asean agri bites-march 2011 tushar-newagri-bites | asean tanuj shori / ken arieff wong nomura 3 23...

23 March 2011 Nomura 1

Any authors named on this report are research analysts unless otherwise indicated. See the important disclosures and analyst certifications on pages 61 to 65.

Agri-Bites | A S E A N CONSUMER RELATED/AGRI RELATED

Tanuj Shori +65 6433 6981 [email protected]

Ken Arieff Wong +60 3 2027 6895 [email protected]

Ploenjai Jirajarus (Capital Nomura Securities)

Action

The correction in soft commodities ytd and corresponding equity underperformance (although valuations never ran up in the first place) provide an attractive broad-based BUYing opportunity, in our view. Crude oil support and any prospects of QE3 should prevent commodity prices from going into free-fall as global inventories are at multi-year lows. We continue to like planters (IFAR, Sime and LonSum), Olam, Noble, Mewah, Indian agri stocks, and think earnings will be near-term catalysts. US planting report may provide the fillip to palm oil as soy may lose the acreage battle.

Catalysts

Supply-driven imbalances and consolidation should drive near- to medium-term newsflow and implied price reactions for soft commodities and related equity plays.

Anchor themes

Dominant themes include: 1) China/India consumption; 2) food inflation; 3) weather patterns; 4) US$ and crude oil movements; and 5) business restructuring.

The great buying fair for food exposure Upstream names offer good value; BUY Sime, IFAR and LonSum

Current upstream valuations have been beaten down with recent weakness in the CPO price, offering strong upside even assuming RM3,000/tonne for CPO (lower than consensus and spot prices — we maintain our assumption at RM3,400/tonne in FY11F). A positive outlook for global agri-commodities (with multi-year low inventories) and strong crude oil prices support our bullish CPO price view. Our top picks include IndoAgri, LonSum, Genting Plantations and Sime Darby.

Olam and Mewah are looking oversold, we still like Noble

We still like Noble, as we believe its earnings momentum should continue near term and think it should be a net beneficiary of sugar, coal and carbon credit markets. On Olam, we think concerns are overdone and earnings will provide a good catalyst for a bounce-back. We believe Mewah at current valuations (~9x P/E) is looking very good from a risk-reward perspective, but low liquidity is a concern.

Marketing feedback – Wilmar, KLK, LonSum, Olam, Minzhong liked

Most questions during our marketing were on Olam. Overall, we saw investors looking for BUY ideas in palm as CPO may stabilize; their top picks seemed to be KLK, IFAR and London Sumatra. There was interest in niche plays like China Minzhong and GMG, as well, with broad consensus positive on rubber. We got some pushback on Noble as our top pick as investors think earnings expectations may be priced in. While we are NEUTRAL on Wilmar, we saw much interest in the stock at current levels with investors getting positive vibes from insider buying.

All eyes on US planting data – who will win the acreage battle?

As per a recent USDA forecast, winners this time around will likely be corn and wheat, while soybean acreage may not gain. This is mostly driven by current soybean prices, which are lower than corn and wheat, and thus less attractive for planters to plant. The much-anticipated Planting Intentions Survey result will be released on 31 March and will provide a more accurate picture on planting expectations for the coming season. We think that as long as other crops such as wheat, corn and cotton maintain their price strength, soybean should maintain its current strength – supportive of global vegetable oils, including palm oil.

N O M U R A S I N G A P O R E L I M I T E D

Stocks for action

BULLISH

Stock Rating

Price (17 Mar)

(local)

Price target(local)

Pot.upside (%)

OLAM SP BUY 2.55 3.90 52.9

NOBL SP BUY 2.07 2.80 35.3

MII SP BUY 0.87 1.34 54.0

SIME MK BUY 9.00 12.15 35.0

IFAR SP BUY 2.16 3.40 57.4

LSIP IJ BUY 2,225 3,040 36.6

GGR SP BUY 0.64 0.90 40.6

GENP MK BUY 7.97 10.50 31.7

IOI MK BUY 5.57 7.00 25.7

KLK MK BUY 20.60 25.50 23.8

AALI IJ BUY 21,750 28,400 30.6

RSI IN BUY 99.20 170.00 71.4

Ratings and price targets are as of the date of the most recently published report (http://www.Nomura.com), rather than the date of this document. *LSIP’s price target reflects 1:5 share split in March 2011.

Analysts Tanuj Shori

+65 6433 6981

[email protected]

Ken Arieff Wong

+60 3 2027 6895

[email protected]

Ploenjai Jirajarus

(Capital Nomura Securities)

Tushar Mohata (Associate)

Vishnuvardana Reddy (Associate)

Upcoming key events Date Country Event

8 April US USDA Data Release

11 Apr MY MPOB Data release

Source: Nomura research, Bloomberg

Monthly stock performance

Stock Ticker Local price*

Mkt cap (US$mn)

1 wk chg (%)

1 mth chg (%)

Wilmar WIL SP 5.01 25,091 (5.3) (5.5)

Noble NOBL SP 2.07 9,775 0.5 (1.9)

Olam OLAM SP 2.55 4,248 (5.6) (12.7)

Mewah MII SP 0.87 1,026 (10.8) (17.9)

Sime Darby SIME MK 9 17,707 (1.1) (3.0)

IOI IOI MK 5.57 11,695 (2.5) (0.2)

KL Kepong KLK MK 20.6 7,199 (1.3) (5.9)

Gent Plant GENP MK 7.97 1,980 0.9 (1.6)

Astra Agro AALI IJ 21750 3,897 (4.2) (5.4)

Lonsum LSIP IJ 2225 1,727 (6.3) 0.2

Golden Agri GGR SP 0.64 6,080 (4.5) (7.9)

Indofood IFAR SP 2.16 2,447 (5.3) (13.3)

Ruchi Soya RSI IN 99.2 659 (2.4) (6.0)

KS Oils KSO IN 31.85 280 (7.0) (7.5)

* Pricing as of 17 Mar Source: Bloomberg

Agri-Bites | ASEAN Tanuj Shori / Ken Arieff Wong


Contents

Nomura ASEAN Soft Commodity Team 4

The great buying fair 5 In line with commodities, equities have underperformed as well… 6 CPO price has corrected 14% from its peak, but equities punished further – unwarranted in our view 6 CPO price assumption maintained 7 CPO discount to soybean oil comes off, lending some comfort 8 All eyes on US spring planting season; USDA expects little change in hectarage for soybean, with most gains in to be made in corn and wheat 8 Impact of Japanese earthquake on agri-commodities 9 Long positions of “managed money” in soy oil futures withdraws as risk appetite withdraws 10

Stocks: what we like and what we don’t 12 Upstream planters severely punished – offer ‘deep value’ 12 Midstream: we continue to like Noble, Olam and Mewah, but are cautious on Wilmar 12 We also like Indian edible oil players – Ruchi Soya and KS Oils 13 Thai Food & Agri: CNS prefers food processors CPF and GFPT on global demand for high-quality processed foods and benefit from soft commodity price drop 13

Other data points for the month 14 Malaysian February palm oil data — production and exports down, prices fairly reflect inventory levels 14 China soybean crushing margins fell in February, US margins almost at parity 14 Palm oil industry refining margins spike 15 Major news flow for the month 16

Round-up of Feb-March 2011 17 Last month’s commodity price performance: negative 17 Stock performance generally negative, agri inputs and midstream lead fall 17 Consensus downgrades occur on price correction, profit taking 17

Valuation snapshot 18

Valuation charts 24

The ups and downs 26 Last month’s commodity price performance: negative 26 Stock performance generally negative, agri inputs and midstream lead fall 27 YTD 2011 recap: generally negative returns by agri stocks 27 Consensus downgrades occur due to price correction, profit taking 28

Ears to the ground 30 Important events/news flow summary 30 Company news flow summary 32 Highlights of our published research 33



Commodity snippets 34

Palm oil 35 What you need to know for the month of March 35

Soybean, soy meal and soy oil 39 USDA forecasts improving soybean supply in 2010/11F, consumption to rise more 39 World protein meal supply to grow in tandem with disappearance; vegetable oil disappearance to outpace supply growth 40 World soybean production to fall slightly in 2010/11F 41 Brazil and US to capture share of Argentine soybean exports in 2010/11F 42 Soybean consumption to grow at 8.1% in 2010/11F; same as 09/10F 42 China continues to be a substantial consumer of soy products 44 China soybean crushing margins fall in February-March 45

Sugar 47 ISO further cuts sugar surplus forecast for 2010/11F on Australian floods and China weather 47 Thai sugar export volume and price up in Jan-11 47 World sugar prices fell m-m in March 2011 due to expected sugar surplus from India 48

Grains — rice, wheat and corn 49 Grain stock usage ratios to tighten in for wheat and corn while improving for rice in 2010/11F 49 World rice price continues to be weak y-y and m-m in Mar-11 50 Thai rice export volume up in Jan 11 51 Wheat exports in major producing regions to drop in 2009/10F and 2010/11F 51 US corn production to fall, but offset by gains in China 52

Rubber 53 Global natural rubber to grow 4.6% in 2011F and 3.8% in 2012F 53 Thai rubber export volume down but export price up in Jan 11 53 Future rubber price down m-m on worry about car industry in China and the impact from the earthquake in Japan 53

Appendix 1: crop calendar 55

Appendix 2: monthly weather update 56

Valuation methodologies 57 Risks to our investment view 58



Nomura ASEAN Soft Commodity Team

Tanuj SHORI ASEAN Commodity Supply Chain +65 6433 6981 [email protected]

Ken Arieff WONG ASEAN Plantations +60 3 2027 6895 [email protected]

Ploenjai JIRAJARUS Capital Nomura Securities +662 638 5772 [email protected]

Tushar MOHATA +91 22 6723 4042 [email protected]

Vishnuvardana REDDY +91 22 3053 2847 [email protected]



What’s in this issue of our Agri-Bites

The great buying fair After a strong 2H10, we have so far seen a weak 2011, with agri-commodity prices and stocks both having corrected considerably year to date. Amongst soft-commodities, tea, wheat, rubber and sugar have seen the worst falls in thus far in 2011, whereas a very few — like cotton and cocoa — have bucked the trend and are up year to date.

Exhibit 1. Commodity performance – YTD 2011

(30)

(20)

(10)

0

10

20

30

40

Tea

US

Whe

at

Rub

ber

Su

gar

US

Ric

e

US

Soy

Mea

l

Mal

aysi

aC

PO

US

Soy

bean

Can

ola

Oil

Ref

ined

Pa

lm O

ilU

SS

oybe

anO

ilC

hina

Soy

Mea

l

Tha

iland

Ric

eC

hina

Rap

esee

dO

il

Alm

onds

Chi

naS

oybe

anO

il Cor

n

Chi

naS

oybe

an

Su

nflo

wer

Oil

Coc

oa

Cot

ton

(%)

Source: Bloomberg

This has been in contrast to the gains seen in hard commodities such as crude oil and coal. We see this divergence stemming from two things:

Withdrawal of speculative funds from agri-commodities, as risk appetite deflates

Fears of a demand slowdown for agri-commodities from MENA countries (geo-political concerns), as well as impact from the recent events in Japan.

Hard commodities on the other hand have seen a revival in prices stemming from fears of supply disruption (mainly for crude oil).

To an extent, we find the withdrawal of speculative funds unsurprising (we have acknowledged the increasing amount of long positions in our past notes), and we think that agri-prices could stabilise at current levels for the near term assuming that there are no new major developments from a global supply/demand perspective.

The good part in our view is, global agri-demand is relatively inelastic, and any concerns on demand are usually more infrastructure driven — eg, trade and ports cut-off (bottlenecks).

Positive catalysts for agri-commodities:

Stability leading to improved sentiment and demand outlook for agri-commodities.

Continued strength in crude oil prices supporting biofuel demand in the US.

Spring planting intentions which could spur prices further in the fight for acreage.

Negative catalysts for agri-commodities:

Further geopolitical concerns damaging sentiment and global demand outlook.

Withdrawal of ‘Quantitative Easing II’ liquidity in the US (likely by end-June 2011) driving prices lower

Stronger production in 2H11 of palm oil, as well as higher-than-expected planting intentions for a specific crop (eg, soybeans).



In line with commodities, equities have underperformed as well… In-line with weak commodity performance in 2011, equities have been weak since the beginning of the year, as well. However, a key difference in our view is that equities never had re-rated as strongly as commodities had in the first place. Indeed, almost all of the stocks under our coverage — from Singapore midstream names (down 10% ytd vs index down 8%) to upstream planters (Malaysian names down 1% vs index down 1%, Indonesian names down 18% vs index down 6%) — are down ytd. (Please see page 26 for a list of stock P/Es.)

Exhibit 2. Sectoral performance YTD

(30)

(25)

(20)

(15)

(10)

(5)

0

5

10

1-J

an

8-J

an

15-J

an

22-J

an

29-J

an

5-F

eb

12-F

eb

19-F

eb

26-F

eb

5-M

ar

12-M

ar

Singapore Commodity SCM Malaysian Planters

Indonesian Planters Indian Agri

Thai Agri

(%)

Source: Bloomberg

Exhibit 3. Soft commodity stocks: recent performance

Company Closing price 7-month high High attained on

Fall from highs (%)

Target Price Upside (%) EPS CAGR (CY10-12F)

(%)

P/E (CY11F)

P/E (CY12F)

Wilmar 5.02 6.88 9-Nov-10 (27.0) 5.60 11.6 22.0 17.2 14.9

Noble 2.04 2.34 16-Jan-11 (12.8) 2.80 37.3 26.6 13.7 11.9

Olam 2.58 3.38 9-Nov-10 (23.7) 3.90 51.2 20.2 16.5 13.9

Mewah 0.87 1.20 18-Jan-11 (27.5) 1.34 54.0 6.5 9.5 8.1

Sime Darby 9.01 9.46 4-Jan-11 (4.8) 12.15 34.9 40.6 14.4 12.9

IOI 5.78 6.05 4-Jan-11 (4.5) 7.00 21.1 17.3 16.0 14.2

KLK 20.64 22.86 20-Jan-11 (9.7) 25.50 23.5 24.5 15.4 12.9

Genting Plant 8.00 9.03 4-Jan-11 (11.4) 10.50 31.3 23.9 13.7 12.2

Golden Agri 0.64 0.82 3-Jan-11 (22.0) 0.90 40.6 28.1 11.0 9.9

Indo Agri 2.12 2.95 4-Jan-11 (28.1) 3.40 60.4 36.7 10.0 9.3

London Sumatra 2,225 2,570 2-Jan-11 (13.4) 3,040 36.6 26.8 11.2 10.5

Astra Agro 22,100 27,100 9-Dec-10 (18.5) 28,400 28.5 33.0 12.4 11.0

Note: As on 18-March-2011

Source: Bloomberg, Nomura estimates

CPO price has corrected 14% from its peak, but equities punished further – unwarranted in our view Palm oil prices have corrected by 14.2% from the recent peak of RM3,930/tonne in mid-February. This withdrawal coincided largely with weakness seen in other agri-commodities, including vegetable oils (soy), oilseeds and meals, grains and rubber.



Exhibit 4. Upstream plantations have outperformed the index but are still far below CPO price strength

% change since Outperformance vs index Outperformance vs CPO Drop from Highs since Oct

1/Oct/10 (%) (%) (%)

Sime Darby 6.0% 3.4% -20.1% -4.8%

IOI 5.7% 3.1% -20.4% -4.5%

KLK 21.3% 18.7% -4.8% -9.7%

Genting Plantations 2.9% 0.3% -23.2% -11.2%

KLCI 2.6% -23.5%

Malaysia Plantations 8.3% -17.7%

Golden Agri 12.3% 18.5% -13.8% -22.0%

Indofood Agri -8.6% -2.4% -34.7% -28.1%

STI -6.2% -32.3%

Singapore Plantations 8.7% -17.4%

Astra Agro 4.2% 5.7% -21.8% -18.5%

Lonsum 11.8% 13.3% -14.3% -13.4%

JCI -1.5% -27.6%

Indonesia Plantations 8.1% -18.0%

Average – all planters 6.9% 7.6% -19.1% -14.0%

CPO 26.1% Note: Priced as at 18 March, 2011

Source: Nomura research, Bloomberg

CPO price assumption maintained We are maintaining our CPO price assumption of RM3,400/tonne for 2011F, which is based on our multi-variate regression model, and we maintain our Bullish view on the sector. Although we think commodity prices and share prices could take some time in the near term to stable out, we think some of the names under our coverage offer compelling valuations at current levels.

Exhibit 5. CPO price assumptions

Year 2011F 2012F 2013F

Price Forecast (RM/mT) 3,400 3,550 3,450

Source: Nomura estimates

For reference, we have included a sensitivity table below which assumes a lower CPO price assumption for 2011. As shown below, on our estimates, upsides still prevail especially for names such as Indo Agri, Golden Agri and Astra Agro Lestari.

Exhibit 6. Plantation stocks - scenario analysis

Company

Closing Price

(17-Mar)

Target Price (CPO at

RM3,400/mT) Upside (%)

Target Price (CPO at

RM3,000/mT) Upside (%)

Sime Darby 9.00 12.15 35.0% 10.70 18.9%

IOI 5.57 7.00 25.7% 6.20 11.3%

KLK 20.60 25.50 23.8% 22.10 7.3%

Genting Plantations 7.97 10.50 31.7% 8.70 9.2%

Golden Agri 0.64 0.90 40.6% 0.87 35.9%

IndoAgri 2.16 3.40 57.4% 3.10 43.5%

Astra Agro 21,750 28,400 30.6% 26,400 21.4%

London Sumatra 2,225 3,040* 36.6% 2,890 29.9%

Note: CPO price assumption of RM3,000/mT is accompanied by a corresponding decrease in Indonesian export tax assumption to 10%. * Post the 1:5 stock split

Source: Nomura estimates



CPO discount to soybean oil comes off, lending some comfort Following the recent correction in the CPO price, the CPO price discount to soy oil has widened to around ~10% from previous tightness of ~5%. This, we think, leaves some room for CPO prices to stabilise (and possibly trend upwards slightly), as palm oil should be able to maintain its price competitiveness.

Exhibit 7. CPO price widens discount to 10-15% vs soybean oil and rapeseed

-25%

-20%

-15%

-10%

-5%

0%

1-J

an-1

0

22-J

an-1

0

12-F

eb-1

0

5-M

ar-1

0

26-M

ar-1

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16-A

pr-1

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7-M

ay-1

0

28-M

ay-1

0

18-J

un-1

0

9-Ju

l-10

30-J

ul-1

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20-A

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10-S

ep-1

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1-O

ct-1

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22-O

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an-1

1

4-F

eb-1

1

25-F

eb-1

1

18-M

ar-1

1

Palm Oil Disc to Rape Oil Palm Oil Disc to Soy Oil

Source: Bloomberg

All eyes on US spring planting season; USDA expects little change in hectarage for soybean, with most gains in to be made in corn and wheat The U.S. Department of Agriculture (USDA) recently disclosed its expectations for acreage (USDA forecasts – not based on a survey). The winners this time around according the results will likely be corn (+4% y-y) to 92mn acres and wheat at 57mn acres (+6% y-y), although soybean acreage looks to remain unchanged at 78mn acres (+1%). This is mostly driven by current soybean prices, which are lower than corn and wheat, and therefore less attractive for planters to plant. The much-anticipated Planting Intentions Survey result will be released on 31 March and will provide a more accurate picture on the plantings expectations for the coming season.

Additionally, in its 2011 Agri Outlook, the USDA believes that the three main factors shaping 2011 will be tight supplies of corn and soybeans, the small supply cushion for corn and soybeans in the event of adverse weather and the expected strong exports of corn, wheat and soybean.

We think that as long as other crops such as wheat, corn and cotton maintain their price strength, soybean should maintain its current strength – supportive of global vegetable oils, including palm oil.



Exhibit 8. USDA: Acreage forecast

79.2 78.3 93.5 86.0 86.5 88.2 92.0

64.2 75.5 64.7 75.7 77.5 77.4 78.0

75.1 57.3 60.5 63.2 59.2 53.6 57.0

42.3 32.3 29.1 28.2 25.9 26.0 28.1

34.536.0 36.8 34.6 33.7 31.4 31.9

0.0

50.0

100.0

150.0

200.0

250.0

300.0

350.0

1996 …. 2006 2007 2008 2009 2010 2011F

Corn Soybeans Wheat Other Feed Grains, Rice & Cotton CRP(mn acre)

Source: USDA Agricultural Outlook Forum

Exhibit 9. Soy-corn ratio (below average)

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

Sep

-98

Sep

-99

Sep

-00

Sep

-01

Sep

-02

Sep

-03

Sep

-04

Sep

-05

Sep

-06

Sep

-07

Sep

-08

Sep

-09

Sep

-10

Soy to corn ratio Average=2.65

Source: Nomura, Bloomberg

Exhibit 10. Soy-cotton ratio (below average)

0.00

0.05

0.10

0.15

0.20

0.25

0.30

0.35

0.40

0.45

0.50

Sep

-98

Sep

-99

Sep

-00

Sep

-01

Sep

-02

Sep

-03

Sep

-04

Sep

-05

Sep

-06

Sep

-07

Sep

-08

Sep

-09

Sep

-10

Soy to cotton ratio Average=0.22

Source: Nomura, Bloomberg

Impact of Japanese earthquake on agri-commodities We think the recent earthquake and tsunami in Japan could have a meaningful impact on the world trade and prices of various agri-commodities. The situation is currently unfolding, and it is uncertain how much of the port capacity or agricultural land has been affected. However any prolonged disruption to trade flow / agricultural production in Japan could impact prices, in our view. Japan is predominantly an importer and a net consumer of soft commodities. In our view, the commodities most likely to face downward pressure in prices given import delays might be corn, rapeseed, cottonseed and soymeal, given Japan’s large share of world imports in these commodities. However, we also flag that since this questions supply of food, disruption, if any, should be minimal, in our view.

Regarding supplies, the most obvious impact would be on rice, given that one of the biggest agricultural products in Japan is rice. Estimates for crop damage to rice have varied, with some estimates (USDA economists) saying the impacted area accounts for 6-10% of rice production in Japan with others putting estimates as high as 26%. Plantings for rice take place end of April to late June, with harvesting in September. This leads us to believe any impact will likely be seen in the next planting/harvesting season – and more from salt water poisoning (as rice is not as tolerant as wheat and barley to salt).



Exhibit 11. Japan as % of world commodities supply demand

Production Imports Exports Consumption

Grains

Rice, Milled 1.7 2.4 0.7 1.9

Wheat 0.1 4.1 0.2 0.9

Corn n.m. 17.8 n.m. 2.0

Oilseeds

Oilseed, Copra n.m. n.m. n.m. n.m.

Oilseed, Cottonseed n.m. 20.1 n.m. 0.3

Oilseed, Peanut 0.1 5.7 n.m. 0.4

Oilseed, Rapeseed n.m. 21.5 n.m. 3.8

Oilseed, Soybean 0.1 3.9 n.m. 1.6

Protein Meals

Meal, Copra n.m. 2.4 n.m. 1.0

Meal Cottonseed 0.1 1.5 n.m. 0.1

Meal,Fish 7.1 12.4 0.3 13.0

Meal,Peanut n.m. n.m. n.m. n.m.

Meal, Rapeseed 3.8 1.6 n.m. 3.9

Meal,Soybean 1.2 4.0 n.m. 2.5

Vegetable oils

Oil,Coconut n.m. 2.2 n.m. 1.3

Oil, Cottonseed 0.1 4.2 n.m. 0.2

Oil, Palm n.m. 1.7 n.m. 1.3

Oil, Palm Kernel n.m. 3.4 n.m. 1.6

Oil, Peanut n.m. 0.6 n.m. n.m.

Oil, Rapeseed 4.0 0.3 n.m. 4.1

Oil, Soybean 1.2 0.3 n.m. 1.3

Oil, Sunflowerseed n.m. 0.8 n.m. 0.3

Others

Coffee, Green n.m. 7.4 n.m. 5.7

Cotton n.m. 0.8 n.m. 0.3

Sugar, Centrifugal 0.7 3.1 n.m. n.m.

Note: 2009/10 crop year. n.m. implies very low or not meaningful

Source: USDA FAS

Long positions of “managed money” in soy oil futures withdraws as risk appetite withdraws Based on our review of CFTC data, US CBOT soy oil futures held by managed money (eg, portfolio funds and not hedgers and traders) have fallen 22% from their peak – close to early-October levels. This was in line with the overall weakness in commodities, as risk appetite declined with geopolitical concerns and fears of slower global demand stemming from Japan’s natural disasters.

