World sugar market. Platts/Kingsman EU conference Geneva 14th of April Benoît Boisleux

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1 World sugar market Platts/Kingsman EU conference Geneva 14th of April 215 Benoît Boisleux

2 One year evolution of world prices NY 11 (2 nd month continuation) Cts/lb 2 Kingsman EU conf 8 April 214 NY 2nd month (Cts/Lbs) NY 2nd month (Real/lbs) Real/lb

3 14/15 cane crop (Mio Tons) South Brazil sugar production expected higher year on year Sao Paulo state received about half of normal precipitations in January 15. In February, rains came above average and allowed proper cane development. Based on current price environment and weak real (USD/BRL= 3.8), we should still expect a significant part of the cane being used for Sugar production 15/16 Center South Brazil Sugar crop scenario table Production in Mio tons Tel Quel SUGAR MIX (%) 4.5% 41.5% 42.5% 43.5% 44.5% 45.5% 46.5% 47.5% 48.5% 55 28,643 29,35 3,57 3,765 31,472 32,179 32,886 33,594 34, ,164 29,884 3,64 31,324 32,44 32,764 33,484 34,24 34, ,685 3,417 31,15 31,883 32,616 33,349 34,82 34,815 35, ,25 3,951 31,697 32,443 33,189 33,934 34,68 35,426 36, ,726 31,485 32,243 33,2 33,761 34,519 35,278 36,37 36, ,247 32,18 32,79 33,561 34,333 35,14 35,876 36,648 37, ,768 32,552 33,336 34,121 34,95 35,69 36,474 37,258 38, ,288 33,86 33,883 34,68 35,477 36,275 37,72 37,869 38,666 Based on current prices, CS Brazil should produce 33.5 to 34 Mio tons Tel Quel (vs. about 32 Mio tons in 14/15) Prices are still incentivising a higher sugar mix versus last year 3

4 CS Renewed Area (%) CS Average Cane Age (yrs) South Brazil Yield and renewed area 62, 6, 58, Cane crushed Sugar mix 51% 49% 56, 54, 52, 5, 48, 47% 45% 43% 41% Based current prices, the sugar mix in CS Brazil should increase year on year Do we need more Brazilian sugar this year? 46, 44, 42, 39% 37% 4, 8/9 9/1 1/11 11/12 12/13 13/14 14/15 15/16 35% 16% 14% 12% % 8% 6% 4% 2% Several years of low price environment might have affected replanting rates. Will we observe older cane going forward? % 6/7 7/8 8/9 9/1 1/11 11/12 12/13 13/14 14/15 15/16e 3. CS Renewed Area CS Cane Age 4

5 Huge crops in India 14/15 Indian crop should reach a record level of around 27.5 Mio tons, around 12 % higher than last year. Maharashtra alone could produce up to 1 Mio tons versus 8.6 last year. Plantings for crop are almost over in central and southern states, About 6% of the plantings have now been completed in UP. First indication would point to a slightly lower area allocated to cane in 15/16 (- 1% year on Year) Good water level put next year crop development in a good start Based current price environment, Indian stocks could increase by a massive 3 Mio tons this year. 5

6 Thai crop : a slight step down in 14/15 The crop was initially affected by the dryness during the cane development. We expect a crop of 13 Mio tons of cane this year, which should represent 1.85 Mio tons of sugar, vs. 12 Mio tons last year. Thai Millers have improved their efficiency in terms of crush capacity, cane crush and extraction rate across the last years. Future area expansion have lately occurred in Northern region where rice is the major crop. However this trend has slow down and we have not heard of new major capacity investments 6

7 Overview of major countries production Outside China, key producers are still on for large sugar crops in 14/15 & 15/16 Low price environment did not affect global production to a significant extend, as of yet No major weather issue / supply disruption have been noticed lately Key production swingers Production in Mio tons raw value 4, 35, 3, 25, 2, 12/13 13/14 14/15 15/16 15, 1, 5, South Brazil India China Thailand Mexico Russia 7

