DYNAMICS AND OUTLOOK FOR

CHANGE IN GRAIN QUALITY

Black Sea Grain Conference

Kiev 6 6th April 2017

Gennadiy Shulga

2

AGENDA

Why SGS?

Market trends, S&D

Ukrainian wheat quality in comparison with other

exporting countries.

Corn quality

Mycotoxins Monitoring Program results

GMO stastistics

Digital Innovation in Trade

3

SGS POSITION IN THE MARKET

A UNIQUE GLOBAL NETWORK OFFERING AN EXCLUSIVE COVERAGE

92,000 employees including

scientists, engineers, doctors,

chemists, auditors and

inspectors

In over 1,850 offices and

laboratories

Covering most of the main countries and ports

Representing about 40% of the global market share for inspections, verifications and testing services in the agricultural sector

4

AGRICULTURAL VALUE CHAIN

5

TESTING CENTER

AGRI LAB Established in 1992

Commodities: Grain, Rice, Oilseeds, Pulses, Feed Stuff,

Vegoils, Dry Milk, Casein, Sugar

Accredited by DSTU (State Committee on Technical

Regulation and Consumer Policy of Ukraine) to carry out

metrological measurements

Accredited by NAAU (National Accreditation Agency of

Ukraine) to DSTU ISO/IEC 17025

Accredited by GAFTA and FOSFA international

associations for testing grain and oil products

Methods: ASTM, DSTU, EN, GOST, IP, ISO, UOP…

6

USDA WASDE – March ‘17– GLOBAL EXPORTS

World Supply / Demand EXPORTS

CORN

Year 10 11 11 12 12 13 13 14 14 15 15 16 16 17

Exports Mio/MT 91.46 116.97 95.16 131.1 142.20 120.23 152,92 27.2%

WHEAT

Year 10 11 11 12 12 13 13 14 14 15 15 16 16 17

Exports Mio/MT 132.88 157.78 137.36 165.91 164.41 172.79 179.00 4.76%

SOYBEAN

Year 10 11 11 12 12 13 13 14 14 15 15 16 16 17

Exports Mio/MT 91.66 92.27 100.65 112.77 126.22 132.13 141.11 6.8%

TOTAL

Year 10 11 11 12 12 13 13 14 14 15 15 16 16 17

Exports Mio/MT 316 367.02 333.17 409.78 432.83 425.15 473.03 11.3%

Ukraine Grain Export till now has reached 34.6mln mt

Russia exported 28.9mln mt.

7

MARKET TRENDS

US/Canada Share of World Wheat Trade – Record low at 25% in 2016!

Canada exports more wheat than the US for the 1st time in history!

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

US Canada

8

ROLE OF WHEAT BLACK SEA EXPORT

Black Sea Wheat export is growing.

Today it is 95% bigger than US

2.7 times bigger than EU

Black Sea/Europe will dominate the world

wheat trade in the years ahead. The

importance of Chicago in world wheat pricing

is diminishing.

South America to continue its development as

an “Export Powerhouse “ – This will

structurally change the world marketplace.

The South American revolution!

The US to become the world’s residual

holder of grain/soy stocks into 2020.

It is suspected that the low price landscape

may last at least until 2020!

9

Population current growth rate is 1.18%

between 2010-2016 and is projected to

decline to 0.13% by the year 2100.

Average food consumption growth is 30%

in 50 years, from 2358 kcal per capita to

2940 kcal, AGR 0.5%,

Next 15 years the growth of food

consumption will slow down to 0.2%

Production growth of 1.5-1.8% should be

sufficient to serve growing demand.

