Mapping the Market Thought Of economy, crude Oil And Oilseed Complex

Theme: A Glimpse Into Impact Of Policy And Trade Developments Worldwide

By Mr NAGARAJ MEDA

www.transg raph.net

Review of Prior Price Forecasts :B MD CPO 3M Futures 2

TG Forecast: Since April 2019 we have been maintaining that prices are likely to trade weak towards MYR 1900 in next 3 to 4 months.

Actual: Prices have fallen from the Apr’19 (Globoil Dubai) level of MYR 2200 towards MYR 1920 and turned higher.

Forecast: Globoil Dubai Apr’19 Actual Price Action

• 20% fall in Chinese imports to US because of the trade war.

• To analyse the demand fall at China and global level, let us see the micro and macro data.

US import tariffs on China timeline 3

2017 2018 H1 2019

List 1 32 30 12

List 2 14 15 4

List 3 159 182 64

List 4 A 126 133 60

List 4 B 157 166 71

Total 487 525 210

Total Import 504 544 221

US imports from China in USD billion

Impact of US tariffs on imports

• List 1 – July 6th 2018 (25%), List 2 – Aug 23rd 2018 (25%), List 3 – Sep 24th 2018 (10%) and from May 10th 2019 (25%)

• Major decline is in – List 1 (Auto, Metal products such as taps), List 2 (Electronic circuits), List 3 (Tiles, Travel Luggage)

4

17.4 7.8

87.2

13.1 6.9

97.5

11.8 4.4

64.4

List 1 List 2 List 3

US imports from China in USD Billion

H 1 2018

H2 2018

H1 2019

0%

5%

10%

15%

20%

25%

30%

Oct

-16

Jan

-17

Ap

r-1

7

Jul-

17

Oct

-17

Jan

-18

Ap

r-1

8

Jul-

18

Oct

-18

Jan

-19

Ap

r-1

9

US imports from China as % of total imports

0

2

4

6

8

10

12

14

16

18

20

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5 US imports from China in USD Billion

List 1 List 2 List 3, RHS

Higher costs for US; Lower RM imports from China

• US imports from China have reduced following the implantation of tariffs

• However, significant rise in customs duties has added to surge in input costs for US businesses

• This had resulted in tighter margins which shall lower the private investment in the coming months

5

216 199

568 571

221 235

166 166

H1 2018 H1 2019

China Exports (USD Bln)

US Asia Europe Others

1170 1171

77 59

568 539

185 184

204 208

H1 2018 H1 2019

China Imports (USD Bln)

US Asia Europe Others

990 1033 0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

202

204

206

208

210

212

214

216

218

220 US Goods Imports

Imports (USD Bln) Tariff %, RHS

China GDP; Trade war impact on economic activity

• Tariffs and Yuan depreciation had led to sharp decline in Chinese imports which in turn will lead to lower exports in the coming months

• Lower manufacturing activity shall keep the GDP growth at the lower end of China’s target range (6 to 6.5%)

6

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

Jan

-18

Mar

-18

May

-18

Jul-

18

Sep

-18

No

v-1

8

Jan

-19

Mar

-19

May

-19

Jul-

19

China trade growth YoY

Export Growth Import Growth

6.8% 6.7%

6.5% 6.4%

6.4%

6.2%

6.0%

China GDP Growth YoY

0.93

0.77

0.48

0.14

-0.23

0.27

1.02

0.70

0.42

0.33

-0.16

0.24

0.96

0.46

-0.13

0.99

0.28

0.11

2018 2019 2018 2019 2018 2019

Final Consumption Capital Formation Net Exports

Contribution to China GDP value add, Trillion Yuan

JFM AMJ JAS OND

GDP in constant prices, YoY Increase

US GDP; personal consumption is expected to decline

• Growth in private investment has slowed down as the impact of tax cuts had waned. Higher tariffs also led to decline in investment.

