This document provides an outlook on agricultural commodity markets in 2012. It discusses key themes that will impact prices, including an expected economic slowdown which will reduce demand. Speculator activity and policy risks, such as potential protectionism, are also addressed. The outlook presents base, high, and low cases for commodity prices and provides forecasts for wheat and corn prices under different economic scenarios.

1. Outlook 2012—Down, But Not Out
Agri Commodity Markets Research

2. Outlook 2012—Down, But Not Out
Agri Commodity Markets Research
Authors:
Luke Chandler
luke.chandler@rabobank.com
Keith Flury
keith.flury@rabobank.com
Erin FitzPatrick
erin.fitzpatrick@rabobank.com
Nick Higgins
nicholas.higgins@rabobank.com
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3. Contents | i
Contents
Page
Section 1
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
A review of our forecasts for 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 2
Key themes for agri markets in 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Economic slowdown . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Biggest losers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
US and EU to stumble along . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Emerging markets to drive demand growth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Doomsday outcome . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Economic outlook . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Speculators and the US dollar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Correlation spike . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Speculators abandon ags . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Winners and losers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Policy risks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Fuelling policy speculation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
The re-emergence of protectionism . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Grains and oilseeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Chinese import policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
West Africa . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Elections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Capacity constraints . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Supply squeeze . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Increased yield volatility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Higher price floors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 3
Agri Commodity Outlooks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Base case: Stumbling along . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
High case: Recovery stronger and faster than expected . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Low case: From bad to worse . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Wheat . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Corn . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Soybeans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Palm Oil . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Sugar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Coffee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Cocoa . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Cotton . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Livestock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Live cattle . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Lean hogs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Appendix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49

4. Section 1 Introduction | 1
1 Introduction
Rabobank sees agri commodity prices down, the levels seen in 2008/09. Elevated price
but not out, in 2012. Improved fundamental levels must persist in order to encourage
balances and uncertain economic conditions farmers to continue expanding production
are expected to keep prices below the 2011 to keep pace with demand growth and
highs. However, risks to our price forecasts allowing global inventories to rebuild.
are skewed upwards as reliance upon
Agri commodity demand should remain
nontraditional producers pose an increasing
robust in 2012 as consumptive growth in
threat, and inventories remain near
emerging-market economies continues to
historical lows.
drive the agri complex. Our analysis suggests
We believe the long-term bull run in agri that supply side risks, from both weather
commodities remains, but expect prices and politics, have increased again for 2012
across the complex to ease from their record and there remains considerable risk of an
highs, continuing their downward trajectory inflection in both price and volatility levels
in place since mid-2011. Absent further macro amid adverse production conditions across
deterioration, prices are unlikely to plunge to the agri complex.
Figure 1.1: Rabobank’s 2012 agri commodity price forecasts
Q1’11 Q2’11 Q3’11 Q4’11f Spot* Q1’12f Q2’12f Q3’12f Q4’12f
Wheat (CBOT) USc/bu 788 748 688 610 579 595 630 615 595
Wheat (Matif) EUR/tonne 253 234 199 170 179 162 175 172 166
Corn USc/bu 674 732 696 620 585 610 645 630 610
Soybeans USc/bu 1,381 1,363 1,358 1,165 1,122 1,178 1,226 1,260 1,251
Soy oil USc/lb 57.0 57.3 55.8 49.4 49.3 48.7 50.2 49.1 47.5
Soymeal USD/ton 260 240 230 300 282 310 290 330 335
Palm oil MYR/tonne 3,681 3,365 3,100 3,000 3,171 2,800 2,900 3,000 3,100
Sugar USc/lb 30.6 24.4 28.7 24.5 23.1 23.5 23.0 22.0 22.0
Coffee USc/lb 258 271 257 230 232 220 200 180 170
Cocoa USD/tonne 3,322 3,042 2,969 2,400 2,246 2,350 2,450 2,350 2,300
Cotton USc/lb 182 168 108 95 91 85 85 80 80
Source: Rabobank, Bloomberg, 2011

5. 2 | Rabobank Outlook 2012—Down, But Not Out
We see lower average prices for all agri 1. Economic slowdown
commodities covered in our 2012 forecast.
2. Speculators and the US dollar
However, we see upside, from depressed spot
prices, for corn, wheat, soybeans, sugar and 3. Policy risks
cocoa as fundamentals reassert themselves
4. Capacity constraints
and market participants continue to come to
grips with the European debt crisis. We see Given the heightened uncertainty in the
downside to cotton and palm oil prices in the macro environment, we have decided to
short term. In the livestock sector we expect frame our price and fundamental forecasts
higher live cattle prices and slightly lower lean in base, low and high-case scenarios to
hogs prices in 2012. give guidance over the level of confidence
around our economic forecasts and macro
Our outlook is centred on four key themes
level assumptions.
for the agri commodity markets in 2012
which we expect to determine commodity
prices. Aside from the inherent weather
uncertainties in agriculture, we identify
these variables as critical for the agri complex
over the next 12 months.
Rabobank’s 12-month outlook for prices from current levels
Soymeal prices are likely to rebound in 2012 after
SOYMEAL underperformance relative to soy oil and soybeans in 2011.
Soybean prices are likely to be lower YOY in 2012, but
SOYBEANS remain historically elevated, rationing demand, as global
production declines.
US live cattle prices are expected to fall in Q1 2012 from their
LIVE CATTLE November 2011 highs as a record number of cattle on feed outstrips
demand in the near term.
Although lower than 2011 averages, we expect corn prices to rally
CORN from current spot prices into Q2 2012 before easing in Q4 2012 on
record production.
Abundant supply of cocoa beans and better expectations for the
COCOA 2011/12 crop are expected to lead prices lower in 2012.
The demand profile for soy oil is relatively recession-resistant,
SOY OIL which will likely see prices remain elevated in order to slow
demand growth.
Neutral price direction is expected over the next 12 months as the
WHEAT second largest world wheat crop on record softens the fundamental
outlook, but coarse grains provide support.
Despite our forecast for record large palm oil production in 2012, we
PALM OIL expect the low stock levels of total vegetable oils to limit palm oil’s
price downside.
Momentum in the US lean hog market is expected to wane in 2012
LEAN HOGS as producers increase farrowing to meet demand and Chinese
import growth slows.
We forecast lower international sugar prices in 2012 as the market
SUGAR shifts into a surplus for the first time in three seasons.
We expect the global cotton industry to be under pressure and
COTTON prices to fall due to the largest global cotton crop on record.
Prices are forecast to fall in 2012 due to the large harvests expected
COFFEE in Brazil and Vietnam, but diminished stocks will keep risks high.

6. Section 1 Introduction | 3
A quick look in the rear-view mirror: A review of our forecasts for 2011
One of the most common questions we get when talking to clients is “how accurate were your forecasts last year?” This is a
very valid question, so before we launch into our 2012 agri markets outlook, we would like to share a quick self-evaluation
of our performance in 2011—the good, the bad and the ugly.
Our 2011 agri markets outlook report, Agri Bull Market Clouded by Macro Uncertainty, released in December 2010,
highlighted seven key themes for the year ahead.
1. Tightening inventory levels
2. Supply limitations
3. Demand growth from emerging markets
4. China commodity short
5. Heightened political risk amid tightening food supplies
6. Fundamentals only part of the story
7. Sustained heightened volatility
These were the issues we saw as the most important variables likely to influence agri commodity markets in 2011, in
addition to constant supply and demand drivers, such as weather vagaries. Overall, these issues all showed varying degrees
of relevance in 2011, and many of them will remain relevant in 2012, assuming the absence of major weather events.
As last year’s title suggested, from a fundamental viewpoint we held a bullish outlook for the agri complex; our price
forecasts showed an expectation of higher prices for all but one market in 2011. Our top picks for 2011 were corn, soybeans
and coffee, and as it turned out, two out of three ranked at the top of the list in terms of year-on-year price increases, with
coffee the top performer, followed by cotton and corn (see Figure 1.2). Our price forecasts for most commodities were
generally accurate in terms of direction, with only cocoa moving against our forecast due to the outlier event of the
election crisis in Ivory Coast, which we did highlight as a risk, and which created an unexpected rally for prices. Interestingly,
as the situation has normalised and supply chains have restocked, prices have tracked in line with our forecast curve, albeit
at an elevated level (see Figure 1.3).
The other major event of 2011 was the hottest July the US Midwest has seen in over 50 years, which reshaped the supply
side of the balance sheet for the grains complex. This extreme weather event resulted in both a production forecast
downgrade of over 10% and significantly higher prices. Since April, our price forecasts have reflected a much tighter
balance sheet and have quite accurately indicated Q2 as a turning point with quarter-on-quarter declines forecast for Q3
and Q4 (see Figure 1.4).
Figure 1.2: Rabobank 2011 forecasts (December 2010) vs. actual, 2011
Rabobank 2011 forecasts (December 2010) Actual
Q1’11 Q2’11 Q3’11 Q4’11 Q1’11 Q2’11 Q3’11 Q4’11
Wheat USc/bu 700 680 675 675 788 748 688 610
Corn USc/bu 600 580 550 540 674 732 696 620
Soybeans USc/bu 1,300 1,275 1,200 1,185 1,381 1,363 1,358 1,165
Soy oil USc/lb 53 54 52 52 57 57 56 49
Soymeal USD/ton 355 350 345 340 367 354 353 300
Palm oil MYR/tonne 3,650 3,200 2,900 2,750 3,681 3,365 3,100 3,000
Sugar USc/lb 28 26 24 22 31 24 29 25
Coffee USc/lb 195 195 190 185 258 271 257 230
Cocoa USD/tonne 2,550 2,450 2,350 2,300 3,322 3,042 2,969 2,400
Cotton USc/lb 135 115 90 85 182 168 108 95
Source: Rabobank, Bloomberg, 2011

7. 4 | Rabobank Outlook 2012—Down, But Not Out
Figure 1.3: ICE NY Cocoa; Rabobank forecast vs. actual prices, Figure 1.4: CBOT Corn; Rabobank forecast vs. actual prices,
2010-11 2010-11
3,400 800
750
3,200
700
3,000 650
600
USD/tonne
USc/bu
2,800 550
500
2,600
450
2,400 400
350
2,200 300
Q1'10 Q2'10 Q3'10 Q4'10 Q1'11 Q2'11 Q3'11 Q4'11
Q1’10 Q2’10 Q3’10 Q4’10 Q1’11 Q2’11 Q3’11 Q4’11
Actual Dec 2010 forecast Actual Dec 2010 forecast Apr 2011 forecast
Source: Rabobank, Bloomberg, 2011 Source: Rabobank, Bloomberg, 2011
Our most accurate price forecasts across the year were for oilseeds (soybeans, soymeal, soy oil and palm oil) and wheat,
where negative supply-side issues were less of a factor (see Figure 1.5). Our least accurate forecasts were two of the ‘COs’,
cotton and coffee, where despite the direction of the forecast being correct, the magnitude of the price increases was well
above our expectations.
Figure 1.5: Rabobank quarterly average price forecasts vs.
actual price moves in 2011
70
60
50
40
percent
30
20
10
0
-10
-20
Wheat
Corn
Soybeans
Soy oil
Soymeal
Palm oil
Sugar
Coffee
Cocoa
Cotton
Rabobank December 2010 forecast Actual
Source: Rabobank, Bloomberg, 2011
Our commodity price forecasts are provided as a guide to demonstrate our expectations for price direction throughout
the year—regularly updated in our Agri Commodity Markets Research Monthly reports. In view of the level of volatility in
the macroeconomy and the general uncertainty in 2011, our forecasts from a year ago have turned out to be reasonably
accurate. Our bias for higher prices in the complex proved correct and our top picks—corn, soybeans and coffee—
performed better than expected. The seven key themes we identified all played a role in price movements during 2011,
most notably supply limitations and heightened political risk due to their impact on corn and cocoa prices. As these risks
intensified in Q1 2011, our price forecasts were more accurately revised higher while maintaining a downward bias towards
the end of 2011. Although our forecasts for 2H 2011 appeared bearish against market estimates and the futures forward
curve, our expectations for more balanced fundamentals and an easing in prices have largely played out, and we expect
this to continue into 2012.

8. Section 2 Key themes for agri markets in 2012 | 5
2 Key themes for agri markets in 2012
Economic slowdown Biggest losers
Slowing global economic growth in 2012 We anticipate an increased supply of many
will only have a modest impact on agri agri commodities to result in lower prices in
commodity prices as resilient emerging- 2012, but we do not expect a price collapse
market demand offsets anaemic growth due to supportive demand and only a modest
expectations in the developed world. build-up of inventories. However, as supply is
We expect commodities that have a large forecast to be historically tight for many agri
speculator long position and those with commodities, we anticipate supply-side
a high correlation to global growth, concerns to remain a major supportive factor
including livestock and cotton, to be the for most markets, especially coffee and corn.
most vulnerable to slowing global growth. On the demand side of the ledger, we expect
Commodities with a stable demand base lower international prices to encourage buying
and supportive fundamentals, such as corn and stock-building. In our view, demand loss in
and coffee, are expected to be the least the developed world will be inconsequential
exposed to a contraction in economic growth. even with an economic downturn, as lower
prices encourage commercial buying.
Rabobank sees continued macro uncertainty
Demand growth in emerging markets is
with stagnant growth prospects in the EU
expected to remain robust and a driver
and the US, and resilient but weaker
of prices in the agri complex.
expansion in the emerging-market
economies in 2012 (see Figure 2.1). We view We see the cotton and livestock markets
the prospect of a return to recession as a as most vulnerable to economic contraction
considerable risk for both the US and the EU, and stagnant growth. Total meat and fish
but we expect any contraction to be shallow. consumption in the US peaked in 2004 and
As industry and governments are aware of has been declining ever since due to altered
the recession risk and are positioned diets and reduced incomes. This trend is being
defensively, we expect a downturn to be countered by increased meat and fish
small. Our emerging-market growth forecast consumption in emerging markets, which is
projects a level of growth similar to what was more than enough to offset the reduction in
seen in the first half of the decade, and while US consumption. In our view, the higher
the emerging markets are not likely to be able valued livestock markets will be exposed to
to decouple from the developed world, we demand loss if there are further reductions to
see domestic consumption prospects and household incomes in the US. The high share
proactive governments as reasons these of speculators in the livestock futures markets
economies will avoid being dragged into a is also viewed as a threat since a risk-off sell-
recession by the developed world economies. off could pressure the markets. The speculator
net long in the US livestock markets of

9. 6 | Rabobank Outlook 2012—Down, But Not Out
15 November represented 22% of total open US and EU to stumble along
interest, up from 9% in early June, and up Rabobank’s macro economists are forecasting
from the 2011 average of 18%. Given the economic growth in the US to be slightly
fundamentals, there is a compelling reason lower in 2012 as political deadlock and
for livestock values to be elevated currently, waning consumer confidence result in
but we see the market as particularly economic stagnation. Gross domestic product
vulnerable to macro risks. Since cotton is a (GDP) in the US is forecast to grow at 1.5% in
consumer product, the cotton market is also 2012, down from 1.7% in 2011 and down
highly susceptible to recession, and given the from 3.0% in 2010. In the EU the outlook is
forecast fundamentals in the new season, we bleaker; we expect debt concerns and stalling
see heightened downside risk. Cotton prices member economies to bring about only slim
on the NY market have fallen during the last positive growth. EU GDP is expected to slow
seven US recessions going back to 1970 to 0.4% in 2012 from the 1.6% expected in
(see Figure 2.2). Cotton prices are forecast 2011 and the 1.8% expected in 2010. Our
lower in 2012 due to better supply and modest growth forecast assumes the EU will
lacklustre demand, but weakening economies have found a lasting resolution to the debt
could extenuate the downside correction. crisis. Elevated risks remain skewed to the
downside for both regions as unemployment
Differing underlying fundamentals as well
remains high, market sentiment is weak and
as diverse income elasticities of demand
social unrest is rising.
will result in varied price reactions among
commodities during recessionary events. We We forecast limited demand loss for agri
expect the main economies of the world to commodities in both the EU and the US
remain out of recession in 2012, but as risks of even in the face of a double-dip recession.
a double-dip recession in both the US and the Although real incomes are declining in the
EU are high, we have reviewed the potential US and unemployment is high in both
response in the agri complex. In general, regions, food remains a small part of
recessions do not impact agri commodities discretionary incomes and the consumption
uniformly. In fact, supply dynamics are much of most agri commodities is anticipated
more important for price movements, and to be stable. High-value products such as
this is expected to be the case in the event of livestock or consumer-oriented cotton are
a recession in 2012. Recessions have little the most exposed to economic risk and
effect on the demand side in the developed could be threatened depending on the
world and economic contractions do not scale of a downturn.
generally impact supply, which is much more
Emerging markets to drive demand
dependent on long-term prices and weather.
growth
The downside risk for commodities is much
Rabobank anticipates emerging-market
larger if a sizeable slowdown in emerging
growth to ease in 2012 but demand growth
markets occurs, as this is the source for much
in agri commodities to remain strong. We
of the expected expansion in consumption.
foresee economic growth rates in the
Figure 2.1: Rabobank GDP quarterly growth estimates and Figure 2.2: Performance of the S&P GSCI Agriculture Index over
forecasts, Q1 2000-Q3 2012 the past seven US recessions, Dec 1969-2009
15 600
10 500
400
percent
5
300
0
200
-5 100
0
-10
Oct-11
Apr-01
Apr-73
Oct-76
Apr-80
Oct-83
Apr-87
Oct-90
Apr-94
Oct-97
Oct-04
Apr-08
Dec-69
00Q1
01Q1
02Q1
03Q1
04Q1
05Q1
06Q1
07Q1
08Q1
09Q1
10Q1
11Q1
00Q3
01Q3
02Q3
03Q3
04Q3
05Q3
06Q3
07Q3
08Q3
09Q3
10Q3
11Q3e
12Q3f
12Q1f
e=estimate; f=forecast
US Euro area China Brazil S&P GSCI Agriculture Index Recession
Source: IMF, Rabobank, 2011 Source: Bloomberg, Rabobank, NBER, 2011

