PRICING & PURCHASING SUMMIT WASHINGTON DC | NOVEMBER 11-12 2014 PRICING & PURCHASING SUMMIT

Global Agriculture Outlook Track: Agriculture Global Agriculture Outlook 12, November 2014 Brandon Kliethermes Senior Economist +1 573 442 8167 Brandon.Kliethermes@ihs.com Ryland Maltsbarger Senior Manager +1 573 442 8165 Ryland.Maltsbarger@ihs.com

Agenda Historical per capita context Global feed & food grain Outlook Rice Outlook Oilseeds, Oils, Meals Cotton Sugar Livestock

Global Agriculture Outlook / November 2014 Global per capita crops Included: Barley, Corn, Sorghum, Wheat, Rice, Soybean, Sunflower, Rapeseed, Palm Oil, Peanut, Sugar (cane & beet), Olive Oil

Global Agriculture Outlook / November 2014 Global per capita crops Biofuel Included: Ethanol – Brazil , US, EU, Canada, China, Argentina ; Biodiesel – US, EU, Malaysia, Indonesia, Brazil, Thailand, Argentina

Global Agriculture Outlook / November 2014 Global per capita crops less China Lower prices and higher supplies in 2013 & 2014 induces higher quantity disappearance

Global Agriculture Outlook / November 2014 China’s crop stock holdings China draws down on stock levels beginning in 2000 and stops in 2005

Global Agriculture Outlook / November 2014 Biofuel feedstock use Use ramps up around 2003 & 2004 with beginning of EU and US policies along with expansion of Brazilian transportation demand

Changes to grain producers and outlook Global Agriculture Outlook / November 2014 Changes to grain producers and outlook Ryland Maltsbarger, Senior Manager, +1 573 442 8165, Ryland.Maltsbarger@ihs.com

Growth of global grains consumption Global Agriculture Outlook / November 2014 Growth of global grains consumption

Global corn and wheat production: The aftermath of ethanol production Global Agriculture Outlook / November 2014 Global corn and wheat production: The aftermath of ethanol production

Global corn & wheat Area harvested and yield growth Global Agriculture Outlook / November 2014 Global corn & wheat Area harvested and yield growth

Area and yield growth patterns: Cross country Analysis Global Agriculture Outlook / November 2014 Area and yield growth patterns: Cross country Analysis

Global Agriculture Outlook / November 2014 Corn and wheat yield curve: Which countries have yield growth potential?

Corn major producers respond positively to price signals Global Agriculture Outlook / November 2014 Corn major producers respond positively to price signals Pattern 1: Corn area harvested in all major producing countries have increased with prices. The pattern is strikingly similar all across. Pattern 2: An exception is Brazil’s first crop corn area harvested. It actually declined as corn price went up.

Global Agriculture Outlook / November 2014 Wheat major producers are weakly to negatively responsive to wheat price signals Pattern 1: Wheat area harvested in all major producing countries have very slightly increased with prices. The pattern is strikingly similar all across. Pattern 2: An exception is Turkey’s wheat area harvested. It actually declined as wheat price went up.

Global Agriculture Outlook / November 2014 Corn and wheat production baseline forecast: Inter-regional comparison of annualized growth rates

Global corn food seed & industrial demand Global Agriculture Outlook / November 2014 Global corn food seed & industrial demand

Global corn feed demand Global Agriculture Outlook / November 2014 Global corn feed demand

Global wheat food, seed & industrial demand Global Agriculture Outlook / November 2014 Global wheat food, seed & industrial demand

Global wheat feed demand Global Agriculture Outlook / November 2014 Global wheat feed demand

Global Agriculture Outlook / November 2014 Corn & wheat consumption baseline forecast: Inter-regional comparison of annualized growth rates

Global Agriculture Outlook / November 2014 Corn major exporters

Global Agriculture Outlook / November 2014 Wheat major exporters

Corn & wheat exports baseline forecast highlights Global Agriculture Outlook / November 2014 Corn & wheat exports baseline forecast highlights Corn Decline in corn exports in Brazil, Ukraine and India. Strong growth of Russian corn exports. Continued modes growth of exports in Argentina and the EU-28. Wheat Strong growth in wheat exports in Argentina and Brazil. Continued modest growth of exports in the EU-28 and Canada. Decline in wheat exports in Turkey.

