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ABSA AgriBusiness Agric-Economic Outlook 1 October 2009 Presenter name Subject

Discussion agenda • Macro economic trends – World social spend supports agriculture • Agricultural insights - Golden days for agriculture is back • Africa the new frontier – Food security • Commodity outlook for Selected Agricultural commodities

Economic outlook – Supply and demand

Summery of world economic impact on South African Agriculture • Shift in world soft commodity demand • After capitalism replaced communism as economic system in the late 90’s world economic growth increased to more than 4.9% per annum for the four years preceding 2008 • This lead to a shift in demand with a resulting increase in commodity prices • The demand for bio-fuels also impacted positively on commodity prices • Commodity prices was further supported by lower world stocks • Food demand remain sticky • In 2008 - 2009 world experienced a financial meltdown • World wide approximately one billion jobs will be lost during 2009 • In SA approximately 600 000 jobs is expected to be lost in 2009 • If you loos your job you loos your house and your car but you do not loos the need to eat • In a world economic crisis the poor of the poor (job less) is supported by social spend (Dole, Workmen's compensation, Food stamps, Social spend) supporting demaand. The net result is higher commodity prices in spite of a world economic meltdown

Exchange rate impact on South African Agriculture

Economic outlook – Balance of Payment • Exchange rate indicators • The rand will continue to strengthen against the US Dollar and Chinese currencies while the dollar will tend to weaken against the Euro • This is mainly due to the link between the US dollar and the Chinese Yuan as well as the current account deficit of the US (- 3% of GDP) • The Rand is expected to continue to weaken against the bulk of the other currencies

Economic outlook – Inflation • Pointers • Due to higher inflation in 2007 and 2008 the Reserve Bank increased interests rates in a bid to control inflation. • All indication are that inflation is under control and it is expected that inflation will continue to decline creating some leeway for the Reserve Bank to lower interest rates even further.

Effective Market

Primary agricultural confidence index

Polar area Mountain area Tundra / Taiga Moderate Mediterranean Dry grasslands Desert Subtropical Tropical Climatic topography World Climatic topography

Market environment – World Market growth potential (2) • Pointers • Production growth potential for 2050 must be viewed against expected growth in demand of approximately 40 – 60 % over the same period • This is mainly the result of an expected population growth rate of between 0,9% to 1,1% and improvements in the economic welfare of consumers due to economic growth. • Only a portion of economic growth will impact on the growth in demand for food as food is classified as one of the basic needs.

Market environment – World market growth potential (3) • Pointers • In the short term stiff competition in terms of production expansion will come from South America. • The most significant untapped opportunity is Africa • As production expansion exceed demand expectations, prices of soft commodities will remain fairly depressed forcing farmers to improve efficiencies. This is only possible if producers incorporate new technology to improve efficiencies or use efficiencies of scale.

Summery – every thing is market driven

World maize trends

South African maize trends

Expected SA yellow maize price trends

Expected SA white maize price trends

Poultry production trends

Poultry Price trends

SA Beef prices

Mutton Price trends

Thank you for the opportunity to share some ideas Contact details E Janovsky Tel (011) 350 6102 Emailernst.janovsky@absa.co.za

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