grower pricing meetings february 2015 - cane...

Grower Pricing Meetings

February 2015

Wilmar: Jean- Vincent Piot Chris Winship

Neil Cawthorne John Carmody

James Greenwood Simon Haire

Ella Frankel

QSL Bryce Wenham Cathy Kelly

Carla Keith

Topics

Wilmar

• 2014 Season Pricing Completion date

• 2015 Season

- Wilmars’ Fixed (Target & Call) and Pool Pricing mechanisms

- Nomination date and processes

• Other information

- Availability of Wilmar grower pricing team

Market Information & Update

Discussion

Wilmar Pricing Mechanisms – 2015 & 2016

Forward Pricing

Mechanisms

• Target Pricing

• Call Pool

Committed Tonnage

Pools

• Wilmar 2015

Managed Pricing Pool

• Wilmar 2016

Managed Pricing Pool

2015 Wilmar Pricing Options

Target Price • Individual growers set their own price

• Pricing can start as early as 3 years before the crop is harvested

• Orders are in $A10 price increments

• Orders are good until cancelled and are the minimum price that will be achieved

• Minimum order size is 10 tonnes of sugar (110 tonnes cane @ 14ccs)

• Tonnes must be committed by closing nomination date (Feb 23, 2015)

• Pricing must be completed by Feb year after harvest, ie Feb 2016.

Call Pool • Individual growers set their own price

• Pricing can start as early as 3 years before the crop is harvested

• Orders are placed at the price requested by the grower

• Orders are good until cancelled and are the minimum price that will be achieved

• Order sizes are in multiples of 304.82 tonnes of sugar

• Tonnes must be committed by closing nomination date (Feb 23, 2015)

• Pricing must be completed February year after harvest, ie Feb 2016

Wilmar Managed Pricing Pools – 2015 & 2016

• Committed Pricing Pools

• Minimum tonnage nomination of 10 tonnes of nominal sugar exposure

• Nomination must occur by February 23, 2015 (Nomination Close Date)

• The 2015 & 2016 Season Wilmar Managed Pricing Pools aim to enhance the

price outcome for participants, by exercising significant discretion in the timing of

pricing decisions

• Wilmar Sugar Trading will be responsible for all pricing decisions that determine

the gross Australian Dollar price element of this pool

• Risk Management Instruments used may include;- ICE No.11 Futures contracts,

ICE No. 11 options, Forward foreign exchange contracts, and foreign exchange

options.

• Pricing activity will commence after the Nomination Close Date and conclude by

30 June 2016 The gross Australian Dollar price element of this pool will be

adjusted for the Collective Pool Funding Costs and by QSL’s ICE No.11 Shared

Pool Element for 2015 Season to determine a final Net Pool Price

Committed Tonnage Pools - FAQ

• Call Pool or Target Pricing tonnage will not default into the Harvest Pool should it

not be priced by the grower.

• Call Pool or Target Pricing tonnage that remains unpriced at the Pricing

completion date will be priced by Wilmar the following business day at market

prices

• Pricing for future season’s (2016 and or 2017) if a grower nominates tonnage into

Call Pools or Target Pricing and that tonnage remains unpriced before the

Nomination Close date a grower will have the opportunity to either cancel these

orders and or transfer them to another committed tonnage pool

2015 Season – Declaration Date & Nomination

Process

• Available now to nominate tonnage into, via the Wilmar Grower Pricing Web

• Nominations close Monday 23rd Feb 2015 – this will be the last date to

nominate to Committed Tonnage pools (i.e. QSL Fixed Tonnage Pools , Wilmar

Managed Pools, & Wilmar’s Target Price & Call Pool Mechanisms)

2014 Season – Pricing Completion Date • Pricing Completion Date is 20 Feb, 2015.

• Any unfilled orders will be priced at market open the following business day.

2015 Season Nominations

What you need to do prior to the 23rd February

Grower’s who have already undertaken 2015 season Pricing:

Log in via the Grower Pricing Website and please check your:

– Nominated Ha’s and Tonnes

– Current Orders

– % of crop priced

– % of crop available to price

– View your FPPA Schedule 1

2015 Season Nominations

What you need to do prior to the 23rd February

Grower’s who have not already undertaken 2015 season

Pricing, but wish to do so:

Log in via the Grower Pricing Website and:

– Nominate your expected Hectares and Tonnes of cane production – via

FORWARD PRICING page

– Next, click on CREATE/CHANGE ORDERS button to submit your

orders/nominations

– View your FPPA Schedule 1

Growers who do not wish to undertake any Forward Pricing or commit sugar to a

QSL fixed tonnage pool are NOT required to do anything. Your cane will be priced in

the Harvest Pool as well as receiving US Quota (1 – 5%) and you will not have any

fixed tonnage delivery obligation for the 2015 season

SUGAR MARKET UPDATE

Jean- Vincent Piot

Wilmar Sugar Singapore

Research & Trading

After just 4 years, Wilmar Sugar has now become a global business

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The world’s largest trader of raw sugar • Unique insight into the sugar balance sheet key swingers • We also sell sugar to other clients, especially in Asia

Wilmar Sugar assets & partnerships

Production/RefiningStrategic partnership

Regional trading hub

• Wilmar Sugar Pte Ltd : Head Quarter in Singapore

– Global Trading/Execution/Freight/Finance

– Business development

• Wilmar Sugar Brasil (Sao Paolo)

– Sugar origination from Brazil and Central American countries

– Contacts with all Brazilian sugar industry (mills/terminals…)

– Logistics and operations in Brazil

– Elevation contracts in terminals in Santos/Paranagua

• Wilmar Sugar Paris

– Trade support services

– Contacts with Western Hemisphere clients

– European market follow up and partnership

– Market research and analysis Team

• Large presence in Asia (Shanghai, Bangkok, Djakarta…)

• Distribution in Indonesia, Australia, New-Zealand, Sri-Lanka, South Africa

Wilmar Sugar Trading coordinates the global sugar business

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Source: Wilmar analysis

NY#11 sugar price has trended down in the last 4 years

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NY#11 stands now barely below 15 ct/lb as of end January 2015


After 4 years of surpluses, the production to consumption balance is expected to remain in a surplus Despite lower #11 prices, production has remained stable overall in the last 2 years and is expected at the same level for the coming crop year.

The total stock built in the world since 2010 will have amounted to +29 mio tons

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Overall the sugar crops in the main origins are progressing well

Crops currently harvesting in Asia and Central America are going on well, with weather problems compensated for by acreage gains, except in South China

The outlook on the CS Brazil crop remains favorable, but is still subject to weather risk

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Country YTD production

YOY 13/14A 14/15E YOY expected

Comment

India 10.3 M tons (until Jan 15th)

+26% 24.2 M tons 25.8 M tons +1.6 Possible upside

Thailand 3.2 M tons (until Jan 15th)

-5% 11.3 M tons 10.3 M tons -1.0 Possible upside

China 1.5 M tons* (until end Dec)

-35% 13 M tons 11.7 M tons -1.3 Possible downside

Mexico 1.5 M tons (until Jan 17th)

+17% 6.0 M tons 6.2 M tons +0.2 Possible upside

CS Brazil NS 567 M tons cane 32 M tons sugar

580 M tons cane 33 M tons sugar

+1.0

Note*: YTD production of sugar from cane in Southern China (GX, YU, GD, HA)


Prices are still incentivizing farmers to stabilize or expand cane acreage in India and Thailand

Regulated cane prices in India have incentivized cane acreage increases in Central India (MH and KN).

Acreage losses in UP were due to high cane arrears by the mills.

Thailand expanded acreage basis a cane price paid by the mills in 13/14 of 33 US$/mt (1,073 baht @12%)

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Region Cane acreage 13/14

Cane acreage 14/15

YOY Comment

India / UP 2.3 M ha 2.0 M ha -0.3 M ha Higher cane price than FRP High cane arrears Part of the cane price paid as a subsidy by the local State this year

India / MH & KN 1.4 M ha 1.6 M ha +0.2 M ha Cane price at FRP level (min. cane price from Federal gvt)

Total India (incl. other States)

5.0 M ha 4.9 M ha -0.1 M ha

Thailand 1.6 M ha 1.7 M ha +0.1 M ha Possible higher acreage due to uncertainty on extent of switch to cane by rice farmers


The burden of the surplus and falling #11 prices has been borne by the Brazilian millers

The Brazilian milling industry has been over-indebted as a group, and has had difficulties matching lower sugar and ethanol prices together with debt repayments. Bankruptcies have lead to closure of approx. 50 mills in the last 5 years, but their cane has been crushed by others.

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-2 -2 -3

-5 -14 -13

-9 -10

9

18 22

29

21

10

3 2 2 1

New factories

Closed factories


The USD appreciation has helped prices converted in local currencies in the last year The #11 sugar price did closely followed the USDBRL depreciation over the last year, but not enough to preserve the profitability of the Brazilian industry.