8 Global production stabilizes but remains close to record level reached in 12/13 High prices environment from 29 to 212 triggered a massive reaction of the global sugar production. From 29 till 213, global production grew by 22 %. Since then, it did stabilize and is now on the verge to decline The various government support across the globe are creating a significant lag between world market price decrease and the reduction of land allocated to sugar crops. Global production per region in Mio tons raw value K tons 2, 8% West Africa Middle East 18, 6% East Africa / Yemen 16, 4% Southern Africa 14, 2% North Africa / Med 12, % FSU/Central Asia 1, -2% EU/Balkans 8, -4% North_Central America 6, -6% Indian Subcontinent 4, -8% East Asia_Oceania 2, -1% South America 7/8 8/9 9/1 1/11 11/12 12/13 13/14 14/15 15/16-12% Global production growth (%) year on year 8

9 World consumption remains strong On the other side, world consumption remains strong, especially at current low price environment. We have noticed a growth of around 2% globally across the last 5 years and now expect the speed of growth to reach about 2.3 % for 14/15. Growth in consumption represents about 4 Mio tons of additional demand every year Number 1 consuming region, East Asia and Oceania, remains a key driver with a growth estimated at 4% this year (+1.5 Mio tons) Global consumption per region in Mio tons raw value K tons /8 8/9 9/1 1/11 11/12 12/13 13/14 14/15 15/16 Southern Africa West Africa East Africa / Yemen Middle East FSU/Central Asia North Africa / Med EU/Balkans South America North_Central America Indian Subcontinent East Asia_Oceania 9

10 Heavy background remains in place for /15 crop year should turn to be the fifth consecutive global sugar surplus The world market has built 31 Mio tons of stocks across the last 5 years High stock environment should continue to weight on volatility Trade flow surplus are still forecasted for the entire year World sugar production / consumption balance Oct/Sep year / mio tons raw value World stocks estimate End Sep carry-outs in Mio tons raw value Net 14, 12, 1, 8, 6, 4, 2, -2, -4, -6, -8, -1, -12, NY Cts/lb Net Surplus/Deficit NY 11 2nd mth Yearly average 8/9 9/1 1/11 11/12 12/13 13/14 14/15 E15/16 E K tons 9, 8, 7, 6, 5, 4, 3, 2, 1, + 31 Mio tons 9/1 1/11 11/12 12/13 13/14 14/15 E 15/16 E 1

11 World stocks at their peak in Q2 215 just before the Brazilian crop China and Indonesia have been key solutions to the world production excess across 12/13 and 13/14, with major stock build up. Those 2 destinations have now implemented additional import restrictions Major refineries such as Dubai did increase their stocks dramatically in 214, supported by carry opportunities offered by the market (weak spreads on NY 11) Few origins such as India, Thailand or Australia have also seen their stocks rising across the last 3 years. => Who can take the surplus this year? Are there more solutions to carry sugar? Stock evolution in main raw sugar origins and destinations Index, base 1 Major importers stocks End Sep carry-outs in Mio tons raw value Stock evolution in Raw sugar destinations Stock evolution in Raw sugar origins 16, 14, 12, 1, 8, 6, , 6 2, 4 11

12 Conclusions World fundamental situation remains ample : 5 years of consecutive surpluses are sitting in stocks in key origins and destinations In 215, market still needs to find a way to reduce sugar production and to increase demand : - The easiest and quicker way to reduce 215 surplus is to reach price levels that incentivise ethanol production vs. sugar in Brazil. - Increase of import demand could also be part of the solution to solve the trade flow surplus. This could progressively be triggered by higher carry in NY market. The solution of 215 sugar surplus would have to be found at the pump in Brazil Moving to 216 and forward, world stocks will start to decline slightly. Given the lack of production investments in current price environment, we should slowly observe price coming back above cost of production of major producers We are approaching the end of bearish sugar cycle, but we still have a long road to go and have most probably not touched the market lows in Brazilian Real yet. A light at the end of the bearish tunnel 12