• Moving forward, amid decline in job growth and wage growth, personal consumption is also expected to decline resulting in lower GDP growth numbers for JAS’19

7

86 80

43 42

-13 -15

11 14

99

83

32 34

0

-32

13 19

108

45

-32

18

84

42

-25

12

2018 2019 2018 2019 2018 2019 2018 2019

Personal Consumption Private Investment Incremental Net Exports Govt Consumption & Investment

Contribution to GDP Value Add, USD Billion

JFM AMJ JAS OND

GDP in constant prices, YoY Increase

-50

0

50

100

150

200

250

300

350

Jan

-18

Mar

-18

May

-18

Jul-

18

Sep

-18

No

v-1

8

Jan

-19

Mar

-19

May

-19

Jul-

19

US non farm employment change ('000s)

Service producing Goods-producing

2018 avg monthly job additions

3.0%

3.5%

4.0%

4.5%

5.0%

5.5%

6.0%

1.5%

1.7%

1.9%

2.1%

2.3%

2.5%

2.7%

2.9%

3.1%

3.3%

3.5%

Jan

-14

Au

g-1

4

Mar

-15

Oct

-15

May

-16

Dec

-16

Jul-

17

Feb

-18

Sep

-18

Ap

r-1

9

US Wage Growth YoY Trends

Avg hourly earningsgrowth

• Euro Area growth remains undermined by the weakness in German and Italy GDP growth prospects

• Lingering Brexit concerns shall continue to keep the business sentiments depressed; GDP growth shall remain at lower levels

0.1%

0.2% 0.2%

0.6%

0.9%

0.4%

0.2%

0.0%

0.6% 0.7%

-0.1%

0.3%

-0.1%

0.5%

0.4%

0.2%

0.4%

-0.1%

0.6%

0.1%

0.4%

0.3%

0.1%

0.7%

0.7%

-0.1%

0.3%

0.0%

0.5%

0.4%

Germany France Italy Spain Others

Euro Area GDP Growth QoQ

JFM 2018 AMJ 2018 JAS 2018 OND 2018 JFM 2019 AMJ 2019

Euro Area GDP; Recession risk for Germany 8

• ECB announced to restart the QE @ EUR 20 billion a month starting November 2019.

• Inflation remains substantially lower compared to the ECB’s target levels and ECB expects it to remain weak in the coming couple of years as well.

• ECB to increase the quantum of QE as long as the inflation increases consistently to the target levels of 2%.

-150

-100

-50

0

50

100

150

200Ja

n-1

4

Ap

r-1

4

Jul-

14

Oct

-14

Jan

-15

Ap

r-1

5

Jul-

15

Oct

-15

Jan

-16

Ap

r-1

6

Jul-

16

Oct

-16

Jan

-17

Ap

r-1

7

Jul-

17

Oct

-17

Jan

-18

Ap

r-1

8

Jul-

18

Oct

-18

Jan

-19

Ap

r-1

9

Jul-

19

ECB Asset Purchase Program

Net Asset Purchase (EUR Billion) QE quantum(EUR Billion)

1.8

1.3

1.0

1.2 1.2 1.1

1.0

1.4

1.2

1.5 1.6

1.5

Inflation Inflation Less Energy Inflation Less Energy and Food

ECB Inflation Projections

2018 2019 2020 2021

Inflation projections remain substantially lower than the target levels

Restart of QE from ECB as inflation lags behind 9

Restart of QE from Nov’19 at EUR 20 billion a month

• While rate guidance of all the central banks indicate possible lowering of rates in the coming months, FED had started reducing its balance sheet in the recent months and remains relatively hawkish compared to other central banks.

• ECB guidance indicates further rate cut (deposit facility rates) to deeper negative levels.

FOMC projections for Fed Funds Rate ECB assumptions for 3m Euribor Central Bank 2019 GDP Projections

FED is also turned dovish but not to the tune of ECB 10

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

2019 2020

-0.8

-0.6

-0.4

-0.2

0.0

0.2

0.4

0.6

2019 2020

0.0

0.5

1.0

1.5

2.0

2.5

3.0

ECB Fed

TransGraph Consulting Pvt Ltd.

Indian Economy

India GDP; Sharp slowdown in manufacturing

• Decline in personal consumption has kept the manufacturing sector (mainly auto) under pressure.

• Moving forward, GDP growth is likely to remain below 6% level for JAS quarter as well with industry forecasted to grow at 2.3% YoY.

