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Outlook for South American soybean production and export Presented by: Emily French 7 th annual China Industrial Oils and Oilseeds Conference 2012 Guangzhou CHINA 7-8 November 2012 Slide 2 Biggest risk in 2012/2013 remains WEATHER Slide 3 World soybean production Country / region 2011/12 estimate 2012/13 forecast Change from Sept WASDE (%) Change from 2011/12 (%) World238.1264.3+2.4+11% United States 84.277.8+8.6%-7.5% Argentina41.055.0--+21.1% Brasil66.581.0--+21.8% Paraguay4.08.1--+102.5% India11.011.5+0.9%+4.5% China13.512.6---6.7% 11 October 2012 USDA WASDE Slide 4 World soybean production 11 October 2012 USDA WASDE Biggest potential shift from last year to this year? US production declines 6% of world production to 34% with projections that Argentina and Brasil combined will account for 59% of world soy production for MY2012/13 (vs 52% last year) Slide 5 Global soy snapshot October USDA WASDE (MY2012/13 vs MY2011/12) 1.Production = 264.3MMT (238.1MMT). 2.Demand = 258.8MMT (254.2MMT). 3.Daily consumption rate = 709KMT / day (697KMT / day) 4.Ending stocks = 57.6MMT (54.8MMT). 5.Supply cushion = 81.2 days (78.7 days). Summary: World ending stocks / supply cushion look to build vs last year. World demand is slowing. Risks? South American production. Supply dislocation January February 2013. Slide 6 World ending stocks rise to 57.6 MMT 4 th highest since 1990? SUMMARY: it all depends on South American production !! Slide 7 South America soybean production outlook (USDA) CountryMY2011/12MY2012/13Difference Argentina41.055.0+14.0 Bolivia2.22.3+0.1 Brasil66.581.0+14.5 Paraguay4.08.1+4.1 Uruguay1.61.9+0.3 TOTAL115.3148.3+33 SUMMARY: 1.South American production forecast to increase at min-33MMT (using USDA figures) vs last year. 2.Brasil forecast to become the worlds largest soy producer 3.South America to account for 56.1% of world production (48.4% last year) 4.Infrastructure major impediment and risk for world soy importers Slide 8 South America soybean production forecast SUMMARY: 1.South American production = 151.7MMT (+36.4MMT vs LY) vs 148.3MMT USDA 2.World ending stocks any increase above USDA gain of 33MMT will build ending stocks. Risk to downside = 7.3MMT less (min production). Risk to upside build = 9.7MMT 3.World ending stocks range: 50.3MMT (similar to 2004/05) to 67.3MMT build towards 2010/11 levels of 70.5MMT (USDA = 57.6MMT Oct WASDE) CountryEstimateMinMaxUSDA OctMY2011/12 Argentina56.053.059.055.041.0 Brasil82.578.084.52.366.5 Paraguay8.57.09.081.04.0 Uruguay2.51.53.08.11.6 Bolivia2.21.52.51.92.2 TOTAL151.7141.0158.0148.3115.3 Slide 9 Brasil soybean production Slide 10 Brasil soybean production outlook SUMMARY: Brasil production soybean estimates (private, government) range 79-83MMT. Brasil has gone from 15% of world production to 30.6% since 1990. Slide 11 Brasil soy planting profitability - EXPAND Source: Agrosecurity and Gazeta do Povo *includes production costs only & not equipment depreciation or land costs LocationCrop year Yield sacks / ha (bu / acre) Production cost per ha* Average Forward Price / Sack Profit per Hectare Margin over Cost Londrina, Parana 2011/1240.90 (35.5) R$ 1353R$ 50.90R$ 72854% 2012/1350.30 (43.7) R$ 1410R$ 71.90R$ 2206156% Sapezal, Mato Grosso 2011/1252.00 (45.2) R$ 1460R$ 43.88 R$ 82156% 2012/1352.00 (45.2) R$ 1547R$ 56.00R$ 136588% Slide 12 When is it too late to plant soy in Brasil? In general the planting window is very wide and it (1) depends on what area and (2) is there a safrinha crop or cotton planting following full season soy harvest. 1.Mato Grosso (MT) farmers would like to have their early-maturing soybeans planted as quickly as possible 15 Sept is start date. Certainly they would like to have the soybeans planted by the end of October in order to allow enough time for safrinha corn or cotton to be planted after S harvest. 