AUSTRALIA GRAINS INDUSTRY CONFERENCE – SINGAPORE

MICHAEL WHITEHEAD ANZ CLIENT INSIGHTS

MARCH 2014

> 2

AGENDA

SECTION TOPIC

1. GRAIN & OIL SEED INDUSTRY OUTLOOK

2. GRAIN & OIL SEED FORECAST

3. GRAIN & OILSEED SUPPLY CHAIN INVESTMENT REQUIREMENT

US & CANADA BLACK SEA AUSTRALIA

INCREASING COMPETITION TO GAIN ASIA FOOD BOWL SHARE

INCREASING SHARE OF GLOBAL MIDDLE CLASS

2013:28%

2030:66%

TO DRIVE GRAIN CONSUMPTION IN LONG TERM

KEY GLOBAL GRAIN EXPORTERS TO COMPETE FOR THE ASIAN MARKET SHARE

-

140

280

420

560

700

-

700

1,400

2,100

2,800

3,500

1961

/196

2

1965

/196

6

1969

/197

0

1973

/197

4

1977

/197

8

1981

/198

2

1985

/198

6

1989

/199

0

1993

/199

4

1997

/199

8

2001

/200

2

2005

/200

6

2009

/201

0

2013

/201

4

Stock (RHS) Production (LHS) Consumption

> 4

GLOBAL GRAIN & OIL SEED PRODUCTION AND CONSUMPTION (In MT)

GLOBAL GRAINS & OILSEEDS – RECORD PRODUCTION FORECAST

Source: USDA & ANZ Analysis Note 1: Production forecast is based on 25 year Long term growth rate

-

7%

14%

21%

28%

35%

-

700

1,400

2,100

2,800

3,500

1961

/1962

1965

/1966

1969

/1970

1973

/1974

1977

/1978

1981

/1982

1985

/1986

1989

/1990

1993

/1994

1997

/1998

2001

/2002

2005

/2006

2009

/2010

2013

/2014

Production (LHS) Stock-To-Use (RHS)

> 5

GLOBAL GRAINS & OILSEEDS – S/U REMAINS STEADY

GLOBAL GRAIN & OIL SEED PRODUCTION vs. STOCK-TO-USE (In MT)

Source: USDA & ANZ Analysis Note 1: Production forecast is based on 25 year Long term growth rate

-

1,000

2,000

3,000

4,000

5,000

2013/2014 2017/2018 2021/2022 2025/2026 2029/2030

China United States European UnionIndia Former Soviet Union - 12 BrazilArgentina Canada AustraliaROTW Rapid convergence consumption ABARES consumptionFAO consumption

> 6

GLOBAL GRAINS & OILSEEDS – CONSUMPTION GAP LOOMING

GLOBAL GRAIN & OIL SEED PRODUCTION AND CONSUMPTION FORECAST (In MT)

Source: USDA & ANZ Analysis Note 1: Production forecast is based on 25 year Long term growth rate

4.2 4.8 5.4 5.5 5.6 5.6 5.7 5.8 5.8 5.9 6.0 6.0 6.1 6.2 6.2 6.3 6.4 6.4

26.6 26.3 26.8 27.3 27.8 28.4 28.9 29.5 30.1 30.7 31.3 31.9 32.5 33.1 33.8 34.5 35.1

6.6 6.6 6.7 6.8 6.9 7.0 7.1 7.1 7.2 7.3 7.4 7.5 7.5 7.6 7.7 7.8 7.9

19.5 19.0 20.0 20.4 20.9 21.3 21.8 22.3 22.8 23.3 23.8 24.4 24.9 25.5 26.0 26.6 27.2

2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

1

2

3

4

2014 2018 2022 2026 2030

Kazakhstan Russia Ukraine Australia 90

110

130

150

2014 2018 2022 2026 2030

Kazakhstan Russia Ukraine Australia

> 7

AUSTRALIA WHEAT FORECAST (In mt)

AUSTRALIAN WHEAT FORECAST HIGHLIGHTS THE NEED FOR 40% INCREASE IN HARVEST AREA

WHEAT YIELD FORECAST (T/Ha) HARVEST AREA REQUIRED TO SUPPORT FORECASTED PRODUCTION (Indexed to 2013)

Opening Stock Production Export Domestic Consumption

Source: USDA Foreign Agricultural Services , ABARES and ANZ Analysis Note 1: Production forecast is based on 25 year average growth, ending stock is based on stock to consumption median for 25 years Note 2: OECD forecast till 2022 is extrapolated for 2030 based on 2013 to 2022 data Note 3: Harvest area calculation is based on production forecast divided by yield per hectare

