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Global grain marketVery tight wheat and barley outlooks /

Maize to balance ?

25 October 2018

25/10/2018 Grain Outlook 1

Gabriel Omnès (wheat analyst) and Laurine Simon (maize analyst)

stratégiegrains®


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US

$/t

Russian wheat 12.5% Novo

US maize Fob Gulf

Fob Rouen barley

Wheat and barley prices already up

25/10/2018 Grain Outlook

The sharpestincrease for barley

2

Maize pricespressured to the floor by good harvests in US and Ukraine

stratégiegrains®


-45-35-25-15

-55

15253545

maize wheat barley

Mt

EU 28 Russia USABrazil Argentina Others

Strong reduction in wheat and barleyglobal crops

§ -35 Mt for wheat and -5 Mt for barley mostly in EU and Russia


§ +44 Mt for maize thanks to bumper crops in USA/Ukraine and the recovery expected in South America (higher areas)

i

3

Changes in global crop in 2018/19

+4%

-5%

-3%

stratégiegrains®


190

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290

Oct Nov Dec Jan Feb Mar Apr

$/t

delivery

Braz. maize US PNW 3Ycorn French wheatUkrain. Wheat BU/RO wheat Ukrain. maizeUS maize

Maize very attractive against other feedgrain


§ Fob Ukraine: maize 50 $/t cheaper now and discount expected to widen

maize

wheat

-100-80-60-40-20

0204060

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ly 13

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Fob Ukraine: maize - feed wheat prices - $/t

§ Delivered Asia: maize cheaper thanwheat by about 45 $/t

4

stratégiegrains®


Wheat to lose demand in animal feed to the benefit of maize


50%

52%

54%

56%

10%11%12%13%14%15%

07/0808/09

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17/1818/19

Global wheat and maize incorporation in feeds wheat maize Maize scaleWheat scale

5

stratégiegrains®


Global wheat Supply and Demand


§ Record-low production since 2013/14

§ Feed use slashed by low competitiveness (-13 Mt)

§ Very conservative prospects for human/industrial demand (+3 Mt only)

§ World trade to step back (Turkey, India, Asia, record high NorthAfrican crops…)

§ BUT dwindling stocks in main exporting countries

6

stratégiegrains®


Strong early exports out of Russiadespite lower supply


As of of October 12 for 2018/19

05

1015202530354045

2013/14 2014/15 2015/16 2016/17 2017/18 2018/19

Mt

July-October Russian wheat exports

July-October entire season

§ Russian exports currently forecastat 33 Mt…

§ … but it could be less

7

stratégiegrains®


240

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270


$/t

delivery

French wheat German wheat Argent. wheat SRW US Russian wheat

But the countdown has started: Black Sea wheatstill the cheapest — not for long?


Arg before tax

Russian

Russian

SRW

German

German

French

8

Delivered Egypt

stratégiegrains®


-7,6

-2,1 -1,8 -1,1

0,6 0,6

7,6

Russia

Australia

UkraineEU 28

Brazil

Canad

aUSA

Mt

Exports will decrease from Black Sea, Australia, EU to the benefit of USA


Changes in soft wheat 2018/19 exports vs 2017/18

§ Exports from Black Sea, EU, Australia will be capped by lower supply

§ US Bumper stocks and highercrop will allow increasingexports from the USA

33 Mt 13 Mt 15.7 Mt 19.4 Mt

0.8 Mt 17.9 Mt 29.7 Mt

9

stratégiegrains®


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main exporters stocks/use ratio %

US SRW wheat price Fob Gulf $/t

Russian 12.5 % wheat price Fob Novo $/t

French wheat price Fob Rouen $/t

0%

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Russia USA Argentina Ukraine Kazakhstan Australia EU 28

End June soft wheat stocks/use ratios

2016/17 2017/18 2018/19

Wheat stocks/use ratios sharply down by main exporters


§ Surpluses accumulated for the past 3 yearswill disappear in main exporting countries, including Russia, USA and EU…

§ … leading to the lowest Stock/Use ratio in main exporting countries since 2013/14