12

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

14%

Agri (13%) Mining (3%) Manufacturing(17%)

Power andUtility (2%)

Construction(7%)

Domestic TradeServices (18%)

FinancialServices (20%)

Publicadministration

(12%)

GVA Net taxes GDP

India GDP Growth YoY

AMJ 2018 JAS 2018 OND 2018 JFM 2019 AMJ 2019

-1500

-1000

-500

0

500

1000

1500

2000

2500

3000

PrivateConsumption

GovtCosnumption

TotalInvestment

Net Exports GDP

GDP Growth YoY (INR Billion)

AMJ 2018 JAS 2018 OND 2018

JFM 2019 AMJ 2019

2.8%

7.0% 7.2%

6.3%

9.8%

6.6%

-0.1%

4.2%

8.4%

5.7%

6.7%

5.8%

2.0% 2.7%

6.9%

4.9%

6.1%

5.0%

1.8% 2.3%

8.1%

5.6%

8.0%

5.8%

Agriculture Industry Service GVA Net taxes GDP

GDP Growth YoY % OND 2018 JFM 2019 AMJ 2019 JAS 2019 p

Improvement in current account and FDI; primary deficit persists

• Improvement in current account and FDI

• Better than last year levels of primary balance but marginal deficit to persist

• FII outflows from equity had weighed on Rupee sentiments

13

India Balance of Payments (usdbln)

Item AMJ 2018

JAS 2018

OND 2018

JFM 2019

AMJ 2019e

JAS 2019p

2018-19 2019-20p

Current Account

Merchandise trade balance

-45.75 -50.04 -49.28 -35.21 -46.50 -40.00 -180.28 -175.00

Invisibles 29.95 30.98 31.53 30.57 31.25 29.00 123.03 130.00

Total Current Account -15.80 -19.05 17.75 -4.65 -15.25 -11.00 -57.26 -45.00

GDP 676 667 664 712 704 712 2719 2870

CAD as % GDP -2.3% -2.9% -2.7% -0.7% -2.2% -1.5% -2.1% -1.6%

Capital Account

FDI 9.57 7.41 7.31 6.42 14.49 8.65 30.71 38.00

FPI -8.15 0.20 -2.11 9.44 4.40 -3.20 -0.62 8.00

Others* 3.36 8.99 8.57 3.39 5.80 8.60 24.31 19.30

Total Capital Account 4.79 16.60 13.77 19.24 23.89 14.30 54.40 65.30

Balance of Payments -11.34 -1.87 -4.30 14.16 9.69 3.05 -3.34 20.50

Primary Balance -6.23 -11.64 -10.44 1.77 -0.76 -2.35 -26.54 -7.00

-18.30

-5.53 -7.13

18.50 15.78

1.37

AMJ'18 JAS'18 OND'18 JFM'19 AMJ'19 JAS'19till date

Change in Forex Reserves (usd bln)

-0.6

2.3

4.9 3.1

1.1 0.4

-1.7 -2.5

-0.2 -0.8

1.7

-0.7

0.2 1.2 1.4 1.6

-0.8

1.5

6.6

2.3 1.3 1.6

-0.3 -0.9

Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19

India FII Flows (USD Bln) Equity Debt

Total

21.1

5.2 4.6

11.4

27.3

5.3 3.6

18.3

GrossInflows

Repatriation FDI by India Net FDIinfows

India FDI Flows (USD bn)

2018-19 Apr-July

2019-20 Apr-July

Improvement in tax receipts; Spending lags

• Corporate tax cut to lower direct taxes by INR 1.45 lakh crore (Based on calculations, assumed impact of corporate tax cut on receipts may have been after taking into account the lower indirect taxes)

• Fiscal boost to GoI from RBI; More than anticipated surplus transfer (INR 0.5 lakh crore) to aid non tax revenue growth

• Net impact of 0.95 lakh crore on fiscal deficit (INR 8 lakh crore instead of 7.04) means fiscal deficit as % of GDP, it will be 3.8% for 2019-20

India Budget (INR Lakh Crore)