Though we actually find it comforting that some speculative liquidity has left the market, we still think the risk remains whereby commodity prices could recede very quickly with a turn in sentiment. In the near term, we think that liquidity should remain supported so long as QE II liquidity remains intact (ie, to last through 1H11) and fundamentals for the sector (which in the case of palm oil are currently driven by tight supplies) remain supportive.



Exhibit 12. CFTC data – Increasing managed money positions demonstrate speculation declining

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

180,0005

-Jan

-10

19-J

an-1

02

-Feb

-10

16-F

eb-1

02

-Mar

-10

16-M

ar-1

030

-Mar

-10

13-A

pr-1

027

-Apr

-10

11-M

ay-1

025

-May

-10

8-J

un-1

022

-Jun

-10

6-Ju

l-10

20-

Jul-1

03

-Aug

-10

17-A

ug-1

031

-Aug

-10

14-S

ep-1

028

-Sep

-10

12-O

ct-1

026

-Oct

-10

9-N

ov-1

023

-Nov

-10

7-D

ec-1

021

-Dec

-10

4-J

an-1

118

-Jan

-11

1-F

eb-1

115

-Feb

-11

1-M

ar-1

1

30

35

40

45

50

55

60

65Managed Money Long Positions (LHS)

Managed Money Short Positions (LHS)

CBOT Soy Oil Prices (RHS)

Source: Commodity Futures Trading Commission



Our stock calls

Stocks: what we like and what we don’t This section summarises our stock action points for the month.

Upstream planters severely punished – offer ‘deep value’ We still believe that CPO prices will be supported at least through 1H11 and believe that the market has taken too negative a view on CPO upstream plays – having punished names like IndoAgri and Golden Agri, down 22-27% from the peaks. Revisiting our CPO price assumption, even at an assumption of RM3,000/tonne (below consensus view of RM3,100/tonne (based on a Reuters published poll), these names offer good value and upside.

BUY London Sumatra, Indo Agri and Golden Agri, after the recent sell-down. Sensitivities show that they are still compelling BUYs, even with a lower CPO price assumption of RM3,000/tonne. We also like Sime Darby on a positive outlook for all its divisions (apart from oil & gas). We like IndoFood Agri for its strong CPO production growth, coupled with higher leverage to CPO prices (being purer plantation plays), while London Sumatra offers good leverage to CPO prices, as well as exposure to the Indonesian market (where our strategist Wilianto Ie is positive) at compelling valuations (cheapest within our upstream palm oil coverage). Golden Agri is the most liquid CPO name in our coverage, with pure leverage to CPO prices. Sime Darby, in our view, also offers a strong re-rating story given its recent lag (relative to CPO price strength), while low-hanging fruit presents potentially easy wins in terms of earnings upside. Further, Sime Darby’s large market weighting and high liquidity could increasingly be used as a proxy for improving sentiment on Malaysia, especially given a relatively low foreign shareholding of ~15%.

Midstream: we continue to like Noble, Olam and Mewah, but are cautious on Wilmar Noble: Among the midstream space, we like Noble, as we think that the current commodity price upcycle, along with strong performance in agri, energy and locked margins in FY11F should ensure a good FY11 for the company. The company also stands to benefit from high coal prices due to Australian floods, as its mines in NSW are relatively insulated from the floods. It should also be a net beneficiary of any rising coal prices due to higher Japanese demand post the earthquake.

We like Olam, as its asset strategy continues to surprise positively and it is trading at extremely attractive valuations post the recent correction on export incentives. Its recent investments in Africa, such as the Gabon fertiliser project and the sugar refinery in Nigeria, if executed well, could act as a substantial boost to the bottom line, in our view. In its recent NDR with us, Olam reiterated the recent uptick in its growth guidance helped by faster-than-expected contributions of various assets, such as almonds, tomato processing and wheat milling. Moreover, NZFSU and PureCircle can turn around in ~2 years, according to management, which could present potential upside surprise.

Although we think there is inherent dilution risk (to fund expansion), we believe the recent correction is overdone and presents buying opportunity. It is now trading at 16.5x CY11 P/E, de-rating from peak of ~21x CY1 P/E, and at all-time low discounting the time during financial crisis

However, we remain NEUTRAL on Wilmar, as we expect a shrinking valuation premium due to non-core investments in property and weak earnings to continue in 1QFY11. We think that the stock should remain rangebound in the near term on the back of a lack of catalysts. During our recent marketing, we saw a great deal of interest in the stock at current levels, with investors getting positive vibes from recent insider buying.

BUY Indo Agri, Golden Agri and LonSum for good leverage to CPO prices; we also have a BUY on Sime Darby on possible restructuring improvements



We also like recently cited Mewah for its leadership in West Africa pack oil, scale in palm refining, cheap valuation compared to peers and likely high capex intensity post listing, but low liquidity remains a concern.

We also like Indian edible oil players – Ruchi Soya and KS Oils We also like Indian edible oil players Ruchi Soya and KS Oils and think that they will benefit from the rising per capita edible oil consumption in India, a larger percentage of branded sales, increasing capacity utilisation through incremental consolidation in the industry, greater economies of scale and upstream participation. We shift our preference to Ruchi Soya as a strong soybean crop in 4Q CY10–1Q CY11 will likely boost the company’s margins and volume, resulting in a positive earnings surprise, in our view.

Thai Food & Agri: CNS prefers food processors CPF and GFPT on global demand for high-quality processed foods and benefit from soft commodity price drop Regarding Thai agricultural and food companies, Capital Nomura Securities analyst Ploenjai Jirajarus maintains a Neutral rating for the sector. She this month prefers food processors with high-quality products — names like CPF and GFPT. The tense politic situation in the Middle East, high crude price and the Japan earthquake have given rise to worries of global economic uncertainty and therefore, led to a fall in soft commodity price. Thus, CNS’ analyst prefers CPF and GFPT because they are beneficiaries of rising demand for high-quality processed foods for export. Moreover, a slowdown in soft commodities — eg, soybean and corn — will also lower feed costs.

CNS feels that CPF and GFPT are likely to see upward revision in consensus earnings estimates thanks to higher-than-expected demand for processed chicken products exported to Japan and the Middle East. Moreover, the slowdown in global soybean price should ease their feed costs.

CNS also likes TVO as because expected rising export volume for processed chicken products will increase demand for Thailand animal farming and feed mills, and TVO should then be able to sell more soybean meal as a result. Although a fall in soybean and soybean meal prices might be negative to TVO, CNS believes rising demand for both soybean meal and soybean oil will raise production utilisation and, therefore, reduce fix cost per unit.



Other data points for the month

Other data points for the month Malaysian February palm oil data — production and exports down, prices fairly reflect inventory levels Malaysian CPO production for the month saw the lowest February reading in the last three years at 1.09mn mT (-5% y-y), though exports fell a sharper 8.5% m-m, partly on the back of the shorter month in February and festive holidays. This brought inventories to 1.5mn tonnes, closer to 2007 levels.

We continue to flag that the CPO production recovery that many people on the Street are expecting (and pricing in) may see headwinds, in our view, and in turn, support CPO prices at current high levels. CPO inventories are likely to fall in the next few months, we believe, as production enters the lean season and demand recovers post winter. In our view, poor soft commodity production, strengthening crude oil prices and a weak US dollar continue to create the perfect storm for the sector.

Exhibit 13. Malaysian palm oil data for February 2011

Palm Oil Feb-2011 m-m (%) y-y (%) YTD (%)

Production (mT) 1,094,473 3.5% -5.4% -13.1%

Closing Stock (mT) 1,478,793 4.2% -17.3% n.m.

Exports (mT) 1,114,202 -8.5% -14.0% -15.4%

FFB Yield (mT/Ha) 1.20 4.3% -1.6% -11.7%

CPO Yield (mT/Ha) 0.24 4.3% -7.7% -16.1%

Source: Malaysian Palm Oil Board (MPOB), Nomura research

China soybean crushing margins fell in February, US margins almost at parity Chinese soybean crushing margins dropped in February-March due to a sharp jump in the price of soybeans and weak soymeal prices, despite soyoil prices also rising. We think this might act as a dampener for 1Q11F earnings at the processors under our coverage, which had faced benign crushing margins in 4Q10. However, with the aid of locked-in margins, Noble group might benefit in 1Q11, in our view. US crushing margins are almost zero at the moment, due to high prices of raw beans.

Chinese soybean imports were down 55% m-m in February, due to higher raw soybean production domestically. We believe that China will continue to have an insatiable demand for soybeans going forward and will likely drive world soy prices in the medium term.

Exhibit 14. Soybean crushing margins

(40)(20)

020406080

100120140160180

Jun

-09

Jul-0

9

Aug

-09

Sep

-09

Oct

-09

Nov

-09

Dec

-09

Jan

-10

Feb

-10

Ma

r-10

Apr

-10

May

-10

Jun

-10

Jul-1

0

Aug

-10

Sep

-10

Oct

-10

Nov

-10

Dec

-10

Jan

-11

Feb

-11

Ma

r-11

US soybean crush margin (US$/MT)

China soybean crush margin (US$/MT)

China soybean crush margin imported (US$/MT)

Note: Assuming zero processing cost; Source: Bloomberg, Nomura estimates

Crushing margins fell slightly



Palm oil industry refining margins spike Palm oil industry refining margins have spiked to US$50-60/mT in March, owing to the increased differential between refined and crude palm oil prices, in our view. Although competition is on the rise with increasing refining capacity coming on stream, we believe dominant midstream processors such as Wilmar should continue to outperform industry margins, backed by better market intelligence and superior feedstock purchasing price power.

Exhibit 15. Palm oil vs refined palm oil

(100)

100

300

500

700

900

1,100

1,300

1,500

Jan/

08

Apr

/08

Jul/0

8

Oct

/08

Jan/

09

Apr

/09

Jul/0

9

Oct

/09

Jan/

10

Apr

/10

Jul/1

0

Oct

/10

Jan/

11

(US$/MT)

(100)

(50)

0

50

100

150

200

250

Palm oil (LHS)Refined palm oil (LHS)Refining margins (RHS)

Source: Bloomberg

Exhibit 16. Palm oil refining margins

-40

-20

0

20

40

60

80

100

120

140

160

Jan-

10

Feb

-10

Mar

-10

Apr

-10

May

-10

Jun-

10

Jul-1

0

Aug

-10

Sep

-10

Oct

-10

Nov

-10

Dec

-10

Jan-

11

Feb

-11

Mar

-11

(US$/MT)

Source: Bloomberg

Exhibit 17. USDA soybean data summary

Current USDA FAS estimates

05/06 06/07 07/08 08/09 09/10F 10/11F % growth

09-10% growth

10-11

Soybean production (‘000 MT)

United States 83,507 87,001 72,859 80,749 91,417 90,610 13.2 (0.9)

Brazil 57,000 59,000 61,000 57,800 69,000 67,500 19.4 1.4

Argentina 40,500 48,800 46,200 32,000 54,500 50,500 70.3 (9.2)

Total 220,670 237,126 221,006 211,964 260,270 255,533 22.8 (0.7)

Stock usage ratio (%)

Soybeans 24.8 27.7 22.9 19.4 24.1 22.5 24.4 (6.8)

Soybean Meal 4.3 4.4 4.0 3.4 3.6 3.6 5.8 0.4

Soybean Oil 10.4 10.1 8.1 7.7 7.9 6.2 2.8 (21.4)

Palm Oil 11.8 12.8 11.0 12.6 10.0 6.8 (20.6) (32.6)

Total Vegetable Oils 9.9 9.7 9.1 10.3 8.8 6.4 (14.4) (27.4)

Soybean crushing (‘000 MT)

United States 47,324 49,198 49,081 45,232 47,669 45,042 5.4 (5.5)

China 34,500 35,970 39,518 41,035 48,830 57,800 19.0 18.4

Argentina 31,888 33,586 34,607 31,243 34,123 39,000 9.2 14.3

Total 185,188 195,609 201,816 193,808 209,512 225,212 8.1 8.1

Soybean exports (‘000 MT)

United States 25,579 30,386 31,538 34,925 40,852 43,273 17.0 5.9

Brazil 25,911 23,485 25,364 29,986 28,578 31,400 (4.7) 13.7

Argentina 7,249 9,559 13,838 5,588 13,088 12,500 134.2 (16.0)

Total 63,804 71,320 79,588 77,183 92,743 97,997 20.2 5.9

Ending stocks (‘000 MT)

Soybeans total 53,237 62,957 52,871 43,035 58,997 58,281 37.1 (1.1)

Soybean meal total 6,304 6,676 6,363 5,213 5,908 6,424 13.3 8.7

Soybean oil total 3,560 3,759 3,177 2,937 3,051 2,646 3.9 (13.3)

China statistics (‘000 MT)

Soybean imports 28,317 28,726 37,816 41,098 50,338 57,000 22.5 13.2

Soybeans crushed 34,500 35,970 39,518 41,035 48,830 57,800 19.0 18.4

Soy meal consumption 27,776 27,630 30,849 31,673 37,546 44,828 18.5 19.4

Soybean oil consumption 7,607 8,670 9,693 9,486 10,435 12,198 10.0 16.9

Palm oil consumption 4,974 5,138 5,222 5,618 5,930 6,277 5.6 5.9

Source: USDA FAS

We expect stable palm oil refining margins in near term



Major news flow for the month

Exhibit 18. Major news flow

Noble Raises US$500mn in new equity

Noble Group raised US$500mn in new equity in a share placement, with CIC investing pro-rata stake. (Source: Company filing)

Nomura comment: We believe Noble’s intention to maintain investment-grade ratings has led to this capital raising, esp after recent sugar asset acquisitions. We continue to expect strong near-term performance led by a positive macro environment.

Sime Darby sued by Oil & Gas services company for US$178mn – Sime management says claim has 'no basis whatsoever in law'

The press reported that Sime is being sued by Emirates International Energy Services (EMAS) for ~US$178mn. EMAS (a consultant to Sime Darby Engineering–SDE) has accused SDE of backing out of project tenders to help other foreign companies win the tenders, and claims that it had lost expected revenues due to SDE’s withdrawals. (Source: The National, 14 Feb)

Nomura comment: Sime’s mgmt views EMAS’ claims as ‘baseless allegations,' according to the report. Based on our understanding, we do not think it warrants any provision for contingent liability.

Olam to Boost Financial Commodity Unit With ‘Half Dozen Funds’

Olam International Ltd., among the world’s three biggest suppliers of rice and cotton, plans to expand a pilot fund that invests in commodities more than fourfold and add about six new investment vehicles. Using its market knowledge as supplier of more than 20 raw materials, the Singapore-based trader will grow its Ektimo Commodity Relative Value Fund LP to $250 million from $60 million currently, Olam Chief Executive Officer Sunny Verghese said in an interview. “Tailor-made” commodity funds will follow, he said. (Source: Bloomberg)

Sime Hasn’t Signed Agreement to Invest in Oil Palm in Cameroon

Sime Darby Bhd. hasn’t signed any agreement to invest in an oil palm plantation in Cameroon, the Malaysian company said in a statement. “The company does from time to time explore investment opportunities relating to its core businesses as part of the continuous expansion plan of the group,” Sime said. (Source: Company filing)

Ruchi Group lines up $150mn for overseas expansion

In tune with Indian corporates looking abroad to source their raw material needs abroad, Indore-based Ruchi Group plans to grow oil palm in Cambodia. The group has signed a memorandum of understanding with Phnom Penh for this and, initially, oil palm will be cultivated in 20,000 hectares, a company official said. Ruchi Group plans a total investment of $150 million in the next three years to expand globally, while in the country, it plans to spend Rs 80-100 crore for expansion. In Ethiopia, Ruchi has cultivated soyabean on a pilot basis and the result has been good. It plans commercial cultivation of soyabean on 25,000 hectares there. During the pilot project, the yield was two tonnes a hectare. (Source: BusinessLine)

KLK drops plans to issue US$300mn bonds

KUALA Lumpur Kepong Bhd (KLK) has dropped plans to issue US$300 million (RM912 million) bonds based on the company's current financial condition. KLK feels it no longer requires the planned US$300 million, five-year unsecured guaranteed exchangeable bonds with an over- allotment option to increase the issue by US$100 million (RM304 million). (Source: Bloomberg).

Source: Various media reports, company announcements, Nomura research



Recap for the last month

Round-up of Feb-March 2011 Here we summarise key developments from last month.

Last month’s commodity price performance: negative Commodity price performance was generally negative over the past month, due to concerns over the impact of events in Japan and expectations of supply recovery capping prices. Prices of oils such as CPO (-14.1% m-m), refined palm oil (-11.1% m-m), US soybean (-10.6% m-m), US wheat (-26.6% m-m) and rubber (-25.2% m-m) were lower. We witnessed a secular downtick in commodity prices across the board. The S&P GSCI Agri Index was down 12.3% last month.

Stock performance generally negative, agri inputs and midstream lead fall Over the past month, commodity stocks have generally corrected, with agri inputs and midstream stocks showing the greatest fall, on the back of commodity price corrections and concerns on the impact of the Japanese earthquake on the world economy. Downstream stocks like CP Foods, Want Want and China Minzhong have showed positive performance. Olam has lagged on concerns over export incentives and accounting reclassifications. We think that this correction has been overdone, and many of these stocks may now be trading at attractive valuations from a long-term perspective.

Review of stock performance

Exhibit 19. Top- and bottom-five performers over last month

Top five Bottom five

Name Absolute (%) Relative (%) Name Absolute (%) Relative (%)

CP Foods 16.8 11.2 China XLX (22.6) (18.3)

Want Want 13.9 14.6 Chaoda Modern (19.0) (18.3)

GFPT 10.7 5.1 Mewah (18.7) (14.5)

China Minzhong 7.7 11.9 Olam (15.9) (11.7)

Tingyi 6.3 7.0 Indofood Agri (15.6) (11.3)

Source: Bloomberg, Nomura research

Consensus downgrades occur on price correction, profit taking Overall, the Street cut earnings estimates and price targets for many agri companies, pointing to a weaker environment ahead (consensus source: Bloomberg). Wilmar also saw its consensus earnings and PT cut owing to continued weak results. Conversely, Noble’s recommendation spread was upped due to bullish 4Q10 momentum.

Commodity price performance was generally negative over the past month



Valuation

Valuation snapshot

Exhibit 20. Valuations

Name CountryNomura rating

Market cap (US$mn)

Closing price

CY10F CY11F CY12F CY10F CY11F CY12F CY10F CY11F CY12FPEG (CY11

P/E vs CY10-12F CAGR)

