UNDERSTANDING CHINA: THE PECAN EXPORT MARKET & TOTAL CONSUMPTION

UNDERSTANDING CHINA: THE PECAN EXPORT MARKET & TOTAL CONSUMPTION

INSHELL PECAN IMPORTS BY CHINA UNITED STATES SOUTH AFRICA MEXICO

U.S. INSHELL AND PECAN KERNEL EXPORTS TO CHINA (MT) (12 Month Comparison: September August) U.S. PECAN CROP PRODUCTION U.S. INSHELL PECAN EXPORTS TO CHINA (MT) (Included: China, Hong Kong, Vietnam) 180,000 160,000 140,000 120,000 100,000 80,000 60,000 40,000 20,000-166,468 140,613 120,805 119,839 115,344 119,159 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 45,000 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000-44,522 30,402 38,657 25,404 34,331 35,296 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 (up to April) Series2 Approximately 25% of the U.S. pecan production is shipped to China. Approximately 75% of the U.S. inshell pecan exports to China are from Georgia. Source: NPSA, USDA

SOUTH AFRICA 30,000 20,000 10,000-40,000 30,000 20,000 SOUTH AFRICA EXPORTS 75% to 85% OF INSHELL PECAN CROP TO CHINA 18,000 14,300 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 (est) SOUTH AFRICA PECAN PRODUCTION (MT) 2019 (est) 16,500 20,000 2020 (est) 28,000 2021 (est) 35,000 70% of South Africa pecan production is in the Northern Cape Province Approximately 34,100 hectares planted (currently) Approximately 28% hectares are currently in production Approximately 75% of inshell pecan nuts are exported to China Main Cultivars: Wichita, Choctaw, Western, Pawnee 10,000-2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 36% of the crop is 45-55 nuts per pound 40% is 55-65 nuts per pound South Africa crop harvest time is favorable for marketing to China Source: INC, Golden Peanut & Tree Nut, INC online data, South Africa Pecan Processors Association

SOUTH AFRICA

MEXICO Estimated 2017 crop production was 110,000 MT in Mexico Approximately 11,000 MT was export to China (In 2016: 6,604 MT was shipped from Mexico ports) Approximately 70% of the inshell pecan exported to China is from Sonora Sonora main cultivars: Wichita 70% and Western 20% Approximately 60% of crop is 45-55 count per pound 7,000 6,000 5,000 4,000 3,000 2,000 1,000 - INSHELL PECAN EXPORTS TO CHINA (MT) 6,604 5,579 4,092 3,316 3,141 3,337 2011 2012 2013 2014 2015 2016 Sonora harvests in September, right on time for the Chinese New Year **The export number does not include the quantity that was shipped through US ports. SONORA, MEXICO PRODUCTION IN (MT) 25,000 25,000 200,000 150,000 MEXICO PECAN PRODUCTION (MT) 20,000 15,000 10,000 100,000 50,000 5,000 0 2015 2016 2017 2018 2019 2020 2021 0 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Source: Agriculture information Service Mexico, SAGARPA COMENUEZ, Productora, SIAP

GROWER CLEANING PLANTS IN SONORA, MEXICO Inshell pecans going to China are processed in a cleaning plant that cleans, dries, sizes, and packs in 25 kg bags.

HARVEST DATES: VERY IMPORTANT FOR CHINA SOUTH AFRICA Harvest: June - July Ocean transportation to China is 35 days. Timing is very good for Chinese New Year production. SONORA, MEXICO Harvest: September - October Ocean transportation to China: 35 days. Right on time for Chinese New Year production. GEORGIA, USA Harvest: October - December Ocean transportation to China is 40 days. Majority of the crop does not make it for Chinese New Year production.

INSHELL PECAN IMPORTED BY CHINA FROM USA, MEXICO & SOUTH AFRICA (12 Months Comparison: JANUARY - DECEMBER) USA South Africa Mexico IN-SHELL PECAN IMPORTED BY CHINA FROM USA, MEXICO & SOUTH AFRICA 60,000 50,000 18% 25% 40,000 30,000 21% 8% 8% 16% 13% 15% 17% 12% 20,000 71%% 74% 72% 68% 63% 10,000-2013 2014 2015 2016 2017 USA MEXICO SOUTH AFRICA Source: Agriculture Information Service Mexico, SAGARPA COMENUEZ, Productora, SIAP, NPSA, Carter Pecan, South Africa Pecan Processors Association