Attribute

2018-19

Actuals

2019-20

July BE

2019-20

Apr-July

Apr-July

% YoY

Apr-July

% BE

1. Total Receipts 16.66 20.83 4.00 14.4% 19.2%

1.1 Revenue Receipts 15.63 19.63 3.83 14.0% 19.5%

1.1.1 Tax Revenue (Net to Centre) 13.17 16.50 3.39 15.8% 20.5%

1.1.1.1 Direct Taxes 11.25 13.35 2.17 5.8% 16.3%

1.1.1.2 Indirect Taxes 9.55 11.26 3.22 7.2% 28.6%

1.1.1.3 Less Assignment to States 7.61 8.09 2.00 -5.9% 24.7%

1.1.2 Non Tax Revenue 2.46 3.13 0.44 1.8% 14.1%

1.2 Capital Receipts 1.03 1.20 0.17 24.3% 14.2%

2. Total Expenditure 23.11 27.86 9.47 6.5% 34.0%

2.1 On Revenue Account 20.08 24.48 8.40 7.9% 34.3%

2.1.1 Interest Payments 5.83 6.60 1.84 1.5% 27.9%

2.1.2 Other Revenue Expenditure 14.26 17.87 6.56 9.8% 36.7%

2.2 On Capital Account 3.03 3.39 1.08 -3.4% 31.9%

4. Fiscal Deficit (2-1) 6.45 7.04 5.48 1.4% 77.8%

GDP 190.10 211.01

Fiscal Deficit as % of GDP 3.39% 3.34%

14

55.3 49.6 47.7 57.7

55.3

Apr-19 May-19 Jun-19 Jul-19

GST Collections (Net to Centre)

GST Net to Centre (INR '000 Crore)

Avg Target (INR '000 Crore) July'19 BE

0

20

40

60

80

100

120

Ap

r

May Jun

Jul

Au

g

Sep

Oct

No

v

Dec Jan

Feb

Mar

Gross GST Collections (INR Crore)

2018-19 2019-20

Minimum revaluation reserves are at INR 1,354 billion

• Due to the mandate of 20% of balance sheet as economic capital (14.5% as revaluation reserves), RBI may limit the M2M of foreign currency reserves

• In view of this, at the current level of foreign currency reserve, any appreciation of INR to 69 levels, RBI may intervene in the forex markets

15

RBI Balance Sheet Data as on June 30,

2019 (INR Billion)

Balane Sheet 41029

Economic Capital (23.3%) 9560

Of which Contigent Risk Buffer

(CRB) (5.5%) 2257

Revaluation Buffer 7303

62

63

64

65

66

67

68

69

70

71

72

400 405 410 415 420 425 430 435 440 445 450

Forex Threshold for RBI's Revaluation Reserves

RBI BS @ 41029 RBI BS @ 43000 RBI BS @ 45000

Foreign currency reserves are currently at 430 billion (427 billion at the end of June 2019)

RBI Income and Expenditure Statement

(INR Billion)

Item

2016-

17

2017-

18 2018-19

Income 618 783 1930

Total

Expenditure 312 283 170

Amount

transferred to

GoI during the

year 0 100 280

Surplus transfer

to Govt 307 500 1480

USDINR Spot prices are likely to appreciate towards INR 70.30 and trade range bound below INR 72.40 in the coming 2 to 3 months.

USD Dollar Index & USDINR Spot Price Outlook

Dollar Index is likely to hold above 97.30 on any initial weakness and gradually inch higher towards 100.50 in the coming 2 to 3 months

Global Crude Oil

• Basing on Saudi Aramco CEO statement on 17th Sep'19, a probable scenario was built resulting in disruption of around 35.4 million barrels in Sep'19 with production getting restored at Abqaiq field gradually which is explained clearly in the table attached above.

• In the probable scenario, considering the disruption impact of 12% for the entire Sep’19, Saudi’s crude production is expected to decline by 1.18 MBpd for Sep’19 resulting in Saudi Arabia’s crude oil production at 8.62 MBpd in Sep’19 significantly lower from levels of 9.81 MBpd in Aug’19.

• Moving ahead, we expect the production to be at higher than recent normal levels in OND’19 reducing its over compliance rates towards production cuts to mitigate the losses happened in Sep’19.

Temporary shutdown of Saudi output following the drone attack 18

Saudi Prod in Aug’19 (MBpd)

Saudi disrupted Prod (MBpd)

Impact (%)

Number of Days

Impact Quantity (Mln bbl)

9.8 5.7 58% 1 5.7

9.8 4.2 43% 2 8.4

9.8 2.2 22% 4 8.8

9.8 1.5 15% 5 7.5

9.8 1.0 10% 5 5.0

10.2 10.1

9.8 9.8 9.7 9.8

9.7 9.8

8.6

10.0 10.1 10.1

Saudi Arabia Crude Oil Production Trend (MBpd)

Saudi Agreed Production towards Production Cuts: 10.31 MBpd

• OPEC production declined sharply in H2'19 due to continuous over-compliance rates from Saudi Arabia towards production cuts coupled with its supplies getting disrupted in Sep'19 due to the drone attacks. Moreover, lower Iranian and Venezuelan production supported for sharp fall.