CY10F CY11F CY12F

UPSTREAMPalm OilSime Darby (SIME MK) Malaysia BUY 17,797 9.01 25.6 14.4 12.9 2.5 2.3 2.2 13.2 8.3 7.6 0.4 2.0 3.7 4.3IOI (IOI MK) Malaysia BUY 12,185 5.78 19.5 16.0 14.2 3.3 3.0 2.7 12.4 10.9 9.7 0.9 2.1 2.4 2.8KLK (KLK MK) Malaysia BUY 7,242 20.64 20.1 15.4 12.9 3.6 3.3 3.0 12.5 9.8 8.3 0.6 3.1 3.9 4.6Genting Plantations (GENP MK) Malaysia BUY 1,995 8.00 18.7 13.7 12.2 2.1 1.8 1.6 12.2 9.2 8.0 0.6 1.1 1.7 1.9 Boustead Holdings (BOUS MK) Malaysia N.R. 1,663 5.38 13.2 8.8 8.1 1.3 1.5 1.6 12.2 8.6 7.6 0.3 5.8 8.0 8.3 Hap Seng Plantations (HAPL MK) Malaysia N.R. 736 2.80 13.5 9.7 9.8 1.3 1.2 1.1 9.4 6.8 6.9 0.5 4.9 6.1 5.9 Kulim (KUL MK) Malaysia N.R. 1,410 3.40 18.1 12.5 12.2 1.2 1.1 1.0 6.9 5.2 5.1 0.6 1.2 1.6 1.7 IJM Plantations (IJMP MK) Malaysia N.R. 766 2.91 17.5 14.5 13.6 1.8 1.7 1.6 10.8 9.0 8.7 1.1 2.8 3.3 3.6 Malaysia palm oil average 18.3 13.1 12.0 2.1 2.0 1.9 11.2 8.5 7.7 0.6 2.9 3.8 4.1 Golden Agri (GGR SP) Singapore BUY 6,103 0.64 16.3 11.0 9.9 1.0 0.9 0.8 10.3 7.4 6.5 0.4 1.2 1.8 2.0Indofood Agri (IFAR SP) Singapore BUY 2,411 2.12 17.4 10.0 9.3 1.8 1.5 1.3 8.3 5.3 4.6 0.3 0.0 0.0 0.0First Resources (FR SP) Singapore N.R. 1,442 1.25 12.8 10.3 9.1 2.1 1.8 1.5 8.1 6.4 5.8 0.6 1.5 2.3 2.9 Kencana Agri (KAGR SP) Indonesia N.R. 361 0.40 45.0 16.6 10.5 1.6 1.7 1.4 22.4 10.5 7.3 0.2 0.6 1.9 2.9 Singapore palm oil average 22.9 11.9 9.7 1.6 1.5 1.3 12.2 7.4 6.0 0.3 0.8 1.5 1.9 Astra Agro (AALI IJ) Indonesia BUY 3,973 22,100 19.4 12.4 11.0 5.0 4.4 3.9 12.0 8.1 7.0 0.4 3.1 5.2 5.9London Sumatra (LSIP IJ) Indonesia BUY 1,733 2,225 16.9 11.2 10.5 3.5 3.0 2.6 10.4 7.4 6.8 0.4 2.4 4.0 4.8Sampoerna Agro (SGRO IJ) Indonesia N.R. 610 2,825 14.0 11.7 10.9 2.6 2.2 2.0 na na na 0.9 1.8 2.5 2.7 Bakrie Sumatera (UNSP IJ) Indonesia N.R. 542 350 16.2 9.6 7.3 0.6 0.6 0.5 na na na 0.2 1.0 1.6 2.8 Indonesia palm oil average 16.6 11.2 9.9 2.9 2.5 2.2 11.2 7.7 6.9 0.5 2.1 3.3 4.0 Univanich Palm Oil (UVAN TB) Thailand BUY 247 79.50 12.3 8.4 7.4 3.4 2.8 2.5 7.8 5.4 4.8 0.3 5.9 8.7 9.8 Palm Oil Average 18.6 12.1 10.7 2.3 2.0 1.8 11.2 7.9 7.0 0.5 2.4 3.5 3.9 - Others (rubber, sugar, etc)Khon Kaen Sugar (KSL TB) Thailand BUY 665 13.00 71.1 21.5 18.2 2.4 2.0 1.9 20.8 15.7 15.5 0.2 0.8 1.2 1.4 Lamsoon (LST TB) Thailand BUY 112 4.14 12.5 7.9 7.0 1.5 1.4 1.3 9.2 6.1 5.6 0.2 4.6 7.2 8.2 China Minzhong (MINZ SP) China N.R. 688 1.60 10.5 8.1 6.2 2.0 1.5 1.2 5.9 4.3 3.3 0.3 na 0.2 0.3 Chaoda Modern Agri (682 HK) Hong Kong REDUCE 1,756 4.10 2.9 2.5 na 0.5 0.5 na 1.9 1.5 na na 2.0 2.6 naGMG Global (GGL SP) Singapore N.R. 814 0.27 19.3 8.4 6.1 na na na 10.7 4.6 3.3 0.1 1.5 3.0 4.1 Bisi Intl (BISI IJ) Indonesia N.R. 479 1,400.00 23.0 16.0 12.1 3.5 3.0 2.5 15.6 11.9 9.1 0.4 na 0.7 1.2 UPSTREAM AVERAGE 19.8 11.8 10.5 2.2 2.0 1.8 11.1 7.7 7.1 0.4 2.4 3.2 3.7 MIDSTREAM / INTEGRATEDWilmar (WIL SP) Singapore NEUTRAL 25,238 5.02 22.1 17.2 14.9 2.1 1.9 1.8 19.1 14.3 13.4 0.8 1.4 1.5 1.7Noble (NOBL SP) Hong Kong BUY 9,670 2.04 19.0 13.7 11.9 2.4 2.1 1.9 13.3 9.7 8.9 0.5 1.4 1.6 2.2Olam (OLAM SP) Singapore BUY 4,314 2.58 20.0 16.5 13.9 2.8 2.5 2.2 13.1 11.2 10.4 0.8 1.6 1.7 2.1Mewah (MII SP) Singapore BUY 1,030 0.87 9.2 9.5 8.1 1.8 1.7 1.4 8.8 7.6 6.3 1.5 2.5 na naSingapore Average 17.6 14.2 12.2 2.3 2.1 1.8 13.5 10.7 9.7 0.9 1.7 1.6 2.0 Itochu (8001 JP) Japan BUY 15,657 799.00 6.8 5.8 5.6 1.1 1.0 0.8 10.2 8.2 7.8 0.5 2.6 3.1 3.2 Mitstui (8031 JP) Japan BUY 31,074 1,374.00 8.1 6.2 5.8 1.1 1.0 0.9 9.5 7.9 7.7 0.4 2.8 3.7 3.9 Marubeni (8002 JP) Japan NEUTRAL 12,076 562 7.8 6.6 6.3 1.3 1.2 1.0 11.5 9.9 9.4 0.6 2.0 2.3 2.5 Mitsubishi (8058 JP) Japan BUY 44,566 2,124 8.5 7.3 7.1 1.3 1.2 1.1 12.4 9.8 9.8 0.7 2.7 3.1 3.2 Sumitomo (8053 JP) Japan BUY 16,885 1,092 7.1 6.2 5.8 0.9 0.8 0.7 11.7 9.9 9.4 0.6 3.1 3.9 4.3 Japan traders average 7.7 6.4 6.1 1.1 1.0 0.9 11.0 9.1 8.8 0.6 2.6 3.2 3.4 Ruchi Soya (RSI IN) India BUY 665 100.00 14.3 11.8 9.4 1.7 1.6 1.3 7.4 6.2 5.1 0.5 0.8 1.0 1.2 KS Oils (KSO IN) India BUY 273 31.05 6.6 5.8 4.7 0.9 0.8 0.6 4.1 3.6 3.0 0.3 0.8 0.9 1.1 China Agri (606 HK) Hong Kong BUY 4,136 7.99 12.3 9.1 7.3 1.8 1.5 1.2 14.8 10.2 8.1 0.3 2.1 3.0 3.8 ADM (ADM US) United States N.R. 22,280 34.96 11.2 10.1 9.8 1.4 1.3 1.2 9.4 8.6 8.2 1.5 1.7 1.8 1.8 Bunge (BG US) United States N.R. 9,839 67.00 17.8 11.5 10.3 0.9 0.8 0.8 10.2 8.2 7.7 0.4 1.3 1.3 1.4 Petra Foods Ltd (PETRA SP) Singapore N.R. 720 1.50 18.2 14.1 12.1 2.5 2.2 2.0 13.0 10.9 9.4 0.6 2.3 2.9 3.1 Graincorp (GNC AU) Australia N.R. 1,465 7.41 14.3 10.7 11.0 1.1 1.1 1.0 7.5 5.9 6.1 0.8 3.9 4.7 4.7 Sri-Trang Agro Industry (STA TB) Thailand NEUTRAL 1,109 26.25 6.8 8.5 8.0 2.5 2.5 2.0 na na na (1.1) na na naKernel Hdg (KER PW) Ukraine N.R. 2,049 80.50 11.2 9.2 8.7 3.0 2.3 1.9 10.2 8.2 7.6 0.7 0.0 0.4 1.0 Cosan (CSAN3 BZ) Brazil N.R. 6,084 24.95 14.5 14.4 13.4 1.9 1.7 1.6 7.4 7.3 7.8 3.8 1.7 2.1 2.8 Thai Vegetable Oil (TVO TB) Thailand BUY 689 27.25 14.0 11.2 10.0 3.5 3.0 2.7 13.0 9.5 8.5 0.6 5.0 6.2 7.0 MIDSTREAM AVERAGE 12.5 10.3 9.2 1.8 1.6 1.4 10.9 8.8 8.1 0.7 2.1 2.5 2.8 DOWNSTREAM / F&BChina Foods (506 HK) Hong Kong REDUCE 1,743 4.87 28.6 20.3 15.2 2.4 2.2 2.0 15.0 11.8 9.5 0.5 1.2 1.6 2.3 Want Want (151 HK) China BUY 10,721 6.33 29.0 21.9 16.9 10.7 9.1 7.7 22.4 16.4 12.2 0.7 2.7 3.7 4.8 Tingyi (322 HK) China BUY 13,479 18.82 34.5 24.1 20.1 6.9 6.0 5.0 15.1 11.8 9.4 0.8 1.7 2.1 2.5 China Mengniu (2319 HK) Hong Kong BUY 4,478 20.10 24.2 16.4 12.5 3.1 2.7 2.3 12.5 8.7 6.9 0.4 0.9 1.4 1.8 China Yurun (1068 HK) China BUY 5,164 22.20 15.9 11.7 9.0 2.9 2.4 2.0 18.7 12.3 8.8 0.4 1.6 2.2 2.8 Indofood Sukses Makmur (INDF IJ) Indonesia N.R. 4,861 4,850.00 15.2 13.2 11.7 3.2 2.8 2.4 na na na 0.9 2.0 2.5 3.0 GFPT (GFPT TB) Thailand BUY 364 8.80 9.2 8.3 7.5 2.0 1.7 1.5 7.0 6.2 6.4 0.8 3.1 3.5 3.9 Charoen Pokphand Foods (CPF TB) Thailand NEUTRAL 6,132 24.70 12.6 11.9 11.4 3.1 2.7 2.5 12.0 11.3 11.2 2.2 4.0 5.1 5.3 DOWNSTREAM AVERAGE 21.2 16.0 13.0 4.3 3.7 3.2 14.7 11.2 9.2 0.8 1.7 2.2 2.6 AGRI-INPUTSSinofert (297 HK) Hong Kong REDUCE 3,330 3.70 22.2 14.8 11.5 1.7 1.5 1.4 21.0 11.6 9.6 0.4 0.6 1.0 1.3 United Phosphorus (UNTP IN) India BUY 1,390 136.00 10.8 9.3 8.2 1.8 1.6 1.4 6.5 5.8 5.3 0.6 2.0 3.3 4.8 China XLX (CXLX SP) China N.R. 299 0.38 9.8 10.0 8.7 1.2 1.1 1.0 7.9 6.7 5.7 1.7 2.5 2.2 2.6 AGRI INPUTS AVERAGE 14.3 11.4 9.5 1.5 1.4 1.3 11.8 8.0 6.8 0.9 1.7 2.2 2.9

P/B EV/EBITDA Div yld (%)P/E

Note: NR = Not rated, UR = Under review, Pricing as of 18 Mar; Ratings and price targets are as of the date of the most recently published report (http://www.Nomura.com), rather than the date of this document.

Source: Nomura estimates for companies under coverage, Thai covered company estimates provided by Capital Nomura Securities, Bloomberg estimates for others.



Exhibit 21. Estimates


Market cap (US$mn)

Closing price

CY10F CY11F CY12F CY10F CY11F CY12FEPS CAGR (CY10-12F)

CY10F CY11F CY12F CY10F CY11F CY12F CY10F CY11F CY12F

UPSTREAM

Palm Oil

Sime Darby (SIME MK) Malaysia BUY 17,797 9.01 10.0 12.7 11.9 40.8 77.3 11.5 40.6 14.9 16.9 17.4 8.9 9.5 9.4 14.1 16.3 17.0

IOI (IOI MK) Malaysia BUY 12,185 5.78 (3.7) 6.3 2.7 21.3 22.4 12.5 17.3 20.2 19.6 20.1 16.1 16.7 18.4 7.2 5.0 2.2

KLK (KLK MK) Malaysia BUY 7,242 20.64 11.5 10.3 11.5 54.2 30.7 18.7 24.5 18.5 22.3 24.2 14.3 17.0 18.1 6.9 5.7 3.4

Genting Plantations (GENP MK) Malaysia BUY 1,995 8.00 30.8 8.2 11.9 37.4 36.3 12.7 23.9 12.0 14.3 14.0 32.8 41.3 41.6 net cash net cash net cashBoustead Holdings (BOUS MK) Malaysia N.R. 1,663 5.38 (5.2) 31.4 11.6 (29.0) 50.2 8.8 27.9 9.9 13.1 13.5 6.6 7.7 7.3 53.3 57.8 57.6

Hap Seng Plantations (HAPL MK) Malaysia N.R. 736 2.80 (4.6) 25.7 0.9 (2.6) 40.1 (1.0) 17.7 9.5 12.9 12.0 36.1 40.6 39.8 n.cash n.cash n.cashKulim (KUL MK) Malaysia N.R. 1,410 3.40 3.8 (2.8) 6.7 (39.4) 45.2 1.8 21.6 7.6 8.5 8.2 5.5 6.6 6.0 12.9 6.3 n.cash

IJM Plantations (IJMP MK) Malaysia N.R. 766 2.91 23.8 13.4 5.7 45.2 20.5 6.6 13.3 10.2 11.3 11.3 24.9 26.4 26.8 na na naMalaysia palm oil average 8.3 13.2 7.9 16.0 40.3 8.9 23.4 12.8 14.9 15.1 18.1 20.7 20.9 18.9 18.2 20.1 Golden Agri (GGR SP) Singapore BUY 6,103 0.64 27.3 27.8 7.6 76.7 48.0 10.9 28.1 6.3 8.4 8.4 12.3 14.2 14.6 6.3 5.1 2.4Indofood Agri (IFAR SP) Singapore BUY 2,411 2.12 48.1 18.2 10.0 (1.1) 74.3 7.2 36.7 11.6 16.6 14.8 9.0 13.3 13.0 42.3 25.4 11.4

First Resources (FR SP) Singapore N.R. 1,442 1.25 (2.6) 32.6 11.5 (21.7) 24.7 12.5 18.4 17.4 18.8 17.6 34.5 33.4 32.7 9.5 n.cash n.cashKencana Agri (KAGR SP) Indonesia N.R. 361 0.40 (11.0) 26.6 25.5 (67.7) 171.4 57.9 107.0 5.0 10.8 14.9 5.4 10.9 15.3 23.6 60.0 72.8 Singapore palm oil average 15.5 26.3 13.6 (3.5) 79.6 22.1 47.6 10.1 13.7 13.9 15.3 18.0 18.9 20.4 30.2 28.9 Astra Agro (AALI IJ) Indonesia BUY 3,973 22,100 6.0 20.3 8.2 8.0 55.9 13.4 33.0 27.2 37.6 na 22.8 29.5 30.9 net cash net cash net cash

London Sumatra (LSIP IJ) Indonesia BUY 1,733 2,225 9.3 23.0 6.0 27.2 50.6 6.8 26.8 22.0 28.7 26.5 25.7 31.5 31.8 net cash net cash net cashSampoerna Agro (SGRO IJ) Indonesia N.R. 610 2,825 (8.5) 16.6 6.2 (15.7) 19.6 7.5 13.4 19.6 19.7 18.9 18.5 18.5 18.5 n.cash n.cash n.cashBakrie Sumatera (UNSP IJ) Indonesia N.R. 542 350 3.9 52.2 16.2 (67.9) 68.2 31.5 48.7 5.8 6.3 7.1 10.8 10.6 10.3 50.5 45.3 16.4 Indonesia palm oil average 2.7 28.0 9.2 (12.1) 48.6 14.8 30.5 18.7 23.1 17.5 19.4 22.5 22.9 50.5 45.3 16.4 Univanich Palm Oil (UVAN TB) Thailand BUY 247 79.50 9.1 26.0 15.9 4.4 46.7 13.3 28.9 28.6 36.5 35.5 14.0 16.3 15.9 n.cash n.cash n.cashPalm Oil Average 8.7 20.5 10.0 4.1 51.9 13.7 31.1 14.5 17.8 16.5 17.5 20.2 20.6 22.7 25.2 22.9 - Others (rubber, sugar, etc)

Khon Kaen Sugar (KSL TB) Thailand BUY 665 13.00 3.8 6.5 14.2 (63.5) 230.8 17.9 97.5 3.3 10.4 10.5 2.4 8.0 8.3 106.6 66.5 57.2 Lamsoon (LST TB) Thailand BUY 112 4.14 9.8 24.0 9.9 (24.1) 58.1 12.8 33.6 12.6 18.5 18.8 3.6 4.6 4.7 n.cash n.cash n.cashChina Minzhong (MINZ SP) China N.R. 688 1.60 15.0 33.3 33.4 (13.3) 30.4 30.3 30.4 20.6 19.2 20.2 26.4 25.6 25.0 na na naChaoda Modern Agri (682 HK) Hong Kong REDUCE 1,756 4.10 17.3 22.5 na 10.7 16.0 na na 21.3 23.2 na 52.7 53.2 na na na naGMG Global (GGL SP) Singapore N.R. 814 0.27 0.3 212.4 31.6 19.7 128.6 37.5 77.3 13.1 28.1 na 12.9 9.5 9.9 na na naBisi Intl (BISI IJ) Indonesia N.R. 479 1,400.00 20.7 26.7 24.3 144.0 43.4 32.6 37.9 15.7 19.3 21.1 19.5 22.0 23.4 n.cash n.cash n.cashUPSTREAM AVERAGE 9.3 29.3 12.9 6.2 60.4 16.5 36.6 14.5 18.3 16.7 18.1 20.3 19.2 30.3 29.3 26.7

MIDSTREAM / INTEGRATED

Wilmar (WIL SP) Singapore NEUTRAL 25,238 5.02 27.2 22.8 10.3 (31.6) 28.9 15.4 22.0 11.6 12.2 12.8 4.4 4.0 4.2 89.7 79.1 84.0

Noble (NOBL SP) Hong Kong BUY 9,670 2.04 81.8 29.7 18.8 2.9 38.9 15.4 26.6 17.5 17.2 17.4 1.1 1.0 1.0 113.7 113.3 111.6Olam (OLAM SP) Singapore BUY 4,314 2.58 17.9 11.9 9.8 18.0 21.1 19.3 20.2 21.6 18.3 19.0 3.1 2.9 3.2 220.1 231.4 227.5

Mewah (MII SP) Singapore BUY 1,030 0.87 23.3 15.7 16.7 6.9 (3.2) 17.3 6.5 24.8 19.3 18.7 2.6 2.7 2.7 21.8 26.5 23.1Singapore Average 37.5 20.0 13.9 (0.9) 21.4 16.8 18.8 18.9 16.7 17.0 2.8 2.7 2.8 111.4 112.6 111.6 Itochu (8001 JP) Japan BUY 15,657 799.00 4.2 6.7 3.8 35.2 16.4 5.2 10.7 16.8 17.5 16.2 1.6 1.8 1.8 162.5 145.0 117.5 Mitstui (8031 JP) Japan BUY 31,074 1,374.00 (0.8) 10.1 5.6 98.3 29.3 6.8 17.6 13.9 16.6 15.8 3.0 3.6 3.6 97.5 85.0 72.5 Marubeni (8002 JP) Japan NEUTRAL 12,076 562 0.9 9.6 5.3 25.3 18.6 5.6 11.9 17.1 18.6 17.2 1.4 1.6 1.6 257.5 230.0 197.5 Mitsubishi (8058 JP) Japan BUY 44,566 2,124 1.4 6.4 3.8 37.6 16.8 3.5 9.9 13.8 14.9 13.9 2.2 2.4 2.4 100.0 92.5 82.5 Sumitomo (8053 JP) Japan BUY 16,885 1,092 (3.2) 6.5 4.8 13.1 14.2 7.4 10.8 12.4 13.5 13.3 2.3 2.5 2.6 0.0 0.0 0.0 Japan traders average 0.5 7.9 4.6 41.9 19.1 5.7 12.2 14.8 16.2 15.3 2.1 2.4 2.4 123.5 110.5 94.0 Ruchi Soya (RSI IN) India BUY 665 100.00 17.6 15.1 6.4 4.1 20.7 25.2 22.9 14.9 16.4 17.5 1.3 1.5 1.8 60.8 45.7 29.2 KS Oils (KSO IN) India BUY 273 31.05 20.6 14.9 12.6 4.6 14.0 21.4 17.6 17.8 15.6 15.7 4.7 4.5 4.8 75.1 57.9 39.7 China Agri (606 HK) Hong Kong BUY 4,136 7.99 22.9 33.0 18.6 25.0 35.4 23.9 29.5 16.1 19.3 20.0 5.1 5.4 5.6 45.8 60.7 32.3 ADM (ADM US) United States N.R. 22,280 34.96 9.5 9.2 1.3 6.7 10.1 3.4 6.7 13.3 13.4 12.9 2.9 3.0 3.1 26.5 24.0 25.0 Bunge (BG US) United States N.R. 9,839 67.00 0.0 16.2 5.2 (76.7) 54.4 11.4 31.2 5.6 7.8 7.9 1.2 1.7 1.8 12.3 36.7 35.5 Petra Foods Ltd (PETRA SP) Singapore N.R. 720 1.50 (6.8) 20.0 9.7 (15.9) 29.2 16.7 22.8 15.5 16.5 17.1 2.6 2.9 3.0 148.4 168.3 171.4 Graincorp (GNC AU) Australia N.R. 1,465 7.41 7.7 27.0 (4.5) 25.5 33.4 (2.2) 14.2 8.7 9.9 9.2 4.6 5.0 5.0 15.6 14.2 10.8 Sri-Trang Agro Industry (STA TB) Thailand NEUTRAL 1,109 26.25 81.8 12.6 6.4 79.5 (19.6) 5.9 (7.8) 42.9 32.6 27.6 4.6 4.2 4.2 n.cash n.cash n.cashKernel Hdg (KER PW) Ukraine N.R. 2,049 80.50 27.9 28.4 9.1 14.9 22.0 5.6 13.5 28.5 27.0 23.3 13.6 12.7 12.8 35.0 18.5 naCosan (CSAN3 BZ) Brazil N.R. 6,084 24.95 14.3 20.8 7.0 (13.7) 0.8 6.9 3.8 12.0 10.5 10.1 4.1 3.3 3.1 97.9 72.2 45.3 Thai Vegetable Oil (TVO TB) Thailand BUY 689 27.25 0.9 22.3 9.7 (17.1) 24.9 12.4 18.5 27.0 29.6 28.3 6.4 7.1 7.3 20.1 14.6 14.0 MIDSTREAM AVERAGE 17.4 16.9 8.0 12.1 20.3 11.3 15.5 17.6 17.3 16.7 3.7 3.7 3.8 84.2 79.8 73.3 DOWNSTREAM / F&B

China Foods (506 HK) Hong Kong REDUCE 1,743 4.87 12.9 26.6 16.0 (19.0) 41.2 33.3 37.2 8.4 11.3 13.9 2.5 2.8 3.2 n.cash n.cash n.cashWant Want (151 HK) China BUY 10,721 6.33 27.9 29.4 29.6 16.7 32.1 29.7 30.9 37.1 44.8 49.9 16.9 17.3 17.5 n.cash n.cash n.cashTingyi (322 HK) China BUY 13,479 18.82 36.3 38.8 30.2 0.0 42.9 20.0 30.9 29.9 29.8 32.3 6.8 5.7 5.5 n.cash n.cash n.cashChina Mengniu (2319 HK) Hong Kong BUY 4,478 20.10 18.8 18.7 19.5 2.9 47.1 31.1 38.9 13.4 17.5 19.8 10.5 12.0 13.5 n.cash n.cash n.cashChina Yurun (1068 HK) China BUY 5,164 22.20 51.4 47.1 42.4 40.0 35.0 30.7 32.8 23.3 23.3 25.2 12.3 11.4 10.4 n.cash n.cash n.cashIndofood Sukses Makmur (INDF IJ) Indonesia N.R. 4,861 4,850.00 2.5 11.9 6.5 (5.1) 15.3 13.2 14.3 22.9 22.2 21.7 7.2 7.3 7.8 51.6 41.3 29.9 GFPT (GFPT TB) Thailand BUY 364 8.80 7.0 14.6 11.9 11.9 11.0 10.8 10.9 24.2 22.6 21.3 9.7 9.4 9.3 50.8 38.4 28.1 Charoen Pokphand Foods (CPF TB) Thailand NEUTRAL 6,132 24.70 16.2 4.3 5.1 35.8 6.5 4.4 5.4 24.5 22.8 21.4 7.2 7.3 7.3 53.3 42.2 35.2 DOWNSTREAM AVERAGE 21.6 23.9 20.1 10.4 28.9 21.7 25.2 18.4 19.4 20.5 7.3 7.3 7.5 31.1 24.4 18.6

AGRI-INPUTS

Sinofert (297 HK) Hong Kong REDUCE 3,330 3.70 28.6 27.8 15.8 (166.7) 50.0 28.6 38.9 11.5 18.1 22.7 2.7 3.4 3.6 60.4 54.6 49.1 United Phosphorus (UNTP IN) India BUY 1,390 136.00 5.8 10.1 10.5 2.9 16.1 13.3 14.7 17.9 18.0 18.0 10.1 10.9 11.2 16.6 9.8 3.4 China XLX (CXLX SP) China N.R. 299 0.38 3.6 17.5 6.8 39.0 (2.0) 14.7 6.0 12.1 12.0 12.2 6.7 5.7 6.1 54.1 85.6 114.4 AGRI INPUTS AVERAGE 12.7 18.5 11.0 (41.6) 21.4 18.9 19.9 13.8 16.0 17.6 6.5 6.6 7.0 43.7 50.0 55.6

RoE (%) Net debt to equity (%)EPS growth (%) Net margin (%)Revenue growth (%)





Exhibit 22. Performance


Market cap (US$mn)

Closing price

3m ADTV (US$mn)

EV/mature hectare

(US$000)1M 3M 6M 12M YTD

UPSTREAM

Palm Oil

Sime Darby (SIME MK) Malaysia BUY 17,797 9.01 30.6 26.8 (2.9) 3.0 10.6 5.6 2.4 IOI (IOI MK) Malaysia BUY 12,185 5.78 18.3 65.1 1.2 0.3 3.2 6.6 (0.5)KLK (KLK MK) Malaysia BUY 7,242 20.64 10.9 54.1 (5.6) (1.1) 20.7 26.2 (6.6)Genting Plantations (GENP MK) Malaysia BUY 1,995 8.00 1.7 34.4 (1.0) (8.1) 5.8 19.9 (8.8)Boustead Holdings (BOUS MK) Malaysia N.R. 1,663 5.38 1.8 40.5 (5.6) (1.8) 14.7 56.9 0.0

Hap Seng Plantations (HAPL MK) Malaysia N.R. 736 2.80 0.8 23.4 (11.9) (12.5) 19.1 18.1 (16.4)Kulim (KUL MK) Malaysia N.R. 1,410 3.40 3.4 40.0 (5.4) 7.4 69.7 86.7 9.5 IJM Plantations (IJMP MK) Malaysia N.R. 766 2.91 0.7 30.1 (2.0) (2.3) 15.0 16.4 (2.3)Malaysia palm oil average 39.3 (4.2) (1.9) 19.9 29.6 (2.9)Golden Agri (GGR SP) Singapore BUY 6,103 0.64 46.9 27.6 (7.9) (16.9) 10.3 14.3 (20.0)Indofood Agri (IFAR SP) Singapore BUY 2,411 2.12 14.0 25.5 (16.2) (21.5) (6.2) (5.4) (24.3)First Resources (FR SP) Singapore N.R. 1,442 1.25 6.8 24.7 (12.6) (14.4) 14.7 8.7 (19.9)Kencana Agri (KAGR SP) Indonesia N.R. 361 0.40 0.5 38.1 (7.0) (8.0) (1.2) 35.6 (12.1)Singapore palm oil average 29.0 (10.9) (15.2) 4.4 13.3 (19.1)Astra Agro (AALI IJ) Indonesia BUY 3,973 22,100 3.9 27.6 (0.9) (4.3) 7.0 (11.1) (15.6)London Sumatra (LSIP IJ) Indonesia BUY 1,733 2,225 4.6 28.0 2.1 0.2 12.9 20.9 (13.4)Sampoerna Agro (SGRO IJ) Indonesia N.R. 610 2,825 1.2 18.9 2.7 (7.4) 4.6 4.6 (11.0)Bakrie Sumatera (UNSP IJ) Indonesia N.R. 542 350 2.4 23.4 7.7 (9.1) (2.8) (34.0) (10.3)Indonesia palm oil average 24.5 2.9 (5.1) 5.5 (4.9) (12.6)Univanich Palm Oil (UVAN TB) Thailand BUY 247 79.50 0.1 39.2 (4.2) (9.7) 1.3 0.0 (11.7)Palm Oil Average 33.4 (4.1) (6.2) 11.7 15.9 (9.5)- Others (rubber, sugar, etc)