10. Section 2 Key themes for agri markets in 2012 | 7
emerging markets to hover near the bottom is significant as household incomes increase
of levels seen just before the financial crisis and demand changes from staple grains to
of 2008/09, with emerging-market growth more protein from meat. The higher share
forecast at 6.5% for 2012, down modestly of income devoted to food in China is also a
from 6.9% in 2011 and 7.8% in 2010, but threat as higher prices can result in significant
modestly higher compared with the 2000- demand destruction. The ongoing
2005 average of 6.0%. In our view, the demographic and agricultural conversion
emerging-market economies will not be from a rural population and fragmented
able to decouple from a slowdown in the production to an urban population and
developed world, but increasing domestic intensive food production will continue in
demand will play a larger role in growth and 2012. Domestic inflation of food prices is
will be supportive for the agri complex. For forecast to ease in 2012 as international agri
Brazil, we expect GDP growth in 2012 of 3.6%, commodity prices fall. This is likely to support
flat from 3.6% in 2011, and we continue to further increases in demand in China. In our
see global demand for agri commodities view, elevated agri commodity prices resulted
as a driving force in the Brazilian economy. in Chinese government destocking in 2011.
The changing diets and increasing urban The need to restock inventories will be a
population in the emerging markets are supportive impact for prices and is expected
expected to remain the drivers for the agri to occur despite the modest forecast
complex. Demand for oilseeds in emerging downturn in economic growth.
markets has grown 110% since 1999 while in
Doomsday outcome
the developed world the increase has been
Rabobank views the likelihood of a recession
12% (see Figure 2.3). Increasing consumption
or major contraction of the Chinese economy
of agri commodities in emerging markets has
in 2012 as very slim. However, a contraction
played a major role in tightening balance
would have major consequences for both the
sheets despite large global harvests in the
global economy and the agri commodity
past two seasons, and we expect this trend
complex. Given the Chinese government’s
to continue in 2012.
readiness to spend vast reserves to
A slowdown in the key Chinese economy in support the economy and to acquire agri
2012 is not expected to impact the growth commodities to alleviate high domestic prices
in agri commodity demand as inventories and avert social unrest, we would expect
are low for many commodities, inflation the agri complex to remain supported even
is elevated and the government has the in the case of slower-than-anticipated
means and will to secure supplies on the economic growth. A hard landing for China
international market to temper and even would have profound negative impacts on
control domestic food prices (see Figure 2.4). the agri complex, but any contraction event
Food costs represent a higher share of would likely only have short-term impacts
household income in China relative to the on the market.
US or the EU. This is an opportunity since the
potential to increase agri commodity demand
Figure 2.3: Oilseed consumption EU and US vs. BRICs, Figure 2.4: Global GDP and agri commodity demand indexed,
1999/00-2011/12f Dec 1986-Dec 2010
160 300 500
150 450
140 250 400
130 350
million tonnes
Dec 1986 = 100
Dec 1986 = 100
120 200 300
110 250
100 150 200
90 150
80 100 100
70 50
60 50 0
Dec-86
Dec-88
Dec-90
Dec-92
Dec-94
Dec-96
Dec-98
Dec-00
Dec-02
Dec-04
Dec-06
Dec-08
Dec-10
99/00
00/01
01/02
02/03
03/04
04/05
05/06
06/07
07/08
08/09
09/10
10/11
11/12f
Corn demand Soybeans demand
US and EU BRICs Sugar demand Global GDP (RHS)
Source: Rabobank, USDA, 2011 Source: USDA, Rabobank, IMF, 2011

11. 8 | Rabobank Outlook 2012—Down, But Not Out
Economic outlook
Recession or slowing economic growth will
be a threat to the agri commodity markets in
2012, but in our view the expected resilient
demand growth from many agri commodity
markets in emerging economies will help
mitigate the impacts from any economic
downturns. We anticipate lower-than-average
stock levels of many agri commodities to
support prices; while harvests are expected
to be large, encouraged by the high prices,
the supply response is still catching up to
demand. In our view, a recession, if it does
occur, would be expected to be shallow
and not to impact agri commodity demand.
However, cotton is viewed as more
susceptible to a downturn, and livestock
consumption can also be impacted by
recession, but we see emerging-market
demand expansion as more than sufficient
to make up for demand losses in the
developed world. We anticipate lower prices
in 2012 as a function of better supply; this
will support demand despite the heightened
global macro uncertainty.

12. Section 2 Key themes for agri markets in 2012 | 9
Speculators and the US dollar likely against most other commodities in
Weak fundamentals for the US dollar should 2012. Loose monetary policy conditions in
produce a period of further devaluation the US following two rounds of quantitative
versus most other currencies throughout easing in 2008 and 2010, ongoing record
2012, providing upside support for most low interest rates, high unemployment and
agri markets. But as we have seen in 2011, anaemic growth expectations for the US
fundamentals do not always matter. economy are expected to see most other
Rabobank’s base-case macro and foreign currencies outperform the US dollar over
exchange forecasts suggest that a weaker the next 12 months. However, we do expect
US dollar environment will reappear again to see some recovery of the US dollar against
in 2012. While global financial market and major commodity currencies in 2012, which
macroeconomic uncertainty remain a we believe are overvalued.
significant risk to our forecasts, particularly
These weaker fundamentals for the US dollar
if the trend of widespread risk aversion
look set to reassert themselves in 2012, and
continues from 2011 into 2012, a generally
while the US Federal Open Market Committee
weaker US dollar should be a supportive
(FOMC) has not indicated they will implement
factor for the agri complex in the year ahead.
another round of quantitative easing stimulus
Unsurprisingly, we do not expect the (QE3) at this stage; they have not ruled it
weakness of the US dollar to be uniform out either, and we expect this to remain in
in magnitude or even direction, with the play throughout 2012. Even without QE3,
potential for short-term upside against US Federal Reserve policy measures look
the euro afflicted by political paralysis and set to remain loose, with US Federal Reserve
disunity in the member bloc. However, against Chairman Bernanke explicitly stating that
other currencies we see further downside for the federal funds rate was set to remain at
the US dollar from current levels, improving an “exceptionally low level at least through
both the purchasing power of emerging- mid-2013” given conditional economic
,
market importers and the competitiveness conditions. Our forecasts do not see a case
of US agricultural exporters against many for strong enough growth in 2012 to move
of their key competitors (see Figure 2.5). We FOMC policy from current levels. A risk to
would expect most prices within the agri this view is the possibility that the European
complex to appreciate in a weaker US dollar Central Bank could become the lender of
environment. We highlight corn, wheat, last resort which would have a longer term
soybeans and lean hogs as the biggest drag on the euro, balancing the poor US
winners in the complex as the US export dollar fundamentals.
market improves on a weaker dollar.
Recovery from the current challenges appears
Once the dust settles on the EU debt crisis, likely to be protracted and hence we see
we expect focus to return to weaker loose monetary policy and a weak US dollar
fundamentals for the US dollar, with downside as capable of buttressing the US economy.
Figure 2.5: Rabobank FX forecasts, 2012
Q1’12 Q2’12 Q3’12 Q4’12
EUR/USD 1.33 1.39 1.45 1.48
USD/JPY 78.00 79.00 82.00 83.00
GBP/USD 1.56 1.62 1.69 1.74
USD/CHF 0.93 0.90 0.90 0.91
AUD/USD 1.00 0.98 0.97 0.95
NZD/USD 0.76 0.75 0.74 0.73
USD/CAD 1.00 0.99 0.98 0.98
Source: Rabobank, 2011

13. 10 | Rabobank Outlook 2012—Down, But Not Out
‘Flight to safety’ has become a common complex and key macro indicators jumping
catch cry in 2011 and, given the ongoing sharply to reflect the focus of the EU debt
macroeconomic uncertainty, risk aversion crisis (see Figure 2.7). As this continues to
may well continue to be a key theme in 2012. play out, we expect uncertainty to remain
This macro uncertainty—primarily the result elevated, resulting in a continuation of high
of the EU debt crisis, but also influenced by correlation between most asset classes
bipartisan politics in the US and mounting continuing into 1H 2012.
worries of a Chinese economic slowdown—
Speculators abandon ags
has created a risk-on/risk-off trading
Speculative money flows will largely be
environment in all markets over the past
determined by the macro environment in
12 months. Risk-off has meant a withdrawal
2012, with a clear resolution in the euro area
of funds from emerging market assets and
needed to restore confidence levels amongst
currencies, as they are perceived to be higher
investors. Over the past 12 months, we have
in risk than the US dollar, despite growth
seen diverging dynamics: the first half of the
prospects in these markets remaining much
year saw surging agri markets attracting
stronger than in most developed economies.
additional investor inflows as an inflationary
For agricultural prices, this has compounded
hedge amid rising world food prices, while a
price volatility as speculators have not only
flight to safety resulted in significant net
shifted into and out of the underlying agri
outflows of investor capital from agri markets
markets, but also between the commodity
in the second half of the year. Looking ahead,
currencies and the US dollar (see Figure 2.6).
a sudden and complete return of investor
Looking ahead to 2012, the challenge
money into the agri complex appears
becomes one of macro uncertainty and
diminished as the macro uncertainty is likely
whether we continue to see periods of
to remain for some time to come. We also
extreme risk aversion continuing in 2012.
expect there will be less of a constructive
Correlation spike fundamental story in agri markets in 2012 as
The extreme macro uncertainty has resulted fundamentals appear more in balance than in
in all asset classes becoming even more recent seasons.
intertwined over the past 12 months. Broader
Winners and losers
themes such as liquidity, political risk, financial
Based on Rabobank’s forecast of a weaker US
stability, austerity measures and social unrest
dollar against most developed and emerging-
have all resulted in agri markets, currencies,
market currencies over the next 12 months,
equities and other asset classes becoming
commodities produced and exported from
highly correlated for most of 2H 2011. Recent
the US are the most likely to benefit. Further
developments have escalated fears of
devaluation of the US dollar in 2012 will add
contagion. Globally, there are considerable
support to what we expect to be resilient
concerns as to whether individual commodity
emerging-market demand for agricultural
or asset class fundamentals have become
commodities (see Figure 2.8). Recent years
mostly irrelevant as focus has shifted from risk
have seen considerable decoupling of
appetite to risk aversion. In September 2011,
emerging-market currencies from the US
we saw the correlations between the agri
Figure 2.6: Managed money net long positions in agri Figure 2.7: Correlation between the agri complex and key macro
commodities vs. S&P GSCI Agriculture Index, Jan 2007-Nov 2011 indicators, Jan 2007-Sep 2011
600 1,400 0.7
daily price correlation to MSCI World Index
550 1,200 0.6
S&P GSCI Agriculture Index
500 1,000 0.5
thousand contracts
450 800 0.4
400 600 0.3
350 400 0.2
300 200 0.1
250 0 0
Jan-11
May-11
Sep-11
Jan-07
May-07
Sep-07
Jan-08
May-08
Sep-08
Jan-09
May-09
Sep-09
Jan-10
May-10
Sep-10
2007 2008 2009 2010 2011 Sep-2011
S&P GSCI Agriculture Index CBOT Corn NY ICE Sugar
S&P GSCI Agriculture Index Managed money net long (RHS) CBOT Wheat Average (Rabobank coverage)
Source: CFTC, Bloomberg, 2011 Source: Rabobank, Bloomberg, 2011

14. Section 2 Key themes for agri markets in 2012 | 11
dollar, which enables additional purchasing
power in a weaker US dollar environment.
In the instance of China, one of the key
destinations for US agricultural exports, looser
regulatory control has seen the Chinese
renminbi gain 7%-8% versus the US dollar
since mid-2010 and over 23% since 2005. We
are forecasting a near-record 4 million tonnes
of corn to be exported to China in the
2011/12 season and, given domestic supply
concerns and inflationary pressure from
historically high grain prices, a weaker US
dollar versus the renminbi may encourage
further imports to help meet burgeoning
domestic demand. Similarly, we also see
additional demand support from a weaker
US dollar for soybeans, pork and beef.
A weaker US dollar can also alter trade flows
by providing improved competitiveness for
US agricultural exports on the world market.
Commodities we see as most likely to benefit
from this are the key US grains and oilseeds
such as corn, soybeans and, to a lesser degree,
wheat. US beef and pork exports will also
likely benefit from a devaluation of the US
dollar, although market access tends to be a
more potent determining factor for these
markets. While the US dollar is forecast to
weaken against most currencies, we are
forecasting it to strengthen against the
Australian and New Zealand dollars and to
hold fairly stable relative to the Canadian
dollar. Although these commodity currencies
are generally defined by their economies’
reliance on metal and energy exports,
agricultural exports from these countries can
compete with US exports for global market
share. For example, wheat exports from
Australia will likely benefit from a weakening
Australian dollar relative to the US dollar.
Figure 2.8: USD index and S&P GSCI Agriculture Index, 1993-2011
120
550
110
450
100
350
90
250
80
70 150
2001
2011
1993
1995
1997
1999
2003
2005
2007
2009
USD index S&P GSCI Agriculture Index
Source: Rabobank, Bloomberg, 2011

15. 12 | Rabobank Outlook 2012—Down, But Not Out
Policy risks world will see pressure to cut subsidies to
Global agricultural markets are being farmers who are operating in an environment
increasingly politicised, impacting global of near-record agri market prices. With this
agricultural trade, contributing to heightened in mind, forecasting the political risks to the
supply uncertainty and lifting price volatility. world’s food basket, and the prices at which
Geopolitical factors, such as the 2010/11 it is available, will become a more complex
Black Sea region grain export bans, and a task in 2012.
return of civil war to the Ivory Coast, had
We see corn and cocoa as especially
significant impacts on agricultural markets
vulnerable to political risks in 2012, although
(see Figure 2.9). We believe that 2012 will
fundamentals are improving for both as
once again see political intervention as an
producers responded to higher prices by
important determiner of winners and losers
increasing production in 2011. The risk
in the agri complex.
spectrum for the agri complex is skewed
It is important to note the difference between further upward in 2012 as political risks pose
the ongoing political battles in the arena of larger threats to global trade balances.
general fiscal policy and political changes
Fuelling policy speculation
directly applicable to the agri complex.
The 2012 US Presidential Elections represent
Our particular focus is on the potential
the largest potential stumbling point for US
for protectionist responses to exaggerate
agricultural support mechanisms in several
supply shocks.
years. Despite market rhetoric, the US has the
Protectionist responses to weather anomalies, fourth-lowest producer support estimate as
which are likely to increase as the threat of a percentage of GDP in the OECD, indicating
climate change looms larger, are on the rise. comparatively low net transfers to the agri
Market sensitivity to rising food inflation in complex. However, as rounds of budgetary
the developing world is increasing. Upcoming negotiations should bring about substantial
presidential elections in the US pose a risk reductions in US agricultural subsidies from
to renewable fuel subsidies. Perhaps most 2012 onwards, support is likely to decrease
important of all, the over-indebted developed even further.
Figure 2.9: Policy risk hotspots in 2012
Black Sea
region export bans
Chinese strategic reserves
Ethanol policy review and self-sufficiency
Sugar export quotas to
support domestic prices
Civil wars and cocoa-OPEC
Export tariffs and
industrial action
Source: Rabobank, 2011

16. Section 2 Key themes for agri markets in 2012 | 13
The biggest unknown, and a potential risk Because the blender’s credit is unlikely to
for prices for the agri complex in 2012, is be extended and the RFS2 is unlikely to be
the US corn ethanol/biodiesel policy. Ethanol repealed, we believe that policy risks only
demand for corn, which in 2010/11 eclipsed pose marginal risk to corn ethanol production
domestic feed consumption for the first time, in 2012, with spot- and implied future margin
is currently supported through three major analysis showing that distilling and blending
mechanisms: ethanol in the US is currently a profitable
endeavour (see Figure 2.10). This runs against
• Tax credit for blending ethanol with
common perception, which still suggests that
gasoline, known as the blender’s credit is,
ethanol blending would suffer immensely
currently USD 0.45/gallon. This is expected
without the blender’s credit. This being said,
to expire at the end of 2011.
there remains announcement risk, which
• The expanded Renewable Fuels Standard could drive down ethanol production and
(RFS2) mandates levels of renewable fuel prices in the short term as the agri complex
blending, but caps the level of corn starch adjusts to a changed operating environment.
ethanol. Production above this level does
Global oil policy has a strong impact on the
not contribute towards the total mandate.
agri commodities complex, both through
For 2012, the mandate is 15.2 billion
demand, as it affects global economic growth,
gallons, of which no more than 13.2 billion
and more directly through driving half of the
gallons, approximately equivalent to
ethanol profitability equation. Following
4.9 billion bushels of corn, can come from
stimulus programmes introduced by Saudi
corn starch ethanol.
Arabia during the Arab spring of 2011, it is
• A USD 0.54/gallon import tariff to support likely that OPEC will calibrate production
the domestic industry. As imports are not through the 2012 calendar year to maintain
currently economical, we do not consider prices of USD 100/barrel or higher to try to
the import tariff a crucial piece of the maintain a moderate fiscal surplus in the
ethanol puzzle in the current environment. coming years. All else remaining equal, at
This is expected to expire at the end these levels, we would need to see corn prices
of 2011. at USD 6.80/bushel before US ethanol
distillery profits turn negative on a spot basis
The current environment sees an increased
and capacity is taken off-line.
risk of a political turnaround, and subsequent
repeal, of supportive policies in the US The re-emergence of protectionism
compared to recent years. However, there The increasing reliance on nontraditional
have been remarkably few cases of federal exporters to meet the world’s agricultural
laws being repealed in US history and this demand leaves a number of markets in the
gives us little reason to expect that the RFS2 agri commodity complex more vulnerable
mandate will be wound back, reformed or to supply-side shocks through policy
repealed in 2012, as congressional vested intervention. Compounding this price risk is
interests are likely to prove more powerful the fact that we continue to see historically
than the anti-deficit lobby. low inventory levels for a number of
Figure 2.10: US ethanol profitability estimates, Jan 2008-Jan 2012f Figure 2.11: Commodity risk profiles, 1980/81-2011/12f
1.0 2.0
1.8
Trade-weighted risk assessment
1.6
0.5
1.4
USD/gallon
1.2
0.0 1.0
0.8
Refinery purchasing of
December ethanol in 0.6
-0.5 regulatory arbitrage 0.4
before tax credit expiry
0.2
-1.0 0
80/81
83/84
85/86
87/88
89/90
91/92
93/94
95/96
97/98
99/00
01/02
03/04
05/06
07/08
09/10
11/12f
Jan-08
Jan-09
Jan-10
Jan-11
Jan-12f
Producer margin Blender spread Corn Wheat Soybeans
Source: Rabobank, Bloomberg, 2011 Source: Rabobank, Polity IV Project, USDA, Food and Agriculture Organization of the
Note: Blender spread is the price of RBOB Gasoline-Denatured Ethanol, which approximates United Nations, 2011
the blending operating profit of US oil refineries. Producer margin is the estimate of
the profitability.

