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World corn production & Export

Issues in corn exporting countries

Impact on U.S corn

prices

World Corn Review 2007 – interactive presentation

Impact on global corn

export

What countries are the world largest producers and exporters of corn?

The latest issues of production and domestic use of corn in major exporting countries

What drive the U.S corn prices up?

How the U.S corn situation affect the global corn export market?



Impact on corn

prices


The U.S, China, Brazil, Mexico, and Argentina are the five largest corn producing countries

Those five countries produced nearly 500 million ton in 2006 representing 72% of global corn production

Country 2002 2003 2004 2005 2006USA 227,767 256,278 299,914 282,311 272,931China 121,300 115,830 130,290 139,365 143,000EU-25 49,360 39,876 52,968 48,618 44,385Brazil 44,500 42,000 35,000 41,700 42,000Mexico 19,280 21,800 22,050 19,500 22,000Argentina 15,500 15,000 20,500 15,800 19,000India 11,100 14,720 14,180 15,090 14,500South Africa 9,675 9,700 11,716 6,935 10,000Canada 8,999 9,600 8,840 9,461 9,300Romania 7,300 7,020 12,000 10,300 8,500Indonesia 6,100 6,350 7,200 6,900 6,600Egypt 6,000 5,740 5,840 5,860 5,870Serbia & Montenegro 5,585 3,800 6,569 6,600 6,600Nigeria 5,200 5,500 6,500 7,000 7,500Philippines 4,430 4,900 5,050 5,900 5,800Ukraine 4,180 6,850 8,800 7,150 6,500Others 56,698 60,726 64,855 67,086 68,400World 602,974 625,690 712,272 695,576 692,886

World Corn Production by Major Countries (1,000 MT)


export

World Corn Export Share 2006

68%

15%

5%

4%

2%

1%

1%

1%

3%

0% 10% 20% 30% 40% 50% 60% 70%

USA

Argentina

China

Brazil

Ukraine

Serbia & Montenegro

Romania

South Africa

Others



Impact on corn

prices

Country 2002 2003 2004 2005 2006USA 40,924 48,809 45,347 56,181 55,500China 15,244 7,553 7,589 3,727 4,000Argentina 12,349 10,439 13,752 10,707 12,000Brazil 3,181 5,818 1,431 2,826 3,500South Africa 1,141 797 1,517 1,406 500Ukraine 811 1,238 2,334 2,464 2,000Serbia & Montenegro 353 57 589 1,274 1,200Romania 144 93 587 271 600Others 4,286 4,435 3,341 4,215 2,525World 78,433 79,239 76,487 83,071 81,825

World Corn Export by Major Countries (1,000 MT)

All five largest corn producing countries, but Mexico, are also major global corn exporters.

Argentina surpassed China as a second

largest corn exporter since 2003

The world is heavily rely on U.S for foreign supply of corn as the country satisfies 68% of global corn export


export


World corn production &

Export


Impact on corn

prices


export


Increasing Animal Feed

Production

The Need to Develop

Bio Fuel

Large supply of ethanol is necessary

Domestic Demand Pressure for Corn

Less corn available for export

China


Export


Impact on corn

prices

The rising meat consumption…China Meat Consumption (1000 MT)

Beef Beef

Pork

Pork

Broiler

Broiler

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

1995 2005

China Feed Production

87,120

96,600

103,000

75,000

80,000

85,000

90,000

95,000

100,000

105,000

2003 2004 2005

…has resulted in rapid growth of animal feed production

Increased by more than

18%


export


China

While government has recently suspended further expansion of its corn ethanol industry in order to halt a rapid increase in corn prices,… …investors and local governments continue preparing new projects. Some processors dodge policy restrictions by claiming to make alcohol.


Export


Impact on corn

prices

Accelerated fossil fuel consumption triggered by industrial and transportation boom…

…make china in a great need to increase bio-fuel production

China Fuel Consumption (10,000 Kilo Litre)

1,859 2,173

11,594

1,2451,744

2,348

3,006

5,868

-

2,000

4,000

6,000

8,000

10,000

12,000

1980 1985 1990 2004

Diesel Oil

Gasoline

Year Production Quantity2002 & Before NA

2003 > 20,000 MT/Year2004 300,000 MT/Year2005 920,000 MT/Year2010 4,000,000 MT/Year

China Ethanol Production

Government set the target of 4 million ton of

ethanol in 2010


export


China

China Corn Situation

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

2002 2003 2004 2005 2006

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

Production Consumption Export


Export


Impact on corn

prices

Ethanol and feed factors make china divert a large part of country’s corn production from export to domestic market by removing export subsidy.

Even China is expected to be net corn importer by 2008


export


China


Export

Impact on corn

prices


Argentina is the second largest corn exporter since 2003.

The country has exported 69% of its corn production within 2002 – 2006 period.

Argentina’s much lower corn production level compared to that of U.S, however, make the country less powerful in absorbing any supply disruption.

The efforts to expand corn production by increasing planted area have been constrained by high transportation cost.

