World grain outlook for the current crop year

and observations for 2014/15

Presented by: Emily French

Global Grains Asia Singapore

11-13 March 2014

Is the market moving into the start of a 5-year cycle of continued volatility but increasing supplies

as technology is transferred, low cost origins expand production and the consumption growth

engines slow?

In other words … are we in the early stages of a major and longer-term bear market for grains,

oilseed commodities?

… this is the same question I posed last year

CORN WHEAT BEAN OIL

… will it look like this? Or like that?

… or

… are there some of these fun little

guys running around?

ConsiliAgra agricultural trends

Slow, global supply rebuild

Continued, increased competition for demand

Global demand engines idling / slowing – but not out

of gas

Continued shift to a “buyer’s market”

Mother Nature remains a dominant influence

or

February brings about “little fun guys”

Money: potential flow out of equities and into

commodities in Q1?

Ukraine – Russia: “THE” potential “IT” factor

through Q1 and into Q2

China: what happened to expected China-US

soybean cancellations?

South America:

Brasil – smaller crop / logistics.

Argentina – stable crop / blue peso vs official

rate peso

Potential “outside money” inflow to start 2014

Weather – neutral conditions so now it’s down to demand and globalization

Sea surface temps indicate neutral

conditions.

Majority of weather models have

greatest probability for neutral

conditions in 2014

However, it is

important to

reflect on the

extreme

weather events

of 2013 and

the risk of El

Nino in

CY2014

Wheat

Wheat prices have maintained their downtrend since

November 2012 as another year of adequate supply and lack

of supply threat hang over the market

W rejected January lows but continues to

work against a 650 res zone – 50%

retracement

0

20

40

60

80

100

120

World supply cushion – days of use available to

world buyers (+96 days) – remain ample

Wheat has led global diversification of suppliers – shift to

buyer’s market characteristics: multiple origins competing for

world import demand

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

Black Sea - FSU-12 exports (000MT)

In 2002/03 – the Black Sea

forever changed the world wheat

trade grid. 10 years later – this

same shift is occurring in the

world corn trade grid and is

growing in influence in world veg

oil trade

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00% Black Sea - % of world trade

Ukraine - Russia

Black Sea production and exports

6.00%

7.00%

8.00%

9.00%

10.00%

11.00%

12.00%

13.00%

14.00%

15.00%

16.00%

% of world production

Although it accounts for 12.4% of world

production – it is all about exports,

exports, exports (22.1% of world trade)

0

5,000

10,000

15,000

20,000

25,000

Russia

Ukraine

Russia = 10.6% world trade (16.5MMT)

Ukraine = 6.4% world trade (10MMT)

versus

US = 20.3% world trade (31.5MMT)

However, it faces demand headwinds from slowing feed usage

and import stocks that have already been rebuilt during Aug-

October 2013

0 2000 4000 6000 8000 10000

0 10,000 20,000 30,000 40,000 50,000 60,000 70,000

2002/2003

2003/2004

2004/2005

2005/2006

2006/2007

2007/2008

2008/2009

2009/2010

2010/2011

2011/2012

2012/2013

2013/2014

Ending stocks Imports

China restocking largely complete

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

World feed wheat demand has been tepid given its

premium to corn – bias that feed reverts back to 2002-

2010 average (115-120MMT) vs 135MMT forecast

Which brings us to the following summary

• Black Sea geopolitical risk

• Northern hemisphere winter wheat crop conditions

• Brasil – protein play

• India

• World feed demand

ConsiliAgra continues to hold a bearish outlook for wheat

and looks for it to trend towards corn values through 2014

Which leads to the following price forecasts for the old – new Chicago wheat

Assumptions:

• Geopolitical risk is ST for Ukraine-

Russia. Exports continue / hold steady

• El Nino does not develop – rains return

to Australia

• Brasil needs to only shift 2MMT of

MY2014/15 W demand to North America

• China is done re-stocking

• EU exports maintain pace – offset W

exports by increase in C imports

• Canadian logistics will remain

problematic – but export tail / continued

supply push exists

Underlying Support zone Res zones

WK 560 650

WN 550 680

WZ 550** (assuming “normal” US corn production will dominate for world feed demand)