17. 14 | Rabobank Outlook 2012—Down, But Not Out
commodities, with protectionist policy becomes an increasing aim of the
decisions more easily resulting in trade government. The risk of an economic
deficits or supply shortages. Supply slowdown and a reduction in support
also tends to be less reliable in these programmes would have only a marginal
nontraditional export countries due to effect on imports, as the government
weather vulnerabilities, logistical constraints would remain incentivised to encourage
and a lower degree of social stability, all domestic consumption.
factors which lend themselves to a greater
Grains and oilseeds
tendency towards political intervention.
In 2012, a record share of world grain exports
Unsurprisingly, this results in markets having
will come from the Black Sea region and
to factor in risk premiums to account for the
South America, potentially surpassing the
uncertainty for both producers and
share of the EU and the US (see Figure 2.12).
consumers, thereby heightening near-
This creates higher political risk and volatility
term volatility.
in markets as they grapple with the feast or
We see grains, oilseeds and cocoa as the famine nature of exports from these rapidly
commodities in the agri complex most at risk developing regions.
in 2012. Our custom assessment of trade-
A large part of this political risk is derived
weighted geopolitical risks for sections of
from the grains complex being regarded as
the agri complex highlights the increasing
a strategic national imperative, particularly
political risk inherent to the corn and
true for the Black Sea region. This leaves
soybeans markets as marginal production
agri markets increasingly dependent on
shifts from the developed to the developing
interventionist governments in the Black
world (see Figure 2.11). We have generally seen
Sea region, the main exporters of which
improving risk profiles for soft commodities
are Russia, Ukraine and Kazakhstan. Best
though they have higher absolute levels,
demonstrating their potential for
despite being exacerbated by higher
protectionist actions were the export bans
exportable quantities which skews our metric
imposed by Russia from 2010 to 2011,
higher. Low stocks-to-use ratios across the
Kazakhstan in 2008, and Ukraine in 2007
agri complex would further aggravate the
and 2010/11.
price effects of any changes in the political
situation in the agri complex, such as: Additionally, the Ukrainian government
recently enacted laws to facilitate control over
• The potential for grain export bans or the
the country’s exports in conjunction with a
resumption of prohibitive export tariffs
relaxation of export duties. The fact that
in the Black Sea region is compounded
CBOT Wheat prices rose 15.6% in the two
by the likelihood the policies of the
days spanning the imposition of the Russian
constituent countries would move
export ban demonstrates the immediate
in parallel.
impact such moves can have on markets.
• With large shares of global grain and This move came in spite of market
oilseed supply flowing from Brazil positioning already anticipating a yield
and Argentina, there is a possibility that reduction of 8% following the previous
a particularly damaging La Niña could month’s USDA WASDE report.
encourage these governments to enact
As the trend towards an increasingly
policies to support domestic stocks and
important role of nontraditional and more
usage. Trucking industrial action in
risky suppliers continues, substantial risk
Argentina in October 2011 highlighted
premiums have been, and must continue
this susceptibility. Prohibitive export tariffs
to be, built into grain and oilseed prices.
on soybeans in Argentina continue to
Increasingly strong buying from major
create tension between the government
importers will ensure that any supply
and farmers.
disruptions from these regions will be met
• West Africa remains politically volatile and with significant price rises.
we see further protectionist steps being
As marginal increases in world production
taken in 2012 as Ivory Coast considers
come increasingly from countries with higher
establishing a single-buyer policy.
levels of political risk, the market tends to
Production concentration in this region
apply higher risk premiums to prices in the
heightens this risk.
short term as the chance of supply
• Changes in Chinese engagement in the disruptions increases. We see this tendency
import market are likely to be supportive being compounded by political
of prices, as domestic food-price stability overreactions, mainly taking the form of

18. Section 2 Key themes for agri markets in 2012 | 15
export bans, which loom large in the market’s whether hard landing, soft landing or
memory following the measures taken by maintaining the status quo—are likely to
Russia in response to the 2010/2011 drought. have a smaller effect on demand for imports
Export bans should be seen as a likely than is generally expected. We expect that
response to any significant deterioration of the government’s bias in an environment
the domestic inflation picture in the Black of renewed world democratisation and
Sea region. seemingly less constrained domestic dialogue
will be towards increasing focus on street-
A key threat to the global corn complex
level inflation and the price paid for food
is the economic fragility of South America.
by the average Chinese citizen, reinforcing
Argentina in particular has experienced
the status quo.
consistently high inflation, as well as regular
protests and export tariffs that prove a These effects are a big source of uncertainty
common hindrance to trade and remain for markets and are compounded by the fact
a risk for prices (see Figure 2.13). Having that Chinese supply/demand balances are
integrated into global export markets, notoriously opaque. Our analysis suggests
Argentina and Brazil now have a critical piece that inventories of grains and oilseeds
of world trade. In addition to political risks, remain below levels we think the Chinese
both countries have large domestic markets government expects in order to meet their
they need to satisfy, and a very real risk goal of enhancing domestic price stability.
remains that policies could be introduced
West Africa
to support domestic use in the event of a
Most of the world’s cocoa supply is still
supply-side shock.
drawn from West Africa, a region which
Chinese import policy remains politically volatile and prone to civil
The Chinese government and its economy war as seen in 2010/11 in Ivory Coast, the
are perhaps more closely linked than those world’s largest cocoa producer. This political
of any other major power and, as a result, risk remains, though difficult to quantify, with
the ruling party is able to exert more control the largest risk being the return of civil war to
over agricultural trade flows than elsewhere. the Ivory Coast, followed by the introduction
With this in mind, we believe there is more of a central buyer there, as seen in Ghana,
impetus for the Chinese government to to provide price stability. The Ivory Coast
increase than to reduce imports of agri government can reasonably expect
commodities in 2012. that mimicking the policy of its neighbour
will limit the cross-border smuggling that
We forecast a slowing rate of economic
is currently taking place in order to take
growth to have little effect, and it may even
advantage of, or arbitrage, the price
stimulate import demand in the face of
differential between the two nations. The
continuing government rhetoric about food
next obvious step is West African regional
self-sufficiency. This is driven by domestic
integration to form a cocoa OPEC, though
pressure to see real wealth growth for the
we see the risk of this happening as minimal.
public at large and to hold political unrest at
bay. Changes in China’s economic trajectory—
Figure 2.12: World wheat and corn exports by region, Figure 2.13: Argentina’s inflation profile, YOY change in price
1961/62-2011/12f indices, Dec 2000-Oct 2011
140 300
250
120 250
200 100 200
80 150
million tonnes
percent
percent
150
60 100
100 40 50
20 0
50 0 -50
-20 -100
0
Oct-01
Oct-11
11/12f
61/62
63/64
65/66
67/68
69/70
71/72
73/74
75/76
77/78
79/80
81/82
83/84
85/86
87/88
89/90
91/92
93/94
95/96
97/98
99/00
01/02
03/04
05/06
07/08
09/10
Dec-00
Aug-02
Jun-03
Apr-04
Feb-05
Dec-05
Oct-06
Aug-07
Jun-08
Apr-09
Feb-10
Dec-10
US EU South America Black Sea region Other CPI CPI: Food and beverages Big Mac Index Argentina (RHS)
Source: Rabobank, USDA, 2011 Source: Rabobank, Bloomberg, The Economist, 2011

19. 16 | Rabobank Outlook 2012—Down, But Not Out
The risks of production concentration in
such volatile countries mean there is a
significant upside skew to the cocoa price,
contingent upon changes in the West African
political situation.
Elections
Elections provide significant scope,
outside the expected changes to agricultural
policy, to catalyse protectionist policy
implementation for short-term economic
gain. Any such policy action, be it new tariffs
or accommodative domestic policy, can be
easily justified as responding to perceptions
of global economic uncertainty to ensure
domestic stability. We will monitor a number
of specific elections during 2012 in which we
see potential surprises for markets and
resulting price effects for agri commodities
(see Figure 2.14).
Figure 2.14: Selected political events, 2012
Estimated date Assessed agri Event description
market impact
US 3 January Low First Republican party primary in Iowa
Egypt January-March Low Parliamentary election
Russia 4 March Low-moderate Presidential and local elections
US 6 March Low Super Tuesday, 10 states; Republican party candidate
Iran 29 March Moderate Parliamentary election
France 22 April Moderate Presidential elections, first round
France 10 June Moderate Parliamentary elections, first round
Mexico 1 July Moderate Presidential and parliamentary elections
India July Low Presidential elections (elected by parliament)
Kazakhstan August Moderate Parliamentary elections
Turkey August Low Presidential elections
Brazil 7 October Moderate Municipal elections, first round
Ukraine 28 October High Parliamentary elections
October 2012-
China Moderate Communist party internal leadership selection
March 2013
US 6 November Moderate Presidential, House and 1/3 of Senate elections
Ghana December Moderate Presidential and parliamentary elections
Source: Rabobank, relevant governments, Bloomberg, New York Times, 2011

20. Section 2 Key themes for agri markets in 2012 | 17
Capacity constraints heavily on higher-risk production regions
Supplies of a number of agri commodities will such as the Black Sea region. At the same
remain historically low in 2012 as the world’s time, the break-even price in these countries,
capacity to respond to elevated prices by many of which are in historically low-cost
increasing production continues to be areas, is increasing as production costs rise
constrained. Many agricultural markets and credit remains tight. We expect these
remain susceptible to supply-side shocks supply constraints to be compounded by the
as inventory levels remain tight—though already low inventory levels, which will
not at historical lows for most commodities— continue to be supportive of agri commodity
and high production costs, lack of land prices in 2012 (see Figure 2.15). This is reflected
availability and capital restrictions limit by our base-case price forecasts, where
a recovery in inventories. we expect to see a slight easing in most
commodities, but a very soft landing with
We forecast global ending stocks to decline
prices remaining at historically elevated levels.
in 2011/12 for five of the eight commodities
included in our coverage, most notably in Supply squeeze
coffee (-24%), soybeans (-11%) and corn (-7%). Supplies of most agri commodities leading
More modest declines are forecast for wheat into 2012 remain precariously tight with
(-3%) and cocoa (-2%), while stocks are some at or near record low stocks-to-use
forecast to build for cotton (20%), palm ratios. The USDA forecasts the world’s total
oil (12%) and sugar (11%). Most of the grain and oilseed stocks-to-use ratio to
commodities for which we forecast to see a decline in 2011/12 to below 20%—the lowest
decline in stocks despite record high or near level since 2007/08. This is despite the USDA’s
record high production also experienced forecast for the global grain and oilseed area
smaller incremental growth in production. harvested to increase by the largest amount
This is unlike previous cyclical commodity since 2008/09 and to reach a record large
bull rallies where production increased at 755 million hectares. The primary driver across
a pace sufficient to meet growing demand the complex is the tightening of the corn
and replenish stocks. Global grain and balance sheet for a third consecutive year,
oilseed stocks-to-use ratio, for instance, bringing the stocks-to-use ratio to the lowest
have remained below the long-term average level in nearly 40 years. The persistent low
for the past 10 years, despite elevated year- level of global corn stocks in the face of
on-year increases in production. record high prices and production will
continue to be a key price determinant across
Much of the low-hanging fruit in terms of
the entire complex in 2012, despite a sharp
production growth through land expansion
year-on-year increase in global wheat
and yield advancements has been exploited,
production. With corn production unable
causing output growth to be more expensive
to surpass consumption for a second
and have a higher risk profile. In 2012, we
consecutive year, the ability to replenish
expect production growth will be hindered
inventories of crops which lost planted area
by the limited availability of global arable
to corn in 2011—as soybeans did—will also
land, which is causing the world to rely more
be challenged. As a result, we expect corn
Figure 2.15: Global grain and oilseed stocks-to-use and 5-year
average YOY change in production , 1969/70-2011/12f
35
80
YOY change (million tonnes)
30 60
percent
40
25
20
20
0
15 -20
69/70
75/76
79/80
83/84
87/88
91/92
95/96
99/00
03/04
07/08
11/12f
Stocks-to-use 5-year average change in production
Source: Rabobank, USDA, 2011

21. 18 | Rabobank Outlook 2012—Down, But Not Out
to lead the grains and oilseeds complex as Europe and the US), which also have the
for the beginning of 2012, keeping the smallest amount of production constraints,
soybean-to-corn price ratio historically has flatlined, pushing an increased share of
low and challenging wheat’s historical production growth to countries such as
premium to corn. Russia, Brazil, Ukraine and Argentina.
The world’s reliance on these emerging
Risk aversion may limit the amount of
agricultural producers is expected to increase
capital deployed to increase agri commodity
to a record high 18% in 2011/12, reducing
production in 2012 (see Figure 2.16).
traditional exporting countries’ share to
Continued uncertainty surrounding the
below 40% for the first time on record.
economic and political outlook for 2012
is likely to curb the amount of capital As their market share has increased in recent
deployed in the global agriculture sector. years, so too has the variance in global yields
At the farmgate level, producers will be for corn, soybeans and wheat (see Figure 2.17).
hesitant to invest in large purchases or land While it is still too early to determine yield
expansion as they are uncertain of future levels for the 2012/13 crop, the outlook for
returns. Political debates surrounding winter crops in the Black Sea region is already
the continuation of many government being closely monitored due to adverse
programmes which support the agriculture planting conditions. Over 30% of Ukraine’s
sector further fuel this uncertainty. This theme new crop winter grain could be lost due to
of conservatism will play out more strongly the current drought.
in regions that are deemed to be higher risk
As global agri commodity production
by investors who are withdrawing from
continues to expand into emerging markets,
emerging markets in a ‘flight to safety’. From
so too will the battle for acres which persists
an agricultural perspective, this will impact
in developed economies such as the US and
those countries that have shown the largest
the EU. This battle is likely to intensify in 2012
growth in production in recent years: the
as the increase in grain area harvested in 2011
emerging markets. Additionally, a more
(at the expense of oilseeds) did not result in a
conservative outlook for the economic
sufficient production response to replenish
growth in emerging markets will likely
stocks. Yet at the same time, the stocks-to-use
limit the volume growth in loans to the
ratios of vegetable oils are likely to fall to their
agriculture sector.
lowest levels in nearly 40 years for a second
Increased yield volatility consecutive season. This will likely cause
The market share of global agricultural ending stocks of both grains and oilseeds in
production capacity in countries with higher 2011/12 to show a year-on-year decline for
yield variance will continue to grow in 2012. the first time since 2003/04. We expect corn
We expect the market share of regions with values to offer Northern Hemisphere farmers
elevated production risks, such as the Black higher profits than other row crops, further
Sea region and Argentina, to rise further in reducing the area available to plant to
2012. The production capacity in traditional oilseeds and cotton.
agri commodity producing countries (such
Figure 2.16: Brazil financial system loans to agriculture and Figure 2.17: Global yield variance and production shares
YOY change in Brazil’s total area planted, 2002/03-2011/12f
4 20 5 22
18
20
YOY Change in BRL billion
3 16 4
million hectares
2 14 18
percent
percent
12
1 10 3 16
8
0 6 14
2
-1 4
12
2
-2 0 1 10
02/03
03/04
04/05
05/06
06/07
07/08
08/09
09/10e
10/11f
11/12f
81/82
86/87
91/92
96/97
01/02
06/07
11/12f
Global yield variance of corn, soybeans and wheat
YOY change area planted Agriculture loans to Brazil (RHS) Argentina, Brazil and Black Sea region share of global production (RHS)
Source: Rabobank, CONAB, Bloomberg, 2011 Source: Rabobank, USDA, 2011

22. Section 2 Key themes for agri markets in 2012 | 19
Higher price floors potential as prices still remain below the
The cost to produce agri commodities will highs achieved in 2008. Furthermore, the
continue to increase in 2012, raising farmers’ diminishing availability of new arable land
break-even levels and creating higher floor will push farmers to invest more in crop input
prices. Higher production costs will limit the technologies such as seeds and equipment
downside price potential for most agri to increase production through higher yields.
commodities in 2012 as prices must persist This more capital-intensive per hectare cost
above break-even in order to encourage of growing crops against a backdrop of risk
farmers to increase production. The cost aversion by lenders will increase the price
to produce crops such as wheat and corn incentive required by farmers.
(globally weighted by production) has
roughly doubled over the past 10 years.
Nearly all of the cost components—such as
fertiliser, energy and land—are expected to
remain elevated for the 2012 season. Not
only have average global production costs
increased, but the gap between low-cost
producing countries and marginal producers
has also narrowed. For instance, the
cost advantage of producing wheat in
Russia as compared to the US fell from
USD 250/hectare to less than USD 50/hectare
in 2011. This trend of diminishing cost
advantages of countries with a higher risk
profile is likely to continue in 2012, which
will consequently limit their ability to offer
exports at a discounted price relative to
higher-cost producing countries.
We expect this higher cost structure to
persist in 2012, driven by higher energy prices
and strong farmer demand due to the high
profits achieved in 2011 (see Figure 2.18).
Fundamentals in both the energy and
fertiliser markets will remain supportive of
prices in 2012 as capacity growth is slow to
respond to demand growth. Global fertiliser
consumption is likely to have risen 2.5% to
176.4 million nutrient tonnes in 2011/12—a
second year of record high demand. Although
we do not expect fertiliser prices to reach new
highs in 2012, we do see further upside price
Figure 2.18: Index of global corn and wheat production costs
and prices, 2000-2011f
400
350
300
2000=100
250
200
150
100
50
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011f
Wheat production costs Corn production costs
CBOT Wheat CBOT Corn
Source: Rabobank, IHS Global Insight, USDA, Bloomberg, 2011

23. Section 3 Agri Commodity Outlooks | 21
3 Agri Commodity Outlooks
Given the highly uncertain macro economic We also adopt Rabobank’s global FX
environment at present, we have decided strategists’ forecasts as our base case, which
to provide some scenario parameters for shows limited moderation in the US dollar
our price and fundamental forecasts this expected against most currencies in 2012,
year. These three scenarios are provided although we factor in some upside relative
to give some guidance on our level of to commodity currencies.
confidence in our forecasts and the macro-
Our base case implies little impact on
level assumptions we have applied in
demand from an agricultural perspective,
formulating these forecasts. Our base-case
other than perhaps a continuation of protein
macro and FX scenarios have been applied
demand substitution—from red meat to
to our central forecasts for each of the
poultry—in the struggling developed
various agri commodities.
economies. This scenario also assumes very
Base case: Stumbling along limited impact on agricultural demand from
In the base case, Rabobank’s macroeconomics emerging-market economies, with growth
team suggests that the most likely outcome expected to continue at trend levels, which is
for the global economy in 2012 will be one supportive for almost the entire agri complex.
of very weak but positive global economic
High case: Recovery stronger and faster
growth. We apply this as the central driver
than expected
for the base case in our commodity price
The major assumption we factor into this
forecasts. A mild double-dip is expected in
scenario is a quicker and stronger recovery in
the major developed economies of Europe
global growth conditions than we currently
and the US, but importantly for agricultural
forecast. This would require a swift and clear
demand, only a minor softening in growth
resolution to the euro-area crisis, a reversal in
is forecast for emerging-market economies.
investor money flows back into commodities
A lot will no doubt depend on the timing
and higher growth economies, and a return
and effectiveness of a resolution of the
of confidence to global markets. In this
troubles in the euro area, which at this stage
scenario, agricultural demand would remain
still seems some way off. We assume that a
robust in both developed and emerging-
workable solution will be in place by Q1 2012
market economies. We expect this scenario
and we factor in a break-up of the bloc as
would provide a stronger devaluation of the
only a 10% to 15% probability. This scenario
US dollar as safe-haven assets are sold in
implies a modest reversal in investor money
search of growth.
flows, but not a complete return to the
risk-on environment of 2010. Significant
range-bound trading with choppy markets
and a lack of clear flat price direction
would be likely.

24. 22 | Rabobank Outlook 2012—Down, But Not Out
Low case: From bad to worse
This is our downside scenario for world
growth and demand. Here we factor in a
prolonged EU debt crisis, with the debt
concerns spreading to the core countries
of the bloc. Contagion fears paralyse markets
in Europe with knock-on effects globally
and sustained risk-off environment results.
Importantly for our agri complex forecasts,
in this scenario we factor in a substantial
contraction in emerging-market growth
which would significantly crimp demand and
imports of key agri commodities. Consumers
would be forced to transition to lower cost
sources of calories and proteins. In this
scenario, a stronger US dollar environment
would likely persist in 2012 as liquidity and
safe-haven assets are sought by investors.