Normally, production for export is centered 300-400 kilometers from ports; farther distances are not as profitable.


export


Argentina


Export


Impact on corn

prices

USA


export


The Growing Criticism

Over The Use of MTBE*

The Need to

Develop Bio Fuel

Large supply of ethanol is necessary

Domestic Demand

Pressure for Corn

Less corn available for export*Methyl Tertiary-Butyl Ether


Export

Impact on corn

prices


Despite country’s position as a largest corn exporter, nearly 90% of U.S. corn production is dedicated for domestic use.

U.S Corn Use 1994-2006

Feed & Residual

Fuel Alcohol

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

Seed

Cereals & OtherProductsStarch

Glucose & Dextrose

High-fructose Corn Syrup

Alcohol for Beverages &MfgFuel Alcohol

Feed & Residual

Corn is massively used in industry with feed industry takes the largest share.


export


USA


Export

Impact on corn

prices


U.S bio-fuel program and the growing criticism over the use of MTBE has triggered rising ethanol consumption.

EPACT set Renewable Fuel Standard (RFS) that aim at achieving 7.5 billions of gallon bio-fuel by 2012

The already enacted EPACT (Energy Policy Act) 2005 is expected to continue driving up U.S ethanol-based-bio-fuel production.

The U.S Bio-Fuel Program


export


USA


Export

Impact on corn

prices


The Clean Air Act Amendments of 1990 require the use of environmental-friendly octane enhancer such as MTBE (methyl tertiary-butyl ether) and ethanol

Since 1992, MTBE has been used at higher concentrations in some gasoline

The possible hazardous groundwater contamination caused by MTBE, however, has prompted the government to consider replacing MTBE with ethanol

California, New York, and Connecticut, the states that were massively use MTBE, have already switched to ethanol since 2004

What’s wrong with MTBE?


export


USA

The surge in ethanol production has accelerated growth of domestic corn use


Export

Impact on corn

prices


The recent jump in fuel ethanol production has escalated the use of corn to produce ethanol.

-

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

-

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000Ethanol (Millions of Gallons)

Corn dedicated to produce ethanol (1000 MT)

A large part and even most of the recent growth of the U.S domestic corn use has been driven by ethanol production boom

Growth of U.S Domestic Corn Use by Type of Usage

2.2% 1.9%

3.1%

6.0%

3.2% 4.3%

0.0% -0.3%

-1%

0%

1%

2%

3%

4%

5%

6%

7%

2003 2004 2005 2006

Ethanol Other Usage


export


USA

Total Growth 5.4%

6.2%

3.1%

5.7%


Export

Impact on U.S corn

prices


As the U.S corn production cannot proportionally catch up with accelerating domestic corn use, corn ending stock hit the lowest level since the 1995/96 crop yearThe anticipation of lower corn inventory has sparked the recent U.S corn price rally

Corn Price (US$/bu)

1.5

2.0

2.5

3.0

3.5

4.0

Sep Oct

Nov

Dec

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep Oct

Nov

Dec

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep Oct

Nov

Dec

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep Oct

Nov

Dec

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep Oct

Nov

Dec

Jan

2002 2003 2004 2005 2006 2007

Ethanol-led-demand shock is expected to create permanent increase in both domestic use and price of corn

The increase is likely to be somewhere between $1 and $2 per bushel (Paul Aho: Oct 2006)

2.22

3.89


export



Export


export


Impact on U.S corn

prices

Since nearly 70% of corn export come from the U.S, the drop in country’s corn inventory has resulted in falling world inventory of corn

The corn importing countries, therefore, are exposed to both the possible supply shortages and hike in price of corn

Ending Stock of World Corn (Million Metric Tonne)

60

80

100

120

140

160

180

200

220

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006


The global corn market is also possible to have lower U.S corn available for export in the near future.

Much of the additional corn needed for the U.S ethanol production will be diverted from country’s exports (USDA Baseline Projection 2006).

Indonesia Corn Situation

Production

Domestic Consumption

5,500

6,000

6,500

7,000

7,500

8,000

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

2003 2004 2005Argentina 0% 12% 87%Thailand 2% 11% 11%United States 0% 21% 2%India 0% 14% 1%Singapore 0% 0% 0%Malaysia 0% 0% 0%Myanmar 0% 0% 0%Korea 1% 0% 0%Austria 0% 2% 0%Brazil 0% 0% 0%China 97% 40% 0%South Africa 0% 0% 0%

Indonesia Corn Import by Country

The reliance on imported corn make Indonesia vulnerable to the recent unfavorable world corn market situation

While recorded mild increase, country’s corn production is still below domestic consumption levelLimited production, however, will directly cut export

supply from Argentina in case of production drop due to harvest failure

Indonesia, therefore, will rely on U.S as a supplier of the last resort and it will bear the direct impact of any U.S corn market disruptions.


Export


export


Impact on U.S corn

prices


U.S corn market situation could also have direct impact on Indonesia

The decreasing role of China as one of major corn exporting countries make Indonesia shift to Argentina

For queries please contactFor queries please contact

Ibnu Edy WiyonoIbnu Edy WiyonoEconomic & Business ResearchEconomic & Business ResearchVice Chairman Office – Charoen Pokphand IndonesiaVice Chairman Office – Charoen Pokphand IndonesiaEmailEmail : : [email protected]@cp.co.idPhonePhone : 62-21-6919999, Ext. 504: 62-21-6919999, Ext. 504FaxFax : 62-21-6922274: 62-21-6922274

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