GOSA 14 March 2012

SA GRAIN ECONOMIC PERSPECTIVE

PRESENTATION TOPICS

1. AGRICULTURE IN PERSPECTIVE

3. OUTLOOK FOR 2012 / 13

2. TRENDS IN THE GRAIN INDUSTRY

1. AGRICULTURE IN PERSPECTIVE

1.1 Contribution to GDP

1. AGRICULTURE IN PERSPECTIVE

1.2 Consumers spend on agricultural products

1. AGRICULTURE IN PERSPECTIVE

1.3 Per capita consumption of grains, vegetables and fruit

1. AGRICULTURE IN PERSPECTIVE

1.4 Per capita consumption of meat products in South Africa

2. AGRICULTURE IN PERSPECTIVE

2.1 Population growth in South Africa

2. AGRICULTURE IN PERSPECTIVE

2. TRENDS IN THE GRAIN INDUSTRY

2.1 Profitability

High prices – boom in agriculture

Income outstrip expenditure by far - 5 ton/hectare farm in central Free State

o Gross income = R10 000/ha

o Direct costs = R 4 000/ha

o Nett income = R5 000/ha

Overhead costs = R1 000/ha

2.2 Increased efficiency

2.2.1 Production efficiency

2.2.2 Operational efficiency

Export program

2. TRENDS IN THE GRAIN INDUSTRY

2.3 Alternative handling and storage

Growing Industry

Structural change

o On farm storage 1.6 million tons – SIQ

o Silo bags – 1.1 million tons – LBW 9 March 2012

o Producers have fewer and larger equipment

o Harvest tempo

o condition of roads

o Transport costs

o Convenience

Challenge for the traditional silo industry

2. TRENDS IN THE GRAIN INDUSTRY

2.4 Compliance

Major sustainability issue

Top 12 Act’s affecting Senwes

1. Competition Act, 89/19982. National Credit Act, 34/1998 3. Restitution of Land Rights Act, 22/19944. Occupational Health & Safety Act, 85/19935. Consumer Protection Act, 68 of 20086. FICA, 38/20017. Companies Act, 61/ 1973 and 71 of 20088. Securities Services Act, 36/2004 9. Taxation Laws Amendment Act, 3/08 10. Taxation laws Second Amendment Act, 4/0811. Income Tax Act, 58/196212. Value- Added Tax Act, 89/1991

2. TRENDS IN THE GRAIN INDUSTRY

2.4 Compliance

Then there are other Act’s that can have a material impact on a company, i.e.

13. Agricultural Pests Act;14. Agricultural Products Standards Act;15. Compensation for Occupational Injuries & Diseases Act;16. National Railway Safety Regulator Act; 17. Environmental Act 18. Road Transportation Act; 19. Environment Conservation Act;20. National Water Act 21. Foodstuffs, Cosmetics & Disinfectants Act; 22. Fertilizers, Farm Feeds, Agricultural Remedies & Stock Remedies Act;

2. TRENDS IN THE GRAIN INDUSTRY

2.4 Compliance

Add to fixed costs

Non Compliance can lead to huge fines

Unfair competition between those who comply and those who don’t

> Food safety

Overloading of trucks

o Out of 17 loads (4>45 tons; 6> 35 tons)

o Average weight – 41.83 tons. Legal weight = 32 tons

o Cost difference: 300km – 32 ton vs. 42 ton load = R51/ton

2. TRENDS IN THE GRAIN INDUSTRY

Unfair competitive behaviour

Can expect actions to make sure everybody comply

The role of Africa

o World demand outstrip consumption

o China & India

o Africa have the potential to be bread basket

- Huge post harvest losses - storage

- Logistic solutions

2. TRENDS IN THE GRAIN INDUSTRY

3. OUTLOOK 2012/12

SA Maize S&D (000 tons) 2011/ 2012 2012/ 2013

Beginning stocks 2335 591

Production 10360 11705

Imports 500 0

Total Supply 13195 12296

Domestic Demand 10204 10250

Exports 2400 1200

Total Demand 12604 11450

Ending Stocks 591 846

Stocks to Usage 5% 7%

4. OUTLOOK 2012/12

Local Maize Prices seen at export parity in during the harvest (May-July) and at coastal import parity end of the season

Thus SAFEX WM< prices are seen at R1 700-R2 100/ton during the harvest and R2 250-R2 450/ton at the end of the season

YM prices are expected to be around R100-R300/ton lower than that of WM

Price Expectation – local maize

5. OUTLOOK 2012/12

International Maize Prices are expected to drop $40-$50/ton in the Northern Hemisphere’s new season, due to increased plantings. The harvest kicks off in September. Prices should remain high

(around $250-00/ton) until then.

Price Expectation - International market

THANK YOU

QUESTIONS/REMARKS ?