1. Outlook for World Vegoil prices By Dorab E Mistry Godrej International Limited

2. Full Title of my paper Outlook for World Vegetable Oil Prices 8th China International Oils & Oilseeds Conference Guangzhou

3. Congrats to DCE & BMD The importance of CHINA and of DCE keeps rising each year Turnover in Palm Contract on DCE has been expanding rapidly Last year I predicted correctly a Strong Dollar, Lower commodity prices and rising equity prices

4. Events so far this year My predictions on palm oil production and palm pricing were not so accurate. Malaysian Export Tax structure has been a success. Palm futures on BMD have been supported by Malaysian industry Crude oil prices have been strong and higher than palm oil prices. This saved prices from collapse.

5. Palm oil Production story I revised my forecast of growth in palm production in 2013 from 3.9 million tonnes in March to 2.7 million tonnes in September. In reality, production in Indonesia has been poor. September was poor and October was also poor. So prices climbed from 29 October but POGO spreads narrowed

6. Palm oil Production Story If Indonesian production in 2013 is LOWER than 2012, prices will rise to 3000 Ringgits. However, many analysts say Indonesia production is about 1 million tonnes higher in 2013. In that case, present price level will be fine Watch the price of Indonesian CPO and exports of Indonesian CPO to Malaysia

7. Palm oil Production story Indonesia may have started a new High Cycle in September 2013 which will gain strength only from May 2014 and peak in Sept- Nov 2014. In that case prices can come under pressure in Second Half 2014 Most analysts got the Indonesian production wrong in 2013. Only one company got it right.

8. Palm oil Demand Attractive Palm Oil-Gas Oil spreads led to additional demand for palm bio diesel of 100 to 150,000 tonnes per month between July and October Now Indonesia wishes to mandate consumption of 3 million tonnes of palm bio diesel annually If this happens, it is a Game Changer

9. Palm Oil Demand Indian Rupee has stabilised so India has been importing high tonnages once again EU has levied anti-dumping duties on palm bio diesel from Indonesia but they are importing much more palm oil for local processing Malaysia is exporting bio diesel

10. Soya oil Will China really import 69 million tonnes of soybeans in the current year ? Why are Chinese buyers in such a hurry to import extra beans ? Will soya bio diesel from Argentina continue to be exported to USA ? Will the Blenders Credit be renewed in USA ?

11. Rape Oil What will China do with its 4 million tonne State Reserve of old Rape oil which is deteriorating and needs re-processing This Lake of 4 million tonnes overhangs the market and will depress local prices China must start auctions and sell this oil at market prices. There is no alternative

12. Other Oils Sun oil will take markets from Soya oil as in China and will be at a discount to Soya oil until June 2014 Lauric Oils: Coconut oil will remain at big premium to Palm oil an also to Palm Kernel Oil because Philippines will use more internally and production is lower

13. Incremental S&Ds Food Demand in 2013-14 will expand by 3 to 3.5 million tonnes Bio diesel demand will expand by about 2.5 million tonnes due to larger mandates in Indonesia, Malaysia, Brazil and others How will China treat its 4 million tonnes Reserve of Rape oil. Will it begin auctions at market prices ?

14. Expected Actual Soya oil + 1,100 + 100 Rape oil + 100 + 500 Sun oil - 1,000 + 1,200 Gn & Cotton - 200 - 250 Palm + 3,900 + 2,500 Total supply + 4,350 + 2,000 Incremental Supply 12-13

15. Incremental S&Ds 2012-13 Supply Up 2,000 Demand Up 4,500 World Palm oil stocks declined by 3 million tonnes – 1 million in Malaysia and 2 million in Indonesia

16. Incremental S&Ds 2013-14 Soya oil + 1,700 Rape oil + 400 Sun oil + 1,600 Palm oil + 2,500 Total Supply + 6,600 Total Demand + 6,000

17. Price Outlook Presume stable to lower crude oil prices, a continuation of QE and normal weather. Palm : Uncertainty on Indonesian production and on Indonesian consumption of palm bio diesel Expect BMD CPO futures 2400 to 2600 Ringgits. In Jan and Feb 2014 can go higher to 2800 if production is weak.

18. Price Outlook Good idea to Bull Spread palm – buy JFM and sell JAS or OND Soya oil prices will be flat in a narrow range $ 920 o 950 FOB Argentina. Can rise to $ 1000 if Blenders Credit is renewed Sun oil and Rape oil will be at a discount to Soya oil until March 2014

19. Conclusion Market will be DATA DRIVEN Watch incoming data very carefully Palm trees behaviour is uncertain Politicians behaviour is uncertain Thank God we have DCE to give liquidity to big trades Good Luck & God Bless