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Price development – raw materials Kalev

Price development – raw materials Kalev. April 2011 OBP. Lauric oils are up 91% since last year and 58% since 2008. Comments and outlook. Average price of vegetable oils significantly up from last quarter and considerably up from last year Main price drivers since the summer of 2010:

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Price development – raw materials Kalev

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  1. Price development – raw materialsKalev April 2011 OBP

  2. Lauric oils are up 91% since last year and 58% since 2008 Comments and outlook • Average price of vegetable oils significantly up from last quarter and considerably up from last year • Main price drivers since the summer of 2010: • Reduced supply/demand balance • Lower USD • Higher mineral oil price • In the end of 2010 we saw sideways movements and decline in prices due to: • Signs of slower global demand • Signs of better output in 2011 of palm kernel oils • Speculative sell-offs due to catastrophy in Japan • Stabilizing USD • In March prices started to take off again due to renewed confirmed lower supply/demand balance: • Big demand from oleochemical production • Increased demand of biofuels (mainly Philippines) • Higher export figures • Inflation worries in the US/China • 16% lower production of coconut • Financial speculation entering the market after sell-off in early March • We expect prices to stay stiff in 2011 +58% +91%

  3. Cocoa is up 80% since 2008 due to a consequtive worsened harvests year after year – when supply looked better in the start of the 10/11 crop, a new civil war broke out in Ivory Coast Comments and outlook • Average price of cocoa significantly up from last quarter but slightly lower than last year • After better fundamentals in the start of the main crop 10/11, prices fell • Presidential elections in Ivory Coast (world’s major cocoa producer) in November ignited a renewed conflict where current president, Laurent Gbagbo, denied recognizing the winner, Alassane Outtara • With support from the international community, Outtara imposed sanctions on export of cocoa beans and thus price soared in January/February • Price is now coming down over Outtara’s progression of by force taking control of the country, thus price falls with expectations of stop sanctions • With better fundamentals of cocoa this year and when conflict is over in Ivory Coast we expect lower cocoa beans price. Current fall in prices will most likely not be materialized in 2012. This since cocoa purchase on these price levels have been impossible due to current sanctions on Ivory Coast • We fear for an unresolved conflict in Ivory Coast together with the negative effects the conflict has had on the cocoa production • Updated estimations for the season 11/12 signals a new deficit year why we cannot exclude higher price in the end of 2011 Export ban from February makes it impossible to gain on current lower prices, thus cocoa costs as in 2010 +80%

  4. EU sugar prices have increased by 60% in one year and will further increase during 2011 Comments and outlook • EU sugar prices have surged during the last five months due to lack of sugar in the market • Price letters from all the major suppliers in the European market indicate a continued price increase during the reminder of the year • EU has not given any indications of increasing the sugar quota for 2011/2012 • The global sugar market has had an increased influence on the EU market since the sugar reform of 2005/2006 • Globally, sugar prices have been very volatile over the last two years because of failing crops and declining inventories • Global inventories are running very low and it will take years to restock up to a healthy level. Prices will remain high as long as the inventory levels are low • Recent start-up of harvesting in Brazil, and improved crop estimates from Thailand and Brazil has recently stabilized the global market to some extent – albeit on a very high price level • Sugar demand is generally increasing due to increased living standards, however high prices have curbed some demand +60% Sugar #11 ICE NY USc/lbs +57% +113%

  5. Dairy/EU: The price increases in Q1 for Q2 contracting have now soften a bit and prices have decreased somewhat but not back to end of 2010 levels Comments and outlook • Both the global and the EU dairy market will continue to be volatile – contracts are mostly only made on quarterly basis • Milk intake in major EU countries are currently above quota levels • In beginning of 2010 China and Russia had high demand with increases on world and EU market prices as a consequence • Prices increased in Q1 but have during the last weeks dropped down a bit, though not compensating for the increases seen in Q1 • Compared to Q2 the current world market prices for Q3 and Q4 are in line (Butter) and below (Powders) with 0-5%. However, it is important to stress that this is a very volatile business and changes in prices might very well happen as we approach Q3 and Q4 respectively 2009 2010 2011 Source: German ZMP, weekly price report, low range

  6. EUR/kg EUR/kg EUR/kg

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