-

9%

18%

27%

36%

45%

APH AH APW ASW AGP Milling Noodle Durum Feed

2009 2010 2011 2012

Perc

enta

ge o

f ex

port

s

300

350

400

450

Q1 Q2 Q3 Q4Blacksea 14.5 DNS 14 CWRS 13.5 APH13 AH12

> 8

AUSTRALIA SUPERIOR WHEAT QUALITY & EXPORT

AUSTRALIAN WHEAT EXPORT

Acceptable Preferred

Wheat Variety Competition Region

(Quality) Noodles Bread Biscuits Steamed

Bread

AU (APH/AH)

AU (APW)

AU (ASW)

USA (HRW)

USA (DNS)

CAN (CWHWS)

CAN (CPSW)

CAN (CWRS)

IND WHEAT

PAK WHEAT

RUS WHEAT

UKR WHEAT

HIG

H P

RO

TEIN

WH

EAT

PR

ICE

(USD

/T )

BULK EXPORT CONTAINER EXPORT

Source: Trade sources, ABARES and ANZ Analysis Note 1: Based on CNF Malaysia for 2013

300

350

400

450

Q1 Q2 Q3 Q4Blacksea 14.5 DNS 14 CWRS 13.5 APH13 AH12

-

1

2

3

4

5

2007 2009 2011 2013

China Japan Korea Thailand Vietnam Other

1.0 1.0 1.4 1.4 1.4 1.4 1.5 1.5 1.5 1.5 1.5 1.5 1.6 1.6 1.6 1.6 1.6 1.6

13.0 12.6 12.8 13.1 13.3 13.6 13.8 14.1 14.4 14.7 15.0 15.3 15.5 15.9 16.2 16.5 16.8

6.3 6.4 6.5 6.6 6.7 6.7 6.8 6.9 7.0 7.1 7.1 7.2 7.3 7.4 7.4 7.5 7.6

6.7 5.8 6.3 6.5 6.7 6.8 7.0 7.2 7.4 7.6 7.8 8.0 8.2 8.5 8.7 8.9 9.2

2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

Opening Stock Production Export Domestic Consumption

> 9

AUSTRALIA COARSE GRAIN FORECAST (In mt)

AUSTRALIAN COARSE GRAIN FORECAST – BARLEY FALL LOOMING

BARLEY & SORGHUM EXPORT TARGET MARKET (In mt) HARVEST AREA REQUIRED TO SUPPORT FORECASTED PRODUCTION (Indexed to 2013)

80%

110%

140%

170%

200%

2014 2018 2022 2026 2030Harvest Area (Max Yield:2.4 T/ha)Harvest Area (Average Yield:1.61 T/ha)Harvest Area (Median Yield: 1.58 T/ha)

Source: USDA Foreign Agricultural Services , ABARES and ANZ Analysis Note 1: Production forecast is based on 25 year average growth, ending stock is based on stock to consumption median for 25 years Note 2: Harvest area calculation is based on production forecast divided by yield per hectare

-

4

8

12

16

` 2003 2005 2007 2009 2011 2013Domestic Consumption Export

-

4

8

12

16

2001 2003 2005 2007 2009 2011 2013Barley Oat Sorghum Corn (maize) Triticale

-

2

4

6

8

2001 2003 2005 2007 2009 2011 2013

Barley Oat Sorghum Corn (maize)

-

1

2

3

4

5

2007 2009 2011 2013

China Japan Koprea Thailand Vietnam Other

> 10

AUSTRALIA COARSE GRAIN PRODUCTION (In mt)

COARSE GRAIN EXPORT (In mt)

AUSTRALIAN COARSE GRAIN - BEER CONSUMPTION HOPES

BARLEY & SORGHUM EXPORT MARKET (In mt)

AUSTRALIA COARSE GRAIN USAGE (In mt)

Source: USDA Foreign Agricultural Services , ABARES and ANZ Analysis

-

1

2

3

4

2007 2009 2011 2013

Belgium Netherlands Pakistan China Japan Other

60%

80%

100%

120%

140%

2014 2018 2022 2026 2030

Harvest Area (Max Yield: 1.78 T/ha)Harvest Area (Average Yield: 1.25 T/ha)Harvest Area (Median Yield: 1.28 T/ha)

> 11

AUSTRALIA OILSEED FORECAST (In mt)

AUSTRALIAN OILSEED FORECAST – SHORT TERM FALLS

HARVEST AREA REQUIRED TO SUPPORT FORECASTED PRODUCTION (Indexed to 2013)

CANOLA EXPORT TARGET MARKET (In mt)

