Oilseeds and Oils Report 2015

Introduction The oilseed complex has witnessed a revolution in the past decade. Three sweeping changes have taken place: Rapid development in China and other emerging markets created strong demand for vegetable oils and oilseed meals as rising incomes led consumers to increase consumption of oils, processed food and meat. Biofuel programmes, initially mainly in the EU and US, created new demand for vegetable oils as a source of energy. By creating an energy market for vegetable oils, a link has been established between the prices of crude oil and vegetable oils. 2

But, the momentum from these forces has now declined Commodity prices, 197-215 (index: average prices 2 to 213=1) Index: Average prices 2-213 = 1 3 25 2 15 1 5 197 1975 198 1985 199 1995 2 25 21 215 Corn/Maize Soybeans Palm Oil Wheat Brent Crude The slowdown in China and other emerging markets is coinciding with weakening biofuels enthusiasm and lower petroleum prices. The downturn in commodity markets is now well established. This is a reaction to fundamentals rather than an exogenous shock like 28/9. Supply and demand should now respond to lower prices in energy and agricultural markets. 3

Costs of production

LMC costs of production Global coverage of field production cost estimates Palm Oil Coconut Oil Sunflower Oil Soybean Oil Rapeseed Oil 216 LMC International. All rights reserved. Oilseeds and Oils Report 215, Report Summary 5

India soy Brazil soy Russia sunflower Argentina soy 6 Oil yield for major oil crop producers Oil yield per hectare, average 213-15 4.5 4. 3.5 3. 2.5 2. 1.5 1..5 Oil yield, tonnes per hectare. USA soy China rapeseed Canada rape EU sunflower Argentina sunflower Ukraine sunflower EU rape Cameroon palm Nigeria palm Indonesia palm Malaysia palm

Fertiliser costs vs. EU CPO & US maize price Fertiliser price as a % of the crop price for palm oil and maize, indexed Fertiliser product price index, average=1 35% 3% 25% 2% 15% 1% 5% % Jan-1 Sep-2 May-4 Jan-6 Sep-7 May-9 Jan-11 Sep-12 May-14 EU palm oil US maize 7

8 Indonesian regional minimum wages, 21 vs. 215 16 14 12 1 8 6 4 2 Minimum wage, US $ per month West Papua East Kalimantan South Kalimantan Central Kalimantan West Kalimantan South Sumatra Jambi Riau West Sumatra North Sumatra 21 215

Palm oil production costs for field plus factory Average 212/13-214-15, US$ per tonne of oil US$ per tonne of oil: > 6 5 6 < 5 216 LMC International. All rights reserved. Oilseeds and Oils Report 215, Report Summary 9

Colombia Cote D'Ivoire 1 Ecuador Palm oil cost of production US$ per tonne of oil, field plus factory 7 6 5 4 3 2 1 US per tonne of oil Brazil Nigeria Papua New Guinea Thailand Indonesia Malaysia