Khon Kaen Sugar (KSL TB) Thailand BUY 665 13.00 1.6 0.8 (2.3) 20.4 2.4 4.0 Lamsoon (LST TB) Thailand BUY 112 4.14 0.6 (11.5) (16.5) 17.6 17.6 (25.4)China Minzhong (MINZ SP) China N.R. 688 1.60 2.8 (4.8) 15.1 15.9 na 17.6 Chaoda Modern Agri (682 HK) Hong Kong REDUCE 1,756 4.10 9.2 (17.3) (32.8) (40.2) (56.3) (29.7)GMG Global (GGL SP) Singapore N.R. 814 0.27 6.0 (10.0) (10.0) 17.4 92.9 (8.5)Bisi Intl (BISI IJ) Indonesia N.R. 479 1,400.00 0.4 18.6 (26.3) (42.3) (1.4) (25.1)UPSTREAM AVERAGE (4.1) (7.8) 8.2 14.8 (9.9)

MIDSTREAM / INTEGRATED

Wilmar (WIL SP) Singapore NEUTRAL 25,238 5.02 43.0 (5.3) (16.5) (21.3) (24.2) (10.8)Noble (NOBL SP) Hong Kong BUY 9,670 2.04 47.2 (4.7) (1.4) 14.0 (7.3) (6.0)Olam (OLAM SP) Singapore BUY 4,314 2.58 24.8 (12.5) (15.7) (14.6) (1.9) (17.8)Mewah (MII SP) Singapore BUY 1,030 0.87 na (19.4) (18.7) na na (17.1)Singapore Average (10.5) (13.1) (7.3) (11.1) (13.0)Itochu (8001 JP) Japan BUY 15,657 799.00 106.0 (10.3) (2.3) 7.7 3.0 (2.8)Mitstui (8031 JP) Japan BUY 31,074 1,374.00 185.3 (10.0) 4.7 15.3 (9.2) 2.5 Marubeni (8002 JP) Japan NEUTRAL 12,076 562 106.1 (15.2) (1.4) 19.6 (0.9) (1.6)Mitsubishi (8058 JP) Japan BUY 44,566 2,124 235.5 (10.9) (3.2) 8.6 (9.3) (3.4)Sumitomo (8053 JP) Japan BUY 16,885 1,092 84.0 (15.3) (6.8) (0.2) 4.8 (5.0)Japan traders average (12.4) (1.8) 10.2 (2.3) (2.0)Ruchi Soya (RSI IN) India BUY 665 100.00 3.0 (5.4) (3.6) (25.3) 5.9 (16.9)KS Oils (KSO IN) India BUY 273 31.05 2.3 (9.7) (34.4) (37.9) (54.5) (34.6)China Agri (606 HK) Hong Kong BUY 4,136 7.99 10.3 (3.0) (6.3) (21.7) (23.5) (9.4)ADM (ADM US) United States N.R. 22,280 34.96 225.2 (5.8) 16.4 8.0 19.6 16.2 Bunge (BG US) United States N.R. 9,839 67.00 88.4 (10.0) 8.0 16.6 8.1 2.3 Petra Foods Ltd (PETRA SP) Singapore N.R. 720 1.50 0.2 (6.8) (6.8) 17.2 36.4 (10.7)Graincorp (GNC AU) Australia N.R. 1,465 7.41 10.1 (3.6) 16.1 (2.0) 21.2 12.3 Sri-Trang Agro Industry (STA TB) Thailand NEUTRAL 1,109 26.25 14.3 (6.3) (26.6) 29.3 269.7 (27.1)Kernel Hdg (KER PW) Ukraine N.R. 2,049 80.50 3.2 (3.9) 16.1 19.7 43.8 8.1 Cosan (CSAN3 BZ) Brazil N.R. 6,084 24.95 19.5 (1.3) (2.9) 1.1 6.6 (9.6)Thai Vegetable Oil (TVO TB) Thailand BUY 689 27.25 3.3 3.8 (10.7) 15.0 50.6 (16.2)MIDSTREAM AVERAGE (7.8) (4.8) 2.6 17.8 (7.4)DOWNSTREAM / F&B

China Foods (506 HK) Hong Kong REDUCE 1,743 4.87 2.7 4.1 (4.9) (17.6) (31.0) (1.8)Want Want (151 HK) China BUY 10,721 6.33 11.1 2.8 (5.0) (0.2) 9.0 (7.0)Tingyi (322 HK) China BUY 13,479 18.82 12.8 1.0 (5.6) (6.4) (8.2) (5.4)China Mengniu (2319 HK) Hong Kong BUY 4,478 20.10 14.9 (10.7) (4.3) (16.3) (16.8) (2.4)China Yurun (1068 HK) China BUY 5,164 22.20 25.8 (7.9) (18.2) (23.3) (4.7) (13.1)Indofood Sukses Makmur (INDF IJ) Indonesia N.R. 4,861 4,850.00 6.6 3.2 8.4 (4.9) 19.0 (0.5)GFPT (GFPT TB) Thailand BUY 364 8.80 1.3 7.3 10.7 3.5 71.5 8.6 Charoen Pokphand Foods (CPF TB) Thailand NEUTRAL 6,132 24.70 25.8 12.8 4.2 0.4 90.0 0.0 DOWNSTREAM AVERAGE 1.6 (1.8) (8.1) 16.1 (2.7)

AGRI-INPUTS

Sinofert (297 HK) Hong Kong REDUCE 3,330 3.70 8.2 (19.0) (7.3) (15.1) (15.9) (8.0)United Phosphorus (UNTP IN) India BUY 1,390 136.00 5.8 (6.1) (15.6) (27.4) (12.5) (21.4)China XLX (CXLX SP) China N.R. 299 0.38 0.6 (24.0) (36.7) (34.5) (33.9) (36.1)AGRI INPUTS AVERAGE (16.4) (19.8) (25.7) (20.8) (21.8)

Abs Performance (%)





Exhibit 23. Valuation: P/E vs EPS CAGR (2010-12F)

IOI

KLK

Golden Agri

Indofood

Astra Agro

London Sumatra

Univanich Palm Oil

Chaoda Modern Agri

Wilmar

Noble

Olam

Mewah

Itochu

Mitstui

Marubeni

Mitsubishi Sumitomo

Ruchi Soya

KS Oils

China Agri

Thai Vegetable Oil

China Foods

Want Want

Tingyi

China Mengniu

China Yurun

GFPT

Charoen Pokphand Foods

Sinofert

United Phosphorus

China XLX

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

0.0 5.0 10.0 15.0 20.0 25.0 30.0

P/E (CY11F)

EP

S C

AG

R (

CY

10-

12F

)

Source: Bloomberg, Nomura estimates. Estimates for Thai Vegetable Oil and Khon Kaen Sugar provided by Capital Nomura Securities



Exhibit 24. Valuation: P/BV (CY11F) vs ROE (CY11F)

China XLX

United Phosphorus Sinofert

Charoen Pokphand FoodsGFPT

China Yurun

China Mengniu

China Foods

Thai Vegetable Oil

Sri-Trang Agro Industry

China Agri

KS Oils Ruchi Soya

Sumitomo

Mitsubishi

Marubeni

Mitstui Itochu

Mewah Olam Noble

Wilmar

Chaoda Modern Agri

Lamsoon

Khon Kaen Sugar

Univanich Palm Oil

London Sumatra

Indofood

Golden Agri

KLK IOI

Sime Darby

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

45.0

50.0

0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0

P/B (CY11F)

RoE

(C

Y11

F)

Source: Bloomberg, Nomura estimates. Estimates for Khon Kaen Sugar and Thai Vegetable Oil provided by Capital Nomura Securities



Exhibit 25. Valuation: EV/EBITDA vs EBITDA CAGR (2010-12F)

Sime Darby

IOI

KLK Golden Agri

Indofood

Astra Agro

London Sumatra

Univanich Palm Oil

Khon Kaen Sugar

Lamsoon

Chaoda Modern Agri

Wilmar

Noble

Olam

Mewah

Itochu

Mitstui Marubeni

Mitsubishi

Sumitomo

Ruchi Soya KS Oils

China Agri

Sri-Trang Agro Industry

Thai Vegetable Oil

China Foods

Want Want

Tingyi

China Mengniu

China Yurun

GFPT Charoen Pokphand Foods

Sinofert

United Phosphorus

China XLX

0.0

10.0

20.0

30.0

40.0

50.0

60.0

0.0 5.0 10.0 15.0 20.0 25.0 30.0 35.0 40.0

EV/EBITDA (CY11F)

EB

ITD

A C

AG

R (

CY

10-1

2F)

Source: Bloomberg, Nomura estimates. Estimates for Khon Kaen Sugar provided by Capital Nomura Securities



P/E charts

Valuation charts

Exhibit 26. Wilmar — forward P/E

0

1

2

3

4

5

6

7

8

9

10

Jan-

07

Ap

r-07

Jul-0

7

Oct

-07

Jan-

08

Ap

r-08

Jul-0

8

Oct

-08

Jan-

09

Ap

r-09

Jul-0

9

Oct

-09

Jan-

10

Ap

r-10

Jul-1

0

Oct

-10

Jan-

11

(S$)

25x

20x

15x

10x

5x

Source: Bloomberg

Exhibit 27. Noble — forward P/E

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

Jan

-07

Ap

r-07

Jul-0

7

Oct

-07

Jan

-08

Ap

r-08

Jul-0

8

Oct

-08

Jan

-09

Ap

r-09

Jul-0

9

Oct

-09

Jan

-10

Ap

r-10

Jul-1

0

Oct

-10

Jan

-11

(S$)

25x

20x

15x

10x

5x

Source: Bloomberg

Exhibit 28. Olam — forward P/E

0.0

1.0

2.0

3.0

4.0

5.0

6.0

Feb

05

Aug

05

Feb

06

Aug

06

Feb

07

Aug

07

Feb

08

Aug

08

Feb

09

Aug

09

Feb

10

Aug

10

Feb

11

(S$)

10x15x

20x

25x

30x

Source: Bloomberg

Exhibit 29. Mewah — forward P/E

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

26-N

ov-1

0

06-D

ec-1

0

16-D

ec-1

0

26-D

ec-1

0

05-J

an-1

1

15-J

an-1

1

25-J

an-1

1

04-F

eb-1

1

14-F

eb-1

1

24-F

eb-1

1

06-M

ar-1

1

16-M

ar-1

1

(S$)

11x

9x

7x

5x

3x

Source: Bloomberg

Exhibit 30. Sime Darby — forward P/E

10

15

20

25

30

35

Nov

-07

Feb

-08

May

-08

Aug

-08

Nov

-08

Feb

-09

May

-09

Aug

-09

Nov

-09

Feb

-10

May

-10

Aug

-10

Nov

-10

Feb

-11

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

P/E (LHS) CPO (RHS)

-1SD = 15.2

(x)

+1SD = 25.0

Average = 20.1

(RM/mT

Source: Bloomberg

Exhibit 31. IOI — forward P/E

0

5

10

15

20

25

30

35

Jan-

04

Jan-

05

Jan-

06

Jan-

07

Jan-

08

Jan-

09

Jan-

10

Jan-

11

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500PER (LHS)

CPO (RHS)

+1SD=20

Average=15.4

-1SD=10.8

(RM/Mt)

Source: Bloomberg



Exhibit 32. KLK — forward P/E

5

10

15

20

25

30

Jan-

04

Jul-0

4

Jan-

05

Jul-0

5

Jan-

06

Jul-0

6

Jan-

07

Jul-0

7

Jan-

08

Jul-0

8

Jan-

09

Jul-0

9

Jan-

10

Jul-1

0

Jan-

11

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500PE (LHS) CPO (RHS) (RM/mT)

+1SD=17.3

Average=13.9

Source: Bloomberg

Exhibit 33. Genting Plantations — forward P/E

0

5

10

15

20

25

Jan

04

Jan

05

Jan

06

Jan

07

Jan

08

Jan

09

Jan

10

Jan

11

05001,0001,5002,0002,5003,0003,5004,0004,500

P/E CPO (RM/mT) -RHS

-1SD = 8.5

(x)

+1SD = 15.1

Average = 11.8

Source: Bloomberg

Exhibit 34. Golden Agri — forward P/E

0.0

5.0

10.0

15.0

20.0

25.0

30.0

Dec

05

Jun

06

Dec

06

Jun

07

Dec

07

Jun

08

Dec

08

Jun

09

Dec

09

Jun

10

Dec

10

0

1,000

2,000

3,000

4,000

5,000

P/E CPO (RM/mT) - RHS

-1SD = 7.3

(x)

+1SD = 17.0

Average = 12.1

Source: Bloomberg

Exhibit 35. Indofood Agri — forward P/E

0

5

10

15

20

25

Mar

-07

Sep

-07

Mar

-08

Sep

-08

Mar

-09

Sep

-09

Mar

-10

Sep

-10

Mar

-11

1,500

2,000

2,500

3,000

3,500

4,000

4,500

PER (LHS) CPO (RHS) (RM/mT)

+1SD = 16.2

Average = 11.9

-1SD = 7.4

(x

Source: Bloomberg

Exhibit 36. Lonsum — forward P/E

0.0

5.0

10.0

15.0

20.0

25.0

Jan

05

Jul 0

5

Jan

06

Jul 0

6

Jan

07

Jul 0

7

Jan

08

Jul 0

8

Jan

09

Jul 0

9

Jan

10

Jul 1

0

Jan

11

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

P/E CPO (RM/mT) - RHS

-1SD = 8.6

(x)

+1SD = 15.4

Mean = 12.0

Source: Bloomberg

Exhibit 37. Astra Agro — forward P/E

0

5

10

15

20

25

Jan

04

Jan

05

Jan

06

Jan

07

Jan

08

Jan

09

Jan

10

Jan

11

05001,0001,5002,0002,5003,0003,5004,0004,500

P/E CPO (RM/mT) -RHS

-1SD = 6.6

(x)

+1SD = 16.2

Average = 11.4

Source: Bloomberg



What went up, what went down

The ups and downs In this section, we track valuation changes and price performances of the regional agri-players and key soft commodities. We also keep tabs on consensus expectations on earnings and price performance for the companies under our coverage.

Last month’s commodity price performance: negative Commodity price performance was generally negative over the past month, due to concerns on the Japanese earthquake and tsunami impact and expectations of supply recovery capping prices. Prices of oils such as CPO (-14.1% m-m), refined palm oil (-11.1% m-m), US soybean (-10.6% m-m), US wheat (-26.6% m-m) and rubber (-25.2% m-m) were lower. We witnessed a secular downtick in commodity prices across the board. The S&P GSCI Agri Index was down 12.3% last month.

Exhibit 38. Commodity price performance

Commodity name Current price Unit % chg m-m % chg ytd % chg y-y Description

Vegetable Oils

Malaysia Crude Palm Oil 3,369.5 MYR/metric tonne (14.1) (10.3) 28.2 Malaysian Palm Oil Board Crude Palm Oil fob Spot Price

Refined Palm Oil 1,162.5 USD/Metric Tonne (11.1) (7.0) 44.0 RBD Palm Oil (Fully Refined) FOB Malaysia Spot Price

US Soybean Oil 50.01 USd/pound (9.4) (6.7) 40.9 USDA Crude Soybean Oil Spot Price/Illinois

China Soybean Oil 9,950 CNY/MT (3.9) 1.5 36.3 China No. 4 Soybean Oil Spot Price Dalian

China Rapeseed Oil 10,100 CNY/MT (3.8) (1.0) 20.2 China No. 4 Grade Rapeseed Oil Spot Price Jiangsu

Canola Oil 58.63 USD(Cent)/pound (6.8) (7.2) 31.0 Fully Refined Canola Oil Delivered New York Spot Price USD

Sunflower Oil 11,200 UAH/metric tonne (0.9) 6.7 71.0 UkrAgroConsult Domestic Sunflower oil Price

Average (7.1) (3.4) 38.8

Oilseeds & Protein Meals

US Soybean 12.44 USD/bushel (56 lb) (10.6) (7.9) 36.1 USDA No. 1 Yellow Soybeans Spot Price/FOB Chicago Illinois

US Soy Meal 329.30 USD/short ton (9.7) (10.6) 22.4 USDA 48% Soybean Meal Rail Delivery Spot Price/Illinois

China Soybean 4,260 CNY/MT 0.0 5.2 17.4 China No. 2 Yellow Soybean Spot Price Dalian

China Soy Meal 3,120 CNY/MT (9.3) (6.6) 3.3 China Soybean Meal Spot Price Dalian

Average (7.4) (5.0) 19.8

Grains

US Rice 26.25 USD/cwt (7.1) (11.0) 6.1 USDA No. 2 Long Grain Rice Spot Price/Arkansas

Thailand Rice 511.0 USD per M/T (5.7) (5.0) 2.8 Thailand White Rice 5%

US Wheat 6.13 USD/bushel (60lb) (26.6) (16.0) 41.9 USDA No. 2 Soft Red Winter Wheat Spot Price/Chicago

Corn 6.04 USD/bushel (56 lb) (10.9) 3.1 82.2 USDA Illinois North Central No.2 Yellow Corn Spot Price

Average (12.6) (7.2) 33.3

Breakfast Commodities

Sugar 31.29 USd/pound (9.1) (13.4) 48.5 CSCE No. 11 Sugar Spot Price/Global

Cocoa 270.39 No unit (0.1) 11.0 16.7 MLCX - 01 Cocoa Spot

Tea 275 INR per kg (14.1) (26.7) (19.1) NNS Tea Darjelling price INR/kg Kolkata/India

Average (7.7) (9.7) 15.4

Others

WTI Crude Oil 97.18 USD/barrel 13.6 6.3 21.8 Bloomberg West Texas Intermediate (WTI) Cushing Crude Oil

Coal 130.85 USD/metric tonne 8.4 3.8 39.1 McCloskey Newcastle 6700 kc GAD fob Steam Coal Spot

Almonds 3.17 Eur/Kg 0.6 0.6 na Unshelled Almonds Producer Price Eur/Kg

Brazil Ethanol Fuel 0.83 USD/liter 20.6 30.4 77.6 ESALQ Brazil Ethanol Fuel Weekly Spot Price/Sao Paulo USD

Cotton 189.71 USd/pound 1.8 35.7 141.9 USDA Middling Grade Cotton Average Spot Price

Rubber 1,278.75 MYr/kilogram (25.2) (14.4) 23.2 Malaysian Rubber Board Standard Rubber No. 20 FOB

Average 3.3 10.4 60.7

Fertiliser

Urea 480 USD/MT 2.1 20.0 23.1 ICIS Pricing Ammonia Fertilizer fob Yuzhnyy Spot Price

Potash 375 USD/MT 0.0 17.2 17.2 ICIS Pricing Standard Grade MOP Potash Vancouver Spot

Phosphate 620 USD/MT 3.3 5.1 30.5 ICIS Pricing Phosphate DAP Bulk US Gulf fob Spot Price

Average 1.8 14.1 23.6

Commodity/Freight Indices

CRB Index 338.1 0.1 1.6 24.9

RBS Soft Commodity Index 145.0 (12.5) (7.8) 32.8

Baltic Dry Index 1,548.0 31.4 (12.7) (56.7)

CRB Food Index 490.9 (0.8) 11.5 39.4

S&P GSCI Agri Index 490.3 (12.3) (4.0) 59.4

Merrill Lynch Commodity Index 428.0 (1.8) (1.5) 70.6

Average 0.7 (2.1) 28.4

Overall Average (4.1) (0.7) 32.4

Note: Pricing as on 15 March 2011

Source: Bloomberg

Commodity price performance was generally negative over the past month



Stock performance generally negative, agri inputs and midstream lead fall Over the past month, commodity stocks have generally corrected, with agri inputs and midstream stocks showing the greatest decline on the back of commodity price corrections and concerns over the impact of events in Japan on the world economy. Downstream stocks like CP Foods, Want Want and China Minzhong have showed positive performance. Olam has lagged on concerns over accounting reclassifications, and export incentives. We think that this correction has been overdone, and many of these stocks may now be trading at attractive valuations from a long-term perspective.

Exhibit 39. 30-day absolute performance: Up to 15 March 2011

(25)

(20)

(15)

(10)

(5)

0

5

10

15

20

Chi

na X

LX

Cha

oda

Mod

ern

Agr

i

Mew

ah

Ola

m

Indo

food

Agr

i

Sin

ofer

t

Lam

soon

Agr

i-inp

uts

Gol

den

Ag

ri

Nob

le

Mid

stre

am /

Inte

grat

edC

hina

Men

gniu

KLK

Uni

ted

Pho

spho

rus

Tha

iV

eget

able

Oil

Wilm

ar

Ups

trea

m

Sim

e D

arby

KS

Oils

Gen

ting

Pla

ntat

ions

Uni

vani

chP

alm

Oil

Ruc

hi S

oya

Ast

ra A

gro

Chi

na A

gri

IOI

Kho

n K

aen

Sug

arC

hina

Yur

un

Lond

onS

uam

tra

Chi

naF

oods

Tin

gyi

Dow

nstr

eam

Chi

naM

inzh

ong

GF

PT

Wan

t W

ant

Cha

roen

Pok

phan

dF

oods

(%)

Source: Bloomberg

Exhibit 40. 30-day relative performance: Up to 15 March 2011

(20)

(15)

(10)

(5)

0

5

10

15

20

Cha

oda

Mo

dern

Ag

ri

Ch

ina

XLX

Lam

soo

n

Me

wa

h

Sin

ofer

t

Ola

m

Indo

food

Agr

iT

hai

Veg

eta

ble

Oil

Ag

ri-in

puts

Uni

vani

chP

alm

Oil

Uni

ted

Pho

sph

orus

Gol

den

Agr

i

KS

Oils

Ch

ina

Men

gniu

Ast

ra A

gro

KLK

Kho

n K

aen

Sug

ar

Ru

chi S

oya

Nob

le

Mid

stre

am /

Inte

grat

ed

Sim

e D

arb

y

Ge

ntin

gP

lant

atio

ns

Up

stre

am

Lon

don

Sua

mtr

a

Wilm

ar

Chi

na

Agr

i

IOI

Chi

na Y

urun

GF

PT

Chi

naF

ood

s

Tin

gyi

Do

wns

trea

mC

haro

enP

okph

and

Foo

ds

Chi

naM

inzh

ong

Wan

t W

ant

(%)

Source: Bloomberg

YTD 2011 recap: generally negative returns by agri stocks A recap of 2011 YTD stock performance shows that agri commodity stocks have in general underperformed the markets, with the exception of China Minzhong and GFPT.

Weak performance by commodity stocks



Exhibit 41. YTD 2011 absolute performance

(40)

(30)

(20)

(10)

0

10

20

30

Chi

na X

LX

KS

Oils

C

hao

daM

ode

rn A

gri

Un

ited

Ph

osph

orus

Lam

soo

n

Indo

food

Agr

i

Gol

den

Ag

ri

Ola

m

Ru

chi S

oya

T

hai

Ve

geta

ble

Oil

Ast

ra A

gro

Agr

i-in

puts

Me

wa

h

Lon

don

Sua

mtr

aU

niv

ani

chP

alm

Oil

Mid

stre

am /

Inte

grat

ed

Wilm

ar

Gen

ting

Pla

nta

tions

Ch

ina

Ag

ri

Nob

le

Ups

trea

m

KLK

Sin

ofe

rt

Chi

na Y

urun

IOI

Ch

ina

Fo

ods

Tin

gyi

Dow

nst

ream

Chi

naM

eng

niu

C

har

oen

Po

kpha

ndF

ood

s W

ant

Wa

nt

Kh

on K

aen

Sug

ar

Sim

e D

arb

y

GF

PT

Chi

naM

inzh

ong

(%)

Source: Bloomberg

Exhibit 42. YTD 2011 relative performance

(40)

(30)

(20)

(10)

0

10

20

30

40

Ch

aod

aM

oder

n A

gri

Chi

na

XLX

Lam

soon

KS

Oils

Indo

food

Agr

iU

nite

dP

hosp

horu

sT

hai

Ve

geta

ble

Oil

Go

lden

Agr

i

Ola

m

Ast

ra A

gro

Uni

vani

chP

alm

Oil

Agr

i-inp

uts

Chi

na A

gri

Lon

don

Sua

mtr

a

Ruc

hi S

oya

Gen

ting

Pla

nta

tions

Mew

ah

Mid

stre

am /

Inte

grat

ed

Sin

ofe

rt

KLK

Ch

ina

Yu

run

Wilm

ar

No

ble

Chi

na

Foo

ds

Ups

trea

m

Tin

gyi

IOI

Chi

naM

eng

niu

Wan

t W

ant

C

haro

enP

okp

han

dF

ood

s D

owns

tre

am

Kho

n K

aen

Su

gar

Sim

e D

arby

GF

PT

Chi

naM

inzh

ong

(%)

Source: Bloomberg

Consensus downgrades occur due to price correction, profit taking Overall, the Street cut its earnings estimates and price targets for most companies, pointing to a weaker environment ahead (consensus source: Bloomberg). Wilmar also saw its consensus earnings and PT cut owing to continued weak results. Conversely, Noble’s recommendation spread was upped due to bullish 4Q10 momentum.