USA PECAN CROP CONSUMPTION 12 Month Comparison: Jan - Dec 19,000 17,000 15,000 13,000 11,000 9,000 7,000 5,000 KERNEL - USA CONSUMPTION 17,021 16,434 16,876 18,446 18,485 2013 2014 2015 2016 2017 23,000 18,000 13,000-2,000 DATA: ITI Total MULO baking Nuts syndicated Definition. ENDING DECEMBER 2017 DATA: NPSA, USDA: Ending December 2017 8,000 3,000 KERNEL INT L EXPORT 19,330 15,928 16,925 21,681 28,142 2013 2014 2015 2016 2017 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 - IN-SHELL CHINA, HONG KONG, VIETNAM EXPORT 38,635 29,485 31,027 36,007 27,073 2013 2014 2015 2016 2017 DATA: NPSA, USDA: Ending December 2017 150,000 100,000 50,000 0 PECAN CONSUMPTION IN-SHELL 27.9% 31% 36.7% 30% 25.2% 33% 32.1% 37.4% 40.4% 43.5% 36% 31.2% 32.6% 34.4% 28.6% 2013 2014 2015 2016 2017 KERNEL TO IN-SHELL CONVERSION USING AN AVERAGE 50% YIELD FACTOR. 1 lb Kernel = 2 lb In-Shell USA PECAN CONSUMPTION KERNEL CHINA INSHELL EXPORT INTERNATIONAL KERNEL EXPORT Source: NPSA, USDA, SAGARPA COMENUEZ, IRI/MULO BAKING NUTS

Millions of LBS. (Inshell) U.S. CROP PRODUCTION US Production & USDA AVERAGE and PricingPRICE Overview PAID TO GROWER 450,0 400,0 350,0 300,0 250,0 200,0 150,0 100,0 50,0 0,0 $3,00 $2,50 $2,00 $1,50 $1,00 $0,50 $- Crop Size (LBS.) Price Paid to Grower 11 Source: IRI/MULO BAKING NUTS

WORLD TREE NUT PRODUCTION (Metric Tons) Kernel basis, except pistachios in-shell BRAZIL NUTS 10,700 PINE NUTS 22,850 MACADAMIAS 51,854 PECANS 124,145 HAZELNUTS 490,028 PISTACHIOS 586,207 CASHEWS 789,050 WALNUTS 871,849 ALMONDS 1,240,425 0 200,000 400,000 600,000 800,000 1,000,000 1,200,000 1,400,000 2016/2017 CROP. Source: INC

CHINA RETAIL MARKETS CONSUMERS OF TODAY AND TOMORROW China is the largest international market for tree nuts outside the U.S. and the numbers keep rising

E-COMMERCE GROWING RAPIDLY 1.4 billion people in China. China s middle class is now the size of the entire U.S. population! Public data shows that the business value of nuts in China is 29 billion RMB (USD $4.62 billion) in 2017, and will reach 50 billion RMB (USD $7.97 billion) in 2020. China s consumption of tree nuts increased 17% from January 2017 to December 2017. However, consumption of pecans and macadamias is slightly DOWN September through December compared to last year. (Resources: sycm) E-Commerce nut purchases are growing rapidly. But, traditional retail market sales for nut is declining. New trends in nuts for China: Less Flavored Minimal Processing Kernel market is growing very fast From CHASING WEALTH to CHASING HEALTH = EAT RIGHT 10000 8000 6000 4000 2000 0 EXAMPLE OF ANNUAL SALES OF INSHELL PECANS FROM ONE OF CHINA S TOP E- COMMERCE RETAILERS 2012 2013 2014 2015 2016 2017

CHINA S TARIFFS U.S. PECAN IMPORTS 2015: 24% Tariff + 13% VAT 2016: 10% Tariff +13% VAT 2017: 7% Tariff + 11% VAT 2018 (April-July 5, 2018): 22% Tariff + 11% VAT 2018 (starting July 6, 2018): 47% Tariff + 11% VAT 32% Tariff Example Cost: Inshell pecan per LB = $2.00 Tariff: 47% = $0.94 VAT: 11% (($2.20 + $0.94) * 11%) = $0.32 TOTAL per LB = $3.26 7% Tariff Example Cost: Inshell pecan per LB = $2.00 Tariff: 7% = $0.14 VAT: 11% (($2.20 + $0.15) * 11%) = $0.24 TOTAL per LB = $2.38 ** PECAN TARIFFS FROM AUSTRALIA WILL BE 0% IN 2019! ** PECAN TARIFFS FROM MEXICO & SOUTH AFRICA IS 7%.

Thank You! SALLY ARN 334. 268. 8998 Sally@CarterPecan.com www.carterpecan.com 428 Thomas Drive Panama City Beach, FL 32408