CAROB MARKET REPORT

1
CAROB MARKET REPORT

• As of September 13 2004

2
Carob Market Report. GLOBAL(highlights)

• We are facing a short crop campaign in most
  producing countries with the exception of Spain,
  Italy and Algeria, where volumes are rather
  normal.
• One of the two main producing countries Morocco,
  is for the first time in years, not supplying
  seeds at the beginning of campaign to importing
  countries.
• In some countries speculation deposits have been
  consumed up and traders are trying to acquire
  again some stocks in top of the normal needs of
  LBG producers.
• In top of this, some LBG producers have started
  actual campaign without significant stock
  volumes, when the usual level is of 3 or 4 months
  and no forward deals were done this year
• Due to this lack of stock building, speculators
  are trying to buy seeds from kibblers to take out
  product of the market ant try to sell later at a
  higher price, what increase speculation and
  potential risk of price increases..
• AS A SUMMARY WE CAN SAY, IS A TOUGH START OF
  CAMPAIGN, WHERE THE ADVICE WOULD BE TO COVER
  STRATEGIC CUSTOMER ORDERS AS SOON AS POSSIBLE, AS
  MARKET MAY BECOME EVEN TOUGHER, WHEN MAIN LBG
  PRODUCERS COME TO THE MARKET.

3
Carob Market Report. SPAIN

• In Spain all regions are showing good crop
  volumes. Nevertheless, there is a short term poor
  availability of seeds due to late rains, so
  Tarragona and Mallorca will start supplying
  middle October at the soonest and Valencia by the
  end of September.
• The actual coverage of local LBG producers in
  terms of stocks vs potential orders is considered
  to be rather short as compared to other
  campaigns, due mainly to the unexpected end of
  previous campaign prices and proximity of next
  crop reported as a good one.
• Also due to this, they are resisting to buy at
  high prices (2,30 eur/kg) in actual campaign,
  thinking situation in Morocco will be not so bad.
  At the same time, they continue as previous
  campaigns TRYING TO BUY at their respective loyal
  suppliers in Spain at prices ranging between 2,10
  and 2,15, when availability of seeds be possible,
  but I am preventing them to sell to those levels
  by informing punctually about latest prices paid
  in the market, just to avoid these producers take
  a competitive advantage.
• The actual level of prices for small deals has
  been of 2,20 eur/kg (a maximum of 100 hundred
  tons), 2,30 eur/kg (another 3 or 400 tons) and
  lately 2,40 eur/kg (around 200 tons).
• What will provoke a change in the prices
  behavior, is when Danisco decides to buy to
  Armengol, that is the only way out in my opinion
  they have to overcome situation and face orders
  that will come very shortly mainly Kraft, Nutraco
  and Brioches Pasquier contracts, that are
  considered strategic customers for Danisco, when
  this happens will be important to know the
  volume, even more than price, because market is
  expectant about their purchasing needs.
• Another particularity of the market right now is
  speculator action, I have been contacted by two
  kibblers trying to buy first at 2,30 eur/kg and
  lately at 2,40 eur/kg basis, for later sales at
  higher price and volume was up to 200 tons.
• LOCAL STRATEGY SUGGESTED Buy in Spain at levels
  of 2,30-2,40 and follow the market, as other
  markets are supposed to come to Spain to buy.
  Morocco, Portugal, Italy and Turkey, are almost
  blocked and Spain being the only country with
  availability at theoretical reasonable prices,
  for the time being.

4
Carob Market Report.MOROCCO

• The other main producing market Morocco, is for
  the first time in years, not exporting seeds
  neither signing long term export contracts at the
  beginning of campaign because of high prices, as
  explained before. As it is known, under these
  conditions market is starting with high prices of
  pods and later these come down if demand is
  normal and crop sufficient.
• At the same time, because having exhausted
  traders pods deposits related to several previous
  years, wild speculation mainly from merchants is
  taking place, in spite of a relatively not to bad
  local crop, buying pods and not selling them with
  fluidity and reasonable margins.
• This makes buying of pods and consequent seeds
  availability, almost impossible, as more price
  is offered less pods available will exist, so
  what is advised is not to try to buy and let
  market to calm.
• Prices for pods are reported to be in the range
  of 6 - 6,50 DH per kg, with yields that seem to
  be lower than normal, mainly in the south where
  traditionally were between 20 and 26., prices
  for seeds do not exist at this point in time,
  there is no offer, and kibblers ask to wait for
  market slow down.
• Fewer and smaller long term contracts have been
  done this year, but unfortunately will not be
  honoured or postponed some of them, due to the
  big difference between expected prices and real
  ones, this was a very good stabilizing tool in
  the market, that temporarily has been lost.
• STRATEGY SUGGESTED Follow kibbler activity to
  detect important movements and react accordingly,
  on seeds it is recommended to buy in Spain mainly
  where may be some availability at reasonable
  prices.