Exhibit 43. % change in CY11F consensus EPS

(7)

(6)

(5)

(4)

(3)

(2)

(1)

0

1

2

Chi

na F

oods

Sin

ofer

t

Chi

na A

gri

Chi

na X

LX

Nob

le

Chi

na M

engn

iu

Ast

ra A

gro

Cha

oda

Mod

ern

Agr

i

Kho

n K

aen

Sug

ar

Gen

ting

Pla

ntat

ions IOI

Uni

ted

Pho

spho

rus

GF

PT

Indo

food

Agr

i

Gol

den

Agr

i

Uni

vani

ch P

alm

Oil

Lam

soon

Wilm

ar

Ola

m

Mew

ah

Ruc

hi S

oya

KS

Oils

Tha

i Veg

etab

le O

il

Wan

t Wan

t

Tin

gyi

Cha

roen

Pok

phan

d F

oods

Lond

on S

uam

tra

Chi

na Y

urun

Chi

na M

inzh

ong

KLK

Sim

e D

arby

Source: Bloomberg



Exhibit 44. % change in consensus price target

(60)

(50)

(40)

(30)

(20)

(10)

0

10

20

Cha

oda

Mod

ern

Ag

ri

KS

Oils

Lond

on S

uam

tra

Chi

na X

LX

Wilm

ar

Lam

soo

n

Wan

t Wan

t

Sin

ofer

t

Chi

na

Foo

ds

Mew

ah

Ast

ra A

gro

Chi

na A

gri

IOI

Chi

na

Yu

run

Indo

food

Agr

i

Ch

aroe

n P

okph

and

Fo

ods

Tin

gyi

Ch

ina

Men

gniu

Gol

den

Agr

i

GF

PT

Ge

ntin

g P

lant

atio

ns

Kh

on K

aen

Sug

ar

Sim

e D

arby

Ru

chi S

oya

Uni

ted

Pho

sph

orus

Nob

le

Uni

vani

ch P

alm

Oil

KLK

Ola

m

Tha

i Veg

etab

le O

il

Ch

ina

Min

zhon

g

Source: Bloomberg

Exhibit 45. Consensus recommendation momentum

(7)

(5)

(3)

(1)

1

3

5

Wilm

ar

IOI

Wan

t Wan

t

KLK

Sim

e D

arby

Uni

vani

ch P

alm

Oil

Lam

soon

KS

Oils

Chi

na M

engn

iu

Chi

na X

LX

Gol

den

Agr

i

Chi

na M

inzh

ong

Cha

oda

Mod

ern

Agr

i

Ruc

hi S

oya

Chi

na A

gri

Tha

i Veg

etab

le O

il

Tin

gyi

Sin

ofer

t

Uni

ted

Pho

spho

rus

Ast

ra A

gro

Kho

n K

aen

Sug

ar

Nob

le

Chi

na F

oods

Gen

ting

Pla

ntat

ions

Indo

food

Agr

i

Lond

on S

uam

tra

Ola

m

Mew

ah

GF

PT

Cha

roen

Pok

phan

d F

oods

Chi

na Y

urun

Note: Recommendation momentum is defined = (Increase in BUYs)-(Increase in SELLs)

Source: Bloomberg



Keeping track of important news flow

Ears to the ground The following sections are designed to help investors keep abreast of important newsflow and events surrounding the key commodities and stocks under our coverage. We also present highlights of recent earnings announcements and our published research on these stocks.

Important events/news flow summary

Exhibit 46. Important events/news flow summary (Feb-March)

Sector News / event Details Source

Soybean World Soybean-Inventory Estimate Raised on Brazil Crop Outlook

World soybean inventories before the next Northern Hemisphere harvests will be larger than forecast in February because of increased production from Brazil, the U.S. Department of Agriculture said. Stockpiles will total 58.33 million metric tons at the end of the marketing year on Sept. 30, compared with 58.21 million forecast a month ago, the USDA said today in a report. Brazil will harvest 70 million tons, the department said, more than the 68.5 million projected in February.

Bloomberg

Soy, Grains Called Lower as Japan Disaster Reduces Demand

Soybean futures may trade lower on the Chicago Board of Trade on concern that the nuclear disaster in Japan will reduce demand.

Bloomberg

China 2011 Soybean Imports May Rise to 60 Million Tons

China’s soybean imports may rise to more than 60 million tons this year, the Guangzhou Daily reported today, citing Chen Xiwen, deputy head of the Central Rural Work Leading Group. Soybean prices may rise on China’s demand and U.S. farmers’ willingness to grow more corn than soybeans, the report said, citing Chen. U.S. farmers prefer planting corn because of increasing corn prices driven by ethanol fuel demand, Chen said, according to the report.

Bloomberg

Soybean Traders Increase Bets on Price Rise, CFTC Data Shows

Hedge-fund managers and other large speculators increased their net-long position in Chicago soybean futures in the week ended March 8, according to U.S. Commodity Futures Trading Commission data. Speculative long positions outnumbered short positions by 178,533 contracts on the Chicago Board of Trade, the Washington-based commission said in its Commitments of Traders report. Net-long positions rose by 13,693 contracts, or 8 percent, from a week earlier.

Bloomberg

China's soybean imports down 21% in Feb

China's General Administration of Customs announced that the country's soybean imports hit 2.32 million metric tons in February, down 21% compared with the corresponding period of last year, sources reported. The imports in February were 54.86% less than in January, according to the administration.

Bloomberg

Palm oil MPOB: Only 10 biodiesel plants operating

The government has issued 60 biodiesel manufacturing licences as at end-February 2011 but only less than one fifth has started production. Biodiesel (B5) in Malaysia is a blend of 5 per cent palm methyl ester and regular diesel. According to the Malaysian Palm Oil Board (MPOB) data, only 10 biodiesel plants were operating last year, despite some 29 biodiesel plants having been established with total production capacity of 3.37 million tonnes per year. "These plants were operating on and off, with three or four plants operating each month, due to the lack of demand for biodiesel exports and high palm oil prices in the second half of 2010," MPOB director general Datuk Dr Choo Yuen May said.

Bloomberg

Indonesia May Increase Palm-Oil Output, Exports, USDA Unit Says

Indonesia may produce 25.4 million metric tons of palm oil in the marketing year that begins Oct. 1, up from an estimated 23.6 million in the current year, a unit of the U.S. Department of Agriculture said in a report posted today on its website. Exports may rise to 19.35 million tons from an estimated 17.85 million this year, the USDA’s Foreign Agricultural Service said.

Bloomberg

Nigeria Plans to Revive Palm Oil Production, Compass Reports

Nigeria plans to revive palm oil production, from which it could earn over $50 million a year from exports, Compass newspaper reported, citing Peter Onwualu, director general of Materials Research and Development Council. Palm oil production in Nigeria is currently held back by the age of trees, predominance of wild palm grooves, erratic rainfall and poor education of farmers, the western Ogun state- based newspaper said.

Bloomberg

Call to speed up approval of foreign workers for harvest season

The Federal and Sabah state governments have been urged to quickly approve new applications of foreign workers to harvest fresh fruit bunches in the months ahead. This is to enable the industry to achieve the 17.6 million tonnes crude palm oil output target this year.

Bloomberg

Malaysia Palm Oil Output to be 17.59 Million Tons, Dompok Says

Palm oil output in Malaysia, the world’s second-biggest producer, will expand to 17.59 million metric tons this year, from 16.99 million last year, as yields improve, Malaysia Plantation & Commodities Minister Bernard Dompok said at a conference in Kuala Lumpur today.

Bloomberg

Rubber China Car Sales Growth at Slowest Pace in More Than Two Years

After the government ended vehicle-buying incentives and a week-long national holiday stymied demand, wholesales of passenger cars including multipurpose and sport-utility vehicles increased 2.6 percent from a year earlier to 967,200 units last month, the China Association of Automobile Manufacturers said today in a statement. This is the slowest pace of growth since January 2009, when car purchases fell 7.8 percent.

www.bloomberg.com

China Association To Seek To Stabilize Rubber Prices

The International Rubber Consortium (IRCo), which represents the Southeast Asian countries that produce two thirds of the world's natural rubber, will work with the China Rubber Industry Association (CRIA) to counter rubber price volatility. The CRIA made the request to work together with IRCo so as to reduce price volatility. They will be coming up with a joint work plan in the future. They said they were suffering due to record high rubber prices earlier. China is the world's largest natural rubber consumer and importer. IRCo is comprised of Thailand, Indonesia and Malaysia, which together account for 70% of global natural rubber output.

The Wall Street Journal

IRSG forecast world rubber demand to reach 26.1mn tones in 2011F and 27.5mn tones in 2012F

International Rubber Study Group (IRSG) reported on 11 March 2011 that global rubber demand is forecast to reach 26.1 million tons in 2011 and 27.5 million tons in 2012. Global SR demand is expected to grow by 8.6% in 2011 and 6.4% in 2012, while global NR demand is forecast to rise by 4.6% in 2011 and 3.8% in 2012. Partly due to the impact of higher prices, and assuming normal growing conditions, global NR production is forecast to rise by 6.2% in 2011 and 6.5% in 2012.

www. rubberstudy.com

Thailand’s Deputy Prime Minister has ordered a

Thailand’s Deputy Prime Minister and chairman of the National Rubber Policy Committee Suthep Thaugsuban said he has ordered a temporary halt to rubber exports until the price

Bangkok Post



Sector News / event Details Source

temporary halt to rubber exports

improves. Mr Suthep said on 16 March that the current decline in the rubber price was not in line with its trading nature. The price of rubber is down from a record high of THB187/Kg to THB95 due to weak demand from China, a major rubber importer, and the massive quake and deadly tsunamiin Japan. He will call a meeting of agencies to discuss the matter. Asked about rubber farmers' call for the government to provide a price guarantee of THB100/Kg, Mr Suthep said when the government first stepped in to settle problem of low rubber prices the targeted price was set at THB80. The deputy premier believed the rubber price would gradually improve. Rubber traders had now received additional loans from commercial banks and could start to buy rubber from farmers.

Sugar High prices boost Brazilian sugar production despite inter-crop season

Sugar production in January 2011 amounted to 988,400 tons, up from 723,600 tons produced in January 2010. This brought cumulative sugar production in 2010/11 (May/Jan) to 36.269mn tons, up from 32.091mn produced in the same period in 2009/10. Total sugar production in 2009/10 (May/Apr) was 35.365mn tons, up from 34.755mn produced in 2008/09.

www.agra-net.com

India's sugar production up 19% in October/February, OGL exports seen at up to 2 mln tonnes

India produced 16.3mn tons of sugar, white value, in the first five months of 2010/11 (Oct/Sep), up 19% from 13.7mn in Oct/Feb last year, said Narendra Murkumbi, president of the Indian Sugar Mills Association (ISMA) and managing director of Shree Renuka Sugars. He added that total output this season may top 25mn tons, while demand was likely to be around 22mn tons, leaving a surplus of 3mn. He therefore concluded that India can export up to 2mn tons more sugar this season under the open general licence (OGL) scheme, which would be on top of a little more than 1mn tons already allowed by the government until the end of March as re-export obligation against previous raw sugar imports.

www.agra-net.com

USDA cuts 2010/11 sugar output by 0.7%

The US Department of Agriculture cut its sugar production forecast for the current 2010/11 (Oct/Sep) marketing year to 7.950mn short tons, raw value, in its March WASDE report from 8.010mn in February. The cut by 60,000 tons is exclusively due to lower cane sugar production in Florida. It also reduced its forecast for imports from Mexico by 110,000 tons to 1.349mn, due to lower-than-expected Mexican sugar production. Given that total consumption was left unchanged, the closely monitored stocks-to-use ratio in the US sugar market dropped to 10.4% as of the end of the 2010/11 season, from 11.8% in last month's data and compared with 13.3% in 2009/10.

www.agra-net.com

Russia's beet sowing to start two weeks later due to bad weather

Russian farmers will start sowing this year's sugar beet crop around two weeks later than normal because of inclement weather in the south of the country, which will delay the harvest to mid-August, the Russian Sugar Producers Union said. It added that sowing in the key Krasnodar region will probably start around April 10, two weeks later than usual. The union expects this year's area under beet cultivation to rise 1.4% to 1.176mn ha, which would enable farmers to harvest 34mn tons of beet and produce up to 4.2mn tons of sugar, white value.

www.agra-net.com

Rice Thai rice insurance to farmers Thai government will offer crop insurance to rice farmers for their first crop of the 2011/12 season due in August, with THB 8 bn (US$262.2mn) or THB 140 a rai (6.25 rais = 1 hactare) in premiums projected. All rice farmers are encouraged to join the scheme, as the effects of natural disasters will likely grow more intense due to global warming. Based on a projection of coverage for 57 million rai of rice fields, premiums would be THB140 a rai with damage compensation set at THB2,006 a rai. However, This is still lower than the production cost of THB2,800 a rai.

Bangkok Post

Rice May Extend Decline, Limiting Food Costs, UN's Calpe Says

Global stockpiles will increase 4.6 percent to 137 million metric tons by the end of this season, the highest level since 2002. While the USDA lowered its estimate for the global harvest, it also pared its outlook for demand and raised the forecast for inventories in China and India, the top producers. Year-ending stockpiles in Thailand may be 5.2 million tons in 2011, equal to about 17 percent of world import demand, according to FAO data. The 9-magnitude earthquake in Japan, the strongest on record, and the seven-meter tsunami may not have a major impact on the global rice market. The country is sitting on huge stocks to cover the needs and no supply shortage is anticipated.

www.bloomberg.com

Source: Various sources, Nomura research, Capital Nomura Securities



Company news flow summary

Exhibit 47. Company news flow summary

Sector News / Event Nomura comment Source

Wilmar Wilmar International Begins Offer for Stock in Ghana’s Benso Oil

Wilmar International Ltd., the world’s biggest palm-oil processor, said it commenced an offer to buy all 34.8 million shares Benso Oil Palm Plantation Ltd. of Ghana at 83 pesewas per share. The offer, which is on behalf of its wholly-owned subsidiary Wilmar Africa Ltd., ends on March 22, the Singapore- based company said in a statement published in the Daily Graphic newspaper today.

Bloomberg

Olam Olam to Boost Financial Commodity Unit With ‘Half Dozen Funds’

Olam International Ltd., among the world’s three biggest suppliers of rice and cotton, plans to expand a pilot fund that invests in commodities more than fourfold and add about six new investment vehicles. Using its markets knowledge as supplier of more than 20 raw materials, the Singapore-based trader will grow its Ektimo Commodity Relative Value Fund LP to $250 million from $60 million currently, Olam Chief Executive Officer Sunny Verghese said in an interview. “Tailor-made” commodity funds will follow, he said.

Bloomberg

Noble Raised US$500mn in new equity

Noble Group raised US$500mn in new equity in a share placement, with CIC investing pro-rata stake.

Bloomberg

Sime Darby Sime Hasn’t Signed Agreement to Invest in Oil Palm in Cameroon

Sime Darby Bhd. hasn’t signed any agreement to invest in an oil palm plantation in Cameroon, the Malaysian company said in a statement. “The company does from time to time explore investment opportunities relating to its core businesses as part of the continuous expansion plan of the group,” Sime said.

Press release

KLK KLK drops plans to issue US$200m bonds

KUALA Lumpur Kepong Bhd (KLK) has dropped plans to issue US$300 million (RM912 million) bonds based on the company's current financial condition. KLK feels it no longer requires the planned US$300 million, five-year unsecured guaranteed exchangeable bonds with an over- allotment option to increase the issue by US$100 million (RM304 million).

Bloomberg

Ruchi Soya Ruchi Group lines up $150mn for overseas expansion

In tune with Indian corporates looking abroad to source their raw material needs abroad, Indore-based Ruchi Group plans to grow oil palm in Cambodia. The group has signed a memorandum of understanding with Phnom Penh for this and, initially, oil palm will be cultivated in 20,000 hectares, a company official said. Ruchi Group plans a total investment of $150 million in the next three years to expand globally, while in the country, it plans to spend Rs 80-100 crore for expansion. In Ethiopia, Ruchi has cultivated soyabean on a pilot basis and the result has been good. It plans commercial cultivation of soyabean on 25,000 hectares there. During the pilot project, the yield was two tonnes a hectare.

BusinessLine

Thailand’s agro and food companies

Impact from Japan earthquake Positive for CPF, GFPT and TUF: Survivors of Japan's devastating earthquake and tsunami began to hoard ready-to-eat food. In the short term, this should be positive for CPF (NEUTRAL), GFPT (BUY) and TUF (BUY) as their exports to Japan are expected to account for 5%, 17% and 12% of their total sales for FY2011F, respectively. Negative for STA: If the destructive earthquake and tsunami were to severely affect Japan’s economic growth, STA (NEUTRAL) would be hit hardest, in our view, among agro-and-food companies under CNS as its customers in the automobile industry in Japan that contributes to around 10% of its total sales in FY2011F may delay their orders.

Capital Nomura Securities

Source: Various sources, Nomura research, Capital Nomura Securities



Highlights of our published research

Exhibit 48. Recently published research

Date Title Link

10-Mar MPOB Feb 2011 data http://www.nomura.com/research/getpub.aspx?pid=423903

9-Mar Palm Oil Conference 2011 http://www.nomura.com/research/getpub.aspx?pid=423559

8-Mar Genting Plantations: Initiate with BUY: Best of both worlds http://www.nomura.com/research/getpub.aspx?pid=423434

4-Mar Noble: Management meet quick feed http://www.nomura.com/research/getpub.aspx?pid=422947

4-Mar Glencore results readacross http://www.nomura.com/research/getpub.aspx?pid=422844

3-Mar Sime Darby: Plantation estate visit http://www.nomura.com/research/getpub.aspx?pid=422758

3-Mar Noble: The investment grade debate http://www.nomura.com/research/getpub.aspx?pid=422703

1-Mar Noble: The earnings home run http://www.nomura.com/research/getpub.aspx?pid=422078

1-Mar Noble: Earnings hit a home run http://www.nomura.com/research/getpub.aspx?pid=422063

28-Feb Golden Agri: 4Q10 results http://www.nomura.com/research/getpub.aspx?pid=421988

25-Feb IFAR: 4Q10 results http://www.nomura.com/research/getpub.aspx?pid=421568

25-Feb Mewah: 4Q10 results http://www.nomura.com/research/getpub.aspx?pid=421457

24-Feb Lonsum: 4Q10 results http://www.nomura.com/research/getpub.aspx?pid=421426

24-Feb Astra Agro: 4Q10 results http://www.nomura.com/research/getpub.aspx?pid=421425

24-Feb Sime Darby: 2Q11 results http://www.nomura.com/research/getpub.aspx?pid=421424

24-Feb Wilmar: 4Q120 results http://www.nomura.com/research/getpub.aspx?pid=421167

24-Feb KLK: 1Q11 results http://www.nomura.com/research/getpub.aspx?pid=421164

23-Feb Olam: Olam’s defense appears convincing, BUY http://www.nomura.com/research/getpub.aspx?pid=421136

16-Feb IOI: 2Q11 results http://www.nomura.com/research/getpub.aspx?pid=419830

16-Feb Noble: GCL’s 1H11 results a sign of good times to come http://www.nomura.com/research/getpub.aspx?pid=419704

14-Feb Olam: Operationally strong, dilution risk http://www.nomura.com/research/getpub.aspx?pid=419284

14-Feb Sime Darby sued for US$200mn http://www.nomura.com/research/getpub.aspx?pid=419258

11-Feb KS Oils: 3Q11 inline http://www.nomura.com/research/getpub.aspx?pid=418777

10-Feb MPOB Jan 2011 data http://www.nomura.com/research/getpub.aspx?pid=418551

9-Feb Palm Oil: This CPO party is far from over http://www.nomura.com/research/getpub.aspx?pid=418208

4-Feb Noble: Earnings power of the network http://www.nomura.com/research/getpub.aspx?pid=417292

31-Jan Egypt unrest a negative risk for palm oil exports from Malaysia http://www.nomura.com/research/getpub.aspx?pid=415630

28-Jan Sime Darby: Caterpillar FY10 earnings beat estimates http://www.nomura.com/research/getpub.aspx?pid=415488

20-Jan Palm Oil: Still bullish on palm oil http://www.nomura.com/research/getpub.aspx?pid=413275

18-Jan Ruchi Soya: 3Q11 results http://www.nomura.com/research/getpub.aspx?pid=412985

12-Jan ASEAN Agri-Bites: 2011: Another good year in reckoning http://www.nomura.com/research/getpub.aspx?pid=411812

10-Jan MPOB Dec 2010 data http://www.nomura.com/research/getpub.aspx?pid=411452

10-Jan Wilmar: NEUTRAL from Buy, profits aren’t everything http://www.nomura.com/research/getpub.aspx?pid=411433

20-Dec Noble: US$950mn acquisition of Brazil sugarcane mills http://www.nomura.com/research/getpub.aspx?pid=409435

15-Dec Olam: Acquisition of tt Timber http://www.nomura.com/research/getpub.aspx?pid=408760

15-Dec London Sumatra: Initiation: Cheapest planter in coverage http://www.nomura.com/research/getpub.aspx?pid=408527

10-Dec MPOB Nov stats http://www.nomura.com/research/getpub.aspx?pid=407976

8-Dec IFAR: Places 8% of Lonsum http://www.nomura.com/research/getpub.aspx?pid=407531

7-Dec Mewah: Initiation: The price and space are right http://www.nomura.com/research/getpub.aspx?pid=407271

3-Dec Olam: US$200mn sugar refinery in Nigeria http://www.nomura.com/research/getpub.aspx?pid=406842

2-Dec Wilmar: Acquisition of 20% of PPB’s flour business http://www.nomura.com/research/getpub.aspx?pid=406598

30-Nov Palm Oil 3Q10 result wrap http://www.nomura.com/research/getpub.aspx?pid=406074

29-Nov KLK: 4Q10 results http://www.nomura.com/research/getpub.aspx?pid=405786

26-Nov Sime Darby: 1Q11 results http://www.nomura.com/research/getpub.aspx?pid=405464

24-Nov KS Oils: 2Q11 results http://www.nomura.com/research/getpub.aspx?pid=405065

23-Nov ASEAN Soft commodities: marketing feedback http://www.nomura.com/research/getpub.aspx?pid=404867

18-Nov IOI: 1Q11 results http://www.nomura.com/research/getpub.aspx?pid=404216

18-Nov Olam: The African safari continues http://www.nomura.com/research/getpub.aspx?pid=403987

17-Nov Sime Darby: An eventful AGM http://www.nomura.com/research/getpub.aspx?pid=403951

17-Nov Palm Oil: Biofuel storage demand down? http://www.nomura.com/research/getpub.aspx?pid=403735

14-Nov Olam: US$1.54bn investment in urea and palm http://www.nomura.com/research/getpub.aspx?pid=403006

11-Nov Olam 1Q10 results http://www.nomura.com/research/getpub.aspx?pid=402630

11-Nov GGR 3Q10 results http://www.nomura.com/research/getpub.aspx?pid=402532

10-Nov Wilmar: 3Q10 results http://www.nomura.com/research/getpub.aspx?pid=402320

Source: Nomura research



Macro data metrics on palm oil, soy and grains

Commodity snippets In this section, we closely monitor macro data changes for key commodities such as palm oil, soybean, soy meal, soy oil, rice, wheat, corn, rubber and sugar. Please note that we primarily refer to the USDA and Malaysian Palm Oil Board (MPOB) in tracking metrics changes.