10

stratégiegrains®


0%5%

10%15%20%25%30%35%40%

Russia Canada Argentina Ukraine Australia EU 28

End June barley stocks/use ratios

2016/17 2017/18 2018/19

8%

10%

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22%

24%

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/19

main exporters stocks/use ratio %French barley price Fob Rouen $/t

Global barley stocks to dive


§ Global barley production collapsed in 2018/19 (except in North Africa)…

§ … facing a demand only slightly down in China and Saudi Arabia

§ Very low Stock/Use ratio in main exporting countries despite lowerdomestic use

11

stratégiegrains®


Conclusion on 2018/19§ Wheat: very tight situation with

further increase potential especiallyin Russia

§ Swing factors:- Russian political decisions- Argie/Aussie crops- demand in importing countries- dry weather in the EU for wheatsowings

§ Barley: further increase potentialbefore sagging under harvestpressure

§ Swing factors:- private purchases in Saudi (when?)- cut in Australian crop- China/US trade war


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8Sep-18

Nov-18Jan-19

Mar-19

May-19

US $

/t

French barley Fob Rouen

Russian wheat 12.5% Novo

French wheat Fob Rouen

stratégiegrains®


Global maize Supply and Demand


§ Production sharply up combined with ample stocks

§ Feed use poised to increase steeply…

§… pulling up import needs

§ Stocks to stay comfortable

13

stratégiegrains®


3,3

1,6

0,7 0,7 0,50,3

EU 28

Mexico

S. Korea

VietnamChina

Saudi Arabia

Mt

Higher maize imports in several countries, especially in the EU


Changes in maize 2018/19 imports vs 2017/18

§ Record-high imports expected in the EU (21 Mt)

§ Asian imports set to increase due to low feed wheat competitiveness

§ Global trade expected up by 10 Mt

14

stratégiegrains®


Good competitiveness of Black Seamaize


French

BrazUkr

ArgEU Rom/Bg

Maize CIF Algeria/Morocco

§ Ukraine is the most competitivemaize to Meditarreneancountries, followed by Rom/Bulg. maize and US maize

§ French maize not competitive

15

180185190195200205210215220225


$/t

delivery

French maize RO/BU maize Ukrain. maize

US maize Braz. maize

stratégiegrains®


4,9

2,9 2,41,8

1,0 0,7

-2,9

Ukraine

Brazil USASerbia

Argentina

EU 28Russi

a

Mt

Exports expected sharply up from Ukraine,Brazil and the USA – By contrast, Russian exports to plunge


Changes in 2018/19 maize exports vs 2017/18

23.6 Mt

31.1Mt

62.2 Mt

2.7 Mt 26.3 Mt

2.3 Mt

2.8 Mt

§ Ukraine will benefit from high competitiveness delivered in the EU

§ US exports at record high level

§ Fall of Russian exports stemming from a poor harvest

16

stratégiegrains®


0%

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60%

Russia Ukraine Brazil Argentina USA EU 28

Maize stocks/use ratios

2016/17 2017/18 2018/19

Declining albeit still ample global maize stocks


§ Stocks/Use ratio set to stay high in South and North-America

§ S/U ratio in main exporters still reflectinga very comfortable global situation

12%14%16%18%20%22%24%26%28%30%

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main exporters stocks/use ratio %US maize price Fob Gulf $/t

17

stratégiegrains®


Conclusion on 2018/19

§ Maize: much more comfortable SD compared with wheat will preventmaize to rally, gaining huge demandfor feed use with unusually widediscount against wheat

§ Swing factors:- Farmers’ retention (esp. in the US)- wheat prices rising more thanexpected- bad weather impacting maizecrops in S. America


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US $

/t

EU Black Sea maizeUS corn Fob GulfUkrainian maize

stratégiegrains®


Our forecasts for 2019/20


stratégiegrains®


Wheat acreage expected up worldwidefor 2019/20§ +3% worldwide

(+6 Mha) underthe lead of Russia, the USA and the EU

§ +60 Mt of soft wheat weatherpermitting


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200220032004200520062007200820092010201120122013201420152016201720182019

Mha

Black Sea

USA

EU

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US SRW wheat price Fob Gulf $/t