0.3 0.4 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.3 0.3

4.9 4.5 4.6 4.7 4.8 4.9 5.0 5.1 5.2 5.3 5.4 5.5 5.6 5.7 5.8 5.9 6.1

1.7 1.7 1.7 1.7 1.8 1.8 1.8 1.8 1.8 1.9 1.9 1.9 1.9 2.0 2.0 2.0 2.0

3.1 3.1 2.9 3.0 3.0 3.1 3.2 3.3 3.3 3.4 3.5 3.6 3.7 3.8 3.8 3.9 4.0

2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

Opening Stock Production Export Domestic Consumption

Source: USDA Foreign Agricultural Services , ABARES and ANZ Analysis Note 1: Production forecast is based on 25 year average growth, ending stock is based on stock to consumption median for 25 years Note 2: Harvest area calculation is based on production forecast divided by yield per hectare

-

1

2

3

4

5

2007 2009 2011 2013Oilseeds Canola Cottonseed Other

-

1

2

3

4

5

6

2007 2009 2011 2013Canola Cotton Seed Other

-

1

2

3

4

5

6

2001 2004 2007 2010 2013Domestic Consumption Export

> 12

AUSTRALIA OILSEED PRODUCTION (In mt)

AUSTRALIA OILSEED EXPORT (In mt)

AUSTRALIAN OILSEED OVERVIEW – STRONG CHINA POTENTIAL

AUSTRALIA OILSEED USAGE (In mt)

Source: USDA Foreign Agricultural Services , ABARES and ANZ Analysis

CANOLA EXPORT TARGET MARKET (In mt)

-

1

2

3

4

2007 2009 2011 2013

Belgium Netherlands Pakistan China Japan Other

22%

24% 54%

JAPA

N

AUSTRALIAN EXPORTS BY REGION (In mt)

CONSUMPTION

(In mt) ASIA IMPORT MIX

6.4

6.4

2013

2030

121.7

136.6

2013

2030

2.7

3.7

2013

2030

4.3

4.6

2013

2030

5.5

7.8

2013

2030

69% 9%

16% 6%

95%

4% 1%

41%

6% 42%

11%

71%

15%

11% 3%

4

8

12

16

20

2007 2009 2011 2013

Africa Asia Middle East Oceania

AUSTRALIA EXPORT (In mt)

PRODUCTION

(In mt)

2030:

2013:

0.00

0.00

0.02

0.02

0.00

0.00

133.12

120.66

1.16

0.83

IND

ON

ESIA

KO

REA

VIE

TNAM

CH

INA

INCREASING FOCUS ON ASIA TO PROVIDE NEW EXPORT OPPORTUNITIES FOR AUSTRALIA

Source: USDA Foreign Agricultural Services , ABARES and ANZ Analysis Note 1: As of 2012 Note 2: OECD forecast till 2022 is extrapolated for 2030 based on 2013 to 2022 data

5

10

15

20

25

2007 2009 2011 2013Indonesia Korea VietnamChina Japan Others AsiaOther Global

2030:

2013:

2030:

2013:

2030:

2013:

2030:

2013:

41% 6% 42%

11%

Australia Canada US Other

-

6%

12%

18%

24%

30%

-

9

18

27

36

45

1996 1999 2002 2005 2008 2011 2014Ukraine RussiaKazakhstan Australia % (Global Export) (RHS)Black Sea % ( Global Export) (RHS)

22 23

3335

37

Ukraine North Russia WesternAustralia

South Australia EasternAustralia

-

24

48

72

96

120

1996 1999 2002 2005 2008 2011 2014

Kazakhstan Russia Ukraine

> 14

INCREASING COMPETITION FROM BLACK SEA TO POSE CHALLENGE IN LONG TERM

INCREASING BLACK SEA WHEAT PRODUCTION … …COUPLED WITH SEA FREIGHT ADVANTAGE TO MIDDLE EAST1,2…

INCREASING SHARE OF BLACK SEA WHEAT EXPORT IS DRIVEN BY YIELD GROWTH

(In mt) (In USD/T)

Source: USDA Foreign Agricultural Services , ABARES and ANZ Analysis Note 1: As of 2012 Note 3: Freight charges for Iran from respective countries Note 3:OECD forecast till 2022 is extrapolated for 2030 based on 2013 to 2022 data

-

20%

40%

60%

80%

100%

Indonesia Korea Vietnam China Japan

Australia Canada US Other

…RESULTING IN THE REGION BECOMING A KEY EXPORT MARKET FOR BLACK SEA (In mt)

