Rice Industry Field Day Global Market and Sustainability Update Rob - - PowerPoint PPT Presentation

Rice Industry Field Day Global Market and Sustainability Update

Rob Gordon - Chief Executive Officer Thursday 7 March 2019

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Global Outlook

• Global Market
• California Developments
• Global Stockpiles
• Foreign Exchange

Sustainability Update

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Medium Grain Prices: Tender Markets

Source: Creed Report

400 500 600 700 800 900 1,000 1,100 1,200 1,300

Japan Minimum Access Pricing (Since 2007)

US$/tonne (FOB Origin Port) Period since lastField Day

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California Annual Plantings

Source: SunRice and USDA

550 473 533 509 595 528 526 534 519 561 558 585 562 567 4… 429 541 445 506 Forecast Range 500-530 400 440 480 520 560 600 '000 acres

California Rice Acres Planted

Long term aveage of CA plantings has been lowered (to ~500,000 acres) due to competition from increased permanament plantings

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California: Conditions for our Major Competitor

• While it is still early in the cycle, there is presently ample water in California

and 2019 plantings are expected to be in the range between 500,000-530,000 acres

• The years of +540,000 acres of rice plantings are unlikely given the

expansion of almond plantations and permanent cropping

• Californian medium and short grain exports forecast to be 35% higher than

last year

• Coming off smallest export volume since 2014/15, and weaker crops in Australia

and Egypt

• Increased exports likely to be focused on Middle East and North Africa
• Japanese tender prices have also remained buoyant, having recently

returned above US$800/tonne

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Global Stockpiles still High

Source: USDA

20 40 60 80 100 120 140 160 180 Million tonnes

Rice Stockpiles: China / Thailand / Egypt + 'Rest of World'

China Thailand Egpyt Rest of the World

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Chinese Stockpiles and Exports Increase

• As a result of high floor prices for domestic farmers, China stockpiles have

increased by around 6% to 116 million tonnes, which accounts for 69% of

• verall global stockpiles
• China continues to increase exports, especially into lower returning markets

such as Asia and the Pacific, to unwind stockpiles

• China’s annual rice exports have increased by 75% since early 2017 and now

exceed 2 million tonnes

• SunRice is taking advantage of this opportunity and has agreed to purchase

Chinese medium grain rice

• In Middle Eastern sensory testing Chinese medium grain has performed well
• Will US-China trade talks impact trade flows?
• Egypt has unwound stockpiles by 59% over the past year and levels are now

at lowest since 2014 due to small domestic crop and import requirements

• Despite country-specific variances, global rice trade volumes have

experienced minimal change, as reflected in strong pricing year-on-year Premium Riverina rice is sold into high returning markets, as rice sourced beyond Australia satisfies demand in lower returning markets

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Foreign Exchange Movements – A$/US$

• Weaker A$/US$ exchange rate is

favourable for international rice sales

• SunRice’s rice price is sensitive to

exchange rate fluctuations

• US central bank commentary suggests

US rates are presently in neutral position

• Majority of our banking syndicate are

presently forecasting A$ to depreciate

• ver 2019
• PNG bond issuance in September 2018

has improved USD liquidity, reducing SunRice’s exposure to the depreciating PNG Kina exchange rate

Sources: Bloomberg

0.65 0.70 0.75 0.80 0.85

A$/US$ (since January 2015)

Period since 2018 Field Day Average heding for FY19 is US$0.75 0.28 0.30 0.32 0.34 0.36 0.38 0.40

PNG Kina/US$ (since January 2015)

Period since 2018 Field Day

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Is the A$ Set for Further Depreciation?

Source: Bloomberg

0.60 0.65 0.70 0.75 0.80 0.85 0.90 0.95 1.00 1.05 1.10

• 1.0
• 0.5

0.0 0.5 1.0 1.5 2.0 2.5 3.0 US Ten Year Yield AUD/USD

10 Year Rate Spread - Aus v US (Since 2012)

10 Year Bond Spread AUD v USD AUD/USD

We flagged that SunRice anticipated the depreciation of the AUD at the 2018 Field Day

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Iron Ore Pricing versus AUD/USD

Source: Bloomberg

0.60 0.65 0.70 0.75 0.80 0.85 0.90 0.95 1.00 1.05 1.10 20 40 60 80 100 120 140 160 180 Iron Ore Price US$ AUD/USD

Iron Ore Price versus AUD/USD

Iron Ore AUD/USD

Movements since 2018 Field Day

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Crop Size and Milling Yield

Source: SunRice

800 963 1,161 829 690 244 802 625 50 59.3% 55.4% 48.3% 57.4% 58.5% 54.9% 57.2% 51.5% 40 45 50 55 60 200 400 600 800 1,000 1,200

Crop Size and Average MG Milling Yield

Crop Size ('000 tonnes) - LHS Milling Yield Milling Yield (%) '000 tonnes

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Pricing Indicators: On Balance Remain Positive

World Rice Prices Foreign Exchange Milling Yields Crop Size Branded Markets & Sale of Premium Varieties Ensure Stronger Pricing

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SunRice Provides Reliable Paddy Price Indicators

• SunRice continues to

provide growers with reliable price range indicators and guidance

• Regular adjustments to

price range guidance are communicated to growers depending on market and trading conditions

• Base of the C18 paddy

price range has increased by $30/tonne over the past six months: now $385-410/tonne

$255 $317 $294 $395 $405 $415 $379 C18 Range $385-410 200 250 300 350 400 450

Crop Size and Paddy Price (since CY11)

A$/tonne

Source: SunRice

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Sustainability – A local and global responsibility

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Sustainability is a Key Focus – Why?

Companies that focus on sustainability and anchor sustainability within the strategies and activities of their businesses, create a competitive advantage for their business, while working towards addressing social, environmental and ethical issues.

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Sustainability is a Key Focus – Why?

• China is an example of a market where the consumer is demanding

sustainable and safe food: increasing portion of regular spending (~87%) is

• n food rather than non-food products
• Characteristics of food deemed most important by consumers in China
• According to IRRI, consumers are willing to pay between 30-35%

premium for rice that can demonstrate traceable and sustainable credentials

4.9 4.8 4.5 4.4 4.3 3.9 3.5

Scale: 1  5

Source: KPMG

Sustainable Rice Platform (SRP)

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Questions