Russian 12.5 % wheat price Fob Novo $/t

French wheat price Fob Rouen $/t

Wheat situation to ease in 2019/20, weather permitting


World Wheat Supply & DemandMt 16/17 17/18 18/19 19/20

carry-in stocks 232 234 232 204production 729 734 697 755

trade 161 161 158 168consumption 727 736 725 746of which feed 135 137 124 133carry-out st. 234 232 204 213

stocks-to-use ratio 32% 32% 28% 29%

21

stratégiegrains®


Maize stocks to decrease in 2019/20 but still high, esp. in main exporters


Maize - Rolling Market Review / October 2018Page 2/4

World • 2017/18: higher trade since July (+5.1 Mt) benefitted to US exports.

Global trade rose by 11 Mt vs. 2016/17 • 2018/19: trade now expected to rise by more than 10 Mt sustained

by strong feed demand to compensate for the shortfall in wheat and barley

Importers • 2017/18: imports revised up in Iran (+1.2 Mt), S.E. Asia (+1.1 Mt),

Turkey (+0.8 Mt), S. Korea (+0.6 Mt) and EU (+0.5 Mt), breaking a new record in those countries (except for S. Korea)

• 2018/19: imports revised up in EU (+4 Mt vs. July, due to the shortage of wheat and barley), to Asia (+2 Mt), Iran and Turkey due to higher feed demand

Exporters • 2017/18: US exports revised up 4.7 Mt vs. July according to customs

statistics and due to good competitiveness of US maize. Brazilian exports down 2 Mt since last review (due to higher truck freight costs following the introduction of minimum freight prices in May)

• 2018/19: rise in global trade to benefit mostly to Ukraine exports (+4.9 Mt to 23.6 Mt a record level), as it is the most competitive origin in Asia, EU and Mediterranean rim. US exports also expected to reach a new record to 62.2 Mt (+2.4 Mt vs. 2017/18). Exports from Brazil and Argentina also set to rise vs. 2017/18, but exports lower than total availability due to lack of competitiveness of these two origins

• 2017/18: end-Sept 18 stocks revised down by 3 Mt since July to 278 Mt due to lower supply (-4 Mt in carry-in stocks and -1 Mt in harvest) and despite reduction in demand (-3 Mt in feed and industrial sectors). 2017/18 global stocks down by 26 Mt from 2016/17, mainly in China (-10 Mt), Argentina (-5 Mt), Brazil and the US (-4 Mt each). Stock-to-use ratio remained high at global level (27% vs. 30% in 2016/17) and in main exporters (25% vs. 29% in 2016/17)

• 2018/19: higher harvest since July (+17 Mt) more than offsets the rise in feed demand (+10 Mt, due to good competitiveness of maize over feed wheat and barley). Carry-out stocks now expected to decrease by 16 Mt at global level (to 263 Mt vs. 258 Mt in July), mostly in China (-11 Mt). 2018/19 global situation remains comfortable as main

exporters will have enough availability to meet global demand (and compensate for the shortfall of wheat and barley). Stock-to-use ratio set to decrease to 25% at global level (vs. 27% in 2017/18) but to slightly rise in main exporters (to 26%)

• 2019/20: stocks reduction should carry on (-13 Mt vs. 2018/19) as demand expected to rise more than supply (+21 Mt vs. +7 Mt in sup-ply). As most of the stock reduction should concern China, stock-to-use ratio in the main exporting countries is forecast at 26 % (same as in 2018/19). Global situation not expected to be tight, except if harvest turns out to be lower than expected or demand rises more than forecast

• Despite record yield in the US, US prices climbed by 7 $/t (to 168 $/t Fob) since last review, pushed up by upsurge in wheat and barley prices following collapse in harvest (mainly in EU 28 and Russia). How-ever, spread between Ukrainian and US prices narrowed as Ukrainian prices, which were much more expensive than US in July, lost 13 $/t (to 167 $/t). French prices gained 4 $/t (to 204 $/t), with harvest sharply down vs. 2017/18

