Important instruction: Re-Imagining Rice Agriculture Place an image in exactly the same position as this grey box. Thailand Rice Convention 2019 28 th May 2019, Bangkok Select the image. [Mac] in the menu, select ‘ Arrange ’ and then ‘ Send to Back ’ . [PC] right click and then ‘ send to Back ’ . This will then render the green box on top of the image. Olam International Ltd
High global inventories: All exporting countries have higher stocks Fundamental Comparisons Table: USDA, FAO, IGC, Olam For Major Exporting Regions Ending Stocks (in 1,000mt) 2017/2018 2018/2019 2019/2020 USDA FAO IGC USDA FAO IGC USDA FAO IGC India 22,600 21,800 22,700 25,000 25,700 21,900 25,500 27,550 Thailand 3,009 5,600 3,200 3,174 5,400 3,100 3,624 5,600 Vietnam 1,034 3,100 3,800 1,145 3,000 3,700 1,045 2,950 USA 933 930 900 1,702 1,700 1,500 1,867 1,580 Pakistan 1,424 1,324 1,224 South Amer 1,818 690 1,100 1,530 670 900 1,363 480 600 China 109,000 105,100 92,900 115,000 106,500 98,500 117,000 106,500 Other Asea 1,361 1,481 1,481 Total Non Ch 30,818 32,120 31,700 33,875 36,470 31,100 34,623 38,160 YoY Diff 3,057 4,350 -600 748 1,690 • Over the last few years, Thailand has been able to achieve very large export figures due old crop availability • Lower Inventories in Thailand Post liquidation of the government stock • Thailand ending stock has dropped from over 12Mn MT in 2013/14 to around 3Mn now • As that crop availability dwindles, exports are adjusting lower and more in-line with the country ’ s production 1
High global inventories: Stocks-to-use Global Stocks to Use: Exporters, Importers, and China 0.9 0.25 0.8 0.2 0.7 0.6 0.15 0.5 0.4 0.1 0.3 0.2 0.05 0.1 Exporters (Left Axis) Importers (Left Axis) China (Right Axis) 0 0 • Inventories in exporting countries (mainly India) will remain high • Importing countries will continue to see a drawdown in inventory as major importers pursue self-reliance policies • Higher Inventories in China are expected to flatten in 2020 2
Global Export demand is robust despite the loss of Bangladesh and Indonesia Volume Gain Loss (12M on 12M) Major Rice Exporters: 12-Month Moving 000 mt China 840 Aggregate; Jan 2007 - Mar 2019 Brazil (inc Argentina/Paraguay/Uruguay) 490 Vietnam 376 50 Pakistan 11 OtherASEAN -343 45 India -367 Millions of Metric Tonnes US -445 40 Thailand -1,017 Thailand 35 China discounts OtherASEAN 30 continue to drive Vietnam 25 demand to China China 20 Philippines improves India 15 Viet Brazil 10 Pakistan 5 US 0 1/12/2007 1/8/2008 1/4/2009 1/12/2009 1/8/2010 1/4/2011 1/12/2011 1/8/2012 1/4/2013 1/12/2013 1/8/2014 1/4/2015 1/12/2015 1/8/2016 1/4/2017 1/12/2017 1/8/2018 3
Fragrant Prices Thai Rice Prices Remains At A Premium Thai HomMali, Viet Jasmine(Monthly Prices) Jan 2015 - Apr 2019 1400 1200 1000 800 USD 600 400 200 0 Jan-15 Jul-15 Oct-15 Jan-16 Jul-16 Oct-16 Jan-17 Jul-17 Oct-17 Jan-18 Jul-18 Oct-18 Jan-19 Apr-15 Apr-16 Apr-17 Apr-18 Apr-19 Month ThaiHomMali VietJasmine • Increasing supply of lower cost fragrant rice from Vietnam drives Thai export demand lower • Thai Hommali has been able to remain steady at higher prices on the back of domestic demand, Core Exporting countries Demand and lower stocks 4
WR Prices Thai Rice Prices Remains At A Premium WR 5% for Thai, Viet, Pak, India (Monthly Prices) Jan 2015 - May 2019 460 Indonesia Demand 440 Bangladesh Demand 420 400 USD 380 360 340 320 300 Mar-15 May-15 Sep-15 Nov-15 Mar-16 May-16 Sep-16 Nov-16 Mar-17 May-17 Sep-17 Nov-17 Mar-18 May-18 Sep-18 Nov-18 Mar-19 May-19 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Jul-18 Jan-19 Month Thai5 Viet5 Pak5 India5 WR Prices have reverted back to 2015 lows as: • Exceptional import demand from Bangladesh and Indonesia has dried up • The major Exporting countries (especially India) continue to see high inventories • China has begun exporting cheap old crop ; taking less imports (especially cross-border) Thailand has less inventory and also sees risk of further shortage due to drought. Thai and Indian white rice prices have also been able to offer stability even as other markets fell to near-term lows 5