25. Section 3 Agri Commodity Outlooks: Wheat | 23
WHEAT
Q3’11 Q4’11f Q1’12f Q2’12f Q3’12f Q4’12f 12-month outlook from spot
CBOT wheat USc/bu 688 610 595 630 615 595
Matif wheat EUR/tonne 199 170 162 175 172 166
800
750 Low case Base case High case
700 Support from coarse Wheat prices continue Winter wheat
grain markets fades to be supported by abandonment and
650 more quickly than coarse grain prices― yield deterioration
600 expected particularly in the US exceed expectations
USc/bu
550 as drought in the
At-trend exports from Global demand southern states of
500 the major producers accelerates in 2011/12, the US intensifies
450 drive 2012/13 global largely offsetting the
stocks-to-use fourth largest global Drought conditions
400 intensify, severely
above 33% wheat crop on record
350 affecting crops in
300 Crop conditions Poor winter wheat the Black Sea region
improve in spring, planting conditions in
2010 2011 2012 and global yields the US and Ukraine US corn fundamentals
exceed our sub-trend, result in sub-trend tighten more than
base-case forecast crops―but not a total expected, forcing
Historical Base case Low/high case Spot
crop failure prices into a
rationing mode
Source: Bloomberg, Rabobank
Lower wheat prices are forecast for 2012 than risk to our base-case forecasts come from
we have seen in 2011, however from current production uncertainty for the 2012/13
spot levels our view is neutral. While a tight season, with incremental wheat production
feed-grain balance sheet is expected to being generated in more politically volatile
provide some support to wheat prices, and less reliable climatic regions as discussed
particularly in the US, elsewhere we see the in our capacity constraints section.
sharp recovery in wheat production having
Global wheat production is forecast to
a bearish impact on prices, relative to the
increase 6% to 684 million tonnes in the
levels achieved in 2011.
2011/12 season, the second largest crop on
Wheat fundamentals on their own reflect a record. With the Northern Hemisphere crop
bearish situation from current price levels; in the bin, the only production uncertainty
although high protein and high quality remaining at this stage of the wheat season
supplies are less abundant, there will be is in the Southern Hemisphere countries of
ample supplies to meet global demand needs Argentina and Australia. Despite the ongoing
in the season ahead. The outlook for the threat from a strengthening La Niña weather
2012/13 season is not so clear with winter pattern, production in both countries does
wheat planting conditions in a number of not appear at risk, and harvest is now well
regions far from ideal. underway. However, global wheat
consumption is forecast to reach a record
CBOT wheat prices are forecast to average
high of 676 million tonnes in 2011/12, up
14% lower YOY in 2012 as sharply higher
4% YOY—offsetting fewer supplies of feed
world production results in strong export
grains—which we expect will limit the
competition and a build-up in inventories
recovery in global wheat inventory levels to
for the 2011/12 season. Our base case for
just a 2% increase YOY. Despite the increase
wheat prices indicates a mostly neutral view
in stocks, record high global wheat demand
from current levels, following a strong sell-
is forecast to keep the stocks-to-use ratio
off in 2H 2011. We do not expect a further
unchanged from last season at 30%. It is
collapse in prices, while ample supplies
worth noting that this remains well off the
will prevent upside potential, in the absence
low of 20% in 2007/08 that triggered record
of crop failure in 2012. A weaker US dollar—
high wheat prices.
as outlined in our base-case macro
assumptions—will likely provide some Wheat prices in the US are expected to be
support for CBOT prices, while a lack more a function of the domestic corn market
of export competitiveness in the EU will and less affected by the global wheat
see Matif prices under pressure. We do not dynamics than prices elsewhere. Tight
anticipate significant variation between our corn fundamentals in the US, following
scenarios from the demand side of the ledger, the extreme heat of summer 2011 and
with wheat demand relatively inelastic and subsequent yield downgrades, are expected
generally a function of supply. The most to support US wheat prices as domestic prices

26. 24 | Rabobank Outlook 2012—Down, But Not Out
decouple from the global market. The wheat- USDA is forecasting a 24% YOY fall in US
corn futures price spread—which traded at wheat exports to the second lowest level
an unusual inverse throughout 2H 2011— of the last five seasons, while EU exports are
will be important in determining how much expected to drop 26%. Increased global
wheat works into the feed ration in the exportable supplies are the major driver
remainder of the 2011/12 season. The behind this shift in global demand, primarily
premium for corn prices over wheat (spot- to the Black Sea region, where production has
price basis) during 2H 2011 reached the rebounded 43% and export bans have been
highest level since 1995/96 and has repealed following the 2010 drought. Despite
maintained a premium for the longest period this impressive recovery in just 12 months,
in history. While this is unusual, we expect aggregate Black Sea region production is
that corn prices will continue to trade at a expected to fall just short of a record in
premium to wheat for some time to come, 2011/12, although Kazakhstan is forecast to
given the fundamental differences. The USDA produce a record crop of 21 million tonnes,
forecasts a 22% YOY increase in US wheat a 116% YOY increase. We expect exports from
feeding to 160 million bushels in 2011/12; the Black Sea region to reach a combined
this estimate remains well below the levels 38 million tonnes in 2011/12, the second
reached in 2008/09. highest aggregate for the region on record,
and a 27% market share is forecast to be the
Global supply of high quality and high
largest share of global trade from the region
protein wheat is expected to remain relatively
on record.
tight despite this season’s large global wheat
crop. Widespread flooding in key Hard Red Wheat exports from the US and the EU are
Spring (HRS) wheat-producing states in the forecast to represent a record low share of
US and Canada—particularly North Dakota world trade in the 2011/12 season. Combined
and Saskatchewan—resulted in widespread exports from these two key regions are
abandonment in 2011, pressuring supplies forecast to fall from 45% last season to just
and resulting in a strengthening in the 31% in 2011/12. Increased export competition
protein price premium. This is reflected by this season has also been intensified by
the sharp increase in the spread between sizeable crops from both Australia and
the MGEX and CBOT wheat futures markets. Canada. The Australian exportable surplus
This spread is expected to remain elevated, was recently boosted by a stock revision of
at least during the first half of 2012, as tight around 3 million tonnes and is likely to
supplies and the need to encourage plantings benefit from the country’s largest wheat crop
of spring wheat against corn and even on record at a forecast 26.2 million tonnes.
soybeans will likely support MGEX prices. We forecast a record large national export
programme of 21 million tonnes for
Sharply higher global wheat production is
Australia, constrained only by domestic
forecast to result in significant export
logistics and increasing low-cost competition
substitution from lower cost origins, but US
from the Black Sea region into South East
wheat exports have been surprisingly resilient
Asian markets. Greater production in Western
in the first half of the 2011/12 season. The
Australia this season should allow exports to
Figure 3.1: US all-wheat feeding and the wheat/corn spread, Figure 3.2: MGE vs CBOT wheat spread and HRS carryout,
2001/02-2012/13f 2001/02-2011/12f
300 7 250 10
6 9
250
200 8
million bushels
5
million bushels
200 7
USD/bu
USD/bu
4 150 6
150 5
3
100 4
100
2 3
50 50 2
1
1
0 0 0 0
10/11
01/02
02/03
03/04
04/05
05/06
06/07
07/08
08/09
09/10
11/12f
12/13f
10/11
01/02
02/03
03/04
04/05
05/06
06/07
07/08
08/09
09/10
11/12f
All-wheat feeding Maximum CBOT wheat/corn spread (RHS) HRS carryout Max MGE/CBOT wheat spread (RHS)
Source: Rabobank, USDA, Bloomberg, 2011 Source: Rabobank, USDA, Bloomberg, 2011

27. Section 3 Agri Commodity Outlooks: Wheat | 25
exceed last season’s levels. Canadian exports conditions and sub-trend emergence levels
are forecast to jump 9.1% to 18 million tonnes heighten the risk of crop losses in these
despite the growing uncertainty being regions in 2012/13. This production
caused by the expected abolishment of the uncertainty is likely to provide some
single exporter policy next season. support to deferred contracts for both the
Matif and CBOT markets; however, conditions
European wheat prices look set to have the
in the Northern Hemisphere spring will be
most potential for downside due to lower-
the key in determining yields and production.
cost export competition from the Black Sea
Without a significant supply-side shock in
region, although a weaker euro may provide
2012/13, we do not expect prices to return
a partial buffer early in 2012. European, and
to highs seen in 2010 or 2011.
most notably French, wheat exports slumped
early in the 2011/12 season as Black Sea
region exports dominated market share into
the key North African importer destinations,
and we expect these exports will remain
under pressure in 2012. We expect EU wheat
stocks to climb 13% YOY, likely bounding
Matif futures prices well below the highs
of 2011 and above the lows of 2009. A range
of EUR 125/tonne to EUR 196/tonne is
expected, given the weaker fundamental
situation next season.
Our initial estimates for 2012/13 suggest it
may be difficult to replicate this season’s near-
record production next season as we model
area planted globally unchanged to slightly
lower on the basis of significantly weaker
wheat prices year-on-year and increased
competition for planted area from other row
crops. Assuming trend yield at this early stage
of the season in most regions, our initial
estimates suggest a 3% YOY decline in global
wheat production to 662 million tonnes in
the 2012/13 season—still the fourth-largest
global wheat averages on record. Adverse
winter wheat planting conditions in Ukraine,
and in the southern US due to ongoing
drought, suggest it will be difficult to achieve
trend yield this season. Additional poor crop
Figure 3.3: YOY changes in Black Sea region, US and EU exports, Figure 3.4: World wheat production and yield, excluding China
2008/09-2012/13f and India, 2000/01-2012/13f
550 2.9
20
15 500 2.8
million tonnes
10 2.7
tonnes/ha
million tonnes
450
5
2.6
0
400
-5 2.5
-10 350 2.4
-15
300 2.3
-20
10/11
00/01
01/02
02/03
03/04
04/05
05/06
06/07
07/08
08/09
09/10
11/12f
12/13f
08/09 09/10 10/11 11/12f 12/13f
Black Sea region Global production excl. China, India, US Global yield excl. China, India (RHS)
US EU Ukraine Russia Kazakhstan US production Trend line
Source: Rabobank, USDA, 2011 Source: Rabobank, USDA, 2011

28. 26 | Rabobank Outlook 2012—Down, But Not Out
CORN
CBOT Q2’11 Q3’11 Q4’11f Q1’12f Q2’12f Q3’12f Q4’12f 12-month outlook from spot
USc/bu 732 696 620 610 645 630 610
800
750 Low case Base case High case
700 Corn plantings Further US corn New crop US corn
650 exceed 95 million yield reductions acreage is less than
600 acres in the US, with force increasing 93 million acres and
USc/bu
prices falling to USD reliance on volatile yields disappoint
550 5.00/bushel on record emerging-market
500 crop expectations exports Policy changes
restrict Ukrainian/
450 Importer demand is Ethanol production Argentine corn
400 weaker amid hits record levels, exports
350 economic downturn; despite blenders’
USD rally hinders credit lapsing at High oil prices and
300 low USD, drive US
2010 2011 2012 exports the end of 2011
ethanol demand to
Weak La Niña helps China imports 5.2 billion bushels
South American corn 4 million tonnes of US
Historical Base case Low/high case Spot exports hit 34 million corn despite record
tonnes domestic crop
Source: Bloomberg, Rabobank
Rabobank forecasts lower year-on-year CBOT see corn prices test USD 7.00/bushel during
corn prices in 2012. However, we do expect Q2 2012.
a seasonal uptick in prices, averaging
Rabobank forecasts continued reductions
USD 6.45/bushel in Q2 2012 before easing to
to the USDA’s corn ending stocks projections
USD 6.10/bushel in Q4 2012. We expect this
as use creeps higher on strong ethanol
mid-to-late year fall will result from 2012/13
margins and relatively strong exports, while
acreage expectations being ratcheted higher
simultaneously, there is also a significant risk
in the US. Our forecast 2011/12 US corn
of further yield downgrades in the final 2011
ending stocks-to-use ratio would be the
crop report due in January 2012. In broad
lowest on record and provide strong price
terms, most categories of US demand have
support in the near term.
been strong or strengthening since the start
Q2/Q3 2012 corn prices will prove difficult to of the 2011/12 marketing year in August. We
forecast as the US corn complex moves from expect that to continue, with total US corn
a strong deficit to a moderate surplus, with use in 2011/12 forecast to reach 12.8 billion
prices highly path-dependent as the market bushels, a 1.9% decrease from 2010/11
attempts to guide 2012/13 acreage in the US. levels. Key risks to our forecast include the
Although a long way out, we see our corn possibility of negligible La Niña effects and
price forecasts likely to be more a function subsequently strong South American exports,
of South American weather and supply as we currently forecast a lower export
expectations for the US 2012 crop than outcome than the USDA for the continent.
economic outcomes. Ethanol production Fundamentals show oil prices to be a key
responses to oil price changes remain our driver of future corn prices, as we foresee
main mechanism to bring economic greater corn demand from ethanol
variability into the corn complex. production than the USDA for 2011/12
and further increases in 2012/13. Margin
Our low case would also involve the winding
contractions from falling oil prices are a
back of the increases in protein consumption
key risk to our forecast.
we have assumed for the developing world.
If weaker-than-expected growth outcomes The ongoing role of speculative/managed
are realised in the developed world, as money in the agri complex, and in corn
assumed in our low case, we could see oil markets more specifically, will play an
prices dropping below USD 100/barrel important role in price discovery for corn in
and a significant reduction in corn prices the coming year. Current net long positions
towards USD 5.00/bushel as ethanol of managed money are near the lows set in
demand is reduced. Under our high case, July 2010, and we expect it to be difficult for
where the global economy experiences significant liquidations in speculative net
resurgent growth, we would see higher oil long positions to occur from these levels as
prices, strengthening demand and rebuilding structural longs remain. Analysis of origin-
of stocks. These macro conditions would buying suggests a price floor of approximately

29. Section 3 Agri Commodity Outlooks: Corn | 27
USD 6.00 will hold until 2012/13 crop acreage reach 5.2 billion bushels as corn acreage is
and conditions are well established. expanded at the expense of soybeans, with
our forecast near-term futures price ratio
Further out the curve, our downward bias
between the two commodities continuing
for prices strengthens with the 2012/13
to favour corn. Given unchanged oil prices,
marketing year likely to produce the largest
ethanol production should remain near
global corn crop on record. Rabobank
capacity and meet our forecast, as corn
projects that an equal record of 93.5 million
remains in the USD 6.00/bushel to
acres will be planted in the US, further
USD 7.00/bushel range. Our base-case
displacing soybeans as producers capitalise
economic growth assumptions would,
on strong price incentives and increase corn
without increased disturbance in the
acreage in marginal production regions.
Middle East, see Brent Crude oil prices stay
Our state-by-state models suggest that the in the USD 100/barrel to USD 110/barrel
majority of the 1.7 million planted acreage range during 2012.
increase will be from nontraditional
US corn export sales, with a strong pace
producer states.
set for 2011/12, should be supported by a
We forecast an additional 850,000 acres weakening US dollar. We forecast exports
of corn to be planted in North Dakota as it to be 1.62 billion bushels, 25 million bushels
recovers from the severe flooding of 2011. ahead of current USDA expectations. There
There is significant income risk as farmers remains a risk that sales are cancelled as
planting corn for the first time receive crop buyers switch to cheaper origins once crops
insurance returns in line with county yields are more certain. Structural factors such
rather than proven yields. This uncertainty, as China’s ability to import only US corn
along with resilient spring wheat prices, as well as geographical advantages in
caps our expectation of increased exporting to Mexico, where a drought is
substitution in North Dakota. forecast to have reduced the 2011/12
expected crop by 3.5 million tonnes from
Although a long way off, we forecast US
prior USDA estimates, should support
yields of 154 bushels/acre based on our
export sales in Q1 2012.
state-by-state model. This figure was
impacted by the increased acreage from Rabobank forecasts that the USDA will
marginal states. Following this, our have to increase feed demand to 4.7 billion
production forecast is 13.25 billion bushels, bushels from the current 4.6 billion bushel
a 7.9% increase on our 2011/12 forecast. estimate. The November WASDE report
stated that the USDA has underestimated
We forecast a record 5.1 billion bushels of
US domestic corn demand in 20 out of
corn to be used in ethanol production
30 years of analysis, which Rabobank
during the 2011/12 marketing year as
considers worth highlighting. The average
distillers operate on strong margins at full
error is 215 million bushels. This supports
pace despite the risk caused by the imminent
our view that domestic use estimates will
withdrawal of the blender’s credit. Corn use
be increased in the new year. We forecast
for ethanol production in 2012/13 is likely to
4.5 billion bushels of US feed demand in
Figure 3.5: US corn planted area and yield, 2000/01-2012/13f Figure 3.6: Matrix of estimated ethanol production profitability
(in USD/gallon)
100 170
Brent crude price
80 90 100 110 120
95 160 (USD/barrel)
Ethanol price1
2.05 2.28 2.52 2.76 2.99
bushels/acre
million acres
90 150 (USD/gallon)
85 140 5.5 0.03 0.27 0.50 0.74 0.98
80 130
6.0 -0.15 0.08 0.32 0.56 0.79
75 120 Corn price
(USD/bushel)
6.5 -0.34 -0.10 0.13 0.37 0.61
70 110
00/01
10/11
01/02
02/03
03/04
04/05
05/06
06/07
07/08
08/09
09/10
11/12f
12/13f
7.0 -0.52 -0.29 -0.05 0.19 0.42
1
RBOB gasoline/Brent crude relationship based upon OLS regression
Figure assumes a DDG price of USD 220/tonne and an RBOB gasoline/ethanol spread of
USD 0.10/gallon.
Area planted Yield (RHS)
Source: Rabobank, USDA, 2011 Source: Bloomberg, USDA, Rabobank

30. 28 | Rabobank Outlook 2012—Down, But Not Out
2012/13 as DDG substitution increases and either our or the USDA’s forecast, there
the cattle herd shrinks. will be some form of government
intervention. We see several likely
Our global production outlook for corn in
catalysts that could bring further export
2011/12 is relatively large from a historical
limitations into effect:
perspective, with Brazil, Ukraine and
Argentina helping to moderate weakened • The government decides that domestic
expectations for the US crop, albeit with prices are too high and acts to support
greater downside risk than seen in previous domestic consumption,
years. Although record crops are expected
• The current poor outlook for the 2012/13
in many countries, world trade (excluding
wheat crop deteriorates further and
the US) during the remainder of the
resulting export bans cover the entire
2011/12 marketing year is likely to see
grains complex,
supply availability skewed to the downside
as political considerations operate in • No IMF funding deal is struck and the
conjunction with uncertain environmental Ukrainian government sees the record
outcomes. In addition, we see potential for high price for exports and re-introduces
yields in Argentina to be reduced by an tariffs to assuage cash flow issues.
adverse La Niña weather pattern.
Rabobank forecasts 2012/13 will see
We expect 27.5 million tonnes of corn global corn production of 885 million
to be exported from South America in tonnes, a 3.4% increase on our 2011/12
2011/12. Argentina continues to operate forecast and the highest on record. This
in a pressured economic environment with forecast builds on our greatly increased
persistently high inflation and persistent acreage figure for the US and sees an
government intervention in the foreign extra 3 million tonnes in exports from
exchange market. Further economic stress South America as soybeans are displaced
may promote more widespread industrial in a situation analogous to that in the US.
action, causing substantial stress to a world Ukrainian production estimates are
corn complex which relies on strong tempered by strong incentives to plant
Argentine exports. We will monitor this more barley and sunflower and
closely and adjust our forecasts as necessary. consequently, we have reduced our export
forecast to 9.3 million tonnes for 2012/13.
In a year of a record corn production,
We expect global corn trade to be resurgent
Ukrainian exports remain uncertain with the
as China imports a record 7 million tonnes
USDA currently expecting 12 million tonnes
and the world economy pulls itself to its
to be exported in the 2011/12 marketing year.
feet. At this point, we forecast ending
Our analysis suggests 11 million tonnes will
stocks to be 123.8 million tonnes with
be more realistic, with 9.5 million tonnes
a stocks-to-use ratio of 12.6% relieving
our low case, which would put significant
some of the pressure we forecast ahead
upward pressure on corn prices. Given the
for 2011/12.
need to raise the government-mandated
export cap of 10.5 million tonnes to meet
Figure 3.7: Global corn exports, US vs ROW, 1972/73-2012/13f
120 60
100 50
million tonnes
80
40
percent
60
30
40
20
20
0 10
80/81
90/91
00/01
10/11
72/73
74/75
76/77
78/79
82/83
84/85
86/87
88/89
92/93
94/95
96/97
98/99
02/03
04/05
06/07
08/09
12/13f
US ROW Rest of world share of exports (ROW)
Source: Rabobank, USDA, 2011