• For 2018/19, Black Sea prices (Ukraine and EU Black Sea) should be squeezed by higher harvest in this area and decrease to around 170-175 $/t for Ukrainian maize and 180-185 $/t for Black Sea EU maize. US prices are expected to remain close to the (low) level of 2017/18 (around 170 $/t), following record harvest and prospect of higher area for the 2019 harvest. French prices set to rise (to around 210 $/t) to encourage large imports and offset the shortage of wheat and barley

in EU. Therefore, spread between maize and feed wheat should hit a record low level (-60 $/t on average with peaks to -70 $/t). Upside potential esp. for US and Black Sea prices if wheat prices rise more than expected

TRAD

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+1.6 +0.8 +0.3 +0.5+2.1 +0.7 +0.7

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rts18

/19

World Maize ImportsMtMtWorld Maize Exports

Mt 2017/18 2018/19 changeUSA 59.7 62.2 2.4

Argentina 25.3 26.3 1.0Brazil 28.2 31.1 2.9

South Africa 2.5 2.2 -0.4Ukraine 18.8 23.6 4.9

China 0.1 0.1 0.0Others 20.6 20.0 -0.6Total 155.2 165.5 10.3

World Maize Supply & DemandMt 16/17 17/18 18/19 19/20




Maize Futures PricesMt 15.10.18$/t Nov./Dec. 18 March 19CBOT (US) 149 154Euronext (EU) 200 208BSE (Hungary) NA NA

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$/t% World stocks-to-use %

Main exporters stocks-to-use %

US maize pr ices

Stocks-to-use Ratio vs Maize Prices

75 76

143 132

54 51

2 24

2

40

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2017/18 2018/19

Others China USA CIS EUMtWorld & Main Exporters StocksMtWorld & Main Exporters Stocks

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US maize price Fob Gulf $/t

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stratégiegrains®


Barley stocks to bounce back — much more comfortable situation but still fragile


World Barley Supply & DemandMt 16/17 17/18 18/19 19/20




8%

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French barley price Fob Rouen $/t

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stratégiegrains®

strategie-grains.com25/10/2018 Grain Outlook 24

§ Any questions?§ Maize analyst: Laurine Simon

§ Feed/Malting barley analyst: Hélène Duflot

§ Soft/Durum wheat analyst: Gabriel Omnès

§ Crop analysts (EU/Black Sea): Benoit Fayaud, Jean-Sébastien Jacquet, Laurine Simon§ Animal Feed analysts: Damien Jouen, Hémeline Macret, Laurent Crastre

§ Biofuel analyst: Madeleine Breguet

stratégiegrains®


2019 vs 2018

+11% and more

+3% / +10%

-2% / +2%

-3% / -10%

-11% and less

EU282018: 22.9 Mha2019: 24.2 Mha

2014-2018 av: 23.9 Mha

Rains needed by mid-November

EU28 area+5.5% compared to

2018

Soft wheat harvested area (kha) - 2019


stratégiegrains®


Barley harvested area (kha) - 20192019 vs 2018

+11% and more

+3% / +10%

-2% / +2%

-3% / -10%

-11% and less

EU282018: 12390 Kha 2019: 12300 Kha

2014-2018 av: 12230 Kha

EU28 area-1% compared to

2018

Dry conditions could affect winter barley sowings benefiting

to spring barley


stratégiegrains®


World wheat trade to decline for the first time since 2014/15 despite food demand growth


Imports need cut by:§ Lower feed demand (Asia)§ Economic hurdle (Turkey, Venez.)§ Better crop in some importing

countries (South Africa, India)-1,2

-0,7 -0,7-0,5 -0,5

0,40,6

Turkey

India

South Afric

a

Philippines

S. Korea

China

Bangla

desh

Mt

Changes to world soft wheat imports 2018/19 vs 2017/18

27

stratégiegrains®


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Black sea wheat still the cheapest …


Arg before tax

UkrainianRussian

Morocco Algeria

US HRW

French Arg before tax

Ukrainian

German

GermanFrench

28

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delivery

French wheat German wheat (12,5)

Argentinian wheat (11,5) Ukrainian wheat (11,5)

US HRW

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