AAAC Outlook: Coarse Grains & Oilseeds26th November 2010
Brad Glass
• Glencore overview
• Review of global coarse grains and oilseed S&D
• Review of Australian market influences
• Key drivers moving forward for global and domestic markets
Presentation Overview
markets
Disclaimer: this presentation is an overview only – please validate your own information to be tailored to your own situations.
• Major international participant in resources, energy and agricultural products markets
• Provide value-added services such as logistics, marketing, purchasing and financing to long-standing producers and consumers
• Industrial asset portfolio (in mining, smelting, refining
Glencore International AG Overview
• Industrial asset portfolio (in mining, smelting, refining and processing) which complements sourcing and marketing operations
• Consistently profitable (35 years) with a strong and liquid balance sheet
• Experienced management team with 100% employee ownership
Marketing Operations Industrial Operations
– Over 3,000 employees
– Some 50 main offices
– Over 40 countries
– Main offices:
• Baar, Switzerland (Headquarters)
– Over 60,000 employees
– 22 plants
– Grain ports, storage, bio-diesel etc
– 14 countries
– Stakes in publicly listed
Glencore International AG Overview
• Baar, Switzerland (Headquarters)
• London, UK
• Rotterdam, Netherlands
• Stamford, USA
• Singapore
• Beijing, China
– Stakes in publicly listed
companies:
• Xstrata Plc, 35.2%
• Century Aluminum, 47.0%
• Minara Resources, 70.6%
Unique Global Infrastructure
Portovesme
Eurallumina
Columbia Falls
Century
Kazzinc
Kubal
Century
Various Russneft Companies
Tennessee Zinc
Xstrata
Xstrata Xstrata
Xstrata
Xstrata
Xstrata
AughinishXstrata
Netherlands (Biodiesel)
Hungary
Prodeco / La Jagua
Los Quenuales / Perubar
Mopani
Aguilar/AR Zinc
Graspan
Zinc/Copper
Alumina/Aluminium
Coal Nickel Grain
Xstrata Zinc/Copper
Xstrata Coal
Xstrata Alloys
CenturyOil
Xstrata Nickel
Xstrata Aluminium
Xstrata
Cobar
Xstrata
XstrataXstrataMoreno (Crush)
Sinchi Wayra
Murrin Murrin Group
Windalco / Alpart
Xstrata
Pasar
Rostov on Don (Port)
Hungary (Ethanol)
Glencore Agricultural Products Group
• Origination / Marketing
– 30million mt of grain, 5million mt of edible oil/ oilseeds, 0.7 million mt of sugar
• Grain storage and port facilities
– Argentina, Australia, UK, Poland, Hungary, Romania, Russia, the Ukraine, Kazakhstan
• Oilseed crushing
– Argentina, the Ukraine
• BioFuel
– Netherlands, Argentina, Brazil, Hungary & UK– Netherlands, Argentina, Brazil, Hungary & UK
• Rice milling
– Argentina, Uruguay
• Flour milling
– Brazil, Russia
• Farming
– Australia, Paraguay, Russia, Kazakhstan the Ukraine
BARLEY: Key Drivers • World Balance Sheet Tight • Crops smaller in Europe/Ukraine/Canada• Russian Crops devastated by drought.• Russian ban on exports, Ukraine inhibiting
exports.• Production down 24.9 mmt yoy• Production down 24.9 mmt yoy• Australia losing production in WA• Australia gaining production East Coast• Malt S&D snug but Chinese will use
germinating feed – off grade
Feed Barley Price Fremantle Jan – Nov 2010
Barley - China
• China Beer Production is 41,359,000 KL
• Forecast Growth is 3.1% increase
• Per capita beer consumption 30.2 L (inc 1.2L yoy)
• 0.2 – 0.5 mmt of wheat used for Malting
• Australia export 1.25 mmt feed/malt in 09/10• Australia export 1.25 mmt feed/malt in 09/10
• 1.25 mmt of Australian lower grade malt and feed barley entered Chinese market in past 12 months
• In 2010 the quantity of the total barley import may exceed 2.5 mmt (including germinating feed for malt).
Corn: Market Drivers
Change in world corn demand
CBOT Corn 1974 – 2010
CBOT Corn Jan-Nov 2010
US Corn for Ethanol Production
China - Market Influence
• Chinese Corn Crop – Estimates range from 155 – 168 mmt.
• Chinese Demand for Food, Seed and Industrial Demand may exceed 167 mmt in 2010/11. (USDA Nov 162 mmt)(USDA Nov 162 mmt)
• China & India holding a larger share of world grain stocks – supplies not available to the market
Corn: Flags Production & Consumption
• Speculation of deal between China & Argentina for 6-8 mmt.