Comparing costs across oils (including meal credits) Vegetable oil costs of production, US $ per tonne Underlying Oil Costs Net of Meal Credits USA Soybean Oil -675 Italy Soybean Oil -555 Brazil Soybean Oil -538 India Soybean Oil -524 Paraguay Soybean Oil -317 Argentina Soybean Oil -62 Ukraine Rapeseed Oil 122 Ukraine Sunflower Oil 163 Russia Sunflower Oil 19 China Soybean Oil 22 Germany Rapeseed Oil 234 Canada Rapeseed Oil 272 Poland Rapeseed Oil 36 Australia Rapeseed Oil 318 Argentina Sunflower Oil 325 France Rapeseed Oil 328 Malaysia Palm Oil 34 Indonesia Palm Oil 355 USA Rapeseed Oil 363 USA Sunflower Oil 396 Thailand Palm Oil 397 Papua New Guinea Palm Oil 41 UK Rapeseed Oil 424 India Rapeseed Oil 436 Spain Sunflower Oil 438 France Sunflower Oil 46 Indonesia Coconut Oil 522 Philippines Coconut Oil 542 Ecuador Palm Oil 575 Nigeria Palm Oil 592 Cote D'Ivoire Palm Oil 598 Brazil Palm Oil 617 China Rapeseed Oil 617 Colombia Palm Oil 687 The table on the left compares costs per tonne of oil. To do this, we have to deduct a credit against costs for the value of the meal produced when generating one tonne of oil. With high meal prices over the three year averaging period, this makes soybean producers look far the most competitive. Brazil is the lowest cost soybean producer in the world before converting to costs per tonne of oil. It has benefitted greatly from a currency that has declined 5% since 211, lowering costs in dollars. In rapeseed, the extensive, low input Canadian canola (rapeseed) system has very low costs but the EU has higher meal credits. For sunflower, Ukrainian costs have acquired a competitive advantage as the depths of the 28/9 recession and now the conflict with Russia have hit the currency hard. Indonesia and Malaysia are the lowest cost producers of palm oil worldwide, but have small meal credits. Average 212/13-214/15 (real 214 US $ per tonne of oil, ex-mill). Costs allow for field and factory costs, minus a credit against costs for the value of the meal produced for each tonne of oil. 11

Demand

The drivers of demand: population dynamics % population growth rate Population growth rates, average 213-215 4.% 3.5% 3.% 2.5% 2.% 1.5% 1.%.5%.% -.5% Ukraine Belarus Russia Japan Uruguay EU Thailand Jamaica South Korea China Fiji USA Argentina Vietnam Brazil Tunisia Morocco Peru Iran Indonesia India Colombia Australia Venezuela Cambodia Egypt Panama Pakistan Saudi Arabia Sudan Rwanda Yemen Guatemala Cameroon Kenya Nigeria Madagascar Zambia Mali Chad Angola Uganda Jordan Population growth is one of the fundamental drivers affecting the aggregate volume of oil and meat/meal consumption. The age profile of a country matters. The age range of 2-4 are be the most responsive consumers of oil and meat when they increase their incomes. Income groups are also important. The middle classes have higher income elasticities. Population pyramid: India Chinese income groups, 29-3 (% of population) 1+ 95-99 9-94 85-89 8-84 75-79 7-74 65-69 6-64 55-59 5-54 45-49 4-44 35-39 3-34 25-29 2-24 15-19 1-14 5-9 -4 2 4 6 8 1 12 14 Population (millions) Share of population 9% 8% 7% 6% 5% 4% 3% 2% 1% % Poor Middle class Rich 29 22 23 13

The drivers of demand: income and urbanisation Changes in GDP per capita explain a lot of the change in meat/meal and food oil demand for many countries. In China, for example, food oil and meat demand has expanded rapidly recently, as has its GDP per capita. Urbanisation tends to stimulate food oil demand in emerging economies, and is associated with higher income elasticities of demand. This is because migration to cities leads to changing lifestyles. Change in GDP per capita vs. food oil demand Change in urbanisation vs. food oil demand % change in food oil consumption per capita 6% Vietnam 5% 4% 3% Russia Pakistan Argentina Thailand Turkey 2% Mexico Brazil South Africa 1% EU % USA Japan Bangladesh Tanzania Cameroon Colombia Bolivia Indonesia South Korea India China Panama -1% -2% % 2% 4% 6% 8% % change in GDP per capita % change in food oil demand per capita 6% Vietnam 5% China Bangladesh Angola India 4% Mozambique Malawi Pakistan Cameroon 3% Bolivia Thailand Colombia Turkey Indonesia 2% Peru Venezuela South Korea Iran South Africa Brazil 1%.5% 1.5% 2.5% 3.5% 4.5% % change in urban population 14