Palm oil

Palm oil Ken Arieff Wong +60 3 2027 6895

[email protected]

What you need to know for the month of March

CPO production down 5.4% y-y in February; down 13% YTD

Malaysian CPO production for February 2011 was 1.09mn mT, off 5.4% y-y, on a 1.6% y-y fall in FFB yields to 1.2mT/ha. This brings YTD production down 13% y-y. This is likely due to the recent flooding in Johor and a lagging impact of the wet weather in 2H10. Meteorological estimates point to La Niña lasting through April/May 2011, posing continued risk to production in the near term.

Exhibit 49. Malaysian palm oil data for February 2011

Palm Oil Feb-2011 m-m (%) y-y (%) YTD (%)

Production (mT) 1,094,473 3.5% -5.4% -13.1%

Closing Stock (mT) 1,478,793 4.2% -17.3% n.m.

Exports (mT) 1,114,202 -8.5% -14.0% -15.4%

FFB Yield (mT/Ha) 1.20 4.3% -1.6% -11.7%

CPO Yield (mT/Ha) 0.24 4.3% -7.7% -16.1%


Inventory recovers slightly on lower exports; still down 17% y-y

CPO inventories rose slightly to 1.48mn tonnes (up 4.2% m-m), mainly owing to lower exports. However stocks are still down 17.3% y-y compared to the same time last year, when inventories stood at 1.79mn tonnes. The average February inventory in the past 5 years has been 1.68mn tonnes. The monthly stock usage ratio stood at 1.43x, in line with a previous five-year February average of 1.46x.

Exports fell 8.5% m-m — mainly due to festive season

CPO exports for February fell 8.5% m-m to 1.14mn tonnes, mainly due to the festive season (Chinese New Year) and a shorter month. There are, however, signs of demand recovery in key export markets such as China (+82% m-m), India (+23% m-m), and the US (+21% m-m), with winter gradually waning in the Northern Hemisphere, which implies that the demand destruction due to high prices was only short term. Further, CPO is a food item — and being the most consumed vegetable oil, demand has some inelasticity (substitutes such as soybean oil and rapeseed oil are more expensive).

Maintain Bullish view on our CPO price assumption of RM3,400/mt

We continue to flag that the CPO production recovery that many on the Street are expecting (and pricing in) may see headwinds and, in turn, support CPO prices at current high levels. CPO inventories are likely to fall in the next few months, as production enters the lean season and demand recovers post winter. In our view, poor soft commodity production, strengthening crude oil prices and a weak US dollar still present the perfect storm for the sector. Our picks in Malaysia are Sime Darby (better leverage to CPO price, execution turnaround possibility), Genting Plantations and KLK (strong mature hectarage growth and fundamentals).



Exhibit 50. Malaysian palm oil ending stock up 4.2% m-m in February 2011

0.6

0.8

1.0

1.2

1.4

1.6

1.8

2.0

2.2

2.4

Jan-

00

Jul-0

0

Jan-

01

Jul-0

1

Jan-

02

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Jan-

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4

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05

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5

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11

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500Ending stock (LHS) CPO price (RHS) (RM per tonne)(mn tonnes)

Source: Malaysian Palm Oil Board (MPOB), Bloomberg, Nomura research

Exhibit 51. Malaysian FFB yields, down 1.6% y-y in February 2011

0.0

0.5

1.0

1.5

2.0

2.5

Jan-

06

Ap

r-06

Jul-0

6

Oct

-06

Jan-

07

Ap

r-07

Jul-0

7

Oct

-07

Jan-

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r-08

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8

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-08

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r-09

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9

Oct

-09

Jan-

10

Ap

r-10

Jul-1

0

Oct

-10

Jan-

11

FFB Yield (tonne/ha)


Exhibit 52. Malaysian palm oil exports down 8.5% m-m in February 2011

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1,600,000

1,800,000

Jan-

06

May

-06

Se

p-06

Jan-

07

May

-07

Se

p-07

Jan-

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May

-08

Se

p-08

Jan-

09

May

-09

Se

p-09

Jan-

10

May

-10

Se

p-10

Jan-

11

Total Palm Oil Exports (tonne)




Exhibit 53. China — biggest consumer for Malaysian palm oil in YTD 2011

USA7% EU

13%

China20%

India7%

Pakistan9%

Others44%


Exhibit 54. Malaysia monthly palm oil production growth (y-y %)

-30%

-20%

-10%

0%

10%

20%

30%

40%

Jan-

05

Apr

-05

Jul-0

5

Oct

-05

Jan-

06

Apr

-06

Jul-0

6

Oct

-06

Jan-

07

Apr

-07

Jul-0

7

Oct

-07

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Apr

-08

Jul-0

8

Oct

-08

Jan-

09

Apr

-09

Jul-0

9

Oct

-09

Jan-

10

Apr

-10

Jul-1

0

Oct

-10

Jan-

11

(%)


Exhibit 55. La Niña is forecast to last through 1H11

0

20

40

60

80

100

FM

A20

11

MA

M20

11

AM

J20

11

MJJ

201

1

JJA

201

1

JAS

201

1

AS

O20

11

SO

N20

11

ON

D20

11

ND

J 20

11

La Niña Neutral El Niño(%)

Note: Periods are three-month rolling; eg, ASO 2011 = August, September, October 2011 etc.

Source: International Research Institute for Climate and Society



Exhibit 56. Palm oil supply demand fundamentals point to tight stock/usage ratios for the coming years

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010F 2011F 2012F 2013F

Opening stock 2.85 3.80 4.09 4.15 3.98 4.04 4.79 5.29 5.50 5.98 6.77 6.99 5.96 5.89 6.36

Production (mT)

Production

Malaysia 10.6 10.8 11.8 11.9 13.4 14.0 15.0 15.9 15.8 17.7 17.6 17.8 18.5 18.9 19.1

- Growth (y-y %) 26.9 2.7 8.9 0.9 12.1 4.6 7.1 6.2 (0.4) 12.1 (1.0) 1.5 3.5 2.5 1.0

Indonesia 6.3 7.0 7.7 9.4 10.6 12.4 14.1 16.1 17.3 19.2 21.1 21.6 24.3 26.8 29.2

- Growth (y-y %) 22.5 12.0 10.0 21.7 13.1 16.8 13.9 13.8 7.6 11.2 10.1 2.0 12.8 10.1 9.0

Others 3.6 4.0 4.0 4.1 4.2 4.8 4.8 5.3 5.7 6.1 6.7 7.1 7.5 8.0 8.4

- Growth (y-y %) (0.7) 11.2 0.7 3.5 1.5 14.2 1.4 9.3 8.4 5.7 9.9 6.1 6.1 6.1 5.0

Total production (m tn) 20.6 21.8 23.6 25.4 28.3 31.2 34.0 37.3 38.8 43.1 45.4 46.5 50.3 53.6 56.6

Growth (y-y %) 22.0 5.8 8.0 7.8 11.2 10.3 9.0 9.8 4.1 11.1 5.2 2.4 8.2 6.7 5.6

Consumption (mT)

EU-27 2.0 2.7 2.8 3.4 3.6 3.9 4.4 4.4 4.5 5.1 5.6 5.9 6.2 6.5 6.7

China 1.4 1.6 2.1 2.6 3.3 3.7 4.3 5.4 5.5 5.7 6.2 6.2 7.0 7.3 7.7

Indonesia 2.9 2.9 2.7 3.0 3.2 3.3 3.5 3.7 4.1 4.5 4.9 5.3 5.7 6.1 6.5

India 3.0 3.6 3.6 3.5 4.2 3.4 3.3 3.1 3.8 5.3 6.8 6.8 7.2 7.7 8.2

Malaysia 1.2 1.4 1.5 1.5 1.6 1.8 2.0 2.2 2.2 2.6 2.4 2.5 2.7 2.8 3.0

Others 8.9 9.3 10.9 11.3 12.5 14.1 16.1 17.4 18.0 19.5 19.3 20.4 21.6 22.7 23.9

Total consumption (m tn) 19.4 21.5 23.6 25.4 28.2 30.2 33.7 36.3 38.0 42.7 45.1 47.5 50.4 53.2 56.1

Growth (y-y %) 10.1 10.8 9.6 7.6 11.1 7.1 11.4 7.7 4.9 12.2 5.8 5.2 6.1 5.6 5.5

Ending stock 3.80 4.09 3.96 3.98 4.03 4.79 5.29 5.50 5.98 6.77 6.99 5.96 5.89 6.36 6.90

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010F 2011F 2012F 2013F

Stock / usage ratio (%) 19.5 19.0 16.8 15.6 14.3 15.8 15.7 15.2 15.7 15.9 15.5 12.6 11.7 12.0 12.3

Production growth (%) 22.0 5.8 8.0 7.8 11.2 10.3 9.0 9.8 4.1 11.1 5.2 2.4 8.2 6.7 5.6

Consumption growth (%) 10.1 10.8 9.6 7.6 11.1 7.1 11.4 7.7 4.9 12.2 5.8 5.2 6.1 5.6 5.5

Supply / demand (%) 122.3 118.9 117.6 117.0 114.1 117.3 114.4 120.1 117.6 114.2 115.5 112.6 111.7 112.0 112.3

Demand / supply (%) 81.8 84.1 85.1 85.5 87.7 85.3 87.4 83.2 85.1 87.6 86.6 88.8 89.5 89.3 89.0

Supply 23.5 25.6 27.7 29.6 32.2 35.2 38.8 42.6 44.3 49.1 52.1 53.4 56.2 59.5 63.0

Demand 19.2 21.5 23.5 25.3 28.3 30.0 33.9 35.4 37.7 43.0 45.1 47.5 50.4 53.2 56.1

Surplus production 1.2 0.3 0.0 0.0 0.0 0.9 0.3 1.0 0.8 0.5 0.2 (1.0) (0.1) 0.5 0.5

Supply growth (%) 16.4 9.1 8.0 6.9 9.0 9.3 10.1 9.8 4.1 10.8 6.2 2.5 5.2 5.9 5.8

Demand growth (%) 6.7 12.3 9.2 7.4 11.9 6.3 12.8 4.6 6.4 14.1 5.0 5.2 6.1 5.6 5.5

Source: Nomura estimates, USDA, Oil World

Exhibit 57. Palm oil stock usage ratio to remain tight

19.5%

14.3%

15.7%

15.9%15.8%

19.0%

16.8%15.6% 15.2%

15.7% 15.5%

12.6%

11.7%

12.0%

% 10

% 12

% 14

% 16

% 18

% 20

% 22

199

9

200

0

200

1

200

2

200

3

200

4

200

5

200

6

200

7

200

8

200

9

2010

F

2011

F

2012

F

(%)

Source: Nomura estimates, USDA, Oil World



Soy-related products

Soybean, soy meal and soy oil Tanuj Shori

+65 6433 6981 [email protected]

USDA forecasts improving soybean supply in 2010/11F, consumption to rise more The USDA in its March 2011 Oilseeds data release, points to an improving supply scenario for soybeans and oilseeds in general in 2010/11F. Soybean supply is expected to rise 4.6%, and cottonseed supply to rise 10% y-y. However, rapeseed supplies are expected to decline 2% y-y, leading to an overall oilseed supply increase of 3.4%. Consumption, however, will rise across the board, with cottonseed (up 8.4%) and soybean (up 6%) leading the increase. Stock usage ratios for soybean are expected to tighten to 22.5% in 2010/11F, which might lead to higher soybean prices, in our view.

Exhibit 58. World oilseeds: supplies (mn MT)

Current USDA FAS

% chg 09-10

% chg 10-11

estimates 05/06 06/07 07/08 08/09 09/10F 10/11F y-y y-y

Cottonseed 44.42 47.35 47.35 42.54 40.04 44.02 (5.9) 9.9

Rapeseed 53.25 50.6 53.18 61.43 67.29 65.97 9.5 (2.0)

Soybean 268.1 290.37 283.97 264.83 303.31 317.4 14.5 4.6

Total 448.91 468.83 465.36 458.82 497.88 514.69 8.5 3.4

Soybean as % of total 59.7 61.9 61.0 57.7 60.9 61.7 Source: USDA FAS

Exhibit 59. World oilseeds: disappearance (mn MT)

Current USDA FAS

% chg 09-10

% chg 10-11


Cottonseed 43.08 46.02 46.13 41.72 39.35 42.67 (5.7) 8.4

Rapeseed 47.74 45.94 49.63 54.76 59.71 60.47 9.0 1.3

Soybean 214.86 227.41 231.1 221.79 244.31 259.07 10.2 6.0

Total 384.53 395.63 403.75 402.58 427.36 446.61 6.2 4.5


Exhibit 60. World oilseeds: stock usage ratios

Current USDA FAS

% chg 09-10

% chg 10-11


Cottonseed 3.1 2.9 2.6 2.0 1.8 3.2 (10.8) 80.4

Rapeseed 11.5 10.1 7.2 12.2 12.7 9.1 4.2 (28.4)

Soybean 24.8 27.7 22.9 19.4 24.1 22.5 24.4 (6.8)

Total 16.7 18.5 15.3 14.0 16.5 15.2 18.1 (7.6) Source: USDA FAS

Exhibit 61. World soybeans: stock usage ratio

0

5

10

15

20

25

30

05/0

6

06/0

7

07/0

8

08/0

9

09/1

0F

10/1

1F

(%)

Source: USDA FAS

USDA expects global supply of oilseeds to rise 3.4% in 2010/11F and disappearance to rise 4.5% y-y



World protein meal supply to grow in tandem with disappearance; vegetable oil disappearance to outpace supply growth The USDA forecasts world protein meal supplies will increase by 6.5% in 2010/11F, which is equal to expected disappearance growth of 6.5%, leading to steady stock usage ratios of 3% in 2010/11F. Soybean meal stock usage ratios are expected to stay steady in 2010/11F, suggesting that meal prices might remain benign during that time period. Soybean oil prices are expected to however rise, owing to a lower SU ratio of 6.2% in 2010/11F vs 7.9% in 2009/10F, due to demand outpacing supply.

The USDA expects the SU ratio for palm oil to tighten from 12.6% in 2008/09 to 10% in 2009/10F and 6.8% in 2010/11F. This is in line with our view that CPO supply will likely remain tight, and this might support CPO prices at the current high levels, with production not growing at rates envisaged earlier.

Exhibit 62. World protein meals: supplies (mn MT)

Current USDA FAS

% chg 09-10

% chg 10-11


Cottonseed 14.78 15.6 15.87 14.59 14.03 15.05 (3.8) 7.3

Rapeseed 27.03 26.51 27.88 31.08 33.9 34.35 9.1 1.3

Soybean 152.23 160.18 165.04 158.65 170.49 184.55 7.5 8.2

Total 224.33 232.25 239.1 237.14 250.45 266.75 5.6 6.5

Soybeans as % of total 67.9 69.0 69.0 66.9 68.1 69.2 Source: USDA FAS

Exhibit 63. World protein meals: disappearance (mn MT)

Current USDA FAS

% chg 09-10

% chg 10-11


Cottonseed 14.51 15.38 15.72 14.48 13.87 14.89 (4.2) 7.4

Rapeseed 26.43 26.27 27.63 30.84 33.67 34.07 9.2 1.2

Soybean 145.93 153.5 158.68 153.44 164.58 178.13 7.3 8.2

Total 216.26 224.3 231.41 230.46 243.2 259 5.5 6.5


Exhibit 64. World protein meals: stock usage ratios

Current USDA FAS

% chg 09-10

% chg 10-11


Cottonseed 1.9 1.4 1.0 0.8 1.2 1.1 51.9 (6.9)

Rapeseed 2.3 0.9 0.9 0.8 0.7 0.8 (12.2) 20.3

Soybean 4.3 4.4 4.0 3.4 3.6 3.6 5.8 0.4

Total 3.7 3.5 3.3 2.9 3.0 3.0 2.8 0.4

Source: USDA FAS

Exhibit 65. World soybean meal: stock usage ratio

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

05/06 06/07 07/08 08/09 09/10F 10/11F

(%)

Source: USDA FAS

Exhibit 66. World oils: supplies (mn MT)

Current USDA FAS

% chg 09-10

% chg 10-11


Palm 39.31 41.48 45.73 48.46 51.29 52.64 5.8 2.6

Rapeseed 17.83 17.81 18.89 21.22 23.43 24.1 10.4 2.9

Soybean 37.72 40.01 41.38 38.84 41.54 45.18 7.0 8.8

Total 128.98 133.46 140.36 145.31 153.6 158.77 5.7 3.4


Exhibit 67. World oils: disappearance (mn MT)

Current USDA FAS

% chg 09-10

% chg 10-11


Palm 35.16 36.77 41.21 43.03 46.62 49.31 8.3 5.8

Rapeseed 17.15 17.35 18.16 20.14 21.98 23.2 9.1 5.6

Soybean 34.16 36.34 38.28 36.06 38.49 42.53 6.7 10.5

Total 117.34 121.65 128.65 131.79 141.2 149.26 7.1 5.7


The SU ratios for protein meal and vegetable oils are expected to remain tight due to demand rising with production



Exhibit 68. World oils: stock usage ratios

Current USDA FAS

% chg 09-10

% chg 10-11


Palm 11.8 12.8 11.0 12.6 10.0 6.8 (20.6) (32.6)

Rapeseed 4.0 2.7 4.0 5.4 6.6 3.9 23.0 (41.2)

Soybean 10.4 10.1 8.1 7.7 7.9 6.2 2.8 (21.4)

Total 9.9 9.7 9.1 10.3 8.8 6.4 (14.4) (27.4)

Source: USDA FAS

Exhibit 69. World soybean oil: stock usage ratio

0

2

4

6

8

10

12

05/06 06/07 07/08 08/09 09/10F 10/11F

(%)

Source: USDA FAS

World soybean production to fall slightly in 2010/11F According to the USDA, world soybean production will rise 22.8% y-y to record highs during 2009/10F owing to a recovery in Argentine (+70% y-y) and Brazilian soybean production (+19% y-y). This strong crop is expected to decline slightly in 2010/11F, with production overall to be relatively flat (largest producer US: -0.9% y-y, Brazil +1.4% y-y and Argentina -9.2% y-y). There has been a switch in USDA expectations at Brazil and Argentina, due to normal weather at Brazil and droughts at Argentina. Brazil is expected to have a stronger crop, whereas the Argentine crop is expected to decline. Total production in 2010/11F is expected to remain at its second-highest level historically, at 258mn mT.

Exhibit 70. Soybean production by country (‘000 MT)

Current USDA FAS

% chg 09-10

% chg 10-11


US 83,507 87,001 72,859 80,749 91,417 90,610 13.2 (0.9)

Brazil 57,000 59,000 61,000 57,800 69,000 70,000 19.4 1.4

Argentina 40,500 48,800 46,200 32,000 54,500 49,500 70.3 (9.2)

Total 220,670 237,126 221,006 211,964 260,270 258,402 22.8 (0.7)

China as % of total 7.4 6.7 6.3 7.3 5.8 5.9 Source: USDA FAS

Exhibit 71. Global soybean production

0

50,000

100,000

150,000

200,000

250,000

300,000

05/06 06/07 07/08 08/09 09/10F 10/11F

('000 MT)

(10)

(5)

0

5

10

15

20

25

(%)Total (LHS) y-y growth (RHS)

Source: USDA FAS

Soybean production likely to rise to record highs in 2009/10F but recede slightly in 2010/11F season. Raw soybean stock, however, should be healthy for both seasons



Brazil and US to capture share of Argentine soybean exports in 2010/11F

In the current month’s data release, the USDA expects Argentine soybean exports to drop 16% in 2010/11F due to a lower crop, and thinks the US and Brazil will capture this share of falling Argentine exports (US +6% y-y, Brazil +14% y-y). China will likely remain the largest soybean importer, with imports increasing by 22.5% y-y in 2009/10F and 13.2% y-y in 2010/11F. Japanese share of soybean imports at 3.45mn mT might increase following the earthquake and tsunami damage.

Exhibit 72. Soybean exports by country (‘000 MT)

Current USDA FAS

% chg 09-10

% chg 10-11


US 25,579 30,386 31,538 34,925 40,852 43,273 17.0 5.9

Brazil 25,911 23,485 25,364 29,986 28,578 32,500 (4.7) 13.7

Argentina 7,249 9,559 13,838 5,588 13,088 11,000 134.2 (16.0)

Total 63,804 71,320 79,588 77,183 92,743 98,258 20.2 5.9 Source: USDA FAS

Exhibit 73. Soybean exports by major exporters

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

100,000

05/06 06/07 07/08 08/09 09/10F 10/11F

('000 MT)

(2)

0

2

4

6

8

10

12

14

16

18

(%)US+Brazil+Argentina (LHS)

y-y growth (RHS)

Source: USDA FAS

Exhibit 74. Soybean imports by country (‘000 MT)

Current USDA FAS

% chg 09-10

% chg 10-11


China 28,317 28,726 37,816 41,098 50,338 57,000 22.5 13.2

EU-27 13,937 15,291 15,123 13,213 12,609 14,000 (4.6) 11.0

Japan 3,962 4,094 4,014 3,396 3,402 3,450 0.2 1.4

Total 64,129 69,062 78,137 77,200 87,439 95,789 13.3 9.5

China as % of total 28,317 28,726 37,816 41,098 50,338 57,000 22.5 13.2

Source: USDA FAS

Exhibit 75. China soybean imports

0

10,000

20,000

30,000

40,000

50,000

60,000

05/06 06/07 07/08 08/09 09/10F 10/11F

('000 MT)

0

5

10

15

20

25

30

35

(%)China (LHS)

China % growth (RHS)

Source: USDA FAS

Soybean consumption to grow at 8.1% in 2010/11F; same as 09/10F According to USDA estimates, soybean consumption will grow at 8.1% in 2009/10F and 2010/11F, lead by a 19%/18.4% demand growth in China in the two years. Soy meal consumption is expected to grow at 19% in China and 10% in the EU-27, leading to overall consumption growth of 9.2% y-y. Similarly, soy oil consumption will likely grow at 17% in China and 8% in the US in 2010/11F, leading to overall growth of 10% y-y. Soybean crushing volumes are expected to increase with the pace of soybean crop expansion, aided by strong demand in emerging countries like China, which import and crush soybeans locally. Domestic soybean crush in Argentina is also expected to increase by 9% y-y in 2009-10F and 14% in 2010/11F.



Exhibit 76. Soybean crushing by country (‘000 MT)

Current USDA FAS

% chg 09-10

% chg 10-11


China 34,500 35,970 39,518 41,035 48,830 57,800 19.0 18.4

US 47,324 49,198 49,081 45,232 47,669 45,042 5.4 (5.5)

Argentina 31,888 33,586 34,607 31,243 34,123 39,000 9.2 14.3

Total 185,188 195,609 201,816 193,808 209,512 226,481 8.1 8.1


Exhibit 77. Soybean crushing: China vs world

0

50,000

100,000

150,000

200,000

250,000

05/06 06/07 07/08 08/09 09/10F 10/11F

('000 MT)

(10)

(5)

0

5

10

15

20

25

(%)China (LHS)

Total (LHS)

China % growth (RHS)

World % growth (RHS)

Source: USDA FAS

Exhibit 78. Soy meal consumption by country (‘000 MT)

Current USDA FAS

% chg 09-10

% chg 10-11


China 27,776 27,630 30,849 31,673 37,546 44,828 18.5 19.4

EU-27 32,875 33,228 35,169 31,579 30,138 33,256 (4.6) 10.3

US 30,114 31,166 30,148 27,891 27,777 27,669 (0.4) (0.4)

Total 145,448 152,114 157,189 152,449 160,613 175,455 5.4 9.2


Exhibit 79. Global soy meal consumption

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

180,000

200,000

05/06 06/07 07/08 08/09 09/10F 10/11F

('000 MT)

(4)

(2)

0

2

4

6

8

10

(%)Total (LHS)

% total growth (RHS)

Source: USDA FAS

Exhibit 80. Soy oil consumption by country (‘000 MT)

Current USDA FAS

% chg 09-10

% chg 10-11


China 7,607 8,670 9,693 9,486 10,435 12,198 10.0 16.9

US 8,147 8,426 8,317 7,432 7,195 7,757 (3.2) 7.8

Brazil 3,113 3,395 3,920 4,274 4,970 5,190 16.3 4.4

Total 33,572 35,501 37,730 35,912 38,250 42,063 6.5 10.0

China as % of total 22.7 24.4 25.7 26.4 27.3 29.0

Source: USDA FAS

Exhibit 81. Global soy oil consumption

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

05/06 06/07 07/08 08/09 09/10F 10/11F

('000 MT)

(6)

(4)

(2)

0

2

4

6

8

10

12

(%) Total (LHS)

% total growth (RHS)

Source: USDA FAS



China continues to be a substantial consumer of soy products China crushes most of its soy oil and soy meal requirement locally, while depending on imports to satisfy palm oil demand. Soy meal represents 71% of total Chinese meal consumption and soy oil represents 41% of total oil consumption in China. The USDA expects local demand to grow by 19%, 17% and 6% y-y for soy meal, soy oil and palm oil, respectively, in 2010/11F. The strong demand outlook necessitates stable soybean and palm oil imports over the next 12 months.