-

10%

20%

30%

40%

<$50 $50-$99 $100-$199 $200-$499 $500-$999 $1,000+

(USD '000)

461 341 270

520

1,200

89 133

-

10

20

30

40

NSW Vic Qld SA WA Tas NTNo. of farms ('000) Avg. Farm Size (ha)

-

6%

12%

18%

24%

15-24 25-34 35-44 45-54 55-64 65 +

Farmers and Farm Managers Employed Total

> 15

KEY CHALLENGES TO AUSTRALIAN FARMING

AGEING AUSTRALIAN FARMERS…

Source: Agricultural Commodities, Australia and ANZ Analysis Note 1: Data include all farming activities and sourced from Agricultural Census for 2011-2012

SMALL FARM SIZES…

…LOW TURNOVERS…

-

6%

12%

18%

24%

AU BRZ UKR US CAN CHN EU OECD RUSProducer Support (% of sector revenue)

80

100

120

140

160

1999 2001 2003 2005 2007 2009 2011

Index of Prices received Index of Prices paid

> 16

KEY CHALLENGES TO AUSTRALIAN FARMING

…ALONG WITH LESS GOVT. SUPPORT …

Source: Agricultural Commodities, Australia and ANZ Analysis Note 1: Data include all farming activities and sourced from Agricultural Census for 2011-2012

…LEADING TO LOW RETURNS…

Impacting competitiveness of Australian Farming

Industry

(20)

(10)

-

10

20

30

2008 2009 2010 2011 2012 2013

17

Farm Production

Receival & Storage1

16% - 29%

Note 1: Receival and Storage costs based on 3-months storage

INFRASTRUCTURE CHALLENGES ACROSS THE SUPPLY CHAIN…

Australian Grain Supply Chain

Throughput 0.6x

Receival Sites: 623

Avg. Dist2 20km

Throughput: 6-7x

Receival Sites : 271

Avg. Dist2 80km

* Median cost of wheat supply chain for all states

Note 2: Average Farm to Bin distance

USA & Canada Grain Supply Chain

Southern Oscillation Index Cost of Grain Production USD/T

Sources: USDA, ABARES, AGEIC

NOTE: The above table represents the best practices across USA and Canada

136138

140142 143

145

Ukraine Argentina USA Canada France Australia

>  Australia currently has scattered receival sites with total bulk handling capacity of over 55mt, in addition it has ~15mt on-farm storage capacity

> Majority of the storage capacities in US & Canada are on-farm storage units providing farmers the option to store grains in un-favourable marketing conditions

% of supply chain cost

Canada Canada

30% - 34%

8%-9%

18

Port Facilities

Others4

Sea Freight

…LEADING TO HIGH SUPPLY CHAIN COST ~70 USD/TON…

Transit Time: 6 days

Shipping USD 9/ton

Transit Time 26 days

Shipping USD 31/ton

International Shipment3: 3.4

International Shipments3: 3.6

Note 5: Charge for a 40-foot dry container or a semi-trailer (total freight including agent fees, port, airport, and other charges).

Costs5: USD

1,020

Costs5: USD 680

Note 1: Logistics Performance Index Note 2: Ease of tracking cargo score Note 3: Ease of arranging competitively priced shipments score

Transportation6

27% - 39%

Axle Load: 16-19 ton

LPI Index1: 3.7

Axle Load: 23 ton

LPI Index1: 3.9

Tracking2: 3.8

Tracking2: 4.1

> Grain transport facility in Australia is deteriorating, with large maintenance investments required, specially into rail infrastructure

>  In USA, train lines can move grain 1,000 km at a cost of USD 10/ton compared to USD 25/ton in Australia for less than 500 km

>  Australia’s proximity to Asia, provides it with significant cost advantage in terms of sea freight specially for South-East Asia

> Western exports into Asian countries are challenged to a greater extent due the freight disadvantages it has to Australia

NOTE: The above table represents the best practices across USA and Canada

Australian Grain Supply Chain USA & Canada Grain Supply Chain

Note 4: Other charges include GRDC Levy and other levy Note 6: Transportation costs based on Rail charges for 200km distance between receival site and port

Western Australia To Indonesia

USA To Indonesia

19

…REQUIRES INVESTMENT INTO UPGRADING THE FACILITIES…

STORAGE RAIL TRACK UPGRADE PORT

20mt

$2.0bn

2013 Total Grain Exports – 30mt Exports by OAE’s – 15mt

2030 Total Grain Exports – 40mt Exports by OAE’s – 20mt

Assuming OAE’s account for ~50% of total grain exports from Australia, capex requirements have been derived till 2030 considering a new supply chain is setup to support the OAE’s

