DJ/M A/J J/SO/DJ/M A/J J/SO/DJ/M A/J J/SO/DJ/M A/J J/SO/D 2013 2014 2015 2016 2017 In 2016: Severe production deficit Big reduction of stocks

In 2017 already 70% of the global production growth occurred in Jan/June, with Indonesia up 3.2 Mn T and Malaysia up 1.1 Mn T from year ago 19 18 17 16 15 14 INDONESIA : Palm Oil Output (Mn T) 18.2 17.8 17.1 15.6 13.9 18.5 12 11 10 9 8 MALAYSIA : Palm Oil Output (Mn T) 11.1 10.9 9.7 9.0 8.7 7.6 13 7 12 Jan/June July/Dec 6 Jan/June July/Dec 2015 2016 2017 2015 2016 2017

World production seen up by 7.1 Mn T in 2017 and by 3.9 in 2018. Stocks of palm oil still down by 3.6 Mn T from year ago as of 1 Jan 2017. 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 2018F 2017F 2016 2015 2018F 2017F 2016 2015 Indonesia 38.00* 35.60* 32.10* 33.40* 3.79* 3.70* 3.51* 3.87* Malaysia 21.00* 19.86* 17.32 19.96 4.06* 3.92* 3.51* 4.18* C&S America 4.75* 4.57* 4.04* 3.82* 3.19* 3.19* 2.99* 3.04* Africa 2.65* 2.55* 2.44* 2.38* 1.70* 1.68* 1.65* 1.66* Oth ctrs. 3.54* 3.47* 3.00* 3.24* 2.58* 2.61* 2.29* 2.57* WORLD 69.94* 66.05* 58.90 62.80 3.57* 3.48* 3.24 3.62 +3.9 Mn +7.1 Mn -3.9 Mn T Yields still relatively low

Oilseeds: sideways or bearish, unless more weather problems occur Oils & fats: At the end of the 2016/17 season, stocks still be low relative to annual consumption. A second year (2017/18) without severe weather problems is required to bring oils & fats stocks to more comfortable levels. But this is a slow process. Concluding Statements 22 20 18 16 14 12 10 8 World Stocks in Percent of Annual Usage (%) 17 oils & fats 10 oilseeds 2002 2004 2006 2008 2010 2012 2014 2016 2018F At the end of the season

17 Oils & Fats: Stocks & Stocks/Usage 32 28 Stocks/Usage (%) 16 14 Replenishment of veg oil stocks will take time 24 12 20 Stocks Mn T 10 and will not be possible in 2016/17 16 8 12 6 8 4 4 2 2002 2004 2006 2008 2010 2012 2014 2016 2018F E n d - S e p t e m b e r

Have we already seen the lows for the calendar year? At prices below or around US-$ 600 price-sensitive buyers already covered at least part of their requirements 720 700 680 660 640 620 600 580 560 RBD Palm Olein, fob Malaysia, June 2 nearby and deferred in US-$/T 108 $ inverse June July JAS OND JFM AMJ

The deferred positions strengthened, due to - a slowing down of the production growth, - still low stocks in many ctries, - strong palm oil demand RBD Palm Olein, fob Malaysia, July 24 nearby and deferred in US-$/T 640 620 600 580 560 Aug Sept OND JFM AMJ

Palm olein currently about US $ 100 below soya oil Additional downward momentum is limited. But it cannot be excluded that palm olein temporarily falls to or slightly below US $ 600 within the next 3-5 months. 900 850 800 750 700 650 600 550 Daily Prices of 2 Oils (in US-$/T) Soya oil, fob Arg. RBD palm olein, fob Malaysia 500 Ja16 Feb Apr Jun Aug Sep Oct Nov Ja17 Mar Apr May Jun Daily prices from 1 Jan 2016 until 24 July 2017

Most of the bearishness in the palm oil outlook is already discounted. There is still some downward potential if production in Jul/Oct 2017 comes up to expectations. But additional price reductions should be limited. I currently don t expect the first position to fall below 2300 Ringgit in Oct/Dec 2017. 3300 3200 3100 3000 2900 2800 2700 2600 2500 2400 2300 MALAYSIA: Crude Palm Oil Futures Close First position in Malaysian Ringgit/T 2200 May Jun Jly Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jly Prices from 3 Mayl 2016 until 25 July 2017

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