The income elasticity of demand changes over time Food oil consumption in advanced economies Food oil consumption in emerging economies 35 3 Food oil consumption per capita kg/year 3 25 2 15 1 5 198 1985 199 1995 2 25 21 215 Japan USA EU Australia Korea Food oil consumption per capita, kg/year 25 2 15 1 5 198 1985 199 1995 2 25 21 215 Indonesia Brazil Argentina China Turkey Meal demand in advanced economies Meal demand in emerging economies Meal consumption per capita kg/year 12 1 8 6 4 2 198 1985 199 1995 2 25 21 215 Japan USA EU Australia Meal consumption per capita kg/year 9 8 7 6 5 4 3 2 1 198 1985 199 1995 2 25 21 215 China Brazil Thailand Argentina At some point in a market s evolution, increases in income will cease to have any impact on food oil and meat consumption per capita. 15

Prospects for global food oil and meat consumption The countries are ranked into potential growth categories according to their scores across a range of determinants of demand. F2.1: Growth prospects for food oil and meat (pig and poultry) consumption based on key indicators Growth Indicator: Fast growth Kenya Rwanda United Arab Emirates Bangladesh Zambia Tanzania Vietnam Papua New Guinea Panama Malawi Paraguay Malaysia Nigeria India Mali Ethiopia China 216 LMC International. All rights reserved. Fast-medium growth Medium growth Uganda Saudi Arabia Angola Mozambique Philippines Iraq Indonesia Madagascar Nicaragua Pakistan Guatemala Bolivia Tunisia Yemen Turkey Kazakhstan Cameroon Morocco Sierra Leone Peru Ecuador Zimbabwe Iran Egypt Sudan Singapore Colombia South Africa Sri Lanka Australia Mexico Venezuela El Salvador Thailand Brazil Uruguay Oilseeds and Oils Report 215, Report Summary Low growth Russia South Korea Canada Argentina Chile Ukraine USA EU Jamaica Belarus Japan 16

Global vegetable oil and meal demand forecasts Global consumption of vegetable oils Global consumption of oilseed meal 25 21 215 216 22 225 Growth Rate 215-25 (% p.a.) Food Argentina.75.84 1.1 1.12 1.15 1.23 1.1% Brazil 3.17 3.52 3.9 3.89 4.13 4.41 1.4% Canada.8.8.91.95.99 1.5 1.1% China 18.68 24.3 3.64 31.63 35.49 4.21 2.7% EU 1.84 1.96 1.73 11.53 11.72 11.94.4% India 11.1 14.68 19.72 2.93 24.86 28.31 3.4% Indonesia 3.8 4.45 5.95 6.7 6.82 7.56 2.5% Japan 2.7 2.4 2.4 2.5 2.5 2.6.% Malaysia.62.73.81.83.93 1.3 2.5% Mexico 1.53 1.67 1.9 2. 2.18 2.35 1.8% Russia 2.8 2.48 2.87 2.99 3.8 3.31 1.2% Turkey 1.24 1.28 1.81 1.89 2.6 2.22 1.8% Ukraine.61.87.93.92.99 1.3 1.3% USA 9.52 9.59 1.29 1.11 1.5 11.2 1.% World 94.41 111.2 135.96 14.36 156.3 175.2 2.5% Biofuels Brazil. 1.63 2.71 2.75 3.92 4.29 5.1% EU 2.4 9.9 8.64 9.48 11.8 1.35 1.4% US.41.41 4.66 4.99 5.71 5.71 1.8% World 3.32 15.1 25.28 28.36 34.85 36.6 3.1% Industrial World 8.3 9.97 12.21 12.51 13.85 15.84 2.6% TOTAL 16.3 136.28 173.45 181.23 25. 227.1 2.6% 25 21 215 216 22 225 Growth Rate (215-225, % p.a.) Brazil 9.7 13.8 16.2 16.4 17.4 18.6 1.5% China 36.9 53. 74.6 78.1 91.4 1.4 2.8% EU 44.4 46.7 49.3 49.9 51.9 54..9% India 8.5 9.6 12. 12.5 15.5 17.2 3.6% Russia 2. 3.3 4.8 5.2 5.3 5.8 1.2% US 33.2 3.3 34. 34.9 36.8 39.6 1.4% Rest of World 52.4 63.6 86.2 87.3 12.9 117.8 3.4% World 187.1 22.3 277.1 284.1 321.2 353.4 2.4% For food oil, China and India together account for over a third of global food oil demand today. This is up from less than 3% in 2. By 225, their share will have climbed close to 4% making these two markets fundamental to the sector s development. Biofuels will account for around 36 million tonnes of vegetable oil consumption. World oilseed meal consumption should expand at 2.4% per annum to over 35 million tonnes by 225, with Asia leading this development. 17