$1.6bn

Capacity - 2030

Total Capex - 2030

Initial Capex – 2014 - 18

1,325 km

$2.0bn

$1.6bn

Capacity - 2030

Total Capex - 2030

Initial Capex – 2014 - 18

30mt

$7.6bn

$6.0bn

Capacity - 2030

Total Capex - 2030

Initial Capex – 2014 - 18

Note 1: Assuming OAE’s export 50% of total grain exports from Australia Note 2: OAE’s – Other Accredited Exporters

28% 33% 31% 8% 27% 37% 25% 11%

19.7 23.0 21.8 5.6

20

… WHICH COULD LEAD TO POTENTIAL COST REDUCTION ACROSS SUPPLY CHAIN

Note 1: Assuming storage time of 3 months and rail network being used to transport to port at a distance of 200km Note 2: Other charges include GRDC Levy, End Point Royalties, and other levy

BENEFITS OF PARALLEL SUPPLY CHAIN – COST ANALYSIS

CAPEX TIMELINE (In USD bn)

Total Capex Required till 2030: USD 11.6 bn

AUSTRALIA WHEAT SUPPLY CHAIN - USD/TON OAE’s Wheat Supply Chain - USD/ton

Current Scenario Parallel Supply Chain

2014 $1.7

2015 $1.9

2016 $1.9

2017 $1.9

2018 $1.9

2019 $0.2

2020 $0.2

2021 $0.2

2022 $0.2

2023 $0.2

2024 $0.2

2025 $0.2

2026 $0.2

2027 $0.2

2028 $0.2

2029 $0.2

2030 $0.2

Total Cost: USD 70/ton COST BREAK-UP

13.7 18.4 12.4 5.6 20.0

COST BREAK-UP

13.7 18.4 12.4 5.6 20.0

Receival & Storage Transportation Port Facilities Others Benefit

>  USD 20/ton benefit arising from the OAE’s moving to a parallel supply chain >  OAE’s can save ~29% of their current supply chain costs driven by operational efficiencies and reduced charges

21

UPGRADING CURRENT INFRASTRUCTURE

>  Australia’s current supply chain infrastructure requires substantial upgrading and maintenance in order to compete with other grain exporters supplying into Asia (USA, Canada, etc.)

>  Investments are required into developing efficient storage capacities, upgrading existing grain rail lines and capacities at port level (storage and loading) in order to make the system more efficient

IMPROVING THE EXISTING GRAIN SUPPLY CHAIN

>  Grain storage facilities/receival bins are currently scattered across Australia (~623 receival bins) with average distance between a grain farm and bin in Australia is ~20km compared to ~80km in Canada. In WA ~40% of the sites handle ~80% of grain, thereby leading to inefficiency for other sites due to under utilisation

GRAIN STORAGE

GRAIN RAIL NETWORK

>  Axle loads (currently ~17 ton) and low siding, limits the rail length and load carrying capacity. Up-gradation of axle loads to 20-23 ton and increasing siding could further increase load capacity per train from ~2,000 to 10,000 ton

GRAIN ROAD INFRASTRUCTURE

>  Truck capacities also require investments, as ageing of current fleet along with limited capacities compared to new models restrict the movement of grains and increase costs

GRAIN PORT FACILITY

>  Loading capacities for port terminals can vary from ~600 ton/hr to 5,000 ton/hr in Australia, leading to congestion in ports with low capacities as trucks/trains have to wait for longer time

AUSTRALIA WELL REPRESENTED BY SCALE COMPARISON > 22

North America

35%

South America

12% Australia 12%

Eastern EU/Black

Sea 10%

Africa 9%

Asia 3%

Global 19%

Total AUM by Target Geography (Percent)

North America, $9,450

South America, $3,360 Australia,

$3,245

Eastern EU/Black

Sea, $2,815

Africa, $2,295

Asia, $900

Global, $5,200

Total AUM by Target Geography (USD)

ROW CROPS REMAIN THE MAJOR FOCUS > 23

Permanent 10%

Row 59%

Pastoral 20%

Infrastructure

11%

Total AUM by Crop Type

Permanent $2,790

Row $15,960

Pastoral $5,455

Infrastructure $3,060

Total AUM by Crop Type

ACCESSIBILITY OF MEDIUM SIZED FUNDS > 24

0

5

10

15

20

25

30

Up to $50m

$51 - $199m

$200 - $499m

$500 - 999 $1000m+

Size of Major Agri Funds

Up to $50m 2% $51 -

$199m 9%

$200 - $499m 29% $500 - 999

18%

$1000m+ 42%

% of Total Assets by Fund Size

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