• Strategic deal reduces exposure to tight US Balance sheet
• USDA expecting record Corn crop in • USDA expecting record Corn crop in Argentina at 25 mmt up 11% yoy
• La Nina concerns in Argentina, with the trend towards drought conditions later in the season.
Argentina Soil Moisture at 10th November
World Canola Production: Major Markets
2008/09 2009/10 2010/11 YOY Change %
EU-27 19.08 21.45 20.0 -7%
F.S.U 4.24 3.22 2.3 -29%
Australia 1.84 1.91 2.25 +13%Australia 1.84 1.91 2.25 +13%
Canada 12.64 12.42 11.0 -11%
China 12.1 13.7 12.8 -7%
Pakistan 0.23 0.23 0.23 0%
Australian Canola Export by Origin
Season 2009/10
• Western Australia 920,310 mt• Western Australia 920,310 mt
• South Australia 232,893 mt
• Victoria 45,500 mt
Canola Price Fremantle Jan – Nov 2010
Australian Canola Exports: Destinations (mt)
Season 2009/10
•Bangladesh 50,876
•Pakistan 504,632
•UAE 124,571
•India 5,500
•Japan 169,447
•Europe 343,677
Soybeans – Impact on Oilseed Complex
CBOT Soybeans 1970 – 2010
CBOT Soybeans Jan-Nov 2010
Change in world Soybean demand
Chinese Imports of US Soybeans (mmt)
10
15
20
25
30
0
5
10
1991
1992
1993
1994
1995
1996
1997
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2007
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2009
2010
Year
Chinas Soybean Imports: Percentage of World Total
30
40
50
60
70
0
10
20
30
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
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2005
2006
2007
2008
2009
2010
La Nina: Reports strongest in 50 years ?
Trend in Chinese Agriculture Consumption past 20 years.
1989/90 2009/10 % Change
Population 1.2 billion 1.3 billion 2%
Wheat 102.6 105.0 2%
Corn 74.2 156.0 110%
Rice 120.8 134.5 11%
Rapemeal 2.5 9.8 292%
Soy Meal 1.4 37.5 2579%
Cotton 20.3 47.0 132%Cotton 20.3 47.0 132%
Soy Oil 1.1 10.4 845%
Palm Oil 1.0 6.3 630%
Poultry 2.1 12.2 481%
Pork 21.3 48.8 129%
Dairy 4.3 29.6 588%
Source: AgResource Company 2010
04:04 24Nov10 RTRS-China sees big corn shortage, urges more bank aid
BEIJING, Nov 24 (Reuters) - China's Banking Regulatory Commission (CBRC) has called on
banks to urgently offer special support to the agriculture sector in the face of severe shortages of
corn, cotton and sugar, among other crops. Local media reported that the notice,
issued on Monday, marked the first official admission that the country faces
corn shortages, following repeated assurances from the government grain authority that the country has ample reserves. Special financial support should be offered to those involved in
production, processing and circulation of some farm products to counteract looming shortages for
short-grain rice, corn, vegetables, cotton, sugar and other crops, the commission said on its web
site (www.cbrc.gov.cn). CBRC is among several Chinese authorities that have published detailed
Annual inflation rose to a 25-measures as part of efforts to combat rising prices. Annual inflation rose to a 25-
month high in October, largely driven by food price rises. The State
Administration of Grain last week said it would boost state sales of vegetable oils and soy on top
of weekly sales of corn, rice and wheat, but many buyers of corn have been restricted from weekly
bidding. The regulator urged banks to boost lending to agriculture-related industries as the top
priority to help stabilize farm prices. Domestic futures prices of cotton, sugar and corn frequently
hit record high levels this month before the central bank moved to tighten credit inflows to the
commodity markets by raising banks' reserve ratio twice this month, in part to reduce speculative
capital.
Summary• World Grain Demand
• Production trendlines increases a necessity – growth in production
• US trying to reinvigorate their economy, recent purchase of US$600 economy, recent purchase of US$600 bln of US Treasurys – weaker US$
• World economic growth returning but focus is in SE Asia & Latin America for Agricultural demand.
Summary (cont)• China to try to limit inflation and slow
their segments of their economy –food inflation
• Food vs Fuel debate to return ?
• Return of the term AGFLATION • Return of the term AGFLATION
• Market issues are more structural not as speculative as seen in 2007/08
• Watch for major producer concerns issues arising…
Thanks for your time today,
Questions ?Glencore Grain WA Office:
Rob Haddrill & Shaun Cleary