31. Section 3 Agri Commodity Outlooks: Soybeans | 29
SOYBEANS
CBOT Q3’11 Q4’11f Q1’12f Q2’12f Q3’12f Q4’12f 12-month outlook from spot
Soybeans USc/bu 1,358 1,165 1,178 1,226 1,260 1,251
Soy oil USc/lb 55.8 49.4 48.7 50.2 49.1 47.5
Soymeal USD/ton 230 300 310 290 330 335
1,400 Low case Base case High case
Record large US corn US soybean planted China’s imports
1,300 harvest results in area declines to a grow 15% or more
our low-case corn 5-year low of less YOY and exceed
price level of than 74 million acres 60 million tonnes
1,200
USc/bu
USD 5.00/bushel in 2012/13
South American
1,100 Chinese imports fall The South American production below
below the USDA’s exportable surplus 133 million tonnes
56.5 million tonne is record large at
1,000 USD 1/gallon
forecast in 2011/12 56 million tonnes
in 2011/12 biodiesel credit
900 US soybean 2012/13 extended in 2012
2010 2011 2012 planted area remains Chinese import
flat YOY or rises growth accelerates
Historical Base case Low/high case Spot
above 75 million 12% YOY in 2011/12 to
acres 58.5 million tonnes
Source: Bloomberg, Rabobank
Soybean prices in 2012 are poised to fall from Based on our analysis of the corn balance
the levels seen in 2011 but are likely to remain sheet, we forecast corn prices will continue
historically elevated even though slowing to outperform soybean prices during the
global growth threatens to temper demand. beginning of 2012 as corn must win the US
Our base case shows significant upside for battle for acres. We expect soybean planted
deferred prices from spot, as soybeans area to lose more than 1 million acres to corn
strengthen relative to corn in 2H 2012. Based and decline to 73.9 million acres in 2012/13—
on our low case, we view soybeans as the the smallest area planted since 2007/08.
most defensive commodity in the grain A rebound in soybean yields to a trend of
and oilseed complex, given their relative 44 bushels/acre would mitigate the drop in
underperformance in 2011 and the large planted area, resulting in a 5% YOY increase in
emerging-market demand profile. However, production to 3.21 billion bushels. This would
with our forecast for lower corn prices cause the market to be even more sensitive
in 2012, we expect the spillover bullish to adverse weather developments as a result
sentiment which was a key driver for of yields playing such a pivotal role in
soybean prices during 2011 to fade. determining whether or not US soybean
production will increase in 2012/13 or decline
Yet a floor price will be set based on South
for a third consecutive year. This 5% YOY
America’s production costs and Chinese
increase in US production would allow US
import demand, as US farmers plant a record
exports to increase by less than 5 million
large corn acreage in 2012/13 largely at the
tonnes—far below the average annual pace
expense of soybean area. We expect this will
needed to reach the growing Chinese import
cause the US to concede its position as the
demand. This will require South America to
world’s largest soybean exporter to Brazil for
increase production in 2012/13 by at least
a second consecutive year and will shift price
2 million tonnes in order to prevent a further
seasonality to reflect South America’s crop
drawdown in global soybean ending stocks.
calendar. Consequently, we believe the
soybean-to-corn price ratio will reverse from The ability of global soybean production
historically low levels as early as Q2 2012— to grow in 2012/13 is likely to be affected
albeit at lower absolute year-on-year values. by South American capacity constraints.
This lower price outlook for soybeans in 2012 Favourable weather and increased soybean
will be limited, given the supply constraints plantings in Brazil are supportive of record
inherent in soybeans’ expansion into new high production and exports available from
territories which have a higher break-even South America for 2011/12. We forecast the
price floor and higher political risks. Downside combined soybean production of Brazil,
price risk will also be mitigated by the Argentina, and Paraguay to reach a record
relatively inelastic biodiesel demand for high of 134 million tonnes in 2011/12, further
soy oil and by China’s declining soybean solidifying the region’s importance in meeting
production, which will be supportive of global demand. However, there are signs that
its need to increase imports year-on-year. the pace of land expansion is slowing in Brazil

32. 30 | Rabobank Outlook 2012—Down, But Not Out
and Argentina, creating a biannual battle for appreciation and higher input costs are
acreage. From 2000/01 to 2007/08, the reducing the cost advantages of expanding
combined harvested soybean area in these soybean production in Brazil. Since we expect
three countries increased by an average of the Brazilian real to remain volatile and
7% (even when accounting for a year-on-year stronger in 2012, the cost advantage of
decline as a result of the global financial buying inputs in domestic currency while
crisis). Since then, harvested soybean area selling crops in US dollars is diminishing.
has only risen by an average of 4%. As farmers Consequently, incentivising Brazilian farmers
slow the pace of their land expansion, the to undertake further acreage expansion will
battle for acres between major row crops in require a higher CBOT soybean price. For
Brazil, which has prevailed for many years in instance, in the state of Mato Grosso, where
the US, is clearly becoming a biannual event. soybean production growth increased the
For instance, in the Brazilian states that most in 2011/12, the cost of production for
typically produce the highest soybean soybeans was less than USD 9/bushel. When
yields (such as Paraná), corn plantings have transportation to port is included, costs
increased at the expense of soybeans in increase to USD 11/bushel. We expect this
2011/12. Although the increase in corn break-even cost to increase in 2012, which will
plantings has not been enough to cause give CBOT soybean prices limited downside
total soybean area to decline in year-on-year below the USD 11/bushel, based on our
terms—in fact we expect the Brazilian forecast for the Brazilian real to remain strong
soybean harvested area will reach a record during 1H 2012 before declining in 2H 2012.
high in 2011/12—it does signify that the
The demand profile for soy oil may potentially
capacity to augment soybean supplies is
diverge from soymeal in 2012 as the growth
becoming increasingly constrained. As a
in demand for biodiesel and emerging-
result, a higher floor price will be needed
market food consumption of soy oil outpaces
to incentivise the increased production
the growth in feed demand for soymeal. We
necessary to replenish the global soybean
believe soy oil prices are least exposed to the
balance sheet in 2012/13.
potential economic slowdown in 2012 due to
We believe that in order to offer South their smaller exposure to EU and US markets,
American farmers the profit margins required which account for one-quarter of total
to further expand soybean planted area in demand as opposed to their more than
2012/13, CBOT soybean prices must remain one-third share of demand for soymeal.
above USD 10/bushel in Q3 2012—which is This exposure can be further reduced to
roughly the break-even cost needed to bring 18% if the relatively inelastic demand of
on new soybean area in Brazil. Although Brazil biodiesel is excluded.
is positioned as a more cost-efficient soybean
In our low case, in which economic growth
producer (particularly because their yields
in developed economies significantly
have been larger than those of US farmers
underperforms that in emerging markets, soy
for the past two seasons), this gap is quickly
oil prices would perform comparatively well,
closing. Rising land values, currency
given their large exposure to emerging
Figure 3.8: US soybean area planted and production, Figure 3.9: Corn and soybean area harvested in Brazil and
1998/99-2012/13f Argentina and ratio of soybean/corn area harvested,
1987/88-2011/12f
80 3.5
70 3.0
3.2 60
75 2.5
million hectares
billion bushels
50
million acres
2.9
40 2.0
70
ratio
2.6 30 1.5
65 20
2.3
1.0
10
60 2.0
0 0.5
00/01
98/99
99/00
01/02
02/03
03/04
04/05
05/06
06/07
07/08
08/09
09/10
10/11
11/12f
12/13f
87/88
89/90
91/92
93/94
95/96
97/98
99/00
01/02
03/04
05/06
07/08
09/10
11/12f
Area planted Production (RHS) Corn Soybeans Ratio soybean to corn area (RHS)
Source: Rabobank, USDA, 2011 Source: Rabobank, USDA, 2011

33. Section 3 Agri Commodity Outlooks: Soybeans | 31
market economies. US soymeal demand is consumption of animal protein. Food inflation
forecast to fall for a fifth consecutive year during 2011 has not reached the same levels
to the lowest level since 1999/2000 due to seen in 2007 (in fact it has started to decline
relatively flat year-on-year grain-consuming at the end of 2011) but remains historically
animal units and the increased availability of elevated. China’s food inflation has largely
DDGs. The volume of DDGs which substitutes been driven by pork prices, which reached
total soymeal feed demand is estimated to record highs in 2011 as disease reduced
be 20% to 30%. This implies that animal availability. This, in turn, gave farmers a price
feed demand for US soymeal could have incentive to increase pork inventories, which
potentially reached a record high in 2010/11 we view as supportive of China’s soybean
were it not for the displacement by DDGs in import demand in 2012. The outlook for soy
the feed ration. With our forecast for another oil demand growth is also uncertain for 2012
record-breaking year of ethanol production as crush margins have remained negative
in 2011/12, soymeal demand will continue despite the government’s removal of price
to decline. caps. Yet, we expect China’s year-on-year
decline in soybean production in 2011/12 will
The degree to which the soy oil share
continue to be supportive of soybean import
increases hinges largely on the outlook
demand. The uncertainty lies in the extent to
for biodiesel production (primarily in the
which China’s demand will increase, which
US) with significant downside, given the
will largely depend on how the global
likelihood that the USD 1/gallon tax incentive
economic situation unfolds.
will expire at the end of 2011, as well as
upside risk if energy prices rise significantly in
2012. US biodiesel producers achieved record
high profit margins in 2011, which are likely
to deteriorate in 2012, causing year-on-year
production decline to be the third highest
on record. This will be more than offset by an
increase in production in Brazil and Argentina,
where mandates have been increased to
B5 and B7, respectively. Brazil may potentially
increase their blend requirements to B7 on
the way to B20 by 2020.
The largest downside price risk to soybeans
will be the potential for China’s demand
growth for soybeans to slow or decrease in
2012 should the global economic situation
deteriorate, as in our low case, and threaten a
slowdown to China’s economy. In 2007, when
China’s food inflation skyrocketed, consumers
responded by decreasing their per capita
Figure 3.10: Combined US, Brazil and Argentina soy oil exports Figure 3.11: CBOT soy oil share of crush margin,
and industrial domestic use, 2001/02-2011/12f Jan 2002-Nov 2011
14
50
12
45
10
million tonnes
percent
8 40
6
35
4
30
2
0 25
00/01
01/02
02/03
03/04
04/05
05/06
06/07
07/08
08/09
09/10
10/11f
11/12f
2002
2004
2005
2006
2007
2008
2009
2010
2011
Exports Industrial domestic use
Source: Rabobank, USDA, 2011 Source: Rabobank, Bloomberg, 2011

34. 32 | Rabobank Outlook 2012—Down, But Not Out
PALM OIL
MDE-BURSA Q2’11 Q3’11 Q4’11f Q1’12f Q2’12f Q3’12f Q4’12f 12-month outlook from spot
MYR/tonne 3,365 3,100 3,000 2,800 2,900 3,000 3,100
4,000
Low case Base case High case
Exports of rapeseed Palm oil production La Niña strengthens
3,500 oil and soy oil grows 5% YOY in with a negative
MYR/tonne
increase in 2011/12 2011/12 to more than impact to palm oil
as opposed to our 50 million tonnes yields in Malaysia
3,000 forecast for a decline and Indonesia
Global soy oil
Weak economic exports fall to 9.3 Oil prices rise and
2,500
growth in China and million tonnes―the spur increased
India causes their largest YOY decline biodiesel production
import demand to since 2008/09 in the EU/US
decline YOY
2,000 Global palm oil Global soybean
2010 2011 2012 Energy prices fall stocks-to-use production does
and reduce biodiesel increase YOY in not increase 2% as
demand to less than 2011/12 to 11.4% forecast for 2012/13
Historical Base case Low/high case Spot 12%-13% of global but remain
vegetable oils historically low
Source: Bloomberg, Rabobank
Global production of palm oil is poised for alternative vegetable oils is forecast to decline
another year of growth in 2011/12, surpassing in 2011/12, which will benefit palm oil as end
50 million tonnes for the first time in history, users seek lower cost alternatives to soy oil
allowing prices to ease and spurring demand. and rapeseed oil. Although it is likely that
While in isolation this would signify a bearish prices will be pressured in the short term, we
price reaction, declining availability of expect the seasonal slowdown in palm oil
alternative vegetable oils will continue to production during 1H 2012 to lead to a price
create an elevated increase in global demand rebound in 2H 2012.
for palm oil and prevent a significant build-up
The biggest downside risk to our price
of ending stocks. We expect the increase in
forecast for palm oil in 2012 is the political risk
palm oil production to be largely weighted at
surrounding biodiesel production, which
the beginning of the marketing year, driven
accounts for approximately 12% to 13% of
by harvest seasonality and the potential
global vegetable oil consumption. Our low
negative impact of La Niña.
case prices assume a curtailment in mandates
Malaysia’s palm oil production—which or financial incentives for biodiesel
constitutes 44% of global exports—has production in major soy oil exporting
outpaced its 12-month moving average since countries in 2012, which would increase
March 2011, rising to the second-highest exportable surpluses of commodities such
monthly level on record in October at as soy oil and rapeseed oil. On the other hand,
1.91 million tonnes. At the same time, stocks as vegetable oils have become increasingly
rose to the fourth-highest level on record. correlated to oil prices in recent years, this
Going forward, we expect that production link to energy markets also gives potential
seasonality and detrimental weather could for price upside in 2012 in our high case.
potentially cause monthly output to fall
Global palm oil demand is largely driven by
nearly 20% below the 12-month moving
consumption in China and India where we
average. This will be partially offset by the
see a relatively smaller risk of economic
elevated stock levels, but a larger-than-
slowdown in 2012. China’s palm oil
expected export pace or La Niña could give
consumption has only shown year-on-year
further upside potential to our price forecasts.
declines in two of the past 15 years, with last
Our base case prices factor in continued season marking the largest year-on-year
strong global demand growth for vegetable decline over this time period. It also marked
oils, which will be supportive of palm oil the slowest year-on-year percentage growth
prices in 2012, driven by increased biodiesel in China’s total vegetable oil consumption in
production, Chinese demand and weather 15 years, which we expect will result in a
risks. Across the oilseed complex, we expect rebound in 2011/12. Food-price inflation has
the oil share to perform particularly well in begun to decline in China, and crush margins
2012 as the demand profile for oils versus have become less negative. As in past years of
meals diverges further. The output of reduced demand growth, we expect this will

35. Section 3 Agri Commodity Outlooks: Palm oil | 33
Figure 3.12: Monthly Malaysia palm oil production and 12-month Figure 3.13: Palm oil and Brent crude oil prices and correlation,
moving average, 2000-2011 2001-2011
2.0 0.5 160
0.4 140
1.8
0.3 120
1.6
0.2 100
million tonnes
correlation
1.4
prices
0.1 80
1.2
0.0 60
1.0 -0.1 40
0.8 -0.2 20
0.6 -0.3 0
2001
2011
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2000
2002
2003
2004
2005
2006
2007
2008
2009
2010
Correlation Brent crude oil price, USD/bbl (RHS)
Monthly production 12-month moving average MDEX palm oil price, tens of USD/tonne (RHS)
Source: MPOB, Bloomberg, Rabobank, 2011 Source: Rabobank, Bloomberg, 2011
cause China’s demand growth for palm oil to in 2011/12. However, relative to other agri
rebound in 2011/12. Using a conservative 5% commodities, this demand profile is less at
YOY increase, this would push China’s palm risk for a decline based on our economic
oil imports to a record high of more than outlook for 2012.
6 million tonnes. However, there may be
Palm oil prices will continue to be
considerable upside to this assumption,
underpinned by soy oil prices and, to a
particularly as the last year-on-year decline,
lesser extent, rapeseed oil prices. In our
which occurred in 2001/02, was met with
view, palm oil’s price discount relative to
a more than 1 million tonne increase in
soy oil will continue to find resistance above
2002/03—making even the USDA’s forecast
USD 300/tonne—a level not surpassed since
for a 7% YOY increase look conservative. We
the global financial crisis in 2008. End-users
see less risk of a slowdown in India’s palm oil
were aggressive buyers of palm oil in 2011 as
import demand as they have shifted to
its discount dropped below USD 150/tonne.
increasing reliance on palm oil in order to
We believe this price relationship will persist
fulfil vegetable oil demand, which is poised
in 2012, keeping price movements in palm oil
to expand to a record large 46% of the total
dependent on developments in the broader
in 2011/12. In our view, palm oil imports to
oilseed and vegetable oil complex.
India have a larger risk of falling short of
expectations than those to China given the We expect that the year-on-year decline in
relatively strong domestic oilseed production US soybean production in combination with
Figure 3.14: Palm oil and soy oil prices and spread, 2000-2011 Figure 3.15: YOY change in global vegetable oil exports,
2000/01-2011/12f
1,600 5
1,400 4
1,200
3
million tonnes
1,000
USD/tonne
800 2
600 1
400
0
200
0 -1
-200 -2
2011
2001
2000
2002
2003
2004
2005
2006
2007
2008
2009
2010
00/01
01/02
02/03
03/04
04/05
05/06
06/07
07/08
08/09
09/10
10/11f
11/12f
Soy oil premium to palm oil MDEX palm oil CBOT soy oil Palm oil Rapeseed oil Soy oil
Source: Rabobank, Bloomberg, 2011 Source: USDA, Rabobank, 2011

36. 34 | Rabobank Outlook 2012—Down, But Not Out
increased biodiesel consumption in the
US, Brazil and Argentina will reduce global
exportable surpluses of soy oil by 6% in 2012.
Rapeseed oil availability will also be reduced
as global rapeseed production falls by more
than 7%—a result of a second consecutive
year-on-year decline in rapeseed yields. As
these production shortfalls are met with
continued demand growth, palm oil will
account for a record large share of the world’s
vegetable oil use in 2011/12 at more than
34%. As a result, we expect that the record
large palm oil production will fail to create
a substantial build-up in ending stocks and
will require prices to remain elevated in 2012
in order to prevent demand from increasing
above current expectations. We see the
political uncertainty surrounding biodiesel
production as the biggest downside risk
to our price forecast, particularly the
USD 1/gallon tax credit for US producers
which is set to expire at the end of 2011.
Weather poses the largest upside risk to our
price forecast as a strengthening La Niña
could reduce palm oil production in the
coming months more than expected or
cause South America’s soybean yields
to fall below trendline.

