Time To Rethink Cottonseed

Grower Presentation March 2017

Co#onseed – its worth more than wheat, rice, malt, durum…!!!

•  12 bales/ha @ 245 kgs seed per bale x $350 per tonne = $1’000 per hectare

X 500 hectares = $500’000

•  Continuing trend away from being a bi-product to creating its own unique

value •  Need to pro-actively manage this risk and understand what is driving the

market and prices •  Opportunity is to bring transparency, make better informed decisions and add

value

Company Management

Cambel Ball Director

•  Family farming background – Walgett and Moree •  Own and lease farms •  Established IMAC in 2010 •  Traded cotton 12 years as senior cotton trader and

Director of Plexus, China •  Established trading offices in China and USA •  Formally Marketing Manager of Qld Cotton/Olam,

Australia •  Advises growers in Australia, Brazil and South Africa •  Financial Service License

Geoff Barker Director

•  Trading Manager at Cargill Grain Australia •  Chairman of Grain Trade Australia. •  Crush and cottonseed pool manager at Cargill

Australia. •  CEO of Broadbent Grain. •  Inaugural General Manager of Australian Bulk

Alliance, now Emerald Grain export terminal and associated logistics and country infrastructure.

•  25 years industry experience with unparalleled diversity across Operations, Trading, Management, Logistics, Supply Chain & Crush.

Company Management

•  10 years experience working with Cargill in origination, trading and managed their crush business across 3 multi-seed assets.

•  Manages Berkstock’s commodity risk at ROBE oilseed crush plant in Wagga. •  Experience and deep insight into crush margins and industry structure.

•  Lachan Herbert - Independent Advisor

•  Over the last 10 years Australian production trending higher - new areas and higher yields •  Seed factor trending lower as less seed produced per bale of cotton

•  Historical high volatility in production and price, and a strong negative correlation •  Cottonseed value trending higher while production has become more consistent •  Ave bale production 2000 – 2010 2.30 MB ave cottonseed price $197/MT, 2011 – 2018 3.80 MB, ave cottonseed price $288/MT

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LE

TOTALBALES COTTONSEEDPRICES Linear(COTTONSEEDPRICES)

Cottonseed Price Drivers •  Global oilseed complex

- Crush both locally and internationally. - Vegetable oil and meal prices and trends

•  International feed markets - Dairy demand in Asia (Japan, Korea and China) and the U.S. - Competing ingredients internationally

•  Local feedlot and dairy market - Domestic lot feeders and supplementary grazing - Competing ingredients locally.

•  Drought and grazier demand - Easy to feed and freight advantage to cattle producers.

2017 Crop Balance Sheet • Beginning stocks 0.050 million MT • Production (4.25 million bales) 1.041 million MT • Domestic feed usage 0.200 million MT • Local crush 0.150 million MT • Exports 0.650 million MT • Carry out 0.091 million MT • Tight carry out assuming all exports get done. • Seed will get sold. Its just a function of price.

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26.25

52.50

78.75

105.00

99/00 00/01 01/02 02/03 03/04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14 14/15 15/16 16/17

China'sDemandForSoybeans(MMT)

China Soybean Production China Soybean Consumption China Soybean Imports

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07/08 08/09 09/10 10/11 11/12 12/13 13/14 14/15 15/16 16/17

37.00 36.70

32.0030.50

34.00 35.0032.75

30.00

22.00 22.50

China's Cotton Production Decline

Current Market • Prices supported by record demand from China in 2016 on the

back of strong vegetable oil prices late last year and low domestic supplies.

• Estimated 500,000 MT of seed sold to China, ensuring strong bid to entice liquidity since this trade.

• Export prices above local feedlot levels and switched to cheaper cereal grains.

• Crush returns locally have been impacted by higher seed prices and lagging meal and oil demand.

• Countries that can use other origin seeds are switching to US seed

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1-Jan.-16 1-Feb.-16 1-Mar.-16 1-Apr.-16 1-May-16 1-Jun.-16 1-Jul.-16 1-Aug.-16 1-Sep.-16 1-Oct.-16 1-Nov.-16 1-Dec.-16 1-Jan.-17 1-Feb.-17 1-Mar.-17 1-Apr.-17

$AUD/MT

Cottonseed Prices Ex-Gin Moree/Northern NSW

2016 CROP 2017 CROP 2018 Crop

2017 Crop Outlook

• Clients are 80% sold, prices peaked in the short term at $385/$395 per MT

• Currently $350/MT = $21 credit after ginning, under pressure • WTI oil, soybean and soybean oil price pressure not helping sentiment • Market is focused on executing large export book with no new

demand on the horizon. • RISK is Chinese defaults and shipping slows. • Growers minimal exposure except for last 20 percent delivery July

onwards • Be prepared for slower demand for the tail end of the season

2018 Crop Outlook •  Clients advise 25% sold 2018 at $350 or around $20 credit •  Prices have peaked in the short term $350/MT, market is focused on

executing large export book for 2017 •  Limited liquidity on forward sales – local production and China forward

demand unknown •  RISK – sizeable production increase in Southern NSW (Macquare,

Lachlan + MIA), requires export demand to consume surplus •  36% increase in area from 80’000 ha to 115’000 ha or 180’000 MT to

over 315’000 MT cottonseed •  Advantage is ease of logistics into Melbourne port, but proactive

marketing and export promotion essential as crop size increases!

Our Service to Cotton Growers •  Regular newsletter to educate and inform •  Provide an unbiased and independent forward market view and advice •  Text alerts and phone call on any sudden market changes •  Execution of sales on your behalf and management of grower positions •  Record grower positions. •  Explore export partnership arrangements •  Undertake overseas travel to promote Southern NSW cottonseed •  Flexible to suit individual grower requirements •  Cost: $0.75c/bale (equivalent to $3.00/MT) plus any external brokerage.

Cambel Ball 0407645675 cambel@imacqld.com.au www.imacqld.com.au Geoff Barker 0437950906 geoffbarker@berkstock.com.au www.berkstock.com.au