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Global Wheat Trade - Challenges & Opportunities Khalid Husain Khan ITC Limited June 19, 2015

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Agenda Trends : Global Wheat Trade 2015/16 Challenges & Opportunities Case Study: Australian Wheat Exports Wheat Branding Indian Context

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Trends - 2015/16 Slow, global supply rebuild Continued, increased competition for demand Global demand engines idling / slowing but definitely not out of gas Continued shift to a BUYERs MARKET Mother Nature remains a dominant influence El Nino (back in the headlines)

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World wheat production has been on a steady rise Given lack of investment / research (compared to corn), global wheat yields are holding steady more influenced by weather and total area planted

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Slow, global supply rebuild Global daily consumption rates Stagnant in Wheat CommodityUOM2000/012014/15% IncreaseTrend CornMMT/day1.672.6559% WheatMMT/day1.601.9321% SoyKMT/day47077665% CanolaKMT/day10618978% SunflowerKMT/day6311277% Palm OilKMT/day65166156% Canola OilKMT/day377296% Soy OilKMT/day7312674%

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Global Wheat Supply Cushion Supply cushion is similar to previous years but does show a build trend over the past 3 marketing cycles and much above the 2007/08 low.

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Global demand engines idling / slowing Both China and India have shifted from grain net importer roles to producing, consuming and working through existing reserves

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World feed sector will carry a greater burden to create demand Dietary shift & further growth in emerging economies will drive feed demand in the years ahead Growth in feed wheat demand will be led outside the US and will face greater competition from corn than the past few years

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Global Wheat Trade Trade: Global trade is expected be lower than last year, but, still sizeable at 157 MMT US is likely to be the single largest exporter, but, its share is likely to be eroded by competition from other origins Imports: Egypt expected to remain the largest importer. Algeria as well as Saudi Arabia are expected to increase import purchase to meet their growing requirement Exports: Global trade is expected to be 3% lower, intensifying competition Black-sea exports likely to increase owing to competitive prices, especially to Africa

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To Summarize Wheat has led global diversification of Suppliers shift to Buyers market characteristics Multiple origins competing for world import demand World feed wheat demand has been tepid given its premium to corn

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CHALLENGES

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Wheat Trade - Challenges Future of the global trade of wheat will be shaped basis the challenges facing the industry as well as how those challenges will be confronted: Production: Due to lower returns, farmers switching to Soya & Corn. 80% of the times when a crop was grown in US at a financial loss, it involved wheat Competition: Expansion of production to non-regular wheat supplying countries Increasing price competitiveness playing a major role in shaping trade dynamics Supply Chain: Sophistication of supply chain determines cost competency Issues beyond the control of intervention such as winter crops, climatic discrepancies, freezing of ports, etc. limit the scope of exports

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Regulatory Bottle-necks: Any regulatory changes with respect to taxes, duties, restrictions etc. directly impact the export capabilities of the country as well as the market dynamics Disparity due to Self-sufficiency: Another major factor influencing trade is that in major exporting countries, a significant proportion of the crop is exported as the domestic requirement is less vis--vis developing countries where export potential is limited Wheat Trade - Challenges Total Supply : Opening Stock + Production + Imports (Figures in MMT) 2014-15 IGC Forecast

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Shifts in Demand Preferences: Reducing consumption trends Atkins and gluten free diet trends especially in developed countries Availability of alternatives New alternatives to wheat in baked goods including amaranth, buckwheat, chia, quinoa, sorghum, millet, flax, rye, spelt and teff, plus pulses such as pea flour However, increasingly alternative options for feed-wheat in terms of coarse grains will impact further the demand for wheat for the purposes of feed, consequently, trade Wheat Trade - Challenges

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Wheat Trade - Opportunities Productivity: Lower gains in wheat yields compared to other commodities can be bridged through research initiatives in creating specialised wheat for specific purposes Demand: World wheat demand and trade are forecast to grow as once-poor parts of the globe grow more populous and richer. Value Addition: Health Foods: Increasing awareness of health foods in dietary in-take provides avenues for organic wheat High-value foods: Specialised wheat for Pizzas, burgers, noodles, etc. are another avenues for tailor made wheat varieties

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Wheat Trade - Opportunities Export Promotion Increased export promotion and easing of trade policies would eliminate trade barriers & improve competencies as well as producers bottom line Marketing Alternate options: Increasing interest in healthful foods, natural, non-GMO and non-traditional baked goods Increased offering: Newer products for consumption such as wheat germ, wheat gluten etc. Example: Increased consumption of corn & derivative products

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Creating Geographical Niche

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Wheat Trade - Geographical Scope Creating niche for specialized wheat varieties for specific requirements in destination markets is the next step for growth for suppliers: Middle East, East and North Africa: Constitutes for one-third of the world wheat trade with lower cost, middle protein wheat requirement. Emerging industrial baking segment is a lucrative target market for exporters Latin America: Despite a complex maze of tariff and non-tariff measures, increased consumption makes it attractive for trade servicing Asia: A diverse range of high quality wheat based products are consumed. Focus on creating product differentiation basis utility of wheat by suppliers such as Australia, Canada & USA.

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Case Study: Australian Wheat Exports

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Australias Focused Approach to Exports Main Export Destinations for Australian Wheat- Indonesia, Japan, South Korea, Vietnam Noodles- YAN (Indonesia), UDON (Japan), Ramen Required Characteristics - Chewiness, Bright Colour, Firmness Wheat Varieties- Australian Noodle Wheat (ANW), Australian Premium White Noodle (APWN) Bread Required Characteristics - high protein, high WAbs%, good stability, good extensibility, Wheat Varieties- Australian Prime Hard (APH), Australian Hard (AH) Sponge Cake Required Characteristics - low protein, weak medium dough strength, soft & moist crumb Wheat Varieties- Australian Premium Wheat (APW), Australian Standard White (ASW), Australian Soft (ASFT)

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Australian Wheat Differentiated for its Quality Asian noodle sector is dominated by Australian wheat Differentiated Quality Low screenings (cleanliness) High flour extraction Good starch quality for noodles Good flour colour and colour stability

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Thank You