10

GLOBAL CORN PRODUCTION

Commodity Production of

2016/1960 AGR, %

Corn 5.3 3

Wheat 3.2 2.1

Rice 3.18 2.1

Sugar 2.99 1.94

Soyabeans 12 5

Average 5.334 2.828

Commodity

Production

2016/1960 AGR, %

Corn 5.3 3

Wheat 3.2 2.1

Rice 3.18 2.1

Sugar 2.99 1.94

Soyabeans 12 5

Average 5.33 2.83

11

SOYBEAN OIL AND PALM OIL GROWTH

Soybean oil production grow

up 14.9 times in 52 years,

AGR 5.33%

Palm oil growth is 51.4 times,

AGR of 7.9%

12

POULTRY MEAT PRODUCTION

Growth 46 times in 57 years, AGR 6.95%

13

WORLDS SUPPLY CUSHION

Current world supply cushion is sufficient:

Soyabeans 91 days

Corn 80 days

Wheat 126 days

14

UKRAINE FORECAST OF PRODUCTION

Production forecast of grains and oilseeds, mln tons

63,0 72,0 80,0

115,9

16,2 16,5

16,7

19,0

0,0

40,0

80,0

120,0

160,0

2013 2020* 2025* Потенциал** / Potential**

Зерновые / Crops Масличные / Oilseeds

15

UKRAINIAN WHEAT QUALITY BASED ON

QUALITY MAPPING DURING HARVESTING

Year

Pro

tein

Mo

istu

re

Test W

eig

ht

Fo

reig

n M

atte

r

Oth

er c

ere

als

Insect d

am

ag

ed

Bu

g d

am

ag

e

Sp

rou

ted

Sh

rivelle

d

Fallin

g N

um

ber

Wet G

lute

n

W

2004 11.32 13.76 77.00 0.47 1.56 0.70 0.50 1.81 1.26 226.34 21.55 180.78

2013 13.03 12.95 77.00 0.57 0.35 2.05 1.63 0.27 2.13 317.52 26.85 216.83

2014 11.85 12.91 77.24 0.54 0.14 1.45 1.44 0.44 1.44 317.40 23.69 189.41

2015 11.36 13.23 78.30 0.51 0.25 1.15 0.96 0.87 0.95 241.32 22.91 186.41

2016 11.97 12.62 77.65 0.63 0.36 1.00 0.94 0.17 1.93 361.00 22.30 192.00

Average for

last 13 years11.97 12.99 77.55 0.60 0.38 2.31 2.13 0.78 1.74 297.90 22.76 200.45

16

EXPORTED WHEAT QUALITY COMPARISON

Quality of Black Sea region wheat is proven to be one of the

best, but quality of crop in 2016 in Russia is worse than

2015. It is the price of higher yields.

The share of feed wheat has increased from 18% to 31% in

Russia.

