Page 1 - Brazil Agribusiness Report Q4 2012 Published: October 2012

No. of Pages: 134

Price: US $ 1175

We have revised up again our forecast for corn production in 2011/12 on the back of strong yields for the country’s second crop. We are slightly below consensus in our outlook for the soybean crop in 2012/13, as we believe a weaker-than-expected El Niño will present some downside risks to production. For sugar, our view for the harvest to pick up more strongly once weather concerns disappeared has played out very well, and we maintain our forecast for a recovery in output over the medium term. For livestock and dairy, we continue to see problems linked to heavy debt levels for the main companies in the sector, but we expect strong sales growth potential over our forecast period. For coffee, we expect exports to improve significantly in the coming months now that farmers have partially replenished stocks and that the latest estimates for the arabica crop this year are strong. Regaining Strength Brazil – Sugar Monthly Exports (‘000 tonnes) Source: BMI, Bloomberg Key Forecasts 

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Coffee production growth to 2015/16: 11.2% to 53.5mn tonnes. This growth will be driven by Brazil’s continuing dominance in the export market as well as increased domestic consumption. Poultry consumption growth to 2015/16: 12.4% to 10.6mn tonnes. This gain will be underpinned by macroeconomic growth and the subsequent rise in per capita incomes, especially as chicken is the cheapest of the three meats we cover in our report and is often perceived as healthier. Brazil Agribusiness Report Q4 2012 © Business Monitor International Ltd Page 8 Soybean production growth to 2015/16: 22.6% to 92.5mn tonnes. We expect prices to stay supported on the back of a recovery in global demand, which will continue to provide farmers with incentives to invest in their soybean crop. 2012 real GDP growth: 1.8% (predicted to average 3.4% over 2011-2016). Consumer price inflation: 5.5% average in 2012. BMI universe agribusiness market value: 2.4% year-on-year (y-o-y) increase to US$172.5bn in 2013, forecast to increase by an average of 2.0% annually between 2010/11 and 2015/16.

Industry Outlook We have revised down slightly our forecast for the Brazilian 2012/13 coffee crop to 51.0mn bags (from a previous forecast of 55.0mn bags). However, this output will still be 17.1% higher than in 2011/12 and a 6.1% above the previous up-year in the country’s production cycle. We forecast a production balance of 30.5mn bags in 2012/13, compared with 23.5mn bags in 2011/12 and 28.7mn bags in the previous upyear (2010/11). Expectations for this bumper crop from the world’s largest coffee producer has weighed heavily on global prices, taking them 45.1% lower as of September 3 compared with May 2011. Brazilian meat producer JBS turned an overall profit in Q212, the first time the company recorded a profit in two consecutive quarters since early 2010. That said, we see subdued earnings potential over the short term. A key reason for the growth was the company’s 12% quarter-on-quarter (q-o-q) and 19% y-oy increase in revenues from the South American unit. The higher revenues from the Mercosur unit led to a

nearly 50% y-o-y increase in EBITDA for that division, making it easily the company’s best performing division (other divisions include meat operations in the US and Australia). Lower cattle prices in Brazil and a weaker Brazilian real improved export competitiveness for the firm. Overall, the company’s net income improved by 46% q-o-q to BRL170mn, and improved significantly from Q211, when the company experienced a BRL180mn loss. We maintain our forecast for Brazilian soybean output to reach 76.0mn tonnes in 2012/13, as we believe industry sources are being slightly optimistic in their forecast for production to reach 82.0mn tonnes next season. Even at 76.0mn tonnes, the 2012/13 Brazilian soybean crop will help to loosen the global market after January 2013. However, we highlight upside risks to global prices in the short term owing to fears that Hurricane Isaac will provide too much rain in the south of the US while droughts in the north continue to affect soybean yields.

Brazil Agribusiness Market Research Report Table Of Contents Executive Summary 7 SWOT Analysis 9 Brazil Agriculture SWOT .. 9 Brazil Business Environment SWOT ... 10 Supply & Demand Analysis ... 11 Brazil Livestock Outlook .. 11 Brazil Cocoa Outlook .. 18 Brazil Coffee Outlook .. 21 Brazil Sugar Outlook ... 27 Brazil Cotton Outlook .. 32 Brazil Grains Outlook .. 37 Brazil Soybean Outlook ... 42 Brazil Dairy Outlook ... 47 Company Profiles .. 54 JBS SA 54 Brazil Agribusiness Report Q4 2012 © Business Monitor International Ltd Page 4 Cosan Limited . 63 Commodity Price Analysis 71 Monthly Grains Update ... 71 Wheat: Little Potential For Export Restrictions .. 71 Corn: US Downgrades Tighten Market Further . 74 Soybean: South America In The Spotlight ... 76 Rice: The Only Well-Supplied Grain Market .. 78 Monthly Softs Update ... 80 Cocoa: Looking Supported . 81 Coffee: Supported In Short Term 83 Palm Oil: Heading Back To Support .. 85 Sugar: Searching For Support 87 Cotton: Still In A Downward Trend Channel .. 89 Upstream Analysis 91 Americas GM Outlook . 91

Americas Machinery Outlook .. 95 Americas Fertiliser Outlook . 98 Downstream Analysis . 102 Consumer Outlook ..102 Food104 Consumption ..104 Processed Food .105 Dairy ..111 Confectionery.114 Drink ...118 Hot Drinks .118 Alcoholic Drinks 120 Soft Drinks .122 Mass Grocery Retail ...124 Trade ..126 Country Snapshot ... 127 Brazil Agribusiness Report Q4 2012 Š Business Monitor International Ltd Page 5 BMI Forecast Modelling ... 131 How We Generate Our Industry Forecasts .131 - Brazil Agribusiness Report Q4 2012  

We have revised up again our forecast for corn production in 2011/12 on the back of strong yields for the country’s second crop. We are slig...