E D & F MAN Sugar Ltd Future of sugar in Europe And the implication for Turkey and the world market

E D & F MAN Sugar Ltd Future of sugar in Europe Pressure to reform EU sugar regime Inside and outside pressure - WTO & all that Deregulation and the waking of the giant aka Brazil Pressure on costs, synergies and search for sustainable agriculture The future: short term future vs long term prospects Implications for Turkey

E D & F MAN Sugar Ltd Future of sugar in Europe EU sugar policy changes No initial compulsory quota cut: “carrot not stick” approach Intervention system abolished –Replaced with ‘reference price’ & private storage Restructuring fund: attractive buy-out offer for quota –Degressive over 4 years (€730-€420/t) –Funded by producer/consumer levy Prices to EU producers effectively cut by 39% by 2007/08 –Reference price cut & levy application Raw sugar prices unchanged until 2007/08 Regime to apply July 2006 – 2014/15 All current import arrangements maintained –ACP/India/LDCs/West Balkans/CXL –Minimum price to apply for ACP & LDC (transitional period) –Raw sugar imports restricted to ‘traditional refiners’ until 2009

E D & F MAN Sugar Ltd Base Level2006/072007/082008/092009/10 Sugar Quota Isoglucose Quota White Reference Price (€/t) (-25%) (-29%) (-39%) Restructuring Levy (€/t) NA Price - Net Levy505.5 (-20%) (-39%) Beet Price (€/t)43.6 (avg.)32.86 (-25%) (-43%) Raw Sugar Price (€/t) (€0.23/lbs) (€0.23/lbs) (€0.18/lbs) (€0.17/lbs) (-36%) (€0.14/lbs) Restructuring Aid (€/t Quota) Future of sugar in Europe Key Points No change to market price 1 st year -20% drop to producer price 1 st year Beet price compensation No change to raw sugar price 1 st year Restructuring aid encourages early exits Refining margin slim NB: - All million tonnes white value. - % change on base year - Quota includes French DOMS and Azores - Production quotas beyond 2007/08 onwards subject to quota renunciation & uptake of new isoglucose quota, but includes the additional 1 million tonnes on offer to historic ‘C-sugar’ producing countries

E D & F MAN Sugar Ltd Future of sugar in Europe EU Commission Sugar factories Restructuring Aid Decision to stay in business or quit a 4 to 5 year financial consideration

E D & F MAN Sugar Ltd Restructuring of the EU sugar industry Future of sugar in Europe Decision to stay or quit Total production cost > €350/mt Or corporate structure keen to exit † Close down Total production cost < €350/mt Stay in business Conditions for quota sales: a) - Renunciation of the relevant quota b) - Definitive & total stop of production in at least one factory c) - Closure of the factory/factories concerned & dismantle production facilities d) - Restore good environmental conditions to factory site & redeploy workforce * Possibility that there may be room for the factories to benefit from securing carbon credit From 3 to 6 million tonne Cut in quota production

E D & F MAN Sugar Ltd Meanwhile potential rise in EU raw sugar access under EBA tariff cut allfree quota /200274, /200385, /200498, / , / , /200720%149, /200850%171, /200980%197, On100%Quota Removed Free access under what terms? Future of sugar in Europe

E D & F MAN Sugar Ltd Impact of EU changes Major EU destinations World White sugar market and price Support for regional refineries Rise of raw sugar demand and further expansion of cane sugar production In sum premium regional markets vs competitive global/transcontinental markets Future of sugar in Europe

E D & F MAN Sugar Ltd Future of sugar in Europe Impact of EU changes Major EU destinations

E D & F MAN Sugar Ltd Future of sugar in Europe EU=67% EU= 52% EU=10% Fall in direct white exports

E D & F MAN Sugar Ltd The white sugar price and the whites premium Future of sugar in Europe The white premium was under pressure as EU exports were on the rise….

E D & F MAN Sugar Ltd Future of sugar in Europe Declining EU whites could push the world market towards the highs with further premiums For regional physical values

E D & F MAN Sugar Ltd Impact of EU changes Support for regional refineries Future of sugar in Europe

E D & F MAN Sugar Ltd Future of sugar in Europe with the demise of EU exports in sight. Brazil EU Thailand Guatemala & Colombia India ALS & Dubai

E D & F MAN Sugar Ltd Impact of EU changes Major EU destinations World White sugar market and price Support for regional refineries Rise of raw sugar demand and further expansion of cane sugar production In sum premium regional markets vs competitive global/transcontinental markets Future of sugar in Europe

E D & F MAN Sugar Ltd Future of sugar in Europe Inside and outside pressures – WTO and all that Background and Timetable ‘Doha Round’ in progress - launched November 2001 to succeed the Uruguay Round ‘Modalities’ or framework agreed July 2004 Aim to conclude at the Hong Kong Ministerial – December ratification for implementation over 5 years from 2008 Negotiations consistently derailed by agriculture and more recently by services agreement Agricultural Objectives – July 2004 Modality Agreement Domestic support: To achieve “substantial reductions in trade-distorting domestic support”. Export competition: Calls for a “reduction of, with a view to phasing out, all forms of export subsidies”. To include; export subsidies, credits and state trading enterprises. Market Access: “Substantial improvements in market access”. Technical discussions yet to make substantive progress, suggesting that current objective for Hong Kong completion still far from certain. Divergence of Aspirations Political will wavering in developed countries Differing aspirations & allegiances across developing world Questions over “one-size fits all” policy for developing countries – particularly those with highly developed agriculture.

E D & F MAN Sugar Ltd Inside and outside pressure - WTO & all that Brazil, Australia, Thai challenge the EU and perhaps door open to other challenges where C sugar ~ subsidised sugar ∴ C sugar is cross subsidised according to the WTO ruling Ultimate ambition of the European Commission is to eliminate all export subsidies Future of sugar in Europe

E D & F MAN Sugar Ltd Future of sugar in Europe Deregulation and the waking of the giant Expansion of Brazilian raw and white sugar exports and the future of the sugar industry as part of a sustainable agriculture development-

E D & F MAN Sugar Ltd Increase in Brazilian exports of low quality from 1200k, Raws from 14m. In future further focus on rapid raws exports Future of sugar in Europe How Brazil can step in European markets

E D & F MAN Sugar Ltd Future of sugar in Europe 35 million tonne sugar production 23 million tonnes sugar exports 5 billion litres alcohol exports by 2010/11

E D & F MAN Sugar Ltd Pressure on costs, synergies and search for sustainable agriculture Future of sugar in Europe Sugar as part of a sustainable agricultural commodity is fast becoming part of a complex Comprising sugar, ethanol, co-generation, carbon credits The oil impact Higher correlation between oil and sugar prices in the last year. Correlation coefficient = 0.86

E D & F MAN Sugar Ltd The future: Short term v long term prospects Interactive market place Short term significant EU exports leading up to the reform EU exports in 05/06 peak 6.7 million mt From 07/08 exports will fall significantly to 1.374m – min €514 budget limits Ultimately EU pledge to eliminate all export subsidies Many of EU’s traditional markets turning to raws → rise of regional refineries and/or regional suppliers [Turkey] Some of the European markets and EU’s traditional destinations turning to low quality whites and/or stepping up domestic production Future of sugar in Europe

E D & F MAN Sugar Ltd Future of sugar in Europe Freight has become a far more important consideration in international commodity trade Further supporting regional trade flows…

E D & F MAN Sugar Ltd Future of sugar in Europe Implications for Turkey Filling markets left post fall in EU exports and stepping up Turkey’s traditional export destinations- Turkey needs to renegotiate its WTO accession limits……….