• Continuous rise in the US production at a higher pace offset the production losses from OPEC & its allies production cuts and Iran & Venezuela (due to the US sanctions).

Higher US shale oil supplies partially offset the losses from OPEC cuts 19

0.8 1.2 2.1 2.9 4.0 4.6 4.3 4.7 6.5 7.4 4.7 4.4 4.4 4.5 4.8 4.8 4.6 4.7 4.5 4.8

5.48 5.64

6.50

7.46

8.75 9.41

8.86 9.35

10.96

12.16

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019p

US Crude Oil Production Overview

Shale oil prod. (MBpd) Conventional prod (MBpd) Total prod (MBpd)

1.3

1.9

1.6

0.8

0.0

0.4 0.3

-0.1

-1.5 -1.5 -1.3

-2.0

H1'18 H2'18 H1'19 H2'19p

Major Producers YoY Production Change (MBpd)

US Russia OPEC

Despite OPEC supply disruptions, higher US production shall keep markets surplus in 2019

• Crude oil demand growth in 2019 at significantly lower levels compared to the last five-year and ten-year average levels weighed on crude oil prices in 2019.

• Meanwhile, OPEC and its allies production cuts of 1.20 MBpd resulted in a lower supply growth of 0.81 MBpd in 2019 capped the downside of crude oil prices.

• Higher forward cover shall cap the upside of crude oil prices in the next quarter.

20

96.40 96.69

97.38

98.91

99.72

94.95

96.13

97.95

98.97 99.58 1.45

0.56

-0.57

-0.06 0.14

2015 2016 2017 2018e 2019p

Global Crude Oil S&D Balance

Total Supply (MBpd) Total Demand (MBpd) Supply-Demand Gap (MBpd)

Source: IEA, TransGraph estimates

0.81

0.61

1.51 1.41

1.23 1.30

Change in Supply Change in Demand

Global Crude Oil Incremental S&D (MBpd)

2019p Last 5-Yr Avg Last 10-Yr Avg

Source: IEA, TransGraph estimates

93 92

94

95 93

93 0.7%

0.4%

-0.8%

1.0%

-0.1% -0.6%

JAS-18 OND-18 JFM-19 AMJ-19 JAS-19e OND-19p

OECD Demand and Stocks Scenario

Forward Cover (Days) Demand Growth (%)

• With ongoing trade dispute between the two major global economies of the US and China resulted in a slowdown of global economy in 2019.

• Slowdown in global economy resulted in a increasing pessimistic views over the crude oil demand growth in 2019 lead to IEA continuous downside revisions.

IEA is revising continuously demand growth downside with trade uncertainities 21

0.20

0.30

0.10

0.00

0.05

0.10

0.15

0.20

0.25

0.30

0.35

2019 IEA OECD Demand Growth Estimates (MBpd)

1.38

1.47

1.13

1.00

1.05

1.10

1.15

1.20

1.25

1.30

1.35

1.40

1.45

1.50

2019 IEA Global Demand Growth Estimates (MBpd)

ICE Brent Crude Oil Price Outlook

ICE Brent futures have concluded minute wave (b) within minor wave (b) and currently unfolding minute wave c. This weakness will be complex in shape where each down-leg will be retraced more than 61.8% before resumption of weakness. Therefore prices are likely to stay below USD 68 and weaken gradually towards USD 56 in the coming 3 months.

Global Edible Oils And Oilseeds

Supply – Demand – Insight

• Advantage: SUNFLOWER AND PALM OIL – Part of China’s rapeseed demand will be diverted to

sunflower oil and to palm oil.

– China sunflower oil imports are projected to rise by 50% Y-o-Y - from 0.68 MMT to 1.02 MMT in 2019-20.

– Cheaper palm oil is likely to capture any potential demand space available due to lower canola oil imports.

• Advantage: SOYBEAN OIL AND MEAL – Compensating for lower crushing of imported beans,

China plans to import soybean oil directly from key exporters such as Argentina.

– Additional soybean oil import demand estimated at around 0.35 – 0.4 MMT.

– China last month also announced plan to imports protein meal from Argentina, FSU and other key exporters.

Ban On Canadian Canola Imports 96% China’s imported canola and 88% China’s imported canola oil

originated from Canada.