Forward #11 prices in BRL ct/lb are still above Brazilian COP.

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15.05

16.44

13

14

15

16

17

18

19

20

21

22cts/lb, NY equivalent

Brazil - Export VHP sugar vs. Hydrous ethanol market

Sugar Ethanol

Sugar and ethanol prices have been converging

A swing between a maxi-sugar and a maxi-ethanol production mix in CS Brazil can represent up to 7 M tons of sugar production. Given the current outlook, it can swing the sugar balance sheet from surplus to deficit. Ethanol prices in Brazil have a relation to domestic gasoline prices.

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Drop in crude oil prices not expected to have an immediate impact on Brazilian domestic gasoline price… … but Brazilian ethanol exports are losing competitiveness versus US ethanol exports


Speculators remain important forces of the market

20

13

15

17

19

21

23

25

27

(150,000)

(100,000)

(50,000)

-

50,000

100,000

150,000

200,000

250,000

Net Spec SB1

13

13.5

14

14.5

15

15.5

16

16.5

17

17.5

18

(150,000)

(100,000)

(50,000)

-

50,000

100,000

150,000

Net speculative length in the market has been a driving force to the #11 price.

It is mainly influenced by technical signals, fundamental assessments and global macro or commodities complex price actions.


Recap

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For the coming season

Fundamentals

► World production is expected in a surplus to consumption for the 5th consecutive year

► All the major origins (except maybe China) are expected to have decent crops in 2014/15

► Yet weather accidents can always impact the sugar balance sheet, and Brazil is to be monitored

► World stocks have been replenished in most of the origins and destinations

► Current #11 prices still incentivize cane acreage stabilization/expansion in India and Thailand

► The milling industry in Brazil is in a bad financial shape

Macro

► Any prolonged USD strength may provide further bearish pressure to #11 prices

► The global commodities context also influences the funds participation in the sugar market

Overall, we would expect the market to remain in a range (12-18 ct/lb) for the coming season, unless any major event happen (weather, FX violent moves, large industry bankruptcies, etc)

More longer term

► If production remains flat and consumption catches up next year, how long will it take to draw down the current heavy stock levels, before new production is required?

► Further ahead, what will be the ability to expand production at this price level?

► Will the EU turn up as a major exporter to the world market after 2017?

WARNING The contents of this email are confidential and may be privileged. Please delete this email (including any attachments) if you are not the intended recipient. Unless expressly stated, nothing herein constitutes or implies any legal binding obligation with or on Wilmar International Limited and/or any of its subsidiary/associated companies. PLEASE DO NOT RESEND OR FORWARD THIS EMAIL. IMPORTANT NOTICE Information in this presentation may contain projections and forward looking statements that reflect the Company’s current views with respect to future events and financial performance. These views are based on current assumptions which are subject to various risks and which may change over time. No assurance can be given that future events will occur, that projections will be achieved, or that the Company’s assumptions are correct. Actual results may differ materially from those projected. This presentation does not constitute or form part of any opinion on any advice to sell, or any solicitation of any offer to purchase or subscribe for, any shares (including shares of Wilmar International Limited) nor shall it or any part of it nor the fact of its presentation form the basis of, or be relied upon in connection with, any contract or investment decision.

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Grower Pricing Team Availability

Plane Creek Growers

• Neil Cawthorne and Simon Haire will be available every Wednesday at the mill until

the pricing declaration date

• Call Neil Cawthorne or Simon Haire to arrange an appointment time to discuss any pricing related matters

• Contact details available on Grower Pricing Website

• Help with:- - Cash Flow forecasts - Creating orders - Changing orders - Determining 2015 season position

Grower Pricing Team Availability

Proserpine Growers

• Neil Cawthorne will be available Monday– Friday (Except Wednesdays) at the mill.

• Call Neil Cawthorne or Simon Haire to arrange and appointment to discuss any pricing related matters



Grower pricing Team Availability

Herbert River Growers

• Chris Winship will be available Tuesday – Thursday until the pricing declaration date.

James will be available on Tuesdays during this period.

• Call Chris or James to arrange an appointment time to discuss any pricing related matters



Grower pricing Team Availability

Burdekin Growers

• John will be available Tuesday - Thursday until the pricing declaration date. James

will be available on Thursdays during this period.

• Call John or James to arrange an appointment time to discuss any pricing related matters



Thank you

grower pricing meetings february 2015 - cane...

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