720

Corn

Corn faces headwinds of plateaued energy demand, a record

US crop last year and only moderate growth in feed demand

Corn prices in 2013 have been in search of

demand

0

10

20

30

40

50

60

70

80

World supply cushion (61.1days) – steady build

even as China moved to re-stock its reserves this

past year

US export demand benefits from smaller Brasil corn crop &

potential geopolitical risk ex Ukraine

Growth in world corn exports led – Ukraine & Brazil

0

5000

10000

15000

20000

25000

30000

35000

40000

45000

50000

Black Sea FSU South America

0

10000

20000

30000

40000

50000

60000

70000

Ukraine United States

US can handle at least 4MMT of Ukraine demand

shift & still have more than adequate stocks

In 10 years – production increased

141.6MMT – up 55.5%

Foreign production is expanding led by Black Sea region

(FSU & EU) and Brasil

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

450,000

World production excluding China & US

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

80.00%

As a result – US share of world export trade has

plummeted

But is it enough to break corn out of its lower / downtrend

channel?

US ethanol demand has peaked – will either stagnant or

contract depending on profitability – as world export trade

globalizes

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

180,000

US ethanol / FSI peak = 163MMT

0

20,000

40,000

60,000

80,000

100,000

120,000

World corn export trade = 114.4MMT

Which brings us to the following summary

• Black Sea geopolitical risk

• Brasil safrinha plantings – focus on S and S product exports

• World buyers shift to the US

• US – China open sales

• Winter weather – logistics in the US

ConsiliAgra continues to hold a negative view in med-LT

but US weather will hold key / set the tone for MY2014/15

Looking ahead to US corn balance sheet

MY2013/14 UDSA

MY2013/14 ConsiliAgra

MY2014/15 ConsiliAgra

Planted 95.4 95.4 94*

Harvested 87.7 87.7 86.5

Yield 158.8 158.8 158

Beg stocks 821 821 1581

Production 13925 13925 13667

Imports 35 35 25

Total supply 14781 14781 15273

Feed & residual 5300 5000 5000

FSI 6400 6450 6500

Ethanol 5000 5050 5050

Exports 1600 1750 1750

Ending stocks 1481 1581 2023

• USDA Ag Outlook

forum = 92 mil

acres. Issue is

“where did the 8

million acres” go

from prevent

plantings in

2013/14. Bias is

for larger than

expected C

plantings

• Abandonment =

8%. Bias is lower

due to reduced

crop insurance

rate.

• Feed / residual is a

swing factor for

MY2014/15

• Exports also a

swing factor –

export tail out of

South America

Which leads to the following price forecasts for old and new crop corn

Assumptions: • 1 March stocks reflect the “over-estimate”

for 1 December – adds bushels / tonnage

back to US ending stocks

• Ukraine-Russia tensions continue – but

exports do move

• Brasil’s safrinha crop benefits from rainy /

wet season. Offsets yield losses from full

season

• Argentine production moves into cash

channels

• March 2014 and into Spring allows for

warming / rebuild of soil moisture levels

across US Midwest

• 31 March plantings show more acreage

than USDA estimate

Underlying Support Res zones

CK 420 500

CN 450 520

CZ 420 500

Geopolitical tensions drive

old / new spreads – presents

med-LT opportunity if world

production is trend-line in

MY2014/2015

Soybean complex

Soybean & soymeal prices have been the most volatile of the

grains & oilseeds. Key question remains: trade the US

balance sheet or the world balance sheet?

Soybeans Soymeal

Soybean oil – much like the world wheat and corn markets –

has been locked in a downtrend & “buyer’s market”

characteristics

• Like corn and wheat prices

– world veg oil prices have

rebounded strongly off

January 2014 lows.

• ST support coming from

Black Sea (Ukraine-Russia

conflict)

• Spec / managed money

positions have moved to

cover long-held net short

positions.

• Can BO break out of its

long-held downtrend?

South America soy production continues to build

SUMMARY:

1. South American production – forecast to increase ~10MMT vs last year

2. Brasil – logistics now most important fundamental aspect

3. South America to account for 55.2% of world production (48.2% last year)

4. Infrastructure – major impediment and risk for world soy importers

ConsiliAgra Min Max USDA

Feb

MY2012

/13

Argentina 53.5 52 55 54 49.5

Brasil 87.5 85 90 90 82

Paraguay 10 9.5 10.5 9.3 9.4

Uruguay 3 2.8 3.5 3.1 3.0

Bolivia 2.5 2.2 2.9 2.3 2.6

TOTAL 156.5 151.5 161.9 158.7 146.6

Will China’s negative crush margins, weak domestic

SM demand shift market from US to global aspect?