Exhibit 82. China: protein meal consumption (‘000 MT)

Current USDA FAS

% chg 09-10

% chg 10-11


Fish 1,265 1,258 1,646 1,618 1,258 1,515 (22.2) 20.4

Rapeseed 8,320 7,479 7,069 8,317 10,022 9,762 20.5 (2.6)

Soybean 27,776 27,630 30,849 31,673 37,546 44,828 18.5 19.4

Total 44,811 43,951 47,258 49,560 56,432 63,388 13.9 12.3


Exhibit 83. China: vegetable oil consumption (‘000 MT)

Current USDA FAS

% chg 09-10

% chg 10-11


Palm 4,974 5,138 5,222 5,618 5,930 6,277 5.6 5.9

Rapeseed 4,545 4,343 4,139 4,853 5,641 6,100 16.2 8.1

Soybean 7,607 8,670 9,693 9,486 10,435 12,198 10.0 16.9

Total 21,509 22,559 23,343 24,738 26,914 29,430 8.8 9.3


Exhibit 84. China: soy meal consumption

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

50,000

05/06 06/07 07/08 08/09 09/10F 10/11F

('000 MT)

(5)

0

5

10

15

20

25

(%)Soybean meal (LHS)

Soymeal % growth (RHS)

Source: USDA FAS

Exhibit 85. China: soy oil consumption

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

05/06 06/07 07/08 08/09 09/10F 10/11F

('000 MT)

(5)

0

5

10

15

20

(%)Soybean oil (LHS)

Soy oil % growth (RHS)

Source: USDA FAS

Exhibit 86. China: palm oil consumption

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

05/06 06/07 07/08 08/09 09/10F 10/11F

('000 MT)

0

1

2

3

4

5

6

7

8

(%)Palm oil (LHS)

Palm oil % growth (RHS)

Source: USDA FAS

Exhibit 87. China: palm oil imports as % of consumption

40

50

60

70

80

90

100

110

120

05/06 06/07 07/08 08/09 09/10F 10/11F

(%)

Source: USDA FAS

Strong demand outlook in China necessitates stable soybean and palm oil imports over the next year



Exhibit 88. China: soy meal imports as % of consumption

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

05/06 06/07 07/08 08/09 09/10F 10/11F

(%)

Source: USDA FAS

Exhibit 89. China: soy oil imports as % of consumption

0

5

10

15

20

25

30

05/06 06/07 07/08 08/09 09/10F 10/11F

(%)

Source: USDA FAS

China soybean crushing margins fall in February-March Chinese soybean crushing margins dropped in February-March, due to a sharp jump in the price of soybeans and weak soy meal prices, despite soyoil prices also rising. We think this might act as a dampener for 1Q11F earnings at the processors under our coverage, which had faced benign crushing margins in 4Q10. However, with the aid of locked-in margins, Noble group might benefit in 1Q11, in our view. US crushing margins are almost zero at the moment, due to high prices of raw beans.

Chinese soybean imports were down 55% m-m in February, due to higher raw soybean production domestically. We believe that China will continue to have an insatiable demand for soybeans going forward and will likely drive world soy prices in the medium term.

Exhibit 90. China: imported soybean crushing margins

(30)

(20)

(10)

0

10

20

30

40

50

60

Jan

-09

Ma

r-09

May

-09

Jul-0

9

Sep

-09

Nov

-09

Jan

-10

Ma

r-10

May

-10

Jul-1

0

Sep

-10

Nov

-10

Jan

-11

Ma

r-11

(50)

0

50

100

150

200

250

300

USDA No 1 yellow soybeans

China soybean meal

China no 4 soybean oilChina soybean crush margin imported (US$/MT)

Note: assuming zero processing cost


Crushing margins fell slightly



Exhibit 91. US: soy product prices and crushing margins

(20)

0

20

40

60

80

100

Jan

-09

Ma

r-09

May

-09

Jul-0

9

Sep

-09

Nov

-09

Jan

-10

Ma

r-10

May

-10

Jul-1

0

Sep

-10

Nov

-10

Jan

-11

Ma

r-11

(40)

(20)

0

20

40

60

80

100

120

140

USDA No 1 yellow soybeansUSDA 48% soybean meal USDA soybean oil US soybean crush margin (US$/MT)



Exhibit 92. China: domestic soy product prices and crushing margins

(30)

(20)

(10)

0

10

20

30

40

50

Jan

-09

Ma

r-09

May

-09

Jul-0

9

Sep

-09

Nov

-09

Jan

-10

Ma

r-10

May

-10

Jul-1

0

Sep

-10

Nov

-10

Jan

-11

Ma

r-11

(60)

(40)

(20)

0

20

40

60

80

100

120

140

China No 2 Soybeans China soybean meal China no 4 soybean oilChina soybean crush margin (US$/MT)



Exhibit 93. China soybean imports

0

1

2

3

4

5

6

7

De

c-08

Jan-

09

Feb

-09

Ma

r-09

Ap

r-09

May

-09

Jun-

09

Jul-0

9

Aug

-09

Sep

-09

Oct

-09

No

v-09

De

c-09

Jan-

10

Feb

-10

Ma

r-10

Ap

r-10

May

-10

Jun-

10

Jul-1

0

Aug

-10

Sep

-10

Oct

-10

No

v-10

De

c-10

Jan-

11

Feb

-11

(mn tons)

(80)

(60)

(40)

(20)

0

20

40

60

80

(% growth)

Source: Bloomberg



Sugar

Sugar Ploenjai Jirajarus


Tushar Mohata (Associate)

ISO further cuts sugar surplus forecast for 2010/11F on Australian floods and China weather According to the International Sugar Organization’s world sugar balance report (February), the sugar surplus expected in 2010/11F will be lower at 0.2mn mT, cut 85% from the November estimate of 1.3mn mT, which was earlier expected by ISO. World sugar supplies are expected to turn to surplus in 2010/11F (October 2010-September 2011), after two years of running at a deficit.

ISO cut raw sugar production estimates due to cold weather and heavy sleet last month which reduced China's output potential, while last summer's drought hurt Ukraine's beet crop more than expected. The ISO also downgraded its estimate for output in Australia, the third-largest exporter, by 700,000 tonnes, citing rainy weather which left significant quantities of cane uncut even before the arrival of Cyclone Yasi, which destroyed an estimated 25% of the north Queensland crop.

Overall, raw sugar production estimates were cut 0.5% to 168mn mT. Stock usage ratios are still expected to hover around 35% for 2010/11F, lower than recent historical levels. (Source: ISO, http://www.agrimoney.com/printnews.php?id=2874&area=n).

Exhibit 94. ISO world sugar balance

% chg in est

(mn mT) 99/00 00/01 01/02 02/03 03/04 04/05 05/06 06/07 07/08 08/09 09/10F 10/11F 09/10F 10/11F

Total production 131.7 130.6 137.2 148.5 142.3 140.3 150.4 166.3 166.3 150.6 160.6 168.0 0.0 (0.5)

Total consumption 127.6 131.3 136.1 141.7 143.7 147.7 153.3 156.7 159.6 160.9 164.5 167.8 0.1 0.1

Surplus/deficit 4.1 (0.7) 1.1 6.7 (1.4) (7.3) (2.9) 9.6 6.6 (10.3) (4.0) 0.2 3.8 (84.8)

Import demand 37.3 39.7 43.3 45.2 45.2 48.0 48.7 48.9 48.3 48.1 53.4 50.3 0.9 0.3

Export availability 37.5 39.6 43.9 45.2 45.1 48.5 49.2 48.8 48.5 47.9 53.0 50.5 0.3 (0.4)

End stocks 61.5 61.3 62.5 69.1 67.8 60.0 56.3 66.0 72.4 62.4 58.8 58.8 2.6 1.3

Stocks/ consumption ratio in % 48.2 46.7 45.9 48.8 47.2 40.7 36.7 42.1 45.4 38.8 35.7 35.0 2.4 1.1

Note: (October-September year), raw value

Source: ISO World Sugar Balance February 2011

Thai sugar export volume and price up in Jan-11 Thailand’s sugar export volume in January 11 was 339,21 8 tons, up 18.9% y-y from 285,404 tons in January 10, while the export price in the period rose by 11.6% y-y to US$521/ton from US$467/ton. The y-y growth in export volume was a result of rising output of new sugar crop start harvesting from December 2010.

Moreover, Thailand’s sugar export volume in 2010 was 4.50mn tons, down 10.9% from 5.05mn tons in 2009, while the export price in the period rose by 35.6% to US$484/ton from US$357/ton in a year earlier. The tight sugar supply situation during early 2010 in India and Thailand, combined with the tight sugar supply situation during late 2010 in Brazil, caused export sugar price increases for the whole year of 2010.

Thailand’s sugar export volume and price up y-y in Jan 11 due to rising output in new crop starting from December 2010



World sugar prices fell m-m in March 2011 due to expected sugar surplus from India Future price of world raw sugar delivery in May 11 was 25.65 cents/pound on 15 March 2011, up 50.3% y-y but down 12.2% m-m. The m-m drop in price was caused by the relief of India’s supply as Indian Sugar Mills Assocation commented that India will have 3mn tons of sugar surplus in 2010/11F which will enable India to export more sugar in this season.

Exhibit 95. Sugar (#11) price

Sugar #11 World (US$cent/lb)

10

15

20

25

30

35

Jun-

08

Se

p-08

De

c-08

Ma

r-09

Jun-

09

Se

p-09

De

c-09

Ma

r-10

Jun-

10

Se

p-10

De

c-10

Ma

r-11

Source: Bloomberg

Exhibit 96. Thailand: sugar export volume and price

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

De

c-08

Jan-

09F

eb-

09M

ar-

09A

pr-

09M

ay-

Jun-

09Ju

l-09

Au

g-09

Se

p-09

Oct

-09

No

v-09

De

c-09

Jan-

10F

eb-

10M

ar-

10A

pr-

10M

ay-

Jun-

10Ju

l-10

Au

g-10

Se

p-10

Oct

-10

No

v-10

De

c-10

Jan-

11

250

300

350

400

450

500

550

600

650Sugar volume (LHS)

Sugar price (RHS)

(Tons) (US$/ton)

Source: Bank of Thailand

World sugar price fell m-m due to expected sugar surplus in India



Grains

Grains — rice, wheat and corn Grain stock usage ratios to tighten in for wheat and corn while improving for rice in 2010/11F The USDA slightly increased is estimates for wheat and corn production in 2009/10F. Improved weather conditions in China and faster production recovery in Australia led to improvement in wheat supply, and with demand continuing to grow at ~2% pa in 2010/11F, aided by Chinese and Indian demand, the stock usage ratios for wheat and corn should fall in 2010/11F, while for rice, it should rise on the back of higher production. The USDA estimates show corn production increasing 4.3% in 2009/10F and 2.4% in 2010/11F, while wheat and rice production are likely to fall in 2009/10F, owing to Pakistan floods and EU drought. The USDA expects rice production to recover ~2.5% in 2010/11F. However, the demand for corn is expected to increase at a higher rate of 4.3% in 2009/10F.Thus, stock usage ratios are likely to fall for wheat and corn in 2010/11F, indicating strengthening prices, and in the case of rice, improving stock usage ratio indicates easing prices .

Exhibit 97. Wheat, rice and corn summary

(mn MT) 07/08 08/09 09/10F 10/11F % chg 09-10

% chg 10-11

Production

Wheat 611.0 683.1 682.6 647.6 (0.1) (5.1)

Rice, milled 433.6 447.9 440.9 451.5 (1.6) 2.4

Corn 793.6 798.0 812.4 813.8 1.8 0.2

Domestic consumption

Wheat 616.8 641.7 652.5 663.0 1.7 1.6

Rice, milled 428.1 436.9 438.1 447.0 0.3 2.0

Corn 772.5 781.9 815.7 835.2 4.3 2.4

Exports

Wheat 116.7 143.1 134.2 124.3 (6.2) (7.4)

Rice, milled 29.7 29.1 31.1 30.2 6.8 (3.1)

Corn 98.3 84.1 93.2 92.1 10.8 (1.2)

Ending Stocks

Wheat 124.8 167.2 197.3 181.9 18.0 (7.8)

Rice, milled 80.3 91.5 94.3 98.8 3.0 4.8

Corn 131.4 147.8 144.5 123.1 (2.2) (14.8)

S.U. Ratios (%)

Wheat 20.2 26.1 30.2 27.4 16.0 (9.3)

Rice, milled 18.8 20.9 21.5 22.1 2.8 2.7

Corn 17.0 18.9 17.7 14.7 (6.3) (16.8)

Source: USDA FAS

Exhibit 98. Wheat stock usage ratio

14

16

18

20

22

24

26

28

30

3207

/08

08/0

9

09/1

0F

10/1

1F

(%)

Source: USDA FAS

Exhibit 99. Rice stock usage ratio

17.0

18.0

19.0

20.0

21.0

22.0

23.0

07/0

8

08/0

9

09/1

0F

10/1

1F

(%)

Source: USDA FAS

Exhibit 100. Corn stock usage ratio

14

15

16

17

18

19

20

07/

08

08/

09

09/1

0F

10/1

1F

(%)

Source: USDA FAS



USDA revised up global rice stock forecast for 2010/11F USDA released the monthly world markets and trade for grain in March 2011, forecasting 2.4% growth in global rice production in 2010/11F and 2.0% growth in global rice consumption in 2010/11F. Compare with data in the February 2011 edition, the USDA revised down its consumption forecast by 1.2% from 452.3mn tons to 447.0mn tons for the global rice market in 2010/11F. The agency revised down consumption forecasts for India and Vietnam. As a result, it revised up its global ending stocks forecast for 2010/11F by 5.2% from 93.85mn tons to 98.77mn tons mainly from the revised down consumption forecast in India.

Exhibit 101. Top rice producers

(‘000 MT) 05/06 06/07 07/08 08/09

09/10F 10/11F % chg 09-10

% chg10-11

Production

China 126,414 127,200 130,224 134,330 136,570 139,300 1.7 2.0

India 91,790 93,350 96,690 99,180 89,130 94,500 (10.1) 6.0

Indonesia 34,959 35,300 37,000 38,300 36,370 37,500 (5.0) 3.1

Total 418,507 420,310 433,580 447,883 440,917 451,518 (1.6) 2.4 Source: USDA FAS

Exhibit 102. Top rice consumers

(‘000 MT) 05/06 06/07 07/08 08/09

09/10F 10/11F% chg 09-10

% chg 10-11

Consumption

China 128,000 127,200 127,450 133,000 134,320 136,000 1.0 1.3

India 85,088 86,700 90,466 91,080 85,730 91,000 (5.9) 6.1

Indonesia 35,739 35,900 36,350 37,090 38,000 38,850 2.5 2.2


Exhibit 103. Top rice exporters

(‘000 MT) 05/06 06/07 07/08 08/09

09/10F 10/11F % chg 09-10

% chg 10-11

Exports

Thailand 7,376 9,557 10,011 8,570 9,000 10,000 5.0 11.1

Vietnam 4,705 4,522 4,649 5,950 6,734 6,000 13.2 (10.9)

Pakistan 3,579 2,696 3,000 3,000 4,000 2,650 33.3 (33.8)

Total 29,098 31,851 29,689 29,147 31,130 30,170 6.8 (3.1) Source: USDA FAS

Exhibit 104. Top rice importers

(‘000 MT) 05/06 06/07 07/08 08/09

09/10F 10/11F% chg 09-10

% chg 10-11

Imports

Philippines 1,791 1,900 2,500 2,000 2,400 1,500 20.0 (37.5)

Iran 1,500 2,000 350 250 1,150 1,750 360.0 52.2

Nigeria 1,600 1,550 1,800 2,000 2,100 1,900 5.0 (9.5)


World rice price continues to be weak y-y and m-m in Mar-11 On the Chicago Board of Trade, the price of rough rice was US$13.07/100lb on 16 March 2011, down up 12.8% y-y and 2.7% m-m. The price fall was a result of the USDA’s upward revision for global rice ending stock in 2010/11F. This stock revision from 93.85mn tons to 98.77mn tons was made mainly by downward revision of India rice consumption forecast by 4.2% from 95.0mn tons to 91.0mn tons. India is the world’s second rice producer and consumer. Capital Nomura Securities’ analyst Ploenjai Jirajarus anticipates that rough rice price will be under downward pressure because the new crop from Vietnam is coming to the market. Moreover, the Vietnam Food Association said to reduce the minimum export price for 5% broken rice to $500 a metric ton from $520/ton and that of 25% broken rice to $480/ton from $490/ton, free on board.

Exhibit 105. Global price of wheat and corn

300

400

500

600

700

800

900

1000

Apr

-10

May

-10

Jun-

10

Jul-1

0

Aug

-10

Sep

-10

Oct

-10

Nov

-10

Dec

-10

Jan-

11

Feb

-11

Mar

-11

Wheat CornUScent/Bushes

Source: Bloomberg

Exhibit 106. Global price of wheat and rice

300

400

500

600

700

800

900

1000

Apr

-10

May

-10

Jun-

10

Jul-1

0

Aug

-10

Sep

-10

Oct

-10

Nov

-10

Dec

-10

Jan-

11

Feb

-11

Mar

-11

10

11

12

13

14

15

16

17Wheat RiceUscent/Bushel US$/Cw t

Source: Bloomberg

Global rice production and consumption expected to increase 2.4% and 2%

World rough rice price fell y-y and m-m in Mar-11 due to USDA’s upward revision of world rice stock



Thai rice export volume up in Jan 11 Thailand’s rice export volume in January 11 was 855,523 tons, up 19.2% y-y from 717,931 tons in January 10, but export price for the month was US$607/ton, down 3.1% from US$626/ton a year before. The y-y rise in volume may be attributed to the fact that there were several open-bid contracts from foreign governments such as Bangladesh, Indonesia, Philippines, Middle East countries.

However, Thailand’s rice export volume in 2010 was 8.94mn ton, up 3.5% from 8.64mn tons in 2009. The growth rate was lower than that of Vietnam. According to a report from the Thai Rice Exporters Association, Vietnam in 2010 exported 6.75mn tons of rice, up 13.4% y-y from 5.95mn tons.

Exhibit 107. Thailand: rice export volume and price

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

De

c-08

Jan-

09F

eb-

09M

ar-

09A

pr-

09M

ay-0

9Ju

n-09

Jul-0

9A

ug-

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ep-

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-10

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Se

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-10

No

v-10

De

c-10

Jan-

11480

530

580

630

680

730Rice volume (LHS) Rice price (RHS)(Tons) (US$/ton)


Exhibit 108. Global rough rice price

Rough Rice (US$/cwt)

10

11

12

13

14

15

16

17

Ma

r-10

Apr

-10

May

-10

Jun

-10

Jul-1

0

Aug

-10

Sep

-10

Oct

-10

Nov

-10

Dec

-10

Jan

-11

Feb

-11

Ma

r-11

Source: Bloomberg

Wheat exports in major producing regions to drop in 2009/10F and 2010/11F The USDA forecasts a dip in global wheat production, led by a shortfall in the EU, where production is estimated to fall by 1.4% y-y to ~136mn MT in 2010/11F. The EU and Canada are also likely to drive a decline in global wheat exports, with total exports expected to fall by circa 6% and 8% y-y in 2009/10F and 2010/11F, respectively. High wheat prices have trimmed the demand in a number of smaller import markets. On the consumption front, India’s demand is expected to rise significantly, putting pressure on world supplies. USDA forecasts show India’s wheat consumption rising by 10.2% y-y to 78mn MT in 2009-10F and 5.5% y-y to 82mn MT in 2010/11F.

Wheat production shortfall expected in the EU, while demand continues to grow in India

Thailand’s rice export volume in Jan 11 was up y-y due to higher demand from foreign countries



Exhibit 109. Top wheat producers

(‘000 MT) 05/06 06/07 07/08 08/09

09/10F 10/11F % chg 09-10

% chg 10-11

Production

EU-27 132,356 124,870 120,133 151,004 138,051 136,078 (8.6) (1.4)

China 97,445 108,466 109,298 112,464 115,120 114,500 2.4 (0.5)

India 68,640 69,350 75,810 78,570 80,680 80,800 2.7 0.1

Total 619,054 595,912 611,019 683,130 682,594 647,597 (0.1) (5.1) Source: USDA FAS

Exhibit 110. Top wheat consumers

(‘000 MT) 05/06 06/07 07/08 08/09

09/10F 10/11F% chg 09-10

% chg 10-11

Consumption

EU-27 127,525 125,500 116,536 127,500 124,500 122,000 (2.4) (2.0)

China 101,500 102,000 106,000 105,500 107,000 108,800 1.4 1.7

India 69,980 73,477 76,423 70,924 78,150 82,475 10.2 5.5


Exhibit 111. Top wheat exporters

(‘000 MT) 05/06 06/07 07/08 08/09

09/10F 10/11F % chg 09-10

% chg 10-11

Exports

US 27,252 25,041 34,328 27,295 24,175 35,000 (11.4) 44.8

EU-27 15,701 13,816 12,271 25,318 22,117 21,000 (12.6) (5.1)

Canada 15,633 19,278 16,561 18,583 18,974 17,500 2.1 (7.8)


Exhibit 112. Top wheat importers

(‘000 MT) 05/06 06/07 07/08 08/09

09/10F 10/11F% chg 09-10

% chg 10-11

Imports

Egypt 7,771 7,300 7,700 9,900 10,300 9,800 4.0 (4.9)

EU-27 6,758 5,137 6,942 7,740 5,480 4,500 (29.2) (17.9)

Brazil 5,631 7,743 7,076 6,762 6,667 6,700 (1.4) 0.5


US corn production to fall, but offset by gains in China According to the USDA, world corn production is likely to remain flat at 813mn MT in 2010/11F. US corn production is likely to fall 4.9% in 2010/11F, but be offset by a rise in China (+6.3%). Argentine exports are expected to fall 23% y-y in 2010/11F. On the demand side, the US and China will remain the biggest demand drivers of corn, with 4.3% and 1.9% y-y growth, respectively, in 2010/11F.