The supply of oilseeds, meal and oils

Supply of oil crops where has the growth come from? The period of high prices (27-14) stimulated vast increases in global production of oilseed and oil crops. The largest gains were seen in soybean and palm. Growth in soybean oil production kept pace with palm until about 24 but struggled to keep pace thereafter. However, in the last two years signs of convergence have emerged once again. The impressive growth in palm oil production over the past decade belies the fact that more area has been added to other oilseed crops. The difference, of course, is explained by the high oil yields achieved by oil palm for every hectare planted. This means oil palm makes a far bigger contribution to oil supply than to oil crop area.. Supply increases in oil crops Major producers additions to world oil crop area Global production increase vs. 1985, million tonnes 6 5 4 3 2 1 1986 199 1994 1998 22 26 21 214 Palm oil Soybean oil (oil-in-seed) Rapeseed oil (oil-in-seed) Sunflower oil (oil-in-seed) Million hectares 4 35 3 25 2 15 1 5 25 26 27 28 29 21 211 212 213 214 215 216 Brazil (soy) Indonesia (palm) Argentina (soy) Canada (rape) USA (soy) EU (rape) Ukraine (sun) Russia (sun) Malaysia (palm) 19

Deviation from long run trend in palm area and price Malaysian deviation of price and area growth from long run trend 12% 1% Deviation from trend (Malaysia) 8% 6% 4% 2% % -2% -4% -6% 1982 1985 1988 1991 1994 1997 2 23 26 29 212 215 Deviation of area growth from trend (Malaysia) Deviation of price from trend (Malaysia) 2

CPO price and seed sales in Malaysia 1 3,4 Annual Malaysian seed sales, millions 9 3,5 8 2,7 7 2,35 6 2, 5 1,65 4 1,3 3 95 2 6 1992 1994 1996 1998 2 22 24 26 28 21 212 214 Annual Malaysian seed sales, millions CPO price, Ringgits/tonne 21

CPO price and seed sales in Indonesia 2 1, Millions of germinated seeds 16 12 8 4 8 6 4 2 Indonesian CPO price, US$/tonne 1988 1992 1996 2 24 28 212 Seed supply in Indonesia CPO price 22

Total Malaysian and Indonesian oil palm areas Area forecasts where real Brent prices follow Low ($55 ppb), Medium ($7) and High ($1) prices 15 14 Total area (million hectares) 12 11 9 8 6 5 3 2 198 1984 1988 1992 1996 2 24 28 212 216 22 224 US$6 Indonesia US$6 Malaysia U$8 Indonesia U$8 Malaysia U$1 Indonesia U$1 Malaysia 23

Indonesia oil palm area growth 14 35% 12 3% Total Area - Million Hectares 1 8 6 4 25% 2% 15% 1% Annual growth rate 2 5% 198 1985 199 1995 2 25 21 215 % Total Area Annual growth rate 24

Indonesian palm oil area growth, by province Million hectares Regional net area growth in million hectares.9.8.7.6.5.4.3.2.1. 21 23 25 27 29 211 213 215 Northern Sumatra Central Sumatra Southern Sumatra Kalimantan Others 25

West Africa palm oil output Million tonnes 2.5 2. Million Tonnes 1.5 1..5. 28 29 21 211 212 213 214 215 Nigeria Cote d'ivoire Cameroon Ghana Liberia Sierra Leone Benin Gabon Togo 26

West Africa palm oil balances Supply/demand balances, thousand tonnes (negative is deficit) Palm oil balances in 215 (thousand tonnes) 3 2 1-1 -2-3 -4-5 -6-7 Ghana Nigeria Cameroon Togo Benin Sierra Leone Liberia Gabon Cote d'ivoire 27

