FOOD INFLATION: STRATEGIES FOR NAVIGATING AN

INCREASINGLY HUNGRY ASIA

“We Accelerate Growth”

May, 2011

Satish LeleVice President

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Notable news

Chilli prices quadruple in Indonesia

Onion prices soar in India

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Cabbage prices hit kimchi loving S Korea

Corn hits $7.76/bushel in April

2008 and 2011

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Source: FAO

• Food prices back and over 2008 peaks

• Non energy and Metals & Minerals also at highest level

Food prices

• Asia – 3.3 billion population

• Two third of the world poor –

660 million live in Asia

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660 million live in Asia

• 10% increase in food prices

will push another 64 million

into poverty

Root causes for price rise

Fundamentals vs. speculation

Weather Currency hedge

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WeatherPopulation growthPopulation affluenceTransport costsNew demandEmbargoes

Currency hedgeSafe asset classPhysical holdingVolatile trading

Some realities

• More, and more wealthy people eat - China consumed 20 kg of meat in 1985 per person, 50 kg in 2010.

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Obesity: % of population with BMI greater than 30, older than 15

Some realities

A third of the food produced in the world

gets lost or wasted.

Loss and Waste – 1.5 billion tons

A forgotten priority?

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A forgotten priority?

• Consumers in rich countries waste

almost as much food as the entire net

food production of sub-Saharan Africa FAO report – May 2011

So how to combat food inflation?

First of all, is it possible to combat food inflation?

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To an extent “yes if we want to”.

Options - depends which side of the “poverty fence” you sit on?

- Do something?

- Do nothing?

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- Do nothing?

- Panic?

How to combat food inflation

Government

Immediate

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• Interest rates to curb inflation• Control commodity prices• Protect domestic production• Improving food supply chain infrastructure• Integrated food and dairy processing centers

Immediate

How to combat food inflation

Government

Long term

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• Change ratio between natural and forced irrigation

• Improving food supply chain infrastructure• Integrated food and dairy processing centers• Manage political pressures for increasing farm

land availability• Technology transfer from developed world

Long term

How to combat food inflation

Crops and Structure

• New crop strains for uncertain weather

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• New crop strains for uncertain weather• Improve lab to farm speed• Productivity increase through better and cheaper

equipment• Investment in Storage Infrastructure• Diversify sources – S America, Africa• Reduce bio-fuel crop usage?

How to combat food inflation

Individuals

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• Eat better, less and more selectively• Minimize waste• Moderate our meat consumption

So what next?

A gaze into the looking glass…

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Malthus to FEU-US

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Situation 2020

• 1.6 billion to 6 billion in 20th century

• Food production has outpaced population

�Mechanization

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�Mechanization�Green revolution�Land area�Agriculture chemical

• What we have done to get here may not sustain us for 2020 and beyond

What to expect by 2020

• Climate and population

• Water will increasingly become an issue for people and crops

• World will add 890 million by 2020 – 836 million in developing countries

• Food will fall short Wheat Rice Maize

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• Food will fall short

• Prices will increase by 20%

• Trends in dietary habits will change to cope with the shortfall

Wheat

14%

Rice

11%

Maize

9%

Conclusion

• Given current situation volatility will continue• Globally we need a little bit of rethink

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• Globally we need a little bit of rethink

Conclusion

Oh and yeah.. In the meantime if you have a bath tub, better stockpile commodities!

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tub, better stockpile commodities!

Last but not least..

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Thank you

For Additional Information

Donna Jeremiah

Director

Corporate Communications

(603) 6204 5832

djeremiah@frost.com

Carrie Low

Executive

Corporate Communications

(603)6204 5910

carrie.low@frost.com

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Jessie Loh

Manager

Corporate Communications

(65) 6890 0942

jessie.loh@frost.com