Exhibit 113. Top corn producers

(‘000 MT) 05/06 06/07 07/08 08/09

09/10F 10/11F % chg 09-10

% chg 10-11

Production

US 282,263 267,503 331,177 307,142 332,549 316,165 8.3 (4.9)

China 139,365 151,600 152,300 165,900 158,000 168,000 (4.8) 6.3

EU-27 60,668 53,829 47,555 62,505 57,147 55,193 (8.6) (3.4)


Exhibit 114. Top corn consumers

(‘000 MT) 05/06 06/07 07/08 08/09

09/10F 10/11F% chg 09-10

% chg 10-11

Consumption

US 232,015 230,674 261,632 259,053 281,423 293,384 8.6 4.3

China 137,000 145,000 149,000 152,000 159,000 162,000 4.6 1.9

EU-27 61,500 62,300 64,000 62,000 60,000 60,500 (3.2) 0.8


Exhibit 115. Top corn exporters

(‘000 MT) 05/06 06/07 07/08 08/09

09/10F 10/11F % chg 09-10

% chg 10-11

Exports

US 56,084 54,214 60,663 47,907 49,887 50,000 4.1 0.2

Brazil 2,826 8,071 7,883 7,178 8,623 10,000 20.1 16.0

Argentina 10,707 15,693 15,676 8,458 16,971 13,000 100.7 (23.4)


Exhibit 116. Top corn importers

(‘000 MT) 05/06 06/07 07/08 08/09

09/10F 10/11F% chg 09-10

% chg 10-11

Imports

Japan 16,617 16,713 16,614 16,533 15,979 16,100 (3.4) 0.8

Mexico 6,787 8,944 9,556 7,764 8,298 9,000 6.9 8.5

S Korea 8,483 8,731 9,311 7,188 8,461 8,000 17.7 (5.4)




Rubber

Rubber Ploenjai Jirajarus


Global natural rubber to grow 4.6% in 2011F and 3.8% in 2012F The International Rubber Study Group (IRSG) reported in March 2011 that global combined natural rubber and synthetic demand is forecast to reach 26.1mn tons in 2011 and 27.5mn tons in 2012. Global synthetic rubber demand is expected to grow by 8.6% in 2011 and 6.4% in 2012, while global natural rubber demand is forecast to rise by 4.6% in 2011 and 3.8% in 2012. Partly due to the impact of higher prices and assuming normal growing conditions, global natural rubber production is forecast to rise by 6.2% in 2011 and 6.5% in 2012. In the longer term, driven largely by strong growth in the emerging markets, global rubber consumption is forecast to reach 33.9mn tonnes by 2020, with natural rubber demand of 15.4mn tonnes.

Thai rubber export volume down but export price up in Jan 11 Thailand’s rubber export volume in January 11 was 255,500 tons, down 10.1% y-y from 284,291 tons in January 10, while the export price of Thai rubber for the month was US$4,121/tonne, up 75.4% y-y from US$2,349/ton in a year before. Low supply of rubber from Thailand due to heavy rain is the major reason for lower export volume and increasing export prices.

However, Thailand’s rubber export volume in 2010 was 2.73mn tonnes, down 0.3% y-y from 2.74mn tons in 2009 while the average price of rubber export in 2010 rose impressively 87.6% y-y to US$2,898/ton from US$1,544/ton in 2009. Both y-y growth in export volume and price were attributed to rising demand from China and supply constraint in Thailand and Indonesia.

Future rubber price down m-m on worry about car industry in China and the impact from the earthquake in Japan On the Singapore Commodity Exchange, the future blocked rubber price was US$4.00/Kg on 16 March 2011, up 32.5% y-y but down 29.3% m-m. Worries of high car inventory in China and economic uncertainty in Japan caused a sharp m-m fall in the price. Smoked sheet rubber in Thailand was hardest hit to THB105/Kg (US$3.44/Kg) on 14 March 2011 after rubber middle men in Thailand refused to buy rubber from farmers on the worry rubber demand in Japan would fall because car factories in Japan will close down due to the earthquake.

Capital Nomura Securities anticipates that rubber prices may rebound in the short term due to supply constraints in Thailand during the winter season in Feb-May 2011. However, rubber prices may be under downward pressure again during the high season of output in Thailand during Jun-Sep 2011.

Thai rubber export volume and price in Jan 11 fell y-y but export price rose y-y due to supply constraint in Thailand

Rubber future price on the Singapore Commodity Exchange is currently off m-m

Global natural rubber demand is forecast to rise by 4.6% in 2011F and 3.8% in 2012F while global synthetic rubber demand is expected to grow by 8.6% and 6.4%, respectively



Exhibit 117. Malaysia rubber board #20 rubber (RM sen / kg)

300

500

700

900

1,100

1,300

1,500

1,700

1,900

Jan-

08

Ap

r-08

Jul-0

8

Oct

-08

Jan-

09

Ap

r-09

Jul-0

9

Oct

-09

Jan-

10

Ap

r-10

Jul-1

0

Oct

-10

Jan-

11Source: Bloomberg

Exhibit 118. Thailand: rubber export volume and price

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

Dec

-08

Feb

-09

Apr

-09

Jun-

09

Aug

-09

Oct

-09

Dec

-09

Feb

-10

Apr

-10

Jun-

10

Aug

-10

Oct

-10

Dec

-10

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

Rubber volume (LHS)

Rubber price (RHS)

(Tons) (US$/ton)


Exhibit 119. Future price of blocked rubber in SICOM

SICOM TSR20

0

100

200

300

400

500

600

700

Nov

-09

Jan-

10

Mar

-10

May

-10

Jul-1

0

Sep

-10

Nov

-10

Jan-

11

Mar

-11

US Cent/Kg

Source: Bloomberg

Exhibit 120. Monthly stock of rubber in SHFE

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

Feb-09

Apr-09

Jun-09

Aug-09

Oct-09

Dec-09

Feb-10

Apr-10

Jun-10

Aug-10

Oct-10

Dec-10

Feb-11

Tons

Source: Shanghai Future Exchange



Crop Calendar

Appendix 1: crop calendar In this section, we summarise the stage of summer and winter crop production across the globe.

Exhibit 121. March normal crop calendar: Summer crops

Source: USDA / NOAA

Exhibit 122. March normal crop calendar: Winter crops

Source: USDA / NOAA



Weather summary

Appendix 2: monthly weather update In this section, we summarise global weather conditions and their effects on production of key agricultural crops.

Exhibit 123. Weather condition and crop impact: March

Region Weather Crop Impact

US Wild temperature swings, drought Winter grain in Gulf Coast Unfavourable

South America Near-to-above rainfall Summer grain and oilseeds Favourable

Frequent rainfall in Brazil Soybeans, coffee, sugarcane, citrus

Favourable

Europe Abnormally dry February weather, risk of winterkill

Winter grain and oilseed Unfavourable

Former Soviet Union (Western) Bitterly cold weather but protected by deep snow pack

Winter wheat Unfavourable

Northwest Africa Above-normal February rainfall Winter grain Favourable

Middle east and Turkey Much needed rainfall and snow Winter crop Favourable

South Asia Warm weather and timely rainfall in India

Winter wheat and rapeseed Favourable

Eastern Asia Mild weather All crops Favourable

South East Asia Persistent rainfall Palm oil Unfavourable

Warm weather in Vietnam rice harvesting Favourable

South Africa Drier weather with scattered rainfall

Corn Favourable

Australia Occasional showers Summer crops Favourable

Source: USDA



Valuation methodology and investment risks

Valuation methodologies Sime Darby: We value Sime Darby using a SOTP valuation: 1) ascribing a P/E multiple of 18x to its plantations division FY11F PAT, 14x to heavy equipment FY11F PAT, 15x to automobiles FY11F PAT, 10x to Utilities (ex oil and gas) FY11F PAT, and 8x to others; 2) valuing the property business at RNAV, to arrive at our PT of RM12.15.

IOI Corp: Our PT of RM7.00 is derived by pegging our rolling 12M-fwd P/E to 18x and rolling forward to FY11F, being +0.6SD from its mean P/E of 15x.

Kuala Lumpur Kepong: We value KLK on a time-weighted (ie, calendarised) P/E of 18x FY11F EPS, around +1SD above its five-year historical average of 13.9x (unchanged). This is justified, in our view, since KLK has the strongest mature hectarage growth among large-cap Malaysian planters we cover (mature area expected to expand by >6% pa through to FY12F, on our estimates). Our PT is RM25.50, reflecting our FY11F estimates.

Genting Plantations: Our price target of RM10.50 is based on a target FY11F P/E of 18.0x (in line with our multiple for large-cap Malaysian planters). This valuation is +1.6x standard deviations above its historical mean P/E.

Golden Agri: We value the company at 16x FY11F P/E. We believe this mid-cycle valuation of +0.8x SD above the stock’s mean is reasonable in the context of our bullish CPO view. Our PT is S$0.90.

IndoAgri: We value the company at 16x FY11F P/E. We believe this valuation peg of +1x SD above its mean is reasonable, given our bullish CPO view. Our PT is S$3.40.

Astra Agro Lestari: We value Astra Agro on a 12M forward rolling FY11F P/E of 16x. We derive our PT by pegging it at +1SD above the stock’s mean P/E. Our PT is Rp28,400.

London Sumatra: We derive our price target of Rp3,040 (adjusting for a 1:5 share split from the earlier PT of Rp15,200) by pegging it to 15.3x FY11F P/E. This is based on a valuation of +0.9x above its standard deviation, which is fair in the current upcycle.

Wilmar: We value Wilmar on a SOTP basis by ascribing the bracketed multiples to its FY11F earnings from plantation (16x), palm and laurics (15x), consumer pack (20x), oilseed processing (15x), Sucrogen (15x) and other business (12x). We also value the Indonesia sugar business and the rice and flour business by probability adjusted-DCF. Our price target is S$5.60.

Olam: We use a residual dividend model, with an 8.75% cost of equity, a 2.5% terminal growth rate and a long-term ROE of 12% for Olam’s existing business. Building in our earnings estimates arrives at our core business value of S$3.40 for Olam. We add back the DCF value of the urea venture (S$0.40) and palm (S$0.06) to get our price target of S$3.90 (rounded).

Noble: We value Noble using a residual dividend model, with a 8.75% cost of equity, 2.5% terminal growth rate and long-term ROE of 12% to arrive at our price target of S$2.80.

Ruchi Soya: We value the company at 15x FY12F EPS and add Rs35 as the SOTP value of the plantations business to arrive at our PT of Rs170

KS Oils: We value KS Oils at 12x FY12F EPS (at a 20% discount to Ruchi Soya) to account for tax concerns to arrive at our PT of Rs67.

Mewah: We value Mewah on a SOTP basis, ascribing 13x to its bulk segment FY11F earnings (at 20% discount to Wilmar) and 16x to its consumer pack FY11F earnings (at 25% discount to Wilmar and Chinese downstream companies). Our price target is S$1.34.



Capital Nomura Securities valuation methodologies

Charoen Pokphand Food: Price target is based on 12xFY11F EPS.

GFPT: GFPT is valued based on 10x FY11F EPS.

Khon Kaen Sugar Industry: Price target is based on DCF valuation, assuming a WACC at 8.0%, an FY11-15F net profit CAGR of 13% and long term growth of 3% .

Lamsoon (Thailand): Price target is based on 14x FY11F EPS.

Sri Trang Agro Industry: Price target is based on 11x FY11F EPS.

Thai Vegetable Oil: Price target is based on a 14x FY11F EPS.

Univanich Palm Oil: Price target is based on 11x to FY11F EPS.

Risks to our investment view Sime Darby: Downside risks include lower-than-expected FFB yields and slower-than-expected turnaround of its energy division.

IOI Corp: Downside risks include lower FFB yields than we expect, a collapse in agri-commodity prices, and poor property sales. Also, we do flag that 2Q FY11 production fell sharply (-20% y-y) relative to other planters – a possible near-term dampener on sentiment

Kuala Lumpur Kepong: Key downside risks include a sharp drop in agri-commodity prices, weaker than-expected production, lower margins at its downstream division, or weak sales at its retail arm.

Genting Plantations: The key risk to any upstream plantations is lower-than-expected CPO prices, lower-than-expected CPO production, not being able to maintain its planting targets, or commercialise the biotechnology venture, or lower-than-expected footfalls in the Johor Premium outlets.

Golden Agri: Downside risks include lower-than-expected production, a sharp fall in CPO prices, or any further environmental pushbacks against the group.

IndoAgri: Downside risks include lower-than-expected FFB production, a sharp fall in CPO prices, or low sugar contribution.

Astra Agro Lestari: Downside risks include lower-than-expected FFB production, a sharp fall in CPO prices and lower-than-expected plasma yields.

London Sumatra: Downside risks include lower-than-our expected CPO prices, weaker production and slower-than-our expected plantings.

Wilmar: Any delay in execution of Indonesian sugar plantation can have downsides to our price target and earnings estimates. Shortage of raw materials (eg, palm oil, oilseed) could hurt trading volumes of Wilmar’s merchandising and processing businesses. Reduced bargaining power attributable to falling demand could hurt profitability. Underlying growth in volumes and profitability could be constrained by the regulatory framework. Major fluctuations in raw material and product prices also represent a risk to profitability. Upside risks include faster-than-expected recovery in margins.

Olam: Any execution delay or substantial underperformance in the Gabon ventures can lead to downside to our price target. We are building in significant volume expansion in existing commodities. Any lower-than-expected contribution could negatively impact our estimates. Other downside risks include lower-than-expected contributions from associates and new investments; supply chain management; commodity and forex fluctuations; and a drop in world trade volumes. Volatility in almond prices could pose downside risk to our NPV calculations.



Noble: The key company-specific risk in our view would be execution of its targeted processing facilities to generate more trading volumes. For example, it is targeting ~3mn MT of crushing capacity in Argentina (which would imply roughly 8% of Argentina’s crushing market) — the key risk in our view here would be tapping demand for these additional volumes of soy meal and soy oil. China currently satisfies most of its soy meal and soy oil requirements from soybeans crushed domestically and thus exporting crushed soy meal from Argentina to Europe or China is prone to demand risks.

Similarly, the sugar industry in Brazil is plagued with various regulations and the competition is heating up with global giants such as Bunge entering the market. Sustaining volumes with good profitability will remain a challenge, in our view.

Noble is the most leveraged name to commodity cycle. If commodity prices correct, the company’s earnings potential will get negatively impacted. To add, working capital may be a concern with rising commodity prices.

On the funding side, the interest cost can always be the swing factor because of ~80% leverage.

Ruchi Soya: Delay in ramp up of capacity utilization, muted margin expansion vs expectations, competition taking away volumes, delay in palm hectarage growth pose downside risks to our estimates and PT.

KS Oils: Delay in ramp up of capacity utilization, muted margin expansion vs expectations, competition taking away volumes, and any negative newsflow regarding tax investigations pose downside risks to our estimates and PT.

Mewah: Lower-than-expected volume growth, muted margin expansion, or a de-rating in valuation multiples on macro slowdown are downside risks to our estimates and PT.

Capital Nomura Securities investment risks

Charoen Pokphand Food: Downside risks to the price target include: 1) an increase in the price of feed mill’s raw materials (e.g. soybean meal and corn); 2) a fall in Thai broiler prices, and; 3) outbreak of an animal-related disease that would lower consumer confidence to eat meat products. Upside risks include: 1) outbreak of an animal-related disease in rival countries (eg, Brazil); 2) increasing demand for processed meat products in Europe and Japan, and; 3) an opportunity for Thailand to export fresh chicken meat to Japan and Russia

GFPT: Downside risks to the price target include: 1) an increase in the price of feed mills’ raw materials (eg, soybean meal and corn); 2) a fall in Thai broiler prices, and; 3) outbreak of an animal-related disease that would lower consumer confidence to eat chicken products. Upside risks include: 1) outbreak of an animal-related disease in rival countries (eg, Brazil); 2) increasing demand for processed chicken products in Europe and Japan, and; 3) opportunity for Thailand to export fresh chicken meat to Japan and Russia

Khon Kaen Sugar Industry: Upside risks to the price target include a recovery in world and domestic sugar prices to recent highs. Downside risks include: 1) futher lagging in sugar production at its Laos and Cambodia, and; 2) declining Thai ethanol price and consumption.

Lamsoon (Thailand): Downside risks to the price target include a decline in milling and refining margins of refined palm oil. Upside risks include an increase in the price of soybean oil.

Sri Trang Agro Industry: Downside risks to the price target include economic growth in major car-producing countries such as China, the US, Europe and Japan that is below expectations and decreasing demand for Thai rubber. Rubber price volatility will also impact STA’s gross margin. If the rubber price moves steadily upward, STA would



likely have a higher gross margin. However, if rubber price swings up and down, STA would likely be unable to manage its inventory cost.

Thai Vegetable Oil: Downside risks to the price target include a decrease in the crushing margin of soybean meal. Upside risks include the supply and export climate of Argentina’s soybean meal, given that TVO’s rivals usually import soybean meal from low-cost producers in Argentina.

Univanich Palm Oil: Downside risks to the price target include an increase in the price of soybean oil / palm oil.



Other Team Members: Tushar Mohata and Vishnuvardana Reddy (Associate) — All enquiries arising from this note should be directed to Tanuj Shori. Ploenjai Jirajarus (Capital Nomura Securities) — All enquiries arising from this note should be directed to Tanuj Shori.

Any Authors named on this report are Research Analysts unless otherwise indicated

Analyst Certification We, Tanuj Shori and Ken Wong, hereby certify (1) that the views expressed in this Research report accurately reflect our personal views about any or all of the subject securities or issuers referred to in this Research report, (2) no part of our compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this Research report and (3) no part of our compensation is tied to any specific investment banking transactions performed by Nomura Securities International, Inc., Nomura International plc or any other Nomura Group company.

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A rating of 'Suspended', indicates that the rating and target price have been suspended temporarily to comply with applicable regulations and/or firm policies in certain circumstances including when Nomura is acting in an advisory capacity in a merger or strategic transaction involving the company. Benchmarks are as follows: United States/Europe: Please see valuation methodologies for explanations of relevant benchmarks for stocks (accessible through the left hand side of the Nomura Disclosure web page: http://www.nomura.com/research);Global Emerging Markets (ex-Asia): MSCI Emerging Markets ex-Asia, unless otherwise stated in the valuation methodology. SECTORS A 'Bullish' stance, indicates that the analyst expects the sector to outperform the Benchmark during the next 12 months. A 'Neutral' stance, indicates that the analyst expects the sector to perform in line with the Benchmark during the next 12 months. 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A 'Reduce' recommendation indicates that potential downside is 5% or more. A rating of 'Suspended' indicates that the rating and target price have been suspended temporarily to comply with applicable regulations and/or firm policies in certain circumstances including when Nomura is acting in an advisory capacity in a merger or strategic transaction involving the subject company. Securities and/or companies that are labelled as 'Not rated' or shown as 'No rating' are not in regular research coverage of the Nomura entity identified in the top banner. Investors should not expect continuing or additional information from Nomura relating to such securities and/or companies. SECTORS A 'Bullish' rating means most stocks in the sector have (or the weighted average recommendation of the stocks under coverage is) a positive absolute recommendation. A 'Neutral' rating means most stocks in the sector have (or the weighted average recommendation of the stocks under coverage is) a neutral absolute recommendation. A 'Bearish' rating means most stocks in the sector have (or the weighted average recommendation of the stocks under coverage is) a negative absolute recommendation. Explanation of Nomura's equity research rating system in Japan published prior to 6 January 2009 (and ratings in Europe, Middle East and Africa, US and Latin America published prior to 27 October 2008) STOCKS A rating of '1' or 'Strong buy', indicates that the analyst expects the stock to outperform the Benchmark by 15% or more over the next six months. A rating of '2' or 'Buy', indicates that the analyst expects the stock to outperform the Benchmark by 5% or more but less than 15% over the next six months. A rating of '3' or 'Neutral', indicates that the analyst expects the stock to either outperform or underperform the Benchmark by less than 5% over the next six months. A rating of '4' or 'Reduce', indicates that the analyst expects the stock to underperform the Benchmark by 5% or more but less than 15% over the next six months. A rating of '5' or 'Sell', indicates that the analyst expects the stock to underperform the Benchmark by 15% or more over the next six months. Stocks labeled 'Not rated' or shown as 'No rating' are not in Nomura's regular research coverage. Nomura might not publish additional research reports concerning this company, and it undertakes no obligation to update the analysis, estimates, projections, conclusions or other information contained herein. SECTORS A 'Bullish' stance, indicates that the analyst expects the sector to outperform the Benchmark during the next six months. A 'Neutral' stance, indicates that the analyst expects the sector to perform in line with the Benchmark during the next six months. A 'Bearish' stance, indicates that the analyst expects the sector to underperform the Benchmark during the next six months. Benchmarks are as follows: Japan: TOPIX; United States: S&P 500, MSCI World Technology Hardware & Equipment; Europe, by sector - Hardware/Semiconductors: FTSE W Europe IT Hardware; Telecoms: FTSE W Europe Business Services; Business Services: FTSE W Europe; Auto & Components: FTSE W Europe Auto & Parts; Communications equipment: FTSE W Europe IT Hardware; Ecology Focus: Bloomberg World Energy Alternate Sources; Global Emerging Markets: MSCI Emerging Markets ex-Asia.



Explanation of Nomura's equity research rating system for Asian companies under coverage ex Japan published prior to 30 October 2008 STOCKS Stock recommendations are based on absolute valuation upside (downside), which is defined as (Fair Value - Current Price)/Current Price, subject to limited management discretion. In most cases, the Fair Value will equal the analyst's assessment of the current intrinsic fair value of the stock using an appropriate valuation methodology such as Discounted Cash Flow or Multiple analysis etc. However, if the analyst doesn't think the market will revalue the stock over the specified time horizon due to a lack of events or catalysts, then the fair value may differ from the intrinsic fair value. In most cases, therefore, our recommendation is an assessment of the difference between current market price and our estimate of current intrinsic fair value. Recommendations are set with a 6-12 month horizon unless specified otherwise. Accordingly, within this horizon, price volatility may cause the actual upside or downside based on the prevailing market price to differ from the upside or downside implied by the recommendation. A 'Strong buy' recommendation indicates that upside is more than 20%. A 'Buy' recommendation indicates that upside is between 10% and 20%. A 'Neutral' recommendation indicates that upside or downside is less than 10%. A 'Reduce' recommendation indicates that downside is between 10% and 20%. A 'Sell' recommendation indicates that downside is more than 20%. SECTORS A 'Bullish' rating means most stocks in the sector have (or the weighted average recommendation of the stocks under coverage is) a positive absolute recommendation. A 'Neutral' rating means most stocks in the sector have (or the weighted average recommendation of the stocks under coverage is) a neutral absolute recommendation. A 'Bearish' rating means most stocks in the sector have (or the weighted average recommendation of the stocks under coverage is) a negative absolute recommendation. Explanation of CNS rating system for Thailand companies under coverage published from 2 March 2009: Stocks: Stock recommendations are based on absolute valuation upside (downside), which is defined as (Fair Value - Current Price) / Current Price, subject to limited management discretion. In most cases, the Fair Value will equal the analyst's assessment of the current intrinsic fair value of the stock using an appropriate valuation methodology such as Discounted Cash Flow or Multiple analysis etc. However, if the analyst doesn't think the market will revalue the stock over the specified time horizon due to a lack of events or catalysts, then the fair value may differ from the intrinsic fair value. In most cases, therefore, our recommendation is an assessment of the difference between current market price and our estimate of current intrinsic fair value. Recommendations are set with a 6-12 month horizon unless specified otherwise. Accordingly, within this horizon, price volatility may cause the actual upside or downside based on the prevailing market price to differ from the upside or downside implied by the recommendation. A "Buy" recommendation indicates that potential upside is 15% or more. A "Neutral" recommendation indicates that potential upside is less than 15% or downside is less than 5%. A "Reduce" recommendation indicates that potential downside is 5% or more. Explanation of CNS rating system for Thailand companies under coverage published prior to 28 February 2009: Stocks: Stock recommendations are based on absolute valuation upside (downside), which is defined as (Fair Value - Current Price) / Current Price, subject to limited management discretion. In most cases, the Fair Value will equal the analyst's assessment of the current intrinsic fair value of the stock using an appropriate valuation methodology such as Discounted Cash Flow or Multiple analysis etc. However, if the analyst doesn't think the market will revalue the stock over the specified time horizon due to a lack of events or catalysts, then the fair value may differ from the intrinsic fair value. In most cases, therefore, our recommendation is an assessment of the difference between current market price and our estimate of current intrinsic fair value. Recommendations are set with a 6-12 month horizon unless specified otherwise. Accordingly, within this horizon, price volatility may cause the actual upside or downside based on the prevailing market price to differ from the upside or downside implied by the recommendation. A "Strong Buy" recommendation indicates that upside is more than 20%. A "Buy" recommendation indicates that upside is between 10% and 20%. A "Neutral" recommendation indicates that upside or downside is less than 10%. A "Reduce" recommendation indicates that downside is between 10% and 20%. A "Sell" recommendation indicates that downside is more than 20%. Sectors: (No change) A "Bullish" rating means most stocks in the sector have (or the weighted average recommendation of the stocks under coverage is) a positive absolute recommendation. A "Neutral" rating means most stocks in the sector have (or the weighted average recommendation of the stocks under coverage is) a neutral absolute recommendation. A "Bearish" rating means most stocks in the sector have (or the weighted average recommendation of the stocks under coverage is) a negative absolute recommendation.



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