Corn & wheat imports: historic highlights Global Agriculture Outlook / November 2014 Corn & wheat imports: historic highlights Corn Fast growth of corn imports in the EU-28. Recent Surge in Chinese corn imports. Strong and sustained import growth in highly populated third world countries like Mexico, Egypt and Indonesia. Wheat Robust growth of wheat imports to Middle Eastern and African countries. Recent growth in wheat imports to China, Japan and South Korea due to increased wheat feed demand.

Corn & wheat imports baseline forecast highlights Global Agriculture Outlook / November 2014 Corn & wheat imports baseline forecast highlights Corn Chinese corn imports to grow at a remarkably fast rate about 15% annual growth on average. Strong growth of corn imports in Africa and the Middle East. Wheat Strong growth of corn imports in India, Africa and the Middle East. Decline of Brazilian wheat imports.

Corn and wheat global prices Global Agriculture Outlook / November 2014 Corn and wheat global prices

Global Agriculture Outlook / November 2014 Rice outlook Brandon Kliethermes, Senior Economist, +1 573 442 8167, Brandon Kliethermes@ihs.com

Rice area and production Global Agriculture Outlook / November 2014 Rice area and production Although rice production is ample and prices have retreated in the recent year self-sufficiency remains key © 2014 IHS Source: IHS

Major global rice importers Global Agriculture Outlook / November 2014 Major global rice importers Africa continues to be the main driver behind global imports of rice © 2014 IHS Source: IHS

Global Agriculture Outlook / November 2014 Rice exporters Thailand remains the lead rice exporter followed by India and Vietnam, a return from post pledging program © 2014 IHS Source: IHS

Rice price outlook by variety Global Agriculture Outlook / November 2014 Rice price outlook by variety California rice price should begin to ease but likely will be supported until planting intensions are known © 2014 IHS Source: IHS

Oilseed, oils, meals outlook Global Agriculture Outlook / November 2014 Oilseed, oils, meals outlook Brandon Kliethermes, Senior Economist, +1 573 442 8167, Brandon Kliethermes@ihs.com

Global Agriculture Outlook / November 2014 Soybean area China remains on its slow soybean area retreat; maintaining its reliance on foreign supplies

Global Agriculture Outlook / November 2014 Soybean production Following record US production in 2014 soybean prices weaken; softening US area through the projection period

Global Agriculture Outlook / November 2014 Canola/rapeseed area With overly wet and cool conditions across parts of the prairies Canada experienced additional canola abandonment 2014 reducing area harvested

Global Agriculture Outlook / November 2014 Canola/rapeseed production EU looks to year-on-year rapeseed production expansion decreasing its reliance on imports and substitution to meet domestic demand in 2014/15

Global Agriculture Outlook / November 2014 Oilseed prices Softening in 2014/15 as record soybean production in South America 2013/14 and US 2014/15 provide supply pressure across the complex

Soybean trade China imports versus the Big 3s exports Global Agriculture Outlook / November 2014 Soybean trade China imports versus the Big 3s exports

Global Agriculture Outlook / November 2014 Vegetable oil prices As vegetable oil prices have softened Brazil, Argentina and Malaysia have shifted policies to incentivize to more biofuel production and/or disappearance

Global Agriculture Outlook / November 2014 New policy incentives Lower vegetable oil prices stimulate recent government interventions Palm Oil Malaysia B7 mandate in place to blend 7% palm biodiesel with petroleum diesel starting November 2014 B7 may boost the domestic use of biodiesel to 575,000 metric tons per year Studying the possibility of raising the mandate to a B10 Thailand implemented B7 in January Indonesia has been using a B7.5 since 2012 Soybean Oil Brazil raised their biodiesel blend from B5 in May to B6 in July and to B7 in November Argentina exports took off since May as the government cut its export tax from 21% to 11% on biodiesel

Global Agriculture Outlook / November 2014 Vegetable oil food use in China China’s domestic consumption of vegetable oils raises its dependence on oil and oilseed imports as gaps in production widen versus demand