37. Section 3 Agri Commodity Outlooks: Sugar | 35
SUGAR
ICE Q2’11 Q3’11 Q4’11f Q1’12f Q2’12f Q3’12f Q4’12f 12-month outlook from spot
USc/lb 24 29 24.5 23.5 23 22 22
35
Low case Base case High case
30
The 2012 Brazilian Larger Northern New season crop defies
25 Centre/South cane Hemisphere and expectations; lower-
crush exceeds Indian crops shift than-expected Thai,
expectations: larger Indian or Brazilian
USc/lb
20 globe into a surplus,
surplus, weaker prices supplies cause a smaller
weighing on surplus/4th consecutive
15 international prices
International demand deficit season
10 expectations from Ethanol demand Policy action supports
China are not met: market; Indian or EU
in Brazil and tight
5 larger domestic crop governments allow
suffices, government- inventories temper
downside bias smaller exports than
0 buying wanes expected
2010 2011 2012 Deteriorating economic Demand is robust as
Investor confidence
conditions result in prices fall and users returns and the sugar
investor liquidation restock market is viewed as
Historical Base case Low/high case Spot
in futures markets undervalued, leading
to buying
Source: Bloomberg, Rabobank
We forecast lower international sugar prices in ICE #11 contract averaged USc 28/pound in
2012 as the market shifts into a surplus for the 2009/10—resulted in a stock drawdown and
first time in three seasons. With global ending pushed users to rely on inventories and hand-
stocks expected to increase above the 10-year to-mouth buying. The pent-up demand
average for the first time since 2008/09, we surfaced as prices fell in late 2011, and we
anticipate NY raw sugar prices will ease and expect further demand increases in 2012.
reach an average level of USc 0.22/pound in
In our view, the dominant factor in the sugar
Q4. Even with the 6 million tonne surplus
market in 2012 will be the improved supply
forecast for 2011/12, we expect volatility to
situation, a function of larger crops outside
remain elevated and the current risk premium
of Brazil, and likely a reaction to higher
to linger until mid-year when crop sizes are
prices of the past two seasons. Our forecast
more certain. In our view, the forecast
for total global sugar production in 2011/12
increased supply will result in lower prices,
is 174.5 million tonnes, up 5% from the
but a number of supportive factors will
previous season and the fourth consecutive
prevent the collapse of values. Increased
increase. Better beet crops in the EU and
demand from global importers and the
Russia, as well as increased production in
ethanol industry in Brazil are anticipated to be
Thailand and India, resulted in 6.2 million
major supportive factors in the new season.
more tonnes of sugar, enough to offset the
Also, the forecast surplus will not be enough
lack of growth in Brazilian production year-
to replenish the 19.8 million tonnes of deficit
on-year. With the largest surplus forecast for
of the past three seasons, and while the
2011/12 since 2006/07, when prices averaged
stocks-to-use ratio is expected to increase in
USc 10.3/pound, we expect prices on the NY
2011/12, it is forecast to be five percentage
markets will struggle to remain above the
points below the 10-year average.
USc 25/pound level in 2012,assuming benign
Given our bias for easing sugar prices in 2012, weather conditions and no major negative
we expect the buying support to grow and weather events.
remain resilient even in the case of a
The demand for ethanol in Brazil and the
widespread economic downturn. Our forecast
competition between Brazilian drivers and
demand growth in 2011/12 of 1.6% is a
global sugar importers is expected to be a
function of lower prices encouraging buying
major factor in downside support for the
and is up from the 0.8% increase in the
sugar price in 2012. The size of the 2012
previous season. When the sugar market went
Brazilian cane crop is the most important
into deficit from 2008/09 to 2010/11, annual
variable in the equation of how much sugar
demand growth averaged only 0.3%. We
will be available for export and how much
foresee the need for many international
will be available for biofuel use, but the prices
buyers to come on the market in 2012 to
of the products will determine the share of
restock diminished inventories. In our view,
the cane crop devoted to each. Our early
the elevated prices of the past season—the
projections suggest the Centre/South cane

38. 36 | Rabobank Outlook 2012—Down, But Not Out
harvest could be slightly lower than likely be another supportive demand-side
500 million tonnes, up from the 2011 estimate factor in 2012. In 2011/12, Chinese sugar
of 490 million tonnes, but still below the production is forecast to increase 9% from
record of 556 million tonnes reached in the previous season on better weather
2010/11. The early projections of cane supply and an increase in planted area. Domestic
suggest the market for ethanol will be tight consumption is forecast to increase 2.3% in
and that there will be strong competition 2011/12 with the domestic crop representing
between the two products. 81% of total demand. Depleted stocks and
the expected domestic deficit of 2.0 million-
How much of the cane crop will be used
2.5 million tonnes mean that imports are
to produce ethanol is a function of the
forecast to rise to 3 million tonnes, up from
international price of sugar and the USD/BRL
2.8 million the previous season.
exchange rate. If the ICE #11 contract falls too
far, mills in Brazil will focus on ethanol instead In our base case prices, we see strong support
of sugar, assuming a fixed currency exchange for raw sugar values, given the expectations
rate. We estimate the current price level for for demand growth and the modest build-up
mills to change from sugar production to of stocks. We forecast prices to average
ethanol production at near USc 22/pound. USc 23.5/pound in 2011/12, a historically
In the medium term, we assume this support high price, but down USc 4.5/pound from the
level will fluctuate between USc 18/pound previous season’s average. We see downside
and USc 22/pound. In our view, there will risk bias being moderated by demand
be strong support in the international sugar expectations and the increasing competition
price at levels that encourage ethanol of ethanol for cane sugar in Brazil.
production over sugar production. Given our
In our high case, better economic growth
outlook on ethanol prices, we forecast this
and a weaker devaluation of the US dollar
support level to be near our USc 22/pound
will add further support for the sugar market.
price forecast for raw sugar. Looking further
With a stronger US dollar, the value of sugar
out the curve, the growing flex-fuel fleet in
in Brazilian reais will fall, meaning that
Brazil and diminished investment in sugar
international futures contracts—all priced in
capacity will likely keep the domestic market
US dollars—will have to increase to offset the
tight. The government has implemented
falls in real value for Brazilian mills. Speculator
some legislation to support ethanol output
interest in sugar could also add a supportive
and has threatened more policy measures,
element if economic growth expectations are
but in our view, the main deciding factor in
revised higher; the speculator net long
the production of ethanol will be the price
positions were heavily liquidated in 2H due to
of sugar on the NY market. A shortfall of sugar
heightened market uncertainty. Speculators
for ethanol on the Brazilian market due to
may increase the net long position if bullish
elevated sugar prices may result in further
economic growth triggers a risk-on
corn ethanol imports from the US as in 2011.
environment but we expect this to be
Chinese sugar inventories are at very low tempered by the better supply expected
levels currently, and government-buying will in the new season.
Figure 3.16: Global sugar production and surplus/deficit, Figure 3.17: Brazilian ethanol and sugar price inter-relationship
2000/01-2011/12f
10 200 26
180
5 160 24
140
NY sugar prices
22
million tonnes
0 120
raw value
100 20
-5 80
60 18
-10 40
16
20
-15 0 14
0.90 1.00 1.10 1.20 1.30 1.40
2010/11
2000/01
2001/02
2002/03
2003/04
2004/05
2005/06
2006/07
2007/08
2008/09
2009/10
2011/12f
Anhydrous ethanol price (BRL/L)
Sugar equiv. (BRL1.60/USD) Sugar equiv. (BRL1.75/USD)
Surplus/deficit Production Sugar equiv. (BRL1.90/USD)
Source: Rabobank, FO Licht, 2011 Source: Rabobank, Bloomberg, 2011

39. Section 3 Agri Commodity Outlooks: Sugar | 37
In the sugar futures markets, prices have been
greatly impacted by macro concerns in 2011,
and this is expected to remain a major price
driver in 2012. If further negative macro
events occur and our low case of risk-off and
a higher US dollar becomes reality, sugar
prices could over-correct as they did in
May 2010 when they fell to USc 13.67/pound.
The speculator net long position, while low
relative to historic averages, could still be
liquidated further, putting major pressure
on prices. A stronger US dollar environment
would also be unfriendly for international
prices. However, even with negative
conditions, the lower prices would likely
generate increased buying support.
We anticipate high volatility in 2012, which
will partially be a function of heightened
political risk which remains a dominant
feature of the global sugar market. While we
forecast a larger crop for India in 2012 and the
potential for 4 million tonnes of exports, the
Indian government policy of allowing exports
only when domestic supply is assured, and
generally in incremental amounts, increases
uncertainty on the global market. The EU is
also expected to influence the international
market with government action as the bloc
may face a shortage of sugar in 2012 with
imports unlikely to reach demand
expectations. The domestic EU crop in
2011/12 is forecast at 17.4 million tonnes, up
from 15.1 million tonnes the previous season,
but this additional supply is out of quota
and cannot therefore be used for human
consumption. Given the supply issues the
EU experienced in 2011, we anticipate policy
action if a shortfall is expected, but what the
EU will do, and to what extent, is unknown.
Figure 3.18: No. 11 Sugar managed money net long position
and price, 2000/01-2011/12f
250 40
35
200
30
thousand contracts
150
25
USc/lb
100 20
15
50
10
0
5
-50 0
Nov-06
Mar-07
Jul-07
Nov-07
Mar-08
Jul-08
Nov-08
Mar-09
Jul-09
Nov-09
Mar-10
Jul-10
Nov-10
Mar-11
Jul-11
Nov-11
Managed money net long position No. 11 Sugar price (RHS)
Source: Rabobank, CFTC, Bloomberg, 2011

40. 38 | Rabobank Outlook 2012—Down, But Not Out
COFFEE
ICE Q2’11 Q3’11 Q4’11f Q1’12f Q2’12f Q3’12f Q4’12f 12-month outlook from spot
USc/lb 271 257 230 220 200 180 170
350
300 Low case Base case High case
Better-than-expected A large 2012 Brazilian Weather conditions
250
2011/12 Colombian crop shifts the globe affect the Brazilian
crop and increased back to surplus and crop, exacerbating
USc/lb
200
2012/13 production alleviates tight supply tight supply situation
150 build Arabica supply
Demand growth Low stock levels
100 Recession weakens continues at 2.5%, aggravate any
consumption growth supporting values production disruption,
50 in emerging markets; encouraging
demand weakens, Last year’s elevated speculative buying
0 production increases prices support
2010 2011 2012 increased marginal The Vietnamese
Recession fears production growth government enacts a
prompt a speculator in the medium term buying programme to
Historical Base case Low/high case Spot
sell-off, resulting in support Robusta prices
futures liquidation
Source: Bloomberg, Rabobank
Coffee prices are forecast to fall in 2012 due anticipate Arabica prices to revert to 2009
to the large harvests expected in Brazil and levels in 2012, due to the risks of production
Vietnam, but diminished stocks will keep risks and low inventories. However, it is our view
skewed to the upside. Unlike after past coffee that the elevated prices from 2010/11 will
price rallies, we do not foresee a collapse of have resulted in increasing marginal gains in
prices as it will take a couple of seasons to production and helping lift stock levels.
replenish stocks and reverse the decade-long Consequently, we expect the 2011/12
trend of falling stock levels. The stocks-to-use season—a low season for the Brazilian crop,
ratio has fallen from 44% in 2002/03—the but the largest off-season crop ever—to be a
height of the coffee crisis—to our forecast nadir in the medium term for the stocks-to-
18% in 2011/12, the lowest on record. use ratio. While increases in planted area will
Strong global demand is also supportive only yield output growth in three to four
of prices and continues to grow at a brisk years’ time, the better prices have also
2.5% annually. encouraged better husbandry as well as
increased use of inputs, both of which
We anticipate the 2011/12 coffee season will
are supportive for increasing output in
be characterised by razor-thin stocks and high
the short term.
risks, but in our view this is a turning point in
a decade-long trend of shrinking supply. Even Brazilian production has increased notably in
with a large Brazilian crop, we do not the past as a result of higher prices, and we
Figure 3.19: Global coffee ending stock and stocks-to-use, Figure 3.20: Coffee inventories and NY futures price,
2000/01-2011/12f Jul 1995-Jul 2011
60 50 8 320
45
50 7 280
40
6 240
35
40
million bags
million bags
30 5 200
percent
USc/lb
30 25 4 160
20
20 3 120
15
2 80
10
10
5 1 40
0 0 0 0
00/01
01/02
02/03
03/04
04/05
05/06
06/07
07/08
08/09
09/10
2011
2001
10/11f
11/12f
2007
2008
2009
2010
1995
1996
1997
1998
1999
2000
2002
2003
2004
2005
2006
Note: 1 bag=60 kilogrammes Note: 1 bag=60 kilogrammes
ICE Coffee stocks US green coffee stocks
Ending stocks Stocks-to-use (RHS)
NY front month coffee price (RHS)
Source: Rabobank, 2011 Source: Bloomberg, Rabobank, 2011

41. Section 3 Agri Commodity Outlooks: Coffee | 39
anticipate the country will respond to current also anticipate consumption growth in origin
international values with a jump in output. countries to remain robust. Global coffee
The Brazilian crop has increased 80% since demand is forecast to increase 2.4% in
1981 while area has actually decreased 12.5%. 2011/12, up from 2.1% the previous season
However, it has not been a uniform fall as and flat with the 10-year average of 2.5%. In
higher coffee prices have led to increased our view, coffee demand will be supported
area harvested. The coffee rally of 1986 by lower prices in 2012 and increases in
resulted in a harvest area increase of 17% consumption at origin, especially in Brazil.
three seasons later, while four years after the Coffee consumption in Brazil has been
1997 rally, harvest area in the country had growing at a 3.9% annual average in
grown 14%. the past 10 seasons, and we foresee use
expanding by 4.1% in 2012. Based on our
Arabica production has been increasing
models, Brazil will replace the US as the
slower than coffee demand growth. Global
largest consumer of coffee in five years.
production for the variety has increased only
11% from 2001/02 to 2011/12, while total While coffee is not an essential component
coffee demand has increased 29% in the of the human diet (though this is subject to
same period. The difference has been made debate), the income elasticity of demand for
up by increased Robusta production and the product is low; during the financial crisis
stock drawdown. Reduced production from of 2007-2009 the demand for coffee
Colombia in the past three seasons has continued to grow, albeit at a slightly slower
exacerbated the low Arabica stocks situation pace. Coffee imports and purchases were
and has been a catalyst for the 2010/11 price skewed during the crisis as companies drew
rally. In 2012, Arabica supply will be more down stocks and consumers altered buying
abundant because of the larger forecast habits, but the amount of coffee consumed
Brazilian crop, but as this supply will not come increased 2.2% and 1.1% in 2007/08 and
on-line until the start of May, volatility and risk 2008/09, respectively. However, this growth
remains elevated. Our early projection for the is down from the previous five-year average
2012 Brazilian crop is 59 million 60kg bags, of 3.2%. The resilience of coffee demand was
46 million bags of which is expected to be illustrated during the severe recession of
Arabica, and 7 million bags washed. The 2007-2009, and we assume this robust
coming Brazilian crop is bearish given its size, demand will remain even in the face of
but the previous record harvest in 2010 weaker and uncertain economic conditions
occurred as prices were rallying to record in 2012. Given the resilience of consumption,
highs. In our view, the difference is that higher we expect prices in 2012 to be determined
prices of the past season will result in larger much more by supply-side dynamics.
increases in production in other producer
Arabica prices are influenced by the
countries in 2012.
movements in the US dollar and the Brazilian
Our base case of slowing economic growth real and our expectations of a weaker US
in the US and the EU is not expected to have dollar in 2012 are mildly friendly for coffee
a measurable impact on coffee demand; we prices. A falling US dollar is supportive for
Figure 3.21: Coffee currencies and NY futures price,
Apr 2010-Oct 2011
0.058 .70 330
0.057 .68 310
0.056 .66 290
0.055 .64 270
0.054 .62 250
0.053 .60 230
0.052 .58 210
0.051 .56 190
0.050 .54 170
0.049 .52 150
0.048 .50 130
Jan-11
Feb-11
Mar-11
Apr-11
May-11
Jun-11
Jul-11
Aug-11
Sep-11
Oct-11
Nov-11
Apr-10
Jun-10
Jul-10
Aug-10
Sep-10
Oct-10
Nov-10
Dec-10
BRL/USD COP/USD NY front month coffee (USc/lb)
Source: Bloomberg, Rabobank, 2011

42. 40 | Rabobank Outlook 2012—Down, But Not Out
coffee futures prices in NY as it means lower
costs for international buyers, promoting
sales, and a falling dollar generally
encourages fund-buying in the commodity
markets. Speculators use the agri complex
as both a hedge against the falling US
currency and a supporting factor.
The Brazilian real is expected to appreciate in
2012, and this generally supports the Arabica
market. As Brazil accounts for approximately
40% of total global Arabica output and half
of total Arabica exports, moves in the Brazilian
currency are an important factor in coffee
prices, on both the ICE and BMF Arabica
future exchanges. A stronger Brazilian real
is supportive for Arabica prices as growers
in Brazil receive less value for the commodity
and are not inclined to sell. The relationship
between the currency and prices on the
terminal market breaks down when strong
fundamental indicators move the market. We
anticipate currency moves to be supportive
for the coffee markets in 2012, but currency
markets will likely be overshadowed by
fundamental factors as supply is very tight
and production risks are high.