US Soybean Import Tariff Hiked Imports of US soybean by China in 2018-19 down 52% Y-o-Y, falling

prey to trade war and African Swine Fever.

China Exploring Options To Cope With Trade Disputes 24

6.30

0.75 1.45

0.68 0.16

6.90

1.10 1.00 1.02 0.15

Palm Oil Soy oil Canola Oil Sun Oil G'Nut Oil

China Major Edible Oil Imports (MMT)

2018-19 2019-20

56.2

3.1

28.7

1.1

60.2

5.5

14.1

3.2

BRAZIL

ARGENTINA

USA

OTHERS

China Origin-wise Soybean Imports (MMT)

2018-19

2017-18

• After India revised down the import duty for palm oil at beginning of 2019, RBD Olein imports surged significantly to capture a larger share of India’s total palm oil imports.

• Higher in-flow of imported Olein, PFAD and Stearin have hurt the local processors/refiners margins earlier this year.

• After the recent hike of import duty on PFAD and Stearin (from 0% to 7.5% ) and on RBD Olein from Malaysia (from 45% to 50%), refining margins for India’s local refiners is set to improve due to restrictions on palm oil products and derivatives, and thus is expected to boost CPO imports going forward.

25 See-saw India Palm Oil Policy

610 568

670 645

498 474

449 439 421

533

587

137 109

131 167

241

312

238

371

255 265 257

INDIA PALM OIL IMPORT (IN 1000T)

CPO Olein

-40.0

-30.0

-20.0

-10.0

0.0

10.0

20.0

30.0

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

RBD OLEIN IMPORTS GUIDED BY PARITY

Olein Import Share Olein Import Parity (INR/T) (RHS)

DUTY HIKE DUTY CUT DUTY HIKE

-4000

-3000

-2000

-1000

0

1000

2000

3000

4000

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

90.0

PFAD & STEARIN IMPORTS GUIDED BY REFINING MARGINS

PFAD CPS RBDPS Refining Margin (INR/T) RHSIMPORTS IN 1000 Tons

• Steady palm oil domestic consumption at origins is mainly attributed to rising the biodiesel production due to higher blending mandate.

• Malaysia & Indonesia emphasise on the increasing the biodiesel mandate to reduce/control the fiscal deficit, trying to shift away from traditional crude petroleum imports.

S.E. Asia Rising Domestic Consumption 26

3.39

3.61

4.00

4.49

5.08 5.24 5.30

5.35 5.34 5.29

5.55 5.53

MAL+INDO Combined Domestic Consumption (MMT)

0.95 1.10

1.50 1.58

2.32 2.44 2.50

2.70 2.70 2.87

3.09 3.08

Indonesia Quarterly Biodiesel Production (MMT)

• Palm oil combined production at Indonesia & Malaysia is rising steadily at average pace of 8% last 5 years.

• Indonesia production growth is stronger than Malaysia, as Indonesia has advantage of larger share of younger plantations than Malaysia.

• Export demand for palm oil from Indonesia and Malaysia is rising steadily at pace of 5% last 5 years.

• Exports in 2019 jumped 12% Y-o-Y due to sharp surge in Chinese demand.

• China imported 59% more palm oil during Jan’19 to Aug’19 than year ago.

31.13 33.31 39.19 44.93

48.05

17.32 19.92

19.52 20.59 20.18

2016 2017 2018 2019 2020

Indonesia Malaysia

22.88 23.45 24.72 27.88 28.71

16.05 16.55 16.61

18.72 18.25

2016 2017 2018 2019 2020

Indonesia Malaysia

Palm Oil Production (MMT) Annual Exports (MMT)

• With export demand outpacing the production growth, Mal+Indo palm oil stocks by end of 2019 are projected to dip by 19% Y-o-Y.

• By end of 2020, stocks of palm oil at Indonesia are projected to rise 15%, but stocks at Malaysia are likely to dip another 4% in 2020.

Year-end Stocks (MMT)

Global Palm Oil – Rising Production vs. Steady Demand 27

3.64 3.93 4.60

3.76 4.34

1.66 2.73

3.22

2.60 2.51

2016 2017 2018 2019 2020

Indonesia Malaysia

• US soybean production is set to decline by 17% Y-o-Y in 2019-20, owing to unfavourable conditions beginning of 2019.