Global Agriculture Outlook / November 2014 Vegetable oil food use in India Income growth is slower through the projection period in India than China as India’s population grows at a quicker rate keeping the bulk of increased food use to less inexpensive palm oil

Global Agriculture Outlook / November 2014 Oilseed meal prices Meal demand remained strong through 2013/14, but record soybean supplies in the US help to replenish the inventories needed for crush softening meal prices in 2014/15

Global Agriculture Outlook / November 2014 Oilseed meal feed use in China Soybean meal remains the oilseed meal of choice for Feed Use in China as Soybean Crush demand from Vegetable Oil for Food Use helps drive domestic meal supplies

Global Agriculture Outlook / November 2014 Oilseed meal feed use in India Dairy production as the country’s livestock industry dominant player leads their livestock value chain development

Global Agriculture Outlook / November 2014 Cotton outlook Ryland Maltsbarger, Senior Manager, +1 573 442 8165, Ryland.Maltsbarger@ihs.com

Global cotton China’s influence is dramatic on the cotton market Global Agriculture Outlook / November 2014 Global cotton China’s influence is dramatic on the cotton market After price peak in 2010/11 state reserve program Chinese domestic price expands margin above world price, domestic consumption suffers 2014/15 new policy implemented for partial producer support, stock release begins Pace of stock release plays large role in future outlook of global cotton price

Global Agriculture Outlook / November 2014 Global cotton consumption China loses market share from 2010-2014 then stabilizes, the market diversifies towards other Asian countries, largest growth in India, fastest growths in Vietnam and Bangladesh

Global Agriculture Outlook / November 2014 Global cotton area Chinese change in policy lowers area along with weaker domestic prices, governmental supports help to stabilize crop area in other large producers along with weaker competing crops

Global Agriculture Outlook / November 2014 Global cotton production India overtakes China at top producer in 2014/15 despite significantly lower yields

Global Agriculture Outlook / November 2014 Global per capita cotton Overall long term per capita use remains slow, loses market share to man-made fibers

Global Agriculture Outlook / November 2014 Sugar outlook Ryland Maltsbarger, Senior Manager, +1 573 442 8165, Ryland.Maltsbarger@ihs.com

Global Agriculture Outlook / November 2014 Global sugar area harvested Brazil grows the most driven by domestic transportation demand and sugar exports, Thailand continues to expand for export

Global Agriculture Outlook / November 2014 Brazil sugarcane use Brazilian sugarcane use growth is mostly dependent upon expansion of domestic transportation demand, assumed 27.5% blend in 2015/16

Global Agriculture Outlook / November 2014 Global sugar net exports Thailand grows to offset some Brazil dominance, however Brazil still world’s largest option India continues to have potential however policy remains uncertain

Global Agriculture Outlook / November 2014 Livestock outlook Ryland Maltsbarger, Senior Manager, +1 573 442 8165, Ryland.Maltsbarger@ihs.com

Global livestock & meat outlook meat demand & population Global Agriculture Outlook / November 2014 Global livestock & meat outlook meat demand & population World Disappearance Growth By 2025 world meat disappearance looks to grow by 44 million mt (17%) A portion of this will be driven by a 13% increase in population growth However, the remainder will be driven by a combination of recovering production, urbanization, as well as a 29% growth in per-capita GDP Looking at specific countries & region we see: North America is expected to expand by 15% But, for the most part this is not genuine per-capita consumption growth. rather a recovery from a period of falling production over the past 3 years. Looking at 2025, we expect to see per-capita meat demand reach 97 kg/pop, mostly even with the levels of 2008-2009 European growth looks very modest Up 5%, with 2% population growth. Much like the US, per capita disappearance growth is mostly driven by recovering production By 2025 we expect to see per-capita disappearance return to 2010 levels China & India have notable growth outlooks China looks to grow the most on a total level basis India looks to grow the most on a percentage growth basis