43. Section 3 Agri Commodity Outlooks: Cocoa | 41
COCOA
ICE Q2’11 Q3’11 Q4’11f Q1’12f Q2’12f Q3’12f Q4’12f 12-month outlook from spot
USD/tonne 3,042 2,969 2,400 2,350 2,450 2,350 2,300
3,500
3,000
Low case Base case High case
Larger-than-expected Record carry-over from New government
2,500 crops from West Africa 2010/11 season; large buyer established
add to high buffer product stocks in Ivory Coast,
USD/tonne
2,000 stocks, pushing prices pressure terminal compromising supply
lower markets certainty
1,500
Economic contraction Emerging-market Increased chocolate
1,000 results in lower demand for powder and cocoa-based
chocolate and cocoa- products underpins product consumption
500 based production, the entire complex exceeds forecasts,
crimping demand causing inventory
0 US/EU chocolate drawdown
Better supply consumption remains
2010 2011 2012
expectations liquidate stagnant with West African short
large commercial long lacklustre performance crops diminished by
Historical Base case Low/high case Spot position in terminal in cocoa butter market detrimental weather,
markets pushing market into
large deficit
Source: Bloomberg, Rabobank
Abundant supply of cocoa beans and better supplements. The growth in demand for
expectations for the 2011/12 crops are cocoa powder products is expected to come
expected to lead prices lower in 2012. This from emerging markets.
downside, as prices pass two-year lows,
There is no consistent pattern for cocoa bean
follows concerns about West African
terminal markets in a recession since supply
output dwindling.
dynamics are generally more important for
The cocoa bean market is vulnerable prices. During the 2007-2009 recession, cocoa
to economic contraction as chocolate prices on the ICE exchange in the US ended
confectionery is subject to demand higher. However, during this period cocoa
destruction when incomes are under grindings fell as many chocolate makers
pressure. Given the expectations of weak decreased the size of consumer products or
economic growth in the EU and the US, we used substitutes for cocoa. Some of the
foresee consumer chocolate demand in these decrease in grindings can also be attributed
regions to be flat in 2012. However, the cocoa to manufacturers drawing down stocks.
bean market is somewhat insulated from Looking to 2012, we anticipate EU and US
weakness in chocolate consumption due to grindings falling from 2011 levels, but total
the increasing demand for cocoa powder, global grindings to increase 3.7% in 2011/12,
which is found in a variety of products, from driven mostly by the powder market.
chocolate drinks and ice cream to health
Figure 3.22: Cocoa grindings and YOY GDP change in mature
markets, Jun 2000-Sep 2011
550 10
8
500 6
thousand tonnes
4
450 2
percent
0
400 -2
-4
350 -6
-8
300 -10
Mar-01
Dec-01
Sep-11
Jun-00
Sep-02
Jun-03
Mar-04
Dec-04
Sep-05
Jun-06
Mar-07
Dec-07
Sep-08
Jun-09
Mar-10
Dec-10
Combined US and EU grindings EU (RHS) US (RHS)
Source: Rabobank, IMF, NCA, ECA, 2011

44. 42 | Rabobank Outlook 2012—Down, But Not Out
The cocoa bean market could be impacted capacity by the major producing regions was
in 2012 by policy moves in Ivory Coast as leading to a global deficit. The average front-
the new government may play a larger role month price in NY between 2004 and 2007
in the procurement and trade of cocoa. The was USD 1,591/tonne while between 2008
government announced in early November and 2011 it was USD 2,826/tonne, 78% higher.
2011 that farmers will receive a guaranteed Concerns that farmers in West Africa would
cocoa bean price of between 50% and 60% abandon plantations or switch production to
of the international terminal price. This is rubber supported terminal markets. It seems
not expected to have a significant impact as the high prices have worked; helped by
grower prices are already at or above these supportive weather, Ivory Coast production
levels. The Ivory Coast government has stated reached a record in 2010/11, and government
that the export tax is capped at 22%, down officials say a large crop is also expected for
from a 25.3% average in 2008/09, and the 2011/12. Even with the positive impacts of
lower tax will allow growers to realise greater La Niña, production would not reach such
returns. The new government has outlined levels if plantations had been abandoned
a plan in which exporters must pre-purchase or switched to rubber. Price signals have
beans before the harvest begins as a way increased output, and alongside supportive
to have funds to guarantee the farmer price. weather, this is a bearish outcome in a world
The uncertainty about the government’s eating only marginally more chocolate.
plans is impacting the market, and since
the country accounts for one-third of global
output, unpredictable government
interventions will inject volatility into
the international terminal markets.
Due to a large carry-over of cocoa beans from
2010/11 and sizeable crops expected for the
2011/12 main harvest, the supply of cocoa
beans looks bearish in the short term. With
flat chocolate consumption, we anticipate
the butter ratio, which in the EU fell to below
1.0 in November, to continue to remain under
pressure in 2012. Powder ratios are expected
to continue to drive the markets. This dynamic
has been the focal point of the cocoa market
in the past year and we expect this to
continue in early 2012.
In our view, the price of cocoa beans rose to a
new norm in the past four years, as the market
became concerned that underinvestment in
Figure 3.23: NY Cocoa prices, Nov 2000-Nov 2011 Figure 3.24: NY Cocoa commercial long position and price,
1995-2011
4,000 160 4,000
3,500 140 3,500
3,000 120 3,000
thousand contracts
USD/tonne
100 2,500
USD/tonne
2,500
2,000 80 2,000
60 1,500
1,500
40 1,000
1,000
20 500
500
2011
2001
2000
2002
2003
2004
2005
2006
2007
2008
2009
2010
0 0
2011
2001
1995
1997
1999
2003
2005
2007
2009
NY cocoa price 4-year average Commercial long position NY front month cocoa price (RHS)
Source: Bloomberg, Rabobank, 2011 Source: Rabobank, CFTC, 2011

45. Section 3 Agri Commodity Outlooks: Cotton | 43
COTTON
ICE Q2’11 Q3’11 Q4’11f Q1’12f Q2’12f Q3’12f Q4’12f 12-month outlook from spot
USc/lb 168 108 95 85 85 80 80
200
180 Low case Base case High case
160 Demand continues to Better 2011 crops Better-than-expected
140 weaken for cotton as increase supply and economic growth
120 garment sales fall due weigh on prices spurs demand
USc/lb
to economic
100 contraction Lower international Lower prices result in
80 prices support lower-than-expected
Higher USD reduces demand growth Southern Hemisphere
60
apparel imports into planting, shrinking
40 the US, cutting cotton Planted area growth supply supporting
20 consumption rates continues in 2012 with prices after 2H 2012
prices still high relative
0 Further risk-off prompts to historic averages Planting in the US is
2010 2011 2012 more investor unable to reach
liquidation in NY estimates due to
futures market; current continued drought
Historical Base case Low/high case Spot 33,157 longs = 13% in Texas
open interest
Source: Bloomberg, Rabobank
In 2012, we expect the global cotton industry synthetic fibre will come under the same
to be under pressure and prices to fall due to pressure as cotton as the apparel industry
the largest global crop ever and stagnant faces reduced demand growth.
demand. In our view, downside price
We forecast global cotton consumption in
movements in 2012 will be tempered in
2011/12 to increase 1.5% while production
Q1 by the battle for acres in the Northern
for the 2011/12 season is expected to be
Hemisphere growing regions and concerns
6.6% higher than the previous season. The
about the impact of dryness on US plantings.
largest contributor to demand growth is
As a consumer good and not a food product, expected to be emerging markets, especially
cotton is more susceptible to economic China. Apparel demand in China has not
downturns than the rest of the agri complex, slowed as it has in the US; while the Chinese
and this was evident in price movements economy cooled in 2011, buyers purchased
during the past recessions. In our view, cotton a record amount of textiles. Growth is
demand will be squeezed on both sides in forecast to slow further in 2012 in China,
2012, as high prices for the fibre in the past but we anticipate the consumption of
season resulted in higher priced yarn and apparel will remain strong. Although global
textiles; high unemployment and concerns demand for cotton and textiles is being
about household incomes have also resulted increasingly driven by China, the country
in increasingly cost-conscious consumers. cannot absorb all of the fibre. We expect
Garments made from higher priced cotton prices will have to move lower in order to
are reaching retail outlets as the growth in the stimulate demand outside of China.
US and EU economies remains anaemic and
The US drought, which began in
consumer confidence low. Prices of apparel
October 2010 and continues today, has
in the US jumped, with year-on-year increases
devastated cotton production in Texas and
the highest in two decades. Given the
may have a lasting impact as spring plantings
stable prices in the months leading up to
could be threatened. The drought is likely
November 2011, higher priced textiles
to have reduced the US 2010/11 cotton
will remain the norm for much of the first
production estimate by 2 million bales, or
half of 2012 and will continue to impede
11%. The current La Niña pattern is forecast to
demand growth.
remain in place for the second winter in a row.
The increased use of synthetic fibres worsens A La Niña pattern generally results in lower
the cotton outlook further. In the 2010/11 precipitation in the Texas/Oklahoma region.
season, when cotton prices reached all-time Together the two states accounted for 54%
highs, many textile producers blended more of total acreage planted in 2011. The National
synthetic fibres, reducing the demand for Oceanic and Atmospheric Administration of
natural cotton. Synthetic fibre production in the US projects the main cotton growing
China, the largest producer, is forecast to have region to remain dryer and warmer than
reached a record high in 2011. In 2012, average. Time remains for the drought to

46. 44 | Rabobank Outlook 2012—Down, But Not Out
Figure 3.25: Cotton and S&P GSCI Agriculture Index price
performance in recessions, 1970-2009
2.0
1.8
Indexed to start of recession
1.6
1.4
1.2
1.0
0.8
0.6
0.4
1981
1991
1970
1973
1975
1982
2007
2008
ICE cotton front month S&P agri index
Source: Bloomberg, Rabobank, MBER, 2011
break before plantings, but the weather The cotton price on the NY market will
projections for the 2012 US cotton crop have to strike a balance between promoting
are bullish. consumption outside of China and
encouraging enough US growers to plant
Cotton will compete with the other row
in the spring of 2012. Given these dynamics,
crops in 2012 for acres, and as prices in the
we expect Q1 2012 to be the most supported
agri complex are elevated, we do not expect
period for cotton prices, but if benign weather
a collapse of cotton values. US farmers
supports the US crop outlook, continued
increased planted area 34% for the 2011/12
downside is expected. Any correction in the
season as prices reached new nominal
cotton price could be amplified, depending
records. A high abandonment rate of
on the state of the global economy.
33% in the season was the result of the
devastating drought. For 2012, our early
projections are for US farmers to decrease
planting to 11 million acres. We assume
that the weather conditions will improve
in Texas, allowing for a more average
abandonment rate and yield. Given this,
2012 output is expected to exceed the
2011 harvest.
Figure 3.26: Global and Chinese cotton consumption, Figure 3.27: World cotton production and surplus/deficit,
1971/72-2011/12f 1991/92-2011/12f
160 60 15 130
140 10
50 120
120
5
40 110
million bales
million bales
million bales
million bales
100
0
80 30 100
-5
60
20 90
-10
40
10 -15 80
20
0 0 -20 70
00/01
91/92
92/93
93/94
94/95
95/96
96/97
97/98
98/99
99/00
01/02
02/03
03/04
04/05
05/06
06/07
07/08
08/09
09/10
10/11f
11/12f
1971/72
1976/77
1981/82
1986/87
1991/92
1996/97
2001/02
2006/07
2011/12f
World China (RHS) Surplus/deficit Production (RHS)
Source: Rabobank, USDA, 2011 Source: Rabobank, USDA, 2011

47. Section 3 Agri Commodity Outlooks: Livestock | 45
LIVESTOCK
LIVE CATTLE LEAN HOGS
12-month outlook from spot 12-month outlook from spot
Low case Base case High case Low case Base case High case
USD strengthens Feedlot inventories La Niña persists Chinese Chinese reduce Further disease
and US export fall on tight feeder past the expected substantially reduce demand due to outbreaks in China
demand falters supply June end imports on the back disease recovery and result in significant
of strong domestic higher domestic domestic herd
Packer export profits Packers continue to USD weakens production and a production liquidations
fall and with make positive profits further, resulting stronger USD
negative margins driven by strong in stronger-than- Continuing economic Major importers’
they reduce export demand expected export Bank of Japan uncertainty results currencies
purchases growth form intervenes to in USD weakness; appreciate against
USD remains weak emerging markets weaken the yen exports remain at the USD
Brazilian and against the major 1.68 million tonnes
Australian currencies importers Feeder cattle price Large fall in the corn Corn strengthens,
weaken against the skyrockets on price sees producers Corn prices remain resulting in
USD and major beef persistent drought increase farrowings under USD 6.50/lb producers scaling
importing currencies conditions and raise herd and above USD 6/lb back production
inventories
We expect US cattle prices to continue their in the US, further squeezing packer margins.
strong performance in 2012 albeit with a Given the poor calving numbers in 2011,
brief plateau in Q1 as record feedlot the shortage of feeder cattle is not expected
inventories reach the market. However, to be alleviated in 2012. Packers have incurred
tight feeder supply should bias price negative margins on domestically sold beef
upwards from spring onward. in 2011 but have been able to at least partially
recoup losses on strong Asian exports at
Lean hog prices are expected to flatten
profitable levels. US beef exports jumped
in 2012 as US and global supply increases
strongly in 2011, up over 25% YOY and up
but upside risks remain with strong Asian
9.12% on the five-year average. Our forecast
demand and risk of disease in the Chinese
of a weakening US dollar and relatively
domestic herd. Strong demand from
strong Australian and Brazilian currencies,
emerging-market economies is expected
two of the US’s major competitors in the
to provide robust support for US livestock
beef export market, drive our forecast of
markets in 2012.
improving US beef demand from foreign
Live cattle markets. However, this will also force US
US live cattle prices are expected to fall in packers to reduce imports of foreign beef.
Q1 2012 from their November 2011 highs
With the anticipated relaxation of import
as record numbers of cattle on feed outstrip
restrictions by Japan and the recent
demand in the near term. A record drought
ratification of the US–Korea Free Trade
in the southern US has left producers with a
Agreement, we see both improved market
severe shortage of pasture and resulted in
access and export demand providing strong
higher placements of feeder cattle this year,
support for US beef prices in 2012. However,
at lighter weights than normal. The
this upside will be somewhat tempered if
September placement of cattle under
economic conditions deteriorate much
600 pounds was 685,000 head, compared
further and emerging-market economy
with 510,000 head in August 2010—a 34%
growth slows.
increase—while in October 2011, the year-
on-year spread narrowed to an 11% increase. These restrictions currently require US beef
We anticipate the lower weights and increase cattle to be 20 months of age or younger
in placements will result in a large amount at the time of slaughter, but under new
of live cattle being brought to market in the proposals, the maximum import age is likely
early months of 2012 as cattle placed into to be increased to 30 months. The catalyst for
feedlots in July, August and September of the relaxation of restrictions has been the
2011 work their way through the system. decline in Japan’s domestic beef production
following the tsunami in March 2011 and
Tight supplies of feeder cattle mean that live
resulting radioactive contamination in
cattle prices in Q2 2012 are expected to rise
the Japanese agri complex. With imports

48. 46 | Rabobank Outlook 2012—Down, But Not Out
of 351 million pounds, Japan was the third- Lean hogs
largest export market for US beef in 2010. Momentum in the US lean hog market is
However, their imports in 2010 were 61.7% expected to wane in 2012 as producers
below where they were in 2003 at 918 million increase farrowing to meet demand and
pounds, before restrictions were imposed. Chinese import growth slows. This is coming
Japan’s relaxation of the age restriction on off the back of strong bullish momentum in
US beef opens the market to heavier carcass the US lean hog market in 2011. US herd
weights. If the yen continues its strong inventories in 2011 rose by 2.5% in Q3 from
performance against the US dollar, we expect the traditional seasonal low at the end of Q1;
there to be strong upside potential for US this is compared with the Q3 2010 rise of
beef exports into Japan in 2012. 1.6%. Just as the cattle market benefited from
a low US dollar and high export demand, so
We expect to see the beef cut market
too has the pork industry. Strong export
continue to exhibit a large spread between
demand in 2011 has helped maintain higher
Choice and Select cuts in 2012 as seen in the
domestic prices, a situation that will likely
latter half of 2011. The catalyst for this spread
continue with a weak US dollar in 2012.
movement has been the entry of Walmart
into the Choice beef market. Walmart has Pork producers and processors have been
long been a retailer of Select cuts, the lowest challenged with slowing margin growth due
of three USDA grades of beef at the retail level to the upward shift in corn prices. CBOT corn
in the US. However, in an effort to increase prices averaged 61% higher in 2011 than in
sales and attract a higher value customer, the 2010. As a percentage of total feed cost in the
world’s largest retailer has added Choice cuts, raising of US lean hogs, corn has risen from
the midlevel retail cut, to their meat aisle. 49.6% to 54.6% due to both the higher corn
This move has increased the spread between cost and the 11.8% fall in the price of soymeal.
Choice and Select cuts to a full USD 19/cwt Using a 3:1 feed conversion ratio and
from a pre-Walmart entry spread of a assuming a 75% corn feed mix, the cost of
mere USD 3/cwt. Over 50% of Walmart’s adding one pound to a hog under the current
260 billion dollar income came from grocery April 2012 live hog crush is USD 0.42/pound.
sales in 2010. Given Walmart’s market share,
While US breeding stocks increased 1.3% in
packers have been bidding up the price of
November, eventual year-on-year expansion
live cattle, despite negative domestic margins,
is uncertain due to the relatively high price
in an effort to capture long-term business
of corn. Current lean hog packer margins for
from the new player in the Choice cut space.
December 2011-April 2012 indicate a profit
We see the entry of such a retailer into the
of USD 8.58/cwt, a USD 10.27/cwt turnaround
Choice cut market as being supportive of
from the same crush last year. In the
prices for 2012 and expect the spread
December-April crush, corn accounts for
between wholesale boxed Choice cuts
55% of total feed cost, a rise of 5% from the
and wholesale boxed Select cuts to remain
same crush 12 months ago. November 2010
stable at current levels.
saw producers working with a corn cost
of USD 60.01/head, which rose to
Figure 3.28: US beef prices and inflation, Jan 2004-Jul 2011 Figure 3.29: US boxed beef cutout value 600 lbs-900 lbs spread,
Nov 2009-Nov 2011
200 6
200
180 5
190
160 4
140 180
3
index points
120 170
USD/cwt
2
USD/cwt
100 160
1
80
0 150
60
40 -1 140
20 -2 130
0 -3
120
Feb-11
Jul-11
Jan-04
Jun-04
Nov-04
Apr-05
Sep-05
Feb-06
Jul-06
Dec-06
May-07
Oct-07
Mar-08
Aug-08
Jan-09
Jun-09
Nov-09
Apr-10
Sep-10
Jan-11
Mar-11
May-11
Jul-11
Sep-11
Nov-11
Nov-09
Jan-10
Mar-10
May-10
Jul-10
Sep-10
Nov-10
Boxed beef Choice cut US CPI (RHS) Select cut spot price Choice cut spot price
Source: Rabobank, USDA, Bloomberg, 2011 Source: Rabobank, USDA, Bloomberg, 2011

49. Section 3 Agri Commodity Outlooks: Livestock | 47
USD 67.14/head in November 2011, though Japan, the largest export market for US pork,
the increase in the price of lean hogs more increased demand by 14% for the period of
than offset this. This upward movement in the January to October compared to the same
lean hog market has been driven, to a large period in 2010. The increase in demand was
extent, by strong export demand. The January driven by the appreciation of the yen against
to September export figures released by the the US dollar. Pork export demand is
USDA report pork exports at 1.68 million increasingly exposed to currency fluctuations
tonnes. This equals a 288 thousand tonne as the Bank of Japan continues to intervene in
increase year-on-year or a 20.6% increase the foreign exchange market and states that
in volume and a 40.5% increase in value. it will continue to do so in order to support
domestic exports on a lower yen.
There is a risk of weaker pork exports into
China in 2012 as domestic producers recover
from disease outbreaks and scale up
production. This increase in production has
already been seen to a degree, as Chinese
producers reacted to a 139% price rise
in the five months to July 2011. There was
widespread liquidation of the Chinese
domestic hog herd in 2011 due to disease
and this resulted in a larger-than-expected
shortfall in domestic production. In the wake
of this shortage, imports of US pork in China
rose 67.5% in the first three quarters of 2011,
a figure that rises to 376% if Taiwan and Hong
Kong numbers are excluded. Unsurprisingly,
the sharp increase in prices has since resulted
in increased herd-building and increases in
animals brought to market, resulting in a fall
from the June high of CNY 19.8/pound. With
pork considered to be of national strategic
importance to China, the government has
initiated large campaigns to reduce the
outbreaks of foot-and-mouth disease and is
simultaneously seeking to modernise the
production chain, with the ultimate goal of
reaching self-sufficiency.
Figure 3.30: Chinese pork spot prices, Jan 2009-Nov 2011 Figure 3.31: China’s pork imports volume, Jan 2010-Oct 2011
21
70
19
17 60
thousand tonnes
15 50
CNY/kg
13 40
11 30
9
20
7
10
5
0
Jan-11
Mar-11
May-11
Jul-11
Sep-11
Nov-11
Jan-09
Mar-09
May-09
Jul-09
Sep-09
Nov-09
Jan-10
Mar-10
May-10
Jul-10
Sep-10
Nov-10
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Note: Spot price is as reported on the Jilin Market 3-year range 2011 2010 3-year average
Source: Rabobank, Bloomberg, 2011 Source: Rabobank, Bloomberg, 2011