Nigeria 28 Fresh Fruit Bunch (FFB) yields in select countries Tonnes per hectare 25 2 15 1 Tonnes per Ha 5 Gabon Ghana Sierra Leone Togo Benin Honduras Indonesia Costa Rica Cameroon Thailand Colombia Malaysia Guatemala Central America Southeast Asia West Africa

On market RSPO sales Prices in US$ per tonne of oil and thousand tonnes of sales 35 3 1 9 8 Tonnes (') 25 2 15 1 5 7 6 5 4 3 2 1 US $ per tonne Sep-1 Sep-11 Sep-12 Sep-13 Sep-14 Sep-15 Volume Price 29

% of RSPO production sold RSPO certified palm oil sales, million tonnes, and % sold as RSPO certified 3.5 7% RSPO certificates issued/sold - million tonnes 3. 2.5 2. 1.5 1..5. % 21 211 212 213 214 215 Jan-Oct RSPO certicates issued RSPO sales RSPO share sold 6% 5% 4% 3% 2% 1% Shares of volumes sold 3

Global palm oil production to 225 Million tonnes 9 8 7 Million tonnes 6 5 4 3 2 1 2 22 24 26 28 21 212 214 216 218 22 222 224 Indonesia Malaysia Thailand Nigeria Colombia Brazil Papua New Guinea Ecuador West Africa (excl. Nigeria) Rest of World 31

Global vegetable oil in seed and oilseed supply to 225 Global vegetable oil-in-seed supply Global oilseed supply 25 21 215 216 22 225 Growth Rate (215-225, % p.a.) Soybean Argentina 7.32 1.34 12.3 11.76 13.82 15.6 2.6% Brazil 9.46 13.9 19.9 2.85 25.83 28.76 3.3% China 3.11 2.84 2.45 2.36 2.48 2.58.8% USA 15.2 19.23 21.21 21.75 22.31 24.62 1.7% World 39.19 51.47 63.26 66.18 74.84 82.34 2.4% Sunflowerseed Argentina 1.51.92 1.31 1.32 1.35 1.47 1.7% EU 2.7 2.89 3.69 3.27 3.49 3.71 1.3% Russia 1.99 2.66 3.69 3.89 4.9 4.38 1.3% Ukraine 1.26 3.14 4.22 4.55 4.21 4.6.8% World 1.36 13.19 16.76 16.82 17.63 18.78 1.2% Rapeseed Canada 3.18 5.68 7.2 5.84 8.25 8.49 2.9% China 4.7 4.85 5.19 5. 5.4 5.77 1.5% EU 6.54 8.62 9.16 8.9 9.28 9.9 2.% India 2.8 2.42 2.41 2.72 3.18 3.55 2.6% World 18. 23.8 28.6 25.7 3.47 32.93 2.4% Coconut India.45.42.43.43.42.43.% Indonesia.84.97.98.99.98 1.3.7% Philippines 1.58 1.63 1.45 1.49 1.52 1.57.6% World 3.42 3.53 3.35 3.39 3.52 3.64.7% Palm Oil Indonesia 14.41 22.94 32.94 33.8 39.14 44.23 3.% Malaysia 14.96 16.99 19.89 2.51 22.3 24.18 1.8% World 33.85 46.5 6.86 62.89 71.82 81.54 2.9% Palm Kernel Oil Indonesia 1.55 2.56 3.45 3.66 4.23 4.79 3.% Malaysia 1.84 2.1 2.33 2.3 2.5 2.71 1.8% World 4.6 5.53 7.31 7.55 8.62 9.79 2.9% 25 21 215 216 22 225 Growth Rate (215-225, % p.a.) Soybean Argentina 39. 54.5 6.61 57.22 67.26 73.26 2.6% Brazil 53. 69. 96.15 11.43 125.67 139.92 3.3% China 17.4 14.98 12.35 11.5 12.9 12.53.8% USA 85.2 91.47 16.88 15.81 18.56 119.8 1.7% World 215.91 26.56 318.71 322.14 364.25 4.79 2.4% Sunflowerseed Argentina 3.66 2.23 3.16 3.2 3.27 3.56 1.7% EU 6.53 6.99 8.93 7.9 8.45 8.96 1.3% Russia 4.8 6.43 8.93 9.4 9.89 1.59 1.3% Ukraine 3.5 7.6 1.2 11. 1.19 11.12.8% World 25.34 31.78 4.33 4.53 42.49 45.27 1.2% Rapeseed Canada 7.67 12.9 16.41 13.34 18.87 19.41 2.9% China 13.18 13.66 14.6 14.1 15.56 16.6 1.6% EU 15.46 21.63 24.39 21.55 24.73 26.37 2.% India 6.5 6.4 6.31 7.15 8.56 9.55 2.8% World 46.16 61.3 71.94 65.9 78.14 84.45 2.4% Copra India.74.69.71.72.7.71.% Indonesia 1.4 1.6 1.6 1.6 1.68 1.76 1.% Philippines 2.45 2.52 2.23 2.3 2.36 2.43.6% World 5.53 5.71 5.43 5.51 5.71 5.92.7% 32