PB Prices Thai Rice Prices Remains At A Premium Nigerian Cluster's Imports (MT) from India and Thailand (left axis) vs Price Differentials (Thai - India) for PB (right axis) 80 100% 90% 60 Price Differentials (USD) 80% 40 Market Share (%) 70% 20 60% 0 50% 40% -20 30% -40 20% -60 10% -80 0% Jan-15 Mar-15 May-15 Jul-15 Sep-15 Nov-15 Jan-16 Mar-16 May-16 Jul-16 Sep-16 Nov-16 Jan-17 Mar-17 May-17 Jul-17 Sep-17 Nov-17 Jan-18 Mar-18 May-18 Jul-18 Sep-18 Nov-18 Jan-19 Mar-19 May-19 Date NC - India NC - Thailand Price Differential (Thai - India) Nigerian Cluster PB Demand: • Indian volumes come up as the Thai prices are relatively expensive • Recent dominance by Thailand would continue without a larger spread Other West African PB Demand: Indian volumes dominate this region South Africa PB Demand: Thai would continue to dominate this market 6
Thai Rice Global Market Outlook For Thailand rice: • Lack of overhang of the government inventory – No Cheap rice to export; Market would substitute Thai Old Crop stock with Chinese Old Crop • Lower Ending stock compared to the other exporting countries – Firmer Prices • Weather related risk and derived shortages – Thai Rice at a Premium • Thai Rice continues to enjoy a High Quality Reputation “ Re-Imagining Thai Rice ” Maintain Thai Rice Premiums by meeting the Changing Consumer needs and develop the “ core export demand ” 7
Sustainability: Maintaining Thai Rice Premiums by meeting consumer needs Sustainable rice is gaining momentum “Not too expensive Compared to Regular alternatives” Stockholm “Sustainable, healthy” Berlin “Involved with the “Transparent supply local community” chain” Berlin LA Consumers are increasingly “Minimal environmental ethically-minded impact. Eco friendly packaging” LA “I am a firm believer in Sustainability and good Food products with ethical claims is a farmer relationships” US$250bn category with 4% growt h Denver “Info on pkg on how it per year is produced” LA “I want them to be ‘green’” “Good for the environment” Denver LA Note: quotes from consumers Research Mar/Apr 2019 8
Traditional premium-led model is very limited for Rice • Premium Model: Higher income rice consumers , RICE who can afford to pay a premium for sustainable rice • These consumers purchase Premium Products 500 MM mt such as Thai Hommali Rice, mostly in high-end packaging • These niche markets can maintain a similar model to coffee/cocoa , but only accounts for a about 10% of the global rice market • Sustainability can deliver the High end Products that can command the premium Total Palm Oil • consumed per year, Sustenance Model: Majority rice consumers eat 68.645 MM mt cheap, non-fragrant rice, and its byproducts (e.g. brokens) as a cheap staple carbohydrate • Premium model will struggle with lack of margin Total Cocoa + • Sustainability Projects can help reduce the cost of Coffee consumed farming, improve milling yields – overall reduce the per year, Combined 16.66MM mt Cost 9
Thailand should be at the forefront of Sustainable Rice efforts Thai Rice Department, GIZ & Olam led partnership from 2016 which aims at moving 16,000 farmers in Thailand to Sustainable standards • Olam has been the Pioneer in Sustainable Rice Initiative • Only Private company in the world to offer Sustainable rice in this scale • Premium Quality rice • Volume – Scalability • All assurances as per the SRP standard Positive Impacts we have been able to achieve 1. Farmers have seen a 9% reduction in cost Quality improvements have also improved incomes by a further 10% 2. Word of mouth has led us from 70 farmers in 2016 , to 2,300 Farmers in 2018 and expected to 3. be 6,000+ farmers in 2019 4. Water savings as high as 40% 10
Thailand should be at the forefront of Sustainable Rice efforts Thai Rice Department, 10 Thai Ministries, GIZ, Olam, and others in NAMA in 2019 which aims at moving 100,000 farmers in Thailand to Sustainable standards by 2023 To achieve transformational change through a paradigm shift Goal from conventional to low-emission farming in Thailand – Objectives Duration ’ ▪ Farmers have adopted the SRP ▪ 5 years from Aug 2018 – Standard/GAP++ and thereby reduce GHG July 2023 emissions and realize additional co-benefits. ▪ Mitigation services are provided in the market ▪ Innovative incentive schemes are established Budget on the national level to support the ▪ 14.9 million Euro transformation of the whole rice sector to low- é ’ emission production. 11
“ Re-Imagining ” Thai Rice Industry for a Sustainable Future 12
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