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

Imports % of world trade

Why China matters in the med-

long term as the market’s focus /

driver shifts from the US balance

sheet

• Crush margins have moved to 7-

month lows – both spot & forward

• China SM trying to buy world

import demand (north &

Southeast Asia)

• US outstanding sales (known) to

China = 2.34MMT vs 1.13MMT

as of 27 February.

• China rolls South American

ownership forward

• US looks to expand S plantings in

MY2014/15 – 31 March next look

Global soybean supplies are in position to be

record large, with world soybean oil stocks stable

and right at the 10-year average

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

World ending stocks = 73MMT. Likely to be

70MMT (back to Nov WASDE estimate) with

smaller Brasil crop

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

World soybean oil ending stocks – stable. Risk is to

downside if world crush rates slow on back of weaker

SM values / reduced profitability

Not only are world soybean ending stocks on the

rise, but Canada’s rapeseed crop was a record &

Black Sea sunflower oil exports are on the rise

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

80.00%

0

500

1000

1500

2000

2500

3000

% world export trade

Canada’s rapeseed exports continue to build

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

80.00%

90.00%

0

1,000

2,000

3,000

4,000

5,000

6,000

FSU exports % world export trade

Black Sea impact on world veg oil trade

flows on the rise

Looking ahead to US soybean balance sheet

MY2013/14 UDSA

MY2013/14 ConsiliAgra

MY2014/15 ConsiliAgra

Planted 76.5 76.5 80.5

Harvested 75.9 75.9 78.9

Yield 43.3 43.3 42.5

Beg stocks 141 141 152

Production 3289 3289 3353

Imports 30 40 25

Total supply 3459 3469 3530

Crush 1700 1690 1695

Exports 1510 1530 1500

Seed 87 87 88

Residual 12 10 10

Ending stocks 150 152 237

• USDA Ag outlook forum

= 79.5 mil acres. Our

forecast is conservative

= 80.5 mil acres.

• Next look at US

plantings = 31 March

• US S demand for

2014/15 will be largely

influenced by global

crush margins –

profitability

• World feed demand

should be steady – but

does China shift to

more SM exports

• Overhang / shadow of

world supply cushion

from this year.

• Risks? Plantings are

too low. Yield is too

low. All in – risk is to

higher US ending

stocks

This all feeds into the following S complex conclusions:

• US 1 March stocks likely to be tighter this year – than last year (31 March)

• The world veg oil market remains a buyer’s market – multiple origins & oils competing

for food and fuel demand. This is a bearish characteristic

• While veg oil fundamentals have grown more bullish since end 2013, it is the rebuild

and potential record world soybean ending stocks, a supply cushion near 100 days and

expanded US soybean plantings that casts a bearish-trend / supply-heavy scenario.

• Black Sea will impact the world veg oil market – positive & negative – similar to the

impact on the world wheat and corn markets.

• A shift to the world S complex balance sheet, negative crush margins in China,

Argentina coming back online – should pressure soymeal goes – the flat price curve

goes.

• Even if El Nino develops & negatively impact palm oil production – palm oil cannot

afford to lose “too much” of its demand profile from either food or discretionary biofuel

blending to other competing veg oils.

• Long oil share will be the one trade that outperforms in 2014

Which leads to the following price forecasts for the world soybean complex

Assumptions:

• Soybean oil corrects versus soymeal

– long oil share – through 2014

• Global crush margins under pressure

given strength in BO vs SM

• China crush margins remain under

pressure

• Brasilian farmer continues to sell cash

S – logistics remain dominant issue /

factor

• Increased bearish potential if

Argentina adjusts it official exchange

rate & blue peso / black market

Underlying Med-LT downside objectives – old crop

New crop price targets (vs Nov & December contracts)

Soybeans Downside objective: Q2 CY2014: 1300-1150

SX = 1125 - 1000

Soymeal Downside objective = (Q2 2014): 400 - 380

SMZ = 325 - 300

Soybean oil Downside into Q2 2014: 4200-4000

BOZ = 4000 - 3800

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 firm’s 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

Since its inception in 2009, ConsiliAgra clients now range from international & domestic commercials to hedge funds and investment banks as well as a private money portfolio managers.

Contact information:

Emily French Founder, ConsiliAgra www.consiliagra.com Email: efrench@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.