Determinants of vegetable oil prices

EU prices for major vegetable oils EU vegetable oil prices since 27, with six month forecasts (NW EU ports) Vegetable and Crude Oils (US$ tonne) 2,1 1,8 1,5 1,2 9 6 3 Jan-7 Feb-8 Mar-9 Apr-1 May-11 Jun-12 Jul-13 Aug-14 Sep-15 Soybean Oil Crude Palm Oil Rapeseed Oil Sunflower Oil Brent Crude Oil 34

Price premia over Brent crude for palm and soy oil EU soy oil and CPO premia (NW EU ports) over Brent crude with six month forecasts Premium over Brent, US$ per tonne 8 7 6 5 4 3 2 1-1 Jan-7 Jan-8 Jan-9 Jan-1 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 EU Palm Oil Premium EU Soy Oil Premium Palm Oil Average Soy Oil Average 35

CPO premium over Brent crude vs. Malaysian palm oil stocks Malaysian palm oil stocks vs. EU premium for CPO vs. Brent crude (six month forecast) 8 3, EU premium over Brent, US$ per tonne 7 2,8 6 2,6 5 2,4 4 2,2 3 2, 2 1,8 1 1,6 1,4 MPOB Palm Oil Stocks, ' tonnes -1 Jan-8 Jan-9 Jan-1 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 1,2 CPO Premium over Brent Average CPO Premium MPOB Stocks 36

Daily prices premia vs. crude oil Daily premia of CPO prices in Indonesia (FOB and internal) and CIF EU over Brent crude CPO Premium over Brent, US $ per tonne 4 3 2 1-1 -2-3 Sep-12 Mar-13 Sep-13 Mar-14 Sep-14 Mar-15 Sep-15 Cif Rotterdam FOB Belawan FOB Belawan-Export Tax 37

Price premia vs. CPO EU premia for major vegetable oils vs. crude palm oil EU premium over CPO, US$ per tonne 9 8 7 6 5 4 3 2 1 Jan-7 Jan-8 Jan-9 Jan-1 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Soy oil Rapeseed oil Sunflower oil 38

Monthly prices in relation to the long run trend EU crude palm oil price and 5 year trend 1,35 1,15 US$ per tonne 95 75 55 35 Jan-5 Jan-7 Jan-9 Jan-11 Jan-13 Jan-15 CPO Price CPO Price Trend 39

EU price forecasts for major vegetable oils EU vegetable oil prices since 214, with six month forecasts (NW EU ports) 1,5 Vegetable and Crude Oils (US$ tonne) 9 75 6 45 3 15 Jan-14 May-14 Sep-14 Jan-15 May-15 Sep-15 Jan-16 May-16 Soybean Oil Crude Palm Oil Rapeseed Oil Sunflower Oil Brent Crude Oil 4