Country Ukraine Russia Romania Argentina Canada Australia Germany France

Protein on dry

basis 12.1 12.57 12.14 11.12 15.13 11.82 13 11.84

Moisture 12.3 11.56 11.8 11.61 13.74 10.24 13.81 12.89

Test Weight 79.24 78.53 79.23 77.25 81.13 82.2 79.2 79

Admixture 0.57 0.24 0.62 0.35 0.33 2.1 0.78 1.16

Sprouted 0.17 0 0.13 0 0.15 0 0 0.1

Bug Damage 0.9 0.7 0.5 0.03 0 0 0 0

Falling Number 360.37 359.71 322.48 343.38 343.46 416 325.42 319.23

Wet Gluten

(Glutomatic) 24.34 26.28 25.11 24.64 27.89 28.36 23.64

W 192.1 207.13 193.86 203.44 212.86 218.39 186.93

17

RUSSIAN WHEAT

18

UKRAINIAN WHEAT

19

WHEAT QUALITY EXPORT STATISTICS

FOR CROP 2016

Wheat Quality Split by protein content

13.0% + 11.5 - 13.0 % < 11.5 %

Ukraine 5.3% 66.1% 28.6%

Russia 28.1% 45.9% 26.0%

Bulgaria 23.0% 59.0% 18.0%

Romania 20.0% 55.0% 25.0%

Kazakhstan 88.1% 10.7% 1.2%

UK 18.0% 31.0% 51.0%

Poland 90.8% 7.6% 0.6%

Latvia 43.9% 41.1% 15.0%

Lithuania 68.3% 31.7% 0.0%

Estonia 58.0% 42.0% 0.0%

Country

20

STATISTICS FOR TOXINS WHEAT, CROP 2016

Parameter Min, ppb Avg, ppb Max, ppb

Total Aflatoxins - max 4

ppb*

< 2 < 2 3.2

Aflatoxin B1 - max

2ppb*/20ppb**

< 2 < 2 < 2

Vomitoxin (DON) – max

1250ppb*/8000ppb***

< 20 300 900

Zearalenone – max

100ppb*/2000ppb***

< 25 < 25 < 25

Fumonisins < 300

< 300 <300

Ochratoxin A – max 5

ppb*/250ppb***

< 2 < 2 < 2

*as per Commission Regulation (EC) No. 1881/2006 (for foodstuffs)

**as per Directive 2002/32/EC (for animal feed)

***as per Commission Recommendation 2006/576/EC (for animal feed)

21

WEATHER TRENDS CAN’T BE IGNORED

22

SEASONAL TEMPERATURE ANOMALY

PERIOD OF YIELD FORMATION Record global temp readings 2016 warmest in the 136 years.

It is favorable for Black Sea wheat

23

CROP QUALITY - CORN, UKRAINE AND RUSSIA

Crop 2015

Parameter Min Avg Max Min Avg Max

Moisture 11.7 14.1 17.7 11.1 12.2 13.7

Foreign matter 0.03 0.53 3.27 0.51 0.71 1.12

Broken grains, EN 0.2 2.38 8.4 1.48 1.96 2.95

Ambrosia , seed /kg 0 1 547 7 51 739

Crop 2016

Parameter Min Avg Max Min Avg Max

Moisture 11.7 14.3 16.6 11.4 13.6 15.8

Foreign matter 0.02 0.7 4.33 0.43 0.65 1.74

Broken grains, EN 0.1 3.02 8.3 1.83 3.26 5.7

Ambrosia , seed /kg 0 1 40 5 37 570

RussiaUkraine

Ukraine Russia

24

MYCOTOXINS ISSUE

Such weather conditions are favorable for development of

diseases, fungi and insects in grains.

Globally the Authorities and consumers have become more

and more strict as regards to their expectations of food and

feed safety, in EU especially after crop 2012.

Toxins are very dangerous for human and animal health,

allowed limits in ppb.

In case of contamination the cargo is loosing value and in

some cases may have to be destroyed.

Traditional Sampling methodology does not always find

them. Mycotoxins may occur in “pockets” in a commodity.

Consequence of non compliance can be a big multi million

dollars issue and our clients were asking us for sophisticated

instrument for risk mitigation and proving that they are

managing food safety issues.

25

MYCOTOXINS MONITORING PROGRAM

In September 2014 SGS started screening of following Mycotoxins, relevant to

corn: Aflatoxin ( B1 and total), Ochratoxin, Deoxynivalenol, Zearalenone,

Fumonisins, HT-2/T-2. The program continued for 3rd year .

The program is in line with requirements of many certification schemes including

GMP+, OVOCOM, GTP (Cocerial), AIC, EFISC, QS,

Good Early Warning Notification System and risk mitigation tool.

List of countries covered:

Ukraine

Russia

Bulgaria

Hungary

Croatia

Romania

Poland

Serbia

Slovakia

Czech Republic

26

FOOD

aflatoxin ochratoxin fumonisin vomitoxin zearalenone T2/HT2

< 2 % Romania

> 2 % <10 % Ukraine

> 10 % Bulgaria

Slovakia

Hungary

Serbia

Croatia

FEED

aflatoxin ochratoxin fumonisin vomitoxin zearalenone T2/HT2

< 2 % Romania

> 2 % <10 % Ukraine

> 10 % Bulgaria

Slovakia

Hungary

Serbia

Croatia

Probability for having corn exceeding the EC limits with corn crop 2014:

STATISTICAL CHANCE OF HAVING ISSUE

27

DISEASE INDEX BASED ON WEATHER

PATERNS

28

STATISTICAL EVALUATION OF MYCOTOXINS RISK

Our program became a good risk mitigation toll for our clients,

as it helps to avoid many problems and is giving a clear

understanding how to address the issue – where to reinforce

control, how and for which toxins.