• Due to slower imports by China and healthy bean carryover stocks from previous year, US and Brazil are likely to divert more soybeans to domestic crushing in 2019-20.

– SOYBEAN OIL PRODUCTION FOR 2019-20 AT BIG-3 IS ESTIMATED AT 29 MMT – UP 5.4% FROM 27.5 MMT IN 2018-19.

• Despite healthy production, soy oil stocks at US and Brazil by end of 2019-20 MY are seen tighter than last year due to strong demand for biodiesel production.

Big-3 Soybean Production Big-3 Soybean Crush Big-3 Soy Oil Stocks

Global Soy Oil – Steady Crush Undermine US Supply Shock 28

120.0 122.5 101.6

36.5 55.2

55.8

119.3 116.0

116.2

2017-18 2018-19 2019-20

G-3 Soybean Production (MMT)

USA ARG Brazil

51 51 52 56 58 60

40 43 43 38 44 47

41 40 41 44 43 44

2014-15 2015-16 2016-17 2017-18 2018-19 2019-20

Big-3: Annual soybean Crush (MMT)

USA ARG Brazil

0.84 0.77 0.78 0.92 0.77 0.70

0.37 0.29 0.31

0.33 0.51 0.66

0.44

0.29 0.34

0.48 0.65 0.55

2014-15 2015-16 2016-17 2017-18 2018-19 2019-20

Big-3: Year end Soy oil stock(MMT)

USA ARG Brazil

• For 2019-20, Ukraine sunseed production is likely to decline on smaller acreage than last year and flat yields.

• Russia sunseed production is likely to jump 1.2 MMT on 10% increase in yields from last year.

• EU sunseed production is likely to be same as last year on stable yields.

• Domestic crush at “UKR + RUS + EU” is seen increasing 3% for two consecutive years (2018-19 and 2019-20) and resulting in a record high production of 14.82 MMT by 2019-20.

• With production outpacing the export demand, combined stocks of sun oil at “UKR + RUS + EU” is pegged at 0.9 MMT – 10% up from 0.82 MMT in 2018-19.

10.2 11.9 15.2 13.8 14.8 14.3

8.4 9.2

10.8 11.8 10.9 12.1 9.0

7.8

8.7 9.3 10.0 10.1

2014-15 2015-16 2016-17 2017-18 2018-19 2019-20

Sunseed Production At Origins (MMT)

UKRAINE RUSSIA EU

0.29 0.21

0.15 0.24

0.41 0.38

0.21

0.09

0.02

0.08

0.16 0.24

0.35

0.18

0.25

0.35

0.24 0.27

2014-15 2015-16 2016-17 2017-18 2018-19 2019-20

Sun Oil Year End Stock At Origins (MMT)

UKRAINE RUSSIA EU

STABLE SUNSEED PRODUCTION RISING SUN OIL STOCKS ON HEALTHY CRUSH

Global Sun Oil – Ample Supplies To Answer Demand Shifts 29

• Canada and EU canola seed production in 2019-20 is estimated to decline around 7-8%, owing to poor weather conditions last 1-2 years.

• Despite poor seed production, stable crushing is likely to allow global oil production to rise 1.1% Y-o-Y to 28.19 MMT.

• Steady consumption demand for canola oil and shifting trends in trade are expected to result in tighter stocks of canola oil at major origins.

• For 2019-20, global canola oil end stocks are projected at 3.14 MMT – down 11% vs 3.52 MMT of 2018-19.

2019-20 Global Production Down 3% Y-o-Y Shrinking Canola Oil Stocks At Key Origins

Global Canola – Lower Seed Production Hurt Oil Supplies 30

0.43

0.56

0.03 0.09 0.09

1.14

0.20

0.34 0.38

0.04

0.15 0.09

0.89

0.12

Canada EU AUS Ukraine USA China India

Canola Oil End Stocks At Key Origins (MMT)

2018-19 2019-20

16.4 18.4 18.5 21.3 20.3 18.6

24.3 19.9 19.5 21.6

20.1 18.8

3.5 3.6 4.3

3.7 2.2

3.2

2.2 1.8 1.6

2.1 2.8

3.4

14.8 14.3 12.5

11.0 10.8 10.6

5.1 5.5 6.9

6.6 7.8

7.7

2014-15 2015-16 2016-17 2017-18 2018-19 2019-20

Canola Seed Production at origins (MMT)

Canada EU AUS Ukrain China India

• Bumper cottonseed crop is seen compensating the losses in soybean and other oilseeds to keep India total oilseed production (excluding Rice bran) for 2019-20 at 33.56 MMT vs 33.24 MMT last year.