CPO premium over Brent crude vs. Malaysian palm oil stocks The palm oil price premium over crude oil is determined by the level of Malaysian stocks. There is an inverse relationship. 6 2,75 EU premium over Brent, $/tonne 5 2,5 4 2,25 3 2, 2 1,75 1 1,5 1,25 MPOB Stocks, ' tonnes -1 Jan-7 Jan-8 Jan-9 Jan-1 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Premium Average premium Stocks 1, 41

Conclusions

Meal and oil demand growth will converge once more Global per capita oil and meal consumption vs. global per capita GDP KG per person 4 35 3 25 2 15 1 5 8 9 1 11 12 13 14 15 Real GDP per capita (') Meal Total Oil Food Oil Total oil and meal consumption in relation to GDP follow similar upward paths, but total oil growth a boost from the decade of biofuels. As enthusiasm for biofuels eases, food oil will once again have to provide most of the impetus. The result will be that the rate of growth in demand for meal will expand broadly in line with the demand for oils over the next decade, and from a higher base, requiring more absolute tonnage. The decade of protein has begun. 43

Demand may rebalance away from the emerging world Per capita demand for vegetable oil in US and China vs. palm oil price KG per person 35 1,225 3 1,5 25 875 2 7 15 525 1 35 5 175 198 1985 199 1995 2 25 21 215 US demand China demand Palm oil price Palm oil price (US$/tonne) It is interesting to note that per capita demand for oil in the US suffered more from high prices from 26 to 213 than Chinese demand. This is because Chinese and emerging economy demand more generally has been driven by income growth, whereas developed world demand is income inelastic. As incomes slow in emerging economies and prices fall, we may witness a small rebalancing of demand back towards the developed world from the emerging economies. 44

Area may shift back from oil rich to meal rich crops Soybean area as a share of combined palm and soybean area Soybean area as % of total soy+ oil palm area 93% 92% 91% 9% 89% 88% 87% 86% 85% 1961 1967 1973 1979 1985 1991 1997 23 29 215 The subtle shift in demand towards protein will have implications for supply. Soybean area as a share of combined palm and soybean area has fallen since the 197s due to the aggressive growth in oil demand. However, this trend has turned a corner as demand begins to favour meal growth. We have already begun to witness lower growth in palm area and a reduction in the oil-intensive sunflower and canola crops in the past two years. 45

Final thoughts Demand growth generally should slow down as a result of weaker income increases in some key emerging economies and because of lower petroleum prices. This slowdown should lead to a slight rebalancing of demand back to developed markets. These may be more sensitive to prices than income, while the reverse is true in emerging economies. There should also be a rebalancing of demand and thus supply in favour of meal intensive crops, notably soybeans, from the oilintensive crops like palm oil, rapeseed/canola and sunflower. This process may already have begun. We may be entering a protein decade. 46

Oxford 4 th Floor, Clarendon House 52 Cornmarket Street Oxford OX1 3HJ UK T +44 1865 791737 F +44 1865 791739 info@lmc.co.uk New York 1841 Broadway New York, NY 123 USA T +1 (212) 586-2427 F +1 (212) 397-4756 info@lmc-ny.com Kuala Lumpur B-3-19, Empire Soho Empire Subang Jalan SS16/1, SS16 475 Subang Jaya Selangor Darul Ehsan Malaysia T +63 5611 9337 info@lmc-kl.com Singapore 16 Collyer Quay #21- Singapore 49318 Singapore Tel: +65 6818 9231 info@lmc-sg.com www.lmc.co.uk LMC International, 216 All rights reserved This presentation and its contents are to be held confidential by the client, and are not to be disclosed, in whole or in part, in any manner, to a third party without the prior written consent of LMC International. While LMC has endeavoured to ensure the accuracy of the data, estimates and forecasts contained in this presentation, any decisions based on them (including those involving investment and planning) are at the client s own risk. LMC International can accept no liability regarding information analysis and forecasts contained in this presentation.

For more information, please visit www.lmc.co.uk