2.Later-maturing S in MT could be planted until sometime in November without any yield penalty and these generally mature too late for the farmer to plant safrinha corn. 3.Parana (PR): ideal time to plant soybeans is the month of October. Want to be done by mid- November. If a farmer wants to plant safrinha corn (common), the earlier in October the soybeans are planted, the better it is for safrinha corn. 4.Rio Grande do Sul: farmers do not plant a second crop of corn. November is the main planting month and the double crop soybeans can be planted until early in December. Rule of thumb: mid-November w/ min yield loss if weather cooperates for remainder of the season Slide 13 Brasil soybean export outlook and key risks 1.Planting delay slow start to plantings in Mato Grosso. Key region for early, full season S 2.Freight / logistics: freight rates are up 40% in the past year with another 20% increase by February 2013. Why? Regulations (implemented July 2012) 10 hours / day behind the wheel with 30 minute rest per 4 hours. 11 hour rest time mandated. Private estimates has transport time increased 56% for average haul Export margin / competition for load time: this will be influenced by what Brasil produces for its safrinha crop, world corn values SUMMARY: world importers are well aware of potential & real load delays ex Brasil. Inventory management key to transition from US to South America Feb forward 39% of world trade vs 40.1% LY Slide 14 Has or is China prepared for this supply dislocation ? China Jan-Sept 2012 soybean imports = 44.3MMT China MY2012/13 beginning stocks = plus-14MMT Known US outstanding sales to China = 12.3MMT (11 Oct) vs 10.78MMT LY Unknown US outstanding sales = 4.8MMT vs 1.88MMT LY SUMMARY: beginning stocks, in-port stocks, those vessels on the water and US ownership certainly suggests that China is prepared to bridge the supply dislocation gap Slide 15 Comparison of domestic freight costs SUMMARY: Brasil domestic transportation / infrastructure have MT costs nearly 5X that of the US. Argentina is similar to the US. Longer term: as Brasil invests in infrastructure projects it will become even more competitive and likely lower / depress world soy values Source: USDA, AACREA, Sifreca-Esalq-USP. Slide 16 Brasil port snapshot 2010 soybean exports Source: AgrInvest, ConsiliAgra Santos = 8.224MMT Paranagua = 5.33MMT Rio Grande = 4.564MMT Sao Francisco = 3.044MMT Vitoria = 2.379MMT Sao Luiz = 2.06MMT Manaus = 1.283MMT Salvador = 1.232MMT Santarem = 809KMT Slide 17 As production rises so do exportable supplies SUMMARY: As Brasilian soy production increases, its usage as measured by crush actually declines. This is due to the fact that there have been relatively few crush plant investments in the past decade. RULE OF THUMB: Brasil will typically crush less than 50% of its production as production expands / remains above 68MMT. Slide 18 Argentina soybean production SUMMARY: Argentina is similar to the US re land cap for production. Majority of pasture land will remain dedicated to its livestock (majority cattle). Crop rotations: corn to soy. Double crop soy follows wheat Slide 19 Argentina soybean production outlook SUMMARY : weather = reversal of fortune. From drought last year to excessive rains, floods & soil moisture levels recharged this year! Risk? Increased soy plantings (from corn) and subsequently, disease risk. Slide 20 When is it too late to plant soy in Argentina? In general it is corn that is more sensitive to planting dates and this will be the key factor in the total area of soy planted this campaign 1.Given the excess / saturated soil moisture levels the risk in Argentine soy plantings is that plantings will expand. 2.Farmers would rather plant soybeans because it is (1) cheaper to plant, (2) generally yield well in Argentina, and (3) exports are never interfered with by the government 3.If corn plantings remain delayed farmers will focus on soy plantings and then resume corn plantings in early December to avoid pollination in hot temps. 