50. Appendix | 49
Appendix
Global agri commodity balance sheets
Global corn supply & demand Rabobank USDA
(1,000 Ha/1,000 Mt) 07/08 08/09 09/10 10/11f 11/12f 12/13f 10/11f 11/12f
Beginning stocks 110,069 132,272 147,197 144,047 129,869 120,112 144,047 129,038
Area harvested 160,534 158,417 157,763 163,221 168,240 168,830 163,221 168,036
Yield 4.9 5.0 5.2 5.1 5.1 5.2 5.1 5.1
Production 793,615 798,824 819,607 827,393 855,781 884,505 828,687 858,989
Imports 98,489 82,587 89,756 91,302 93,311 99,739 90,088 92,111
Total supply 1,002,173 1,013,683 1,056,560 1,062,742 1,078,962 1,104,357 1,062,822 1,080,138
Exports 98,614 84,467 96,810 90,140 96,777 99,407 90,451 95,142
Feed consumption 496,838 479,294 488,656 493,740 507,266 514,935 494,040 508,525
FSI consumption 275,404 300,851 327,047 348,993 354,806 366,255 349,293 354,901
Total consumption 772,242 780,145 815,703 842,733 862,072 881,190 843,333 863,426
Total use 870,856 864,612 912,513 932,873 958,850 980,597 933,784 958,568
Surplus deficit 21,373 18,679 3,904 -15,340 -6,291 3,647 -14,646 -4,437
Ending stocks 131,317 149,071 144,047 129,869 120,112 123,759 124,300 121,570
Stocks/use 17.0% 19.1% 17.7% 15.4% 13.9% 12.6% 14.7% 14.1%
Global wheat supply & demand Rabobank USDA
(1,000 Ha/1,000 Mt) 07/08 08/09 09/10 10/11f 11/12f 12/13f 10/11f 11/12f
Beginning stocks 130,646 125,949 167,098 200,905 199,493 204,656 200,905 196,126
Area harvested 217,908 224,721 227,166 222,627 222,309 221,500 222,627 222,309
Yield 2.8 3.0 3.0 2.9 3.1 3.0 2.9 3.1
Production 611,231 682,190 684,306 648,698 684,049 662,159 648,698 683,299
Imports 113,666 136,933 133,576 129,847 137,595 137,333 129,847 133,786
Total supply 855,543 945,072 984,980 979,450 1,021,137 1,004,148 979,450 1,013,211
Exports 117,416 143,660 135,799 129,188 140,799 139,491 131,373 137,299
Feed consumption 98,117 117,885 115,662 117,047 128,200 119,556 112,485 126,424
FSI consumption 515,593 516,870 532,614 534,651 547,482 542,679 539,466 546,888
Total consumption 613,710 634,755 648,276 651,698 675,682 662,235 651,951 673,312
Total use 731,126 778,415 784,075 780,886 816,481 801,726 783,324 810,611
Surplus deficit -2,479 47,435 36,030 -3,430 8,367 -75 -3,253 9,987
Ending stocks 124,417 166,657 200,905 199,493 204,656 202,422 196,126 202,600
Stocks/use 20.3% 26.3% 31.0% 30.6% 30.3% 30.6% 30.1% 30.1%
Source: USDA, Rabobank, 2011

51. 50 | Rabobank Outlook 2012—Down, But Not Out
Global agri commodity balance sheets
Global soybean supply & demand Rabobank USDA
(1,000 Ha/1,000 Mt) 07/08 08/09 09/10 10/11f 11/12f 12/13f 10/11f 11/12f
Beginning stocks 62,990 51,423 42,570 59,405 65,680 58,278 59,405 68,368
Area harvested 90,674 96,367 102,170 102,757 103,965 105,365 102,757 104,363
Yield 2.4 2.2 2.6 2.6 2.5 2.5 2.6 2.5
Production 221,006 211,952 260,854 263,106 257,960 263,997 264,180 258,905
Imports 78,118 77,376 86,798 88,659 96,206 100,970 88,678 94,206
Total supply 362,114 340,751 390,222 411,170 419,846 423,245 412,263 421,479
Exports 79,589 76,842 92,596 92,528 98,017 100,467 92,413 96,898
Crush 201,819 193,222 209,503 222,369 232,725 234,962 221,109 230,672
Seed/feed/residual 27,800 28,115 28,718 30,593 30,826 31,126 30,373 30,354
Total consumption 229,619 221,337 238,221 252,962 263,551 266,088 251,482 261,026
Total use 309,208 298,179 330,817 345,490 361,568 366,555 343,895 357,924
Surplus/deficit -10,084 -8,851 16,835 6,275 -7,402 -1,588 8,963 -4,813
Ending stocks 52,906 42,572 59,405 65,680 58,278 56,690 68,368 63,555
Stocks/use 23.0% 19.2% 24.9% 26.0% 22.1% 21.3% 27.2% 24.3%
Global palm oil supply & demand Rabobank USDA
(1,000 Mt) 07/08 08/09 09/10 10/11f 11/12f 12/13f 10/11f 11/12f
Beginning stocks 4,247 4,081 4,891 5,383 4,827 5,426 5,383 5,322
Production 41,084 43,992 45,862 47,925 50,466 52,000 47,930 50,566
Imports 30,733 34,151 34,764 34,989 37,834 41,000 35,349 37,834
Total supply 76,064 82,224 85,517 88,297 93,127 98,426 88,662 93,722
Exports 32,226 34,686 35,641 38,397 39,995 40,950 36,270 38,865
Food consumption 29,616 31,293 32,583 33,786 35,932 38,088 34,361 35,932
Industrial/feed 10,264 11,160 11,910 11,287 11,774 12,400 12,709 13,539
Total consumption 39,880 42,453 44,493 45,073 47,706 50,488 47,070 49,471
Total use 72,106 77,139 80,134 83,470 87,701 91,438 83,340 88,336
Surplus deficit -289 1,004 492 -556 599 1,562 -61 64
Ending stocks 3,958 5,085 5,383 4,827 5,426 6,988 5,322 5,386
Stocks/use 9.9% 12.0% 12.1% 10.7% 11.4% 13.8% 11.3% 10.9%
Source: USDA, Rabobank, 2011

52. Appendix | 51
Global agri commodity balance sheets
Global cotton supply & demand Rabobank USDA
(1,000 Ha/1,000 07/08 08/09 09/10 10/11f 11/12f 12/13f 10/11f 11/12f
480lb bales)
Beginning stocks 62,266 60,868 60,803 44,238 46,297 54,650 44,238 45,219
Area harvested 32,917 30,591 30,134 33,507 35,443 35,873 33,507 36,048
Yield 3.6 3.5 3.4 3.4 3.5 3.5 3.4 3.4
Production 119,683 107,081 101,629 115,095 123,070 125,690 115,277 123,888
Imports 38,959 30,476 36,349 37,000 36,000 35,000 35,654 36,305
Total supply 220,908 198,425 198,781 196,333 205,367 215,340 195,169 205,412
Exports 39,005 30,065 35,595 37,000 36,000 35,000 35,572 36,325
Loss -2,154 -2,633 -162 31 -100 -150 31 -143
Use 123,329 110,315 119,110 113,005 114,817 119,317 114,347 114,274
Total domestic use 121,175 107,682 118,948 113,036 114,717 119,167 114,378 114,131
Total use 160,180 137,747 154,543 150,036 150,717 154,167 149,950 150,456
Surplus/deficit -3,646 -3,234 -17,481 2,090 8,253 6,373 930 9,614
Ending stocks 60,728 60,678 44,238 46,297 54,650 61,173 45,219 54,956
Stocks/use 49% 55% 37% 41% 48% 51% 40% 48%
Global coffee supply & demand Rabobank USDA
(1,000 60 kg bags) 06/07 07/08 08/09 09/10 10/11f 11/12f 10/11f 11/12f
Beginning stocks 31,900 36,185 27,291 31,071 25,478 31,104 24,418 26,847
Arabica production 81,717 72,734 82,390 73,854 85,450 75,000 85,787 80,125
Robusta production 48,867 46,633 51,842 52,027 54,696 55,981 52,096 54,896
Total output 130,584 119,367 134,232 125,881 140,146 130,981 137,908 135,046
Imports 97,470 96,809 96,831 93,800 104,000 105,000 104,473 100,574
Total supply 259,954 252,361 258,354 250,752 269,624 267,085 266,799 262,467
Exports 98,000 96,479 97,303 93,000 103,500 105,000 107,455 102,123
Soluble use 12,857 13,584 12,376 13,144 13,400 13,900 14,694 14,595
Use 112,912 115,007 117,604 119,130 121,620 124,400 117,803 119,362
Total consumption 125,769 128,591 129,980 132,274 135,020 138,300 132,497 133,957
Total use 223,769 225,070 227,283 225,274 238,520 243,300 239,952 236,080
Surplus/deficit 4,815 -9,224 4,252 -6,393 5,126 -7,319 5,411 1,089
Ending stocks 36,185 27,291 31,071 25,478 31,104 23,785 26,847 26,387
Stocks/use 29% 21% 24% 19% 23% 17% 23% 22%
Global sugar supply & demand Rabobank
(1,000 Mt) 04/05 05/06 06/07 07/08 08/09 09/10 10/11f 11/12f
Beginning stocks 67,553 61,225 63,962 72,699 74,296 62,581 57,889 57,007
Production 141,013 151,079 166,405 166,610 151,779 156,862 165,385 174,017
Imports 47,056 48,590 46,572 45,318 46,863 53,084 51,183 50,118
Total supply 208,567 212,303 230,367 239,308 226,075 219,443 223,274 231,024
Exports 49,993 50,414 51,721 51,255 50,993 57,207 56,053 54,138
Consumption 145,169 147,274 153,341 159,947 160,258 160,150 161,397 163,942
Total use 145,169 147,274 153,341 159,947 160,258 160,150 161,397 163,942
Surplus/deficit -7,093 1,981 7,915 727 -12,610 -7,411 -882 6,054
Ending stocks 61,225 63,962 72,699 74,296 62,581 57,889 57,007 63,062
Stocks/use 42% 43% 47% 46% 39% 36% 35% 38%
Global cocoa supply & demand Rabobank
(1,000 tonnes) 04/05 05/06 06/07 07/08 08/09 09/10 10/11f 11/12f
Gross production 3,381 3,786 3,434 3,740 3,596 3,602 4,302 4,037
Ivory Coast 1,286 1,408 1,229 1,382 1,222 1,245 1,500 1,290
Ghana 599 740 614 729 662 620 1,025 940
Net production 3,256 3,748 3,400 3,694 3,542 3,566 4,259 3,997
Grindings 3,363 3,527 3,690 3,755 3,508 3,700 3,882 4,025
Surplus/deficit -107 221 -290 -61 34 -134 378 -28
Ending stocks 1,666 1,906 1,645 1,584 1,618 1,484 1,861 1,833
Stocks/use 50% 54% 45% 42% 46% 40% 48% 46%
Source: Rabobank, 2011

53. US agri commodity balance sheets
US corn supply & demand Rabobank USDA
(Mln acres/Mln bu.) 06/07 07/08 08/09 09/10 10/11f 11/12f 12/13f 10/11f 11/12f
Beginning stocks 1,967 1,304 1,624 1,673 1,708 1,128 608 1,708 1,128
Area harvested 70.6 86.5 78.6 79.5 81.4 83.9 86.0 81.4 83.9
Yield 149.1 150.7 153.9 164.7 152.8 146.3 154.0 152.8 146.7
Production 10,531 13,038 12,092 13,092 12,447 12,275 13,247 12,447 12,310
Imports 12 20 14 8 28 15 15 28 15
Total supply 12,510 14,361 13,729 14,773 14,182 13,418 13,870 14,182 13,453
Exports 2,125 2,437 1,849 1,980 1,835 1,625 1,800 1,835 1,600
Feed consumption 5,540 5,858 5,182 5,125 4,792 4,700 4,550 4,792 4,600
FSI consumption 3,541 4,442 5,025 5,961 6,428 6,485 6,596 6,428 6,410
Ethanol use 2,119 3,049 3,709 4,568 5,020 5,075 5,175 5,020 5,000
Total consumption 9,081 10,300 10,207 11,086 11,219 11,185 11,146 11,219 11,010
Total use 11,207 12,737 12,056 13,066 13,054 12,810 12,946 13,054 12,610
Ending stocks 1,304 1,624 1,673 1,708 1,128 608 924 1,128 843
Stocks/use 11.6% 12.8% 13.9% 13.1% 8.6% 4.7% 7.1% 8.6% 6.7%
US soybean supply & demand Rabobank USDA
(Mln acres/Mln bu.) 06/07 07/08 08/09 09/10 10/11f 11/12f 12/13f 10/11f 11/12f
Beginning stocks 449 574 205 138 151 215 235 151 215
Area harvested 74.6 64.1 74.7 76.4 76.6 73.7 72.9 76.6 73.7
Yield 42.85 41.73 39.73 43.98 43.46 41.40 44.00 43.46 41.34
Production 3,197 2,677 2,967 3,359 3,329 3,050 3,207 3,329 3,046
Imports 9 10 13 15 14 15 15 14 15
Total supply 3,655 3,261 3,185 3,512 3,494 3,280 3,457 3,495 3,275
Exports 1,117 1,159 1,279 1,499 1,500 1,300 1,450 1,501 1,325
Crush 1,808 1,803 1,662 1,752 1,648 1,625 1,675 1,648 1,635
Seed/feed/residual 157 94 106 110 131 120 110 131 120
Domestic consumption 1,965 1,897 1,768 1,862 1,779 1,745 1,785 1,779 1,755
Total use 3,081 3,056 3,047 3,361 3,279 3,045 3,235 3,280 3,080
Surplus/deficit 124 -369 -67 13 64 20 -13 64 -19
Ending stocks 574 205 138 151 215 235 222 215 195
Stocks/use 18.6% 6.7% 4.5% 4.5% 6.6% 7.7% 6.9% 6.5% 6.3%
US wheat supply & demand Rabobank USDA
(Mln acres/Mln bu.) 06/07 07/08 08/09 09/10 10/11f 11/12f 12/13f 10/11f 11/12f
Beginning stocks 571 456 306 656 976 863 824 976 863
Area harvested 46.8 51.0 55.7 49.9 47.6 45.7 46.9 47.6 45.7
Yield 38.7 40.2 44.9 44.5 46.3 43.8 44.2 46.3 43.8
Production 1,808 2,051 2,499 2,218 2,207 1,999 2,073 2,207 1,999
Imports 122 113 127 119 97 120 110 97 120
Total supply 1,930 2,163 2,626 2,336 2,304 2,119 2,183 2,304 2,119
Exports 2,501 2,620 2,932 2,993 3,280 2,982 3,007 3,280 2,982
Feed consumption 117 16 255 150 132 165 145 132 160
FSI consumption 1,020 1,035 1,005 988 996 1,018 1,009 996 1,018
Total consumption 1,137 1,051 1,260 1,138 1,128 1,183 1,154 1,128 1,178
Total use 2,045 2,314 2,275 2,017 2,417 2,158 2,169 2,417 2,153
Surplus deficit -115 -150 351 318 -113 -39 14 -113 -34
Ending stocks 456 306 656 976 863 824 838 863 829
Stocks/use 22.3% 13.2% 28.9% 48.4% 35.7% 38.2% 38.6% 35.7% 38.5%
US cotton supply & demand Rabobank USDA
(Mln acres/1,000 bales) 06/07 07/08 08/09 09/10 10/11f 11/12f 12/13f 10/11f 11/12f
Beginning stocks 6,069 9,479 10,051 6,337 2,947 3,257 3,567 2,947 2,600
Area harvested 5,152 4,245 3,063 3,047 4,360 3,900 3,900 4,330 3,986
Yield 4.2 4.5 4.2 4.0 4.1 4.1 4.6 4.2 4.1
Production 21,588 19,207 12,815 12,188 17,850 16,100 17,900 18,104 16,300
Imports 19 12 0 0 10 10 10 9 10
Total supply 27,676 28,698 22,866 18,525 20,807 19,367 21,477 21,060 18,910
Exports 12,959 13,634 13,261 12,037 14,000 12,000 13,500 14,376 11,300
Loss 303 429 -273 -9 0 0 0 184 10
Use 4,935 4,584 3,541 3,550 3,550 3,800 3,400 3,900 3,800
Total use 18,197 18,647 16,529 15,578 17,550 15,800 16,900 18,460 15,110
Net trade 12,940 13,622 13,261 12,037 13,990 11,990 13,490 14,367 11,290
Surplus/deficit 3,410 572 -3,714 -3,390 310 310 1,010 -347 1,200
Ending stocks 9,479 10,051 6,337 2,947 3,257 3,567 4,577 2,600 3,800
Stocks/use 52.1% 53.9% 38.3% 18.9% 18.6% 22.6% 27.1% 14.1% 25.1%
Source: USDA, Rabobank, 2011

54. Food & Agribusiness Research and Advisory Global Financial Markets
Agri Commodity Markets Research (ACMR) Corporate sales contacts
Luke Chandler—Global Head ASIA—Brandon Ma
+44 20 7664 9514 +852 2103 2688
luke.chandler@rabobank.com brandon.ma@rabobank.com
Keith Flury—Senior Commodity Analyst ASIA—David Teakle
+44 20 7664 9676 +852 2103 2686
keith.flury@rabobank.com david.teakle@rabobank.com
Erin FitzPatrick—Commodity Analyst AUSTRALIA—Terry Allom
+44 20 7664 9540 +61 2 8115 3103
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Nick Higgins—Commodity Analyst BRAZIL—Sergio Nakashima
+44 20 7664 9543 +55 11 5503 7150
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Contributing Analysts CHILE—Gaston Iroume
Tracey Allen—Sydney, Australia +56 2 4498536
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Dean Smith—Sydney, Australia EUROPE—David Kane
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Paula Savanti—Buenos Aires, Argentina
paula.savanti@rabobank.com EUROPE—Arjan Veerhoek
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Jean-Yves Chow—Hong Kong, China
Jeanyves.chow@rabobank.com US—Neil Williamson
+1 212 808 6966
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Scott Colvin—London, UK
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Sterling Liddell—Saint Louis, USA
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www.rabotransact.com

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