1. HGCA response to RFA call for Evidence Alastair Dickie Director, Crop Marketing, HGCA

2. Question 3: What are the relationships between demand for biofuel feedstock, commodity prices, land conversion and food insecurity? How might these be affected in the future by yield improvements and other factors?

3. Wheat demand growth =5Mt pa (0.8%) Maize demand growth =15Mt pa (1.9%) World grain demand - demand for world grains is rising (food & fuel) Source : USDA

4. World grain production 2007 - maize dominates, wheat at mercy of weather Source: USDA (Jan 08)

5. World opening grain stocks fuelling volatility and reliance on the 2008 crop Source: USDA (Dec 07)

6. World wheat production – erosion of yield triggered strong buying Source: IGC (Oct 07)

7. Source: HGCA Intervention World market volatility - rally caused by wheat supply events!

8. Wheat shortage, not biofuel demand - high protein wheat at a large premium Source: HGCA.

9. Trend Analysis - the key markets are just unpredictable Wheat Rice SugarBean Oil

10. Chicago Corn v NY Gasoline - some linkage in price but not always

11. Chicago Bean oil v NY Diesel - demand leakage gives price influence

12. Main market influences - mostly non-UK factors Global Factors Wheat crops lower in main producing countries World 2007/08 wheat crop not large enough to replenish stocks Quality issues in the US and the EU GM-free feedgrain demand And here in the UK 2007 crop 1.6Mt lower than in 2006, at 13.14Mt Overall quality lower than in 2006 Just 11% meet high quality bread wheat specifications compared to over 40% in 2006 Source: HGCA.

13. Source: HGCA & Friends World Grain Production Costs* - grain & oilseeds respond to economic signals * Estimated Average for France, UK, Canada, USA, Australia, Ukraine, Kazakhstan. Excludes rent and mortgage charges 2002/3Index to Average*2008/9 Seed9.813.1 Fertiliser19.438.9 Protection15.620.8 Contracting5.57.3 Total VC50.480.0 Labour14.719.6 Machinery34.445.7 Other13.217.5 Total Costs112.6162.8 Market price $100-120 $200-350 ($/mt)

14. Back to basics - economics applies to grain markets Price Quantity D P S Q Market Drivers: Weather, Transport Costs Trade flows

15. Back to basics - demand shift from new / expanded uses Price Quantity D2D2 D1D1 P1P1 S Q1Q1 Q2Q2 Market Drivers: Asia demand BioFuels Crude Oil Prices

16. Back to basics - prices rise, yield problems, low stocks, new supplies Price Quantity D2D2 D1D1 P1P1 P2P2 S Q1Q1 Q2Q2 Market Drivers: Security of u Supply Fuel Prices New Plantings Substitution Sustainability

17. Source: USDA/IGC/HGCA High forward prices for grain & oilseeds - will lead to a global supply response

18. World Wheat Area strong prices encourage plantings Source: USDA (Dec 07)

19. Supply response expected in 2008 - IGC forecasts record wheat crop of 646Mt IGC estimates 3% increase for world wheat plantings: EU +6% to 26.3M Ha Germany +6%; France +5%; UK +13% FSU +3% to 47.9M Ha Russia +3%; Ukraine +12% Canada +14% to 9.8M Ha USA +5% to 21.7M Ha Australia +10% to 13.5M Ha

20. USA is planting more ! - but will there be enough maize, beans, or wheat? Source: USDA/ La Salle.

21. and EU-27 wheat production is rising - area increase to boost output by maybe 17Mt in ‘08 Source: Strategie Grains + 3.4Mt

22. EU plants more Maize - to address the feedgrain shortage Source: Strategie Grains

23. HGCA Internal Study - the analysis suggests a lot more wheat Source: HGCA UK Crop EstimatesAreaYieldProduction (‘000 Ha)(tonnes/Ha)(‘000 Tonnes) Wheat - Typical1,8007.9014,220 Wheat - Zero Setaside2,1637.8516,980 Expected Increase 20083632,760 Ref: Strategy Graines20508.0216,441

24. Source: Oilworld. 2003/042004/052005/062006/07 Fob Vegetable Oil Prices - soft oil demand boosts sun and rape oils

25. We know that Asia’s Veg Oil Needs are expanding - both China & India are dependent on imports…… Source: USDA. India China

26. ..but the EU also needs more oil -and is also dependent on imports Source: Oilworld, www.oilworld.biz. ‘000 ts

27. World Oilseed Production & Stocks - sharp fall in carry-over stocks for next year Source: USDA. * 2008/09 beginning stocks down by 16Mt

28. UK Household Expenditure - more leisure and motoring %

29. Raw Material costs are not the issue - developed countries pay for added value

30. Raw Material costs are not the issue - managing costs is the issue

31. Food Waste or Food Security - less waste to release resources to tackle climate change

32. … let’s work together to improve our world Thank you