Global livestock & meat outlook China disappearance Global Agriculture Outlook / November 2014 Global livestock & meat outlook China disappearance 17% 31% 56% 58% In total, China meat demand looks to increase by 17 million mt (23%) Some of this is going to be driven by 5% population growth The majority of this is going to be driven by higher incomes, and improving income demographics In 2000 we saw that 80% of Chinese households brought in below $5K per year By 2013, this number fell to 58%, with 31% of households earning between $5K and $15K. This is an important income bracket, as growth in meat consumption is its most responsive to income growth By 2025 IHS expects the % of households earning below $5K to fall to 24%, a 70% reduction from 2000 Households in the key $5K to $15k bracket look to reach 56%, with 17% of households reaching the next key bracket of $15K -$40K On a per-capita basis we expect this to translate into significant meat demand growth Pork is expected to grow by 5 kg/pop (13%) We expect to see pork expand the least on a percentage basis due to its already high level of consumption, and other meats (particularly beef) being considered more of a luxury good, and thus more responsive to income growth. Looking at beef and broiler meat, we expect to see disappearance grow by 1.5 kg and 3 kg respectively. Beef per-capita disappearance is expected to increase by 29% Broiler per-capita disappearance is expected to increase by 31%

Global livestock & meat outlook India disappearance Global Agriculture Outlook / November 2014 Global livestock & meat outlook India disappearance 10% 16% 57% 73% India meat total disappearance looks to reach about 9 million metric tons, up by about 67% India meat demand looks to be driven by a combination of population and income grow India population looks to increase by 167 million people (13%) Incomes also look to improve as the share of households earning between $5K - $15K increase from 16% in 2013 to 57% in 2025 Nearly even with China However, unlike China a smaller percentage of the population is moving above the $15K threshold, only 10% In general, India meat disappearance looks to remain lower than China Due to religious & cultural preferences, particularly for pork and beef. However, total meat consumption is expected to increase by 2.1 kg/pop (47%) Broiler meat disappearance up 1.4 kg/pop (51%) Compared to 31% in China Beef disappearance up 0.7 kg/pop (40%) Compared to 29% in China

Global livestock & meat outlook meat production outlook Global Agriculture Outlook / November 2014 Global livestock & meat outlook meat production outlook In total, we expected to see globally: Pork production to reach 124 million mt, a 45% increase Beef production to reach 70 million mt, a 29% increase Broiler meat production to reach 104 million mt, a 55% increase World meat production growth is mostly driven by expansion in Chinese pork and broiler meat. World beef production looks to expand, but by less. The largest driver of global beef production is expected to be expansion in Brazil The other major areas of production expansion look to be North America and India

Global livestock & meat outlook China production outlook Global Agriculture Outlook / November 2014 Global livestock & meat outlook China production outlook China looks to have the greatest increase in meat production overall, increasing 20% by 2025 By 2025, pork production to reach 64.4 million mt, up 17% from 2013 Broiler meat production to reach 18.1 million mt, up 36% Beef production to reach 7.3 million mt, up 9% Expansion in Chinese's pork and broiler meat production to be driven primarily by domestic demand growth Expansion in beef production is expected to be slower as China's cattle inventories have remained falling on bad production returns.

Global livestock & meat outlook North America production outlook Global Agriculture Outlook / November 2014 Global livestock & meat outlook North America production outlook Expansion in North American meat production is expected to by pushed largely by recovering per-capita domestic consumption, which declined 5% from 2009 to 2013 Broiler meat production to expand the most, by 13% (2.7 million mt) Pork production to reach 15.9 million mt, up 17% Beef production to reach 16.4 million mt, up 13% In North America, broiler meat production looks to expand by the largest amount, up by 2.7 million mt Mostly driven by the US, up by 2.2 million mt The growth is not expected to add to global supplies, with regional consumption increasing by 2.8 million mt Driven mostly by consumption growth in the US and Mexico Pork production looks to expand by 17% (2.3 million mt) Beef production up by 13% (1.8 million mt) It is important to keep in mind that though the increase in production will add to exportable global supplies, the majority of the expansion will go to recovering regional consumption, which declined significantly following 2008.