• 2019-20 rice bran production is estimated at 7.5 MMT, down 0.2 MMT from 7.7 MMT last year.

• India total domestic oil production is estimated at 8.25 MMT vs last year’s 8.45 MMT.

• Lower production & stable demand is likely to create space for more imports of edible oils in 2019-20.

• India edible oil imports in 2019-20 estimated to rise to 16.7 MMT – up 7.1% Y-o-Y.

India 2019-20 Oilseed Production Flat 2019-20 Domestic Oil Production Down 2.4%

India Oilseed Scenario Gripped By Weather Worries 31

10.3 8.3 10.0 9.5

6.9 6.6

7.8 7.3

10.6 11.2

10.1 11.5

7.4 7.6

7.7 7.5

2016-17 2017-18 2018-19 2019-20

India Oilseed Production (MMT)

Soybean Mustard Cottonseed Rice Bran

1.3 1.5 1.6 1.4

2.5 2.7 3.0 2.8

1.2 1.3

1.1 1.3

1.3 1.3 1.4 1.3

2016-17 2017-18 2018-19 2019-20

India Edible Oil Production (MMT)

Soybean Mustard Cottonseed RBO

Global Edible Oil Supply Demand Situation 32

PALM OIL SOY OIL SUN OIL CANOLA 2019-20

2018-19 .

PRODUCTION

TOTAL SUPPLY

TOTAL DEMAND

END STOCKS

77.04 76.17

134.5 132.1

125.6 122.7

8.84 9.38

60.20 56.54

75.91 71.73

70.88 67.40

5.04 4.33

19.47 19.38

29.86 29.13

18.05 17.69

1.79 1.78

28.19 27.87

36.33 36.17

33.20 32.65

3.14 3.52

Global edible oil end stocks for 2019-20 are projected to be tighter than 2018-19, owing to steady demand from both human and industrial consumption.

Oil Marketing Year Oct to Sep

BMD CPO 3M Futures prices are likely to hold above MYR 2100/2070 and gradually trade higher towards MYR 2400 to 2450 until Dec-2019.

BMD CPO 3M Futures prices are likely to weaken towards MYR 2050 and attempt a rebound towards MYR 2200 until Nov-2019 and turn lower subsequently eyeing MYR 2000 or lower.

Price Outlook: Scenario 2

BMD CPO 3M Futures(MYR/MT)

Price Outlook: Scenario 1

Malaysian RBD Palmolein 1M Forward prices are likely to find support above USD 520/510 and witness a rebound towards USD 600/610 until Dec-2019.

Malaysian RBD Palmolein 1M Forward 34

CME Soybean Futures

CME Soybean futures prices are likely to hold above USc 865 on any initial weakness and extend recovery towards USc 950 in the coming 2 to 3 months ahead of turning weak in the subsequent months.

CME Soy-meal futures prices are likely to hold above USD 280 on any initial weakness and extend recovery towards USD 325 in the coming 2 to 3 months ahead of turning weak in the subsequent months.

CME Soymeal Futures

CME Soy Oil Futures

CME Soy oil 1M futures prices are likely to witness initial weakness towards USc 28.50 and subsequently gain higher towards USc 31 and higher in the coming 3 months.

Argentina Soy Oil 1M Fwd

Argentina Soy oil 1M forward prices are likely to hold above USD 650 on any further weakness and trade higher towards USD 700/720 in the coming 3 months.

NCDEX Soybean futures prices are likely to hold above INR 3720 on any initial weakness and extend recovery towards INR 4150 in the coming 2 to 3 months.

NCDEX Ref. Soy oil prices are likely to hold above INR 750 on any weakness and trade higher towards INR 790 in the coming 3 months.

NCDEX Soybean Futures NCDEX Soy Oil Futures

MCX CPO Futures

MCX CPO Futures prices are likely to test INR 535 to INR 530 on initial weakness and trade higher towards INR 600 in the coming 3 months.

NCDEX Rapeseed Futures

NCDEX Rapeseed Futures prices are likely to hold above INR 3880 on any initial weakness and extend recovery towards INR 4050/4100 in the coming 2 to 3 months.