Probability for having corn exceeding the EC limits, based on

more than 10000 test results.

Number

of

samples

tested

Number

of

results

above

>10ppb

Risk %

Number

of

samples

tested

Number

of

results

above

>5ppb

Risk %

Number

of

samples

tested

Number

of

results

>4000pp

b

Risk %

Number

of

samples

tested

Number

of

results

>1750pp

b

Risk %

Number

of

samples

tested

Number

of

results

above

limit

>10ppb

Risk %

Number

of

samples

tested

Number

of

results

above

limit

>100ppb

Risk %

744 7 1 234 10 4 170 0 0 354 0 0 338 3 1 92 1 1

448 60 13 52 5 10 52 0 0 52 0 0 52 0 0 47 0 0

280 12 4 164 25 15 133 4 3 137 23 17 131 1 1 125 49 39

596 15 3 354 72 20 101 0 0 128 0 0 124 0 0 89 0 0

73 1 1 42 0 0 42 0 0 71 4 6 49 0 0 42 0 0

1254 1 0 159 0 0 190 5 3 1382 2 0 347 0 0 124 0 0

323 4 1 160 1 1 151 31 21 153 0 0 151 0 0 120 1 1

40 0 0 40 0 0 40 0 0 38 0 0 38 1 3 38 0 0

31 0 0 31 0 0 31 0 0 31 0 0 31 0 0 31 0 0

30 0 0 30 0 0 30 0 0 30 0 0 30 0 0 30 0 0

Total 3'075 93 3 1'032 103 10 770 40 5 2'022 29 1 953 2 0 646 50 8

Zearalenon T2/HT2

Country

Aflatoxin Total Ochratoxin Fumonisin DON

29

GMO CONTENT. 2016 VS 2015 CROP

SOY BEANS represented in Ukraine by event MON 40-3-2-6 and Mon

89788

Negative – 10.1% 6.5% (achievable only by IP program)

less than 0.1% – 42.4 % 39.5 %

0.1 to 0.9 % – 18.2% 22.25 %

more than 0.9% - 29.3 % 31.75 %

CORN represented in Ukraine by events MON 810, MON 88017, NK603,

DAS 59122, in 2015 we also detected TC 1507, BT11, MON863, GA21

Negative (at the detection limit of 0.01%) – 10.5 % 15.36 %

77.7 % 60.7 % contaminated by soya MON 40-3-2-6 event with test

result not more than 0.1%

less than 0.1% - 11.8 % 23.94 %

RAPESEEDS represented in Ukraine by event GT 73

Negative – 28.71% 9.94%

less than 0.1% - 19.15 %, 20.6 %, (11.97% in 2014)

0.1% and 0.9% - 33.49 % 33.13 %

more than 0.9% but less 10% - 11.96% 28.78%

more than 10% - 6.69% 7.55%

30

AVAILABLE SOLUTION

Non Rejection Guarantees

A policy specifically protecting the

principle against rejection and

consequent losses resulting from

the detection of a harmful

substance or prohibited GMO

event within a cargo. Included

within the policy is a full

Inspection and Testing process.

Already Available :

• Non GMO Guarantee into

E.U.

• Non-authorized GMO Traits

for China and E.U.

• Undesirable substances for

E.U. destinations.

31

BLOCKCHAIN

Digital Innovation will change Trade. Blockchain

Gennadiy Shulga

Vice President

Agriculture, Food and Life

SGS Group Management Ltd,

1 place des Alpes

1211 Geneva

Desk: + 4122 7399374

Mob: + 4178 6043263

Gennadiy.Shulga@sgs.com

SGS Inspection & Testing services along the whole supply chain are

helping our clients to avoid many problems and contribute in facilitation of

international trade.

CONCLUSION