4.Soybeans can be planted until December with minimal yield risk 5.Disease is a risk this year (2012/13) root / stalk disease given soil moisture levels Slide 21 Argentina soybean export outlook and key risk Argentinas government: the Kirchner Administration relies heavily on revenues from its agriculture sector vis--vis its export tax structure. Threat of strikes port, truck (inflationary concerns / higher wages) or government versus farmers Farmers store soy on-farm in white silo bags in protest of its government. Logistics will be less of an issue this year given the recharge of river levels / draft levels Influenced by production SUMMARY: since 2001 introduction of differential export taxes Argentina has exported 17.5% - 24.5% of its production. Forecast 22-24% for MY2012/13. Argentine logistics should favor it as will the producer selling expected given the steep inverse in the flat price market Slide 22 Future expansion of South America soybean plantings Slide 23 Future of South American production Mato Grosso Mato Grosso still has a maximum potential of 13.4 mil ha (33.1 mil acres) in open areas to supply the global demand Grains production > the state is forecast to increase production from 38MMT for 2012/13 to 68MMT for 2021/22 projected 78% increase Grain production area increase 5 million ha (12.35 mil acres) or 52% by 2021/22 crop year: total area planted to grains (corn, soy) = 11.9 mil ha (29.4 mil acres) AgroMT 2022 Outlook (Sept 2012). IMEA Slide 24 Available open areas ag production (Mato Grosso) RegionOxisol area (ha)Other soils* area (ha) Total area (ha) Central-South612,282.32702,773.201,315,055.52 Mid-north1,987,582.1399,034.772,086,616.90 Northeast2,637,783.25322,278.402,960,061.65 Northwest1,484,272.24877,435.52,371,707.77 North857,740.301,266,993.842,124,734.14 West312,889.23146,902.52459,791.75 Southeast1,345,170.84829,534.972,174,705.81 Mato Grosso9,237,720.304,254,953.2313,492,673.53 AgroMT 2022 Outlook (Sept 2012). IMEA Why Mato Grosso? It currently produces 32% of all Brasil soy and is forecast to produce 40% by 2021/22 Slide 25 Future of South America soybean production? Bolivia BOLIVIA the next South American soybean frontier? MY2011/12 production = 2.2MMT Yields = 33 36 bu / acre (38 42 sacks / ha). Relative terms -> ~10 bu / acre lower than neighboring Mato Grosso Limited biotech seed variety being utilized Plantings = 1 mil ha (2.47 mil acres). Land availability = 20 mil ha (49.4 mil acres) Slide 26 Is the market moving into the start of a 5-year cycle of continued, volatility but increasing supplies as technology is transferred and the growth engines slow? In other words are we in the early stages of a major and longer-term bear market for commodities? Slide 27 About ConsiliAgra ConsiliAgra is a global consulting and brokerage firm providing actionable advice and strategies to those operating and trading within the global grain and oilseeds markets. The firms services touch upon every part of the increasingly-complex agricultural markets, presenting a platform through which clients are able to gain a keen understanding of the integrated global agriculture industry; and to act upon this knowledge. We provide: Coordinated risk management (hedge structures and brokerage / clearing services) Active advising services Dynamic trading strategies (proprietary speculative structures) Right people introductions Commodity execution services In forming ConsiliAgra in January 2009, Emily French aligned herself with Global Asset Advisors. Since its inception, ConsiliAgra clients now range from international & domestic commercials to hedge funds and investment banks as well as a private money portfolio. Global Asset Advisors is an umbrella organization compromised of international agriculture speculators, hedgers, service providers and information sources. Contact information: Emily French Managing Director, ConsiliAgra www.consiliagra.com Email: efrench@consiliagra.comefrench@consiliagra.com Office: +866-928-3320 Mobile: +208-610-4593 This presentation is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any commodity. Although the statements of fact in this report are obtained from reliable sources, we do not guarantee their accuracy and any such information may be incomplete or condensed. All options and opinions are subject to change without notice.