Global livestock & meat outlook Brazil production outlook Global Agriculture Outlook / November 2014 Global livestock & meat outlook Brazil production outlook By 2025, pork production to reach 3.7 million mt, up 12% from 2013 Broiler meat production to reach 14.4 million mt, up 17% Beef production to reach 12.3 million mt, up 27% Beef and broiler meat production look to continue their strong rate of expansion, up 27% and 17% respectively Higher production should add to exportable supplies, with beef expanding the most, up 85% (1.6 million mt) Pork is also expected to expand, but mostly inline with growth in domestic demand

Global livestock & meat outlook India production outlook Global Agriculture Outlook / November 2014 Global livestock & meat outlook India production outlook Both beef and broiler meat production look to expand significantly By 2025, beef production to reach 5.5 million mt, up 45% from 2013 Broiler meat production to reach 5.9 million mt, up 71% . For India, meat production looks to maintain strong growth rates Beef up 45% Broiler up 71% Beef production looks to be up by 1.7 million mt (45%) Adding 1.2 million metric tons to domestic use Adding 0.5 million metric tons to export supplies Broiler meat production looks to be 2.4 million mt (71%) Entirely for domestic use

Global livestock & meat outlook meat trade Global Agriculture Outlook / November 2014 Global livestock & meat outlook meat trade 2.4% GAGR 4.4% GAGR Looking at how changes in production and consumption will affect trade, we expect to see global trade continue to expand, but at a slower pace than in the past. The pace looks to slow as many countries and regions work to expand production along side consumption growth In total, we see global meat trade reaching 30.3 million mt in 2015, a 33% increase. Pork trade looks to grow the slowest, at 12%. Growth in pork trade looks to be slowed mostly by the FSU, which looks to have both growing domestic production and falling consumption Global pork trade is expected to reach 7.5 million mt by 2025 Beef and poultry trade look to reach similar levels, at 11.2 million mt and 11.6 million mt respectively. Beef trade looks to grow the most on a percentage basis, by 51% Broiler meat trade looks to grow by 35%

Global livestock & meat outlook China meat imports Global Agriculture Outlook / November 2014 Global livestock & meat outlook China meat imports Growth in Chinese imports to be driven by consumer demand growth and production constraints By 2025, beef imports to reach 2.2 million mt, up 445% from 2013 Pork imports to reach 1.4 million mt, up 80% Broiler imports to grow the lease, reaching 250,000 mt, or up just 3% China looks to the single largest contributor to global beef trade China will account for 48% for the global growth in beef trade Though we only see per capita China beef disappearance growing my 1.5 kg per capita because we expect to see growth in domestic production remain constrained, this growth is going to translate into rapid imports expansion. Chinese beef imports are expected to grow by 445%, or 1.8 million mt. China also looks to have a significant growth in pork imports, though less than beef. China pork imports look to grow by 80% (620,000 MT)

Global livestock & meat outlook Middle East & Africa meat imports Global Agriculture Outlook / November 2014 Global livestock & meat outlook Middle East & Africa meat imports The majority of broiler meat trade is expected to be driven by demand growth in Africa and the Middle East Broiler meat imports are expected to grow by a combined 1.8 million mt, (56%) These two regions are expected to account for 62% for the global growth in broiler meat imports. These two regions look to have the highest rates of population growth, as well as GDP growth Middle East population to expand by 19% and per-cap GDP to grow by 35%. African population to expand by 31% and per-cap GP to grow by 37%.

Global livestock & meat outlook meat trade Global Agriculture Outlook / November 2014 Global livestock & meat outlook meat trade Given the growth in imports, we expect the majority of export growth arise primarily out of Brazil, Argentina, the US, and India Brazilian meat exports look to increase by 41%, with the bulk export growth from beef and poultry Beef exports are expected to reach 3.4 million mt, up 85% Broiler meat exports are expected to reach 4.2 million mt, up 20% Pork exports are expected to reach 756,000 my, up 29% Argentine meat export look to nearly double, up 92% Beef exports to grow by 166%, reaching 495,000 mt Poultry exports are expected to grow by 49%, reaching 482,000 mt US meat exports are expected to increase by approximately 13%, with pork exports expanding the most Pork exports are expected to grow 18%, reaching 2.7 million mt Beef export to grow by 19%, reaching 1.4 million mt Broiler exports are expected to grow at the slowest pace (7%) reaching 3.6 million mt Growth in India meat exports is expected to be driven nearly entirely by beef Beef exports are expected to grow by 29%, reaching 2.3 million mt.

Thank You! Questions?