5
Carob Market Report.ITALY

• Another country presenting a rather normal
  situation is Italy with 2500-3000 tons.
  Traditionally has been high speculative market,
  not easily exporting seeds at market normal
  prices.
• Today with quick communications information is
  running very fast and is at all impossible
  isolate local good crop environments out of the
  rest of the market. Mainly Armengol and other
  people are intensively launching messages of
  short crops all over and this obviously has an
  effect on the local sellers sooner or later, even
  with a relatively good crop.
• Italy started with a price for seeds of 2,60 eur
  / kg and now it is being increased the price by
  at least 5 .
• So, Italy is almost blocked for releasing carob
  seeds even locally, also we do not have to forget
  that after Spain is the second importer from
  Morocco (more than 2000 tons in last campaign)
  and clearly what happens in that country takes a
  strong influence in this market.
• STRATEGY SUGGESTED.

6
Carob Market Report. PORTUGAL

• In Portugal situation is even worse, as compared
  to Italy, with a crop that most of the local
  players and myself confirms is of maximum 60 of
  normal, in spite of desperate messages of Mr
  Caetano declaring to everybody that crop is
  normal (around 4000-4500 tons).
• Prices have been set by kibblers at 2,65 eur / kg
  ex work as a minimum price to sell, being LBG
  producers announcing to pay maximum 2,50 eur /
  kg, the market is obviously also blocked for
  seeds releasing.
• Pods yield has been of low 9 instead of
  traditional 10-11, thus reflecting and
  confirming low crop and potential low yield also
  in seeds.
• STRATEGY SUGGESTED If prices for the seeds are
  not comparatively competitive, not to buy in this
  market for the time being.

7
Carob Market Report.TURKEY

• Turkey is also a problematic country due to the
  extreme cold conditions during last winter,
  mainly in Antalya area where for several nights
  temperatures reached below - 3º C.
• In the country exists strong competition in
  buying pods because of the short crop,
  approximately 50 of a normal one, as reported by
  three main local kibblers, prices for pods were
  of 0,30 cents of euro per kg for yields below 9.
• Under these conditions, seeds prices are expected
  to be high and somewhat out of competition with
  Spain as announced by a main local player. For
  the time being there is not yet product available
  until kibbled, this will take place hopefully not
  before the end of September for the very first
  containers.
• STRATEGY SUGGESTED Follow the local market and
  detect potential opportunities when available to
  buy spot deals.

8
Carob Market Report.GREECE

• Greece is also announcing a short crop but here
  still is not possible to know prices both for the
  pods and seeds.
• One of the main kibblers in the country,
  announced that seeds availability will take place
  by middle of October at the soonest.
• STRATEGY SUGGESTED Follow this local market
  and be aware of potential spot deals
  opportunities.

9
Carob Market Report.ALGERIA

• Algeria is a special country dominated by one
  very important local kibbler. This kibbler since
  many years ago is selling its whole production to
  Danisco.
• This year crop is better than last year, with a
  potential volume of around 800 tons of seeds, of
  which this main kibbler sold already a contract
  of 500 tons to Danisco at a price supposed to be
  around 2,20 eur / kg.
• I convinced this kibbler by the end of October
  when he will deeply know the volume he will
  avail, to offer me some containers in excess of
  the committed volume for export.
• I do not have information available of local
  price for the pods.
• STRATEGY SUGGESTED Try to quote when these
  containers be offered some interesting price
  competing with Danisco, and in agreement with the
  quality of the seeds.

10
Carob Market Report. CYPRUS

• Cyprus is presenting a volume of crop rather
  normal, around 800 tons of seeds, the market is
  dominated by the 2 main cooperatives, on in the
  north part of the country (turkish) and the other
  in the grecian part.
• The quality of these seeds is the lowest both in
  terms of viscosity and gum yield, also has been
  reported lower gel strength as compared to other
  gums, so even for petfood production is of lower
  quality.
• STRATEGY SUGGESTED Not to buy, seeds not
  interesting for medium / high viscosity products.

11
Carob Market Report. OTHER

• Other countries are Tunisia, Libano and Malta
  mainly, with relatively very low volume
  productions.
• STRATEGY SUGGESTED Quality in these markets is
  very unpredictable, I recommend not to buy in
  these markets.