FGV Annual Report 2016

ANNUAL INTEGRATED REPORT 2016 13 WHO WE ARE & HOW WE CREATE VALUE MARKET LANDSCAPE Source: BMI Research INDUSTRY OUTLOOK In 2016, global palm oil output dropped by 3.0 million MT to 59 million MT compared to 2015. This was due to the impact from El Nino, labour shortage & poor age profiles. Global output is expected to increase by 10% or 64 million MT in 2017 subject to increase rainfalls and yield's rebounding. Price (RM/MT) Production (Mil/MT) 2,550 2,600 2,400 2,500 2,350 2,250 2,450 2,300 2,200 2,150 80 90 50 70 40 20 60 30 10 0 2,100 2013 64 2015 2017 2014 2016 2018 2019 56 59 62 59 68 RM2,600 70 Production - RHS Price - LHS Source: BMI Research, United Nations LONG-TERM OUTLOOK (2020) Greater Global Supply - Demand imbalance is expected for commodities resulting from growing population, emerging markets, declining arable land and climate change which will support price pressure upwards. Supply : Constraints on global supply further fuel upward price pressure • Resources constraint - most prominently: i. Water Management ii. Land scarcity iii. Labour • Climate change i. Resulting in productivity inefficiency in certain geographies • Sustainability challenge • Logistics and storage choke points Demand : Rising demand will continue to exert upward pressure on commodity price • Growing population • Rise of emerging markets & increasing food consumption per capita • Dietary shift to protein and fat rich diet • Technological advancement creating new use/demand for agro-commodities