Asia Pacific Agribusiness Insight

INSIGHT
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October 2023
ISSN: 2054-1279
Asia Pacific Agribusiness Insight

Asia Contents
Asia Machinery Outlook: Strong Regional Asia...................................................1
Asia Machinery Outlook: Strong
Fundamentals To Drive Growth While India Is Set
Regional Fundamentals To Drive
To Outperform
Growth While India Is Set To
Key View Outperform .........................................1

Asia GM Outlook: Upside To
• We believe that the outlook for agricultural machinery sales and manufacturing in Asia is
Demand Likely As Food Prices
positive. On the sales side, India and Southeast Asia will outperform, and India will likely
outperform on the manufacturing side. It is our view that elevated commodity prices will Remain High........................................9
continue to support farmer income, providing for capital investment and purchases of Global............................................ 14
agricultural machinery.
Soybean Prices: Forecast Revised
• In FY2022/23, India witnessed record growth in tractor sales of 12% y-o-y, climbing to
944,000 units, while total sales exceeded 1.0mn after exports are included. The surge Downwards Over Robust Global
was driven by increases to the minimum support price (MSP) scheme and favourable Supplies.............................................. 14
monsoon conditions. The annual Union Budget of India continues to set aside
significant spending commitments designed to support domestic agriculture. The
administration of Prime Minister Narendra Modi has targeted funds at farmer-income
support, yield-enhancing investments, and the promotion of mechanisation and
technological adoption.
• Mahindra & Mahindra, the Indian automotive manufacturing firm, experienced robust
tractor sales growth over the FY2022/23 period. The company sold 407,545 tractors, up
by 15% y-o-y. Most recent interim data suggests that the company sold 284,591 tractors
over the January to September 2023 period, with sales being up 5% y-o-y. In September
2023, Mahindra & Mahindra debuted Oja, a new tractor platform made exclusively for
the export market. The INR120bn is expected to double exports by focusing on four
wheel, lightweight tractors.
• In July 2023, Tube Investments of India announced plans to invest INR 300bn in the
electric vehicle sector, with the launch of three electric tractor models under the Montra
Electric brand planned for March 2024. This strategic move includes the acquisition of
Celestial E-Mobility through their subsidiary TI Clean Mobility, strengthening TII's
foothold in the green mobility space.
• We consider the outlook for agricultural machinery sales in Mainland China to be more
muted than in India as mechanisation rates are already high by regional standards and Head Office
the emphasis of recent years has been on smaller, more energy efficient equipment.
30 North Colonnade, Canary Wharf,
Agricultural manufacturing and processing are set to receive a boost as part of the 14th
London
Five Year Plan (2021-2025) as China aims to move up the value chain, in particular
E14 5GN, UK
toward advanced manufacturing.
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• Kubota, the Japanese machinery manufacturer, in partnership with India-based Escorts Limited, has looked to India to establish
an agricultural machinery manufacturing hub with the intention of expanding ‘made-in-India’ sales in Africa, seeking to leverage
India’s low labour costs and existing manufacturing base. In September 2023, Kubota announced plans to release the country's
first remote-monitored robo-tractors by 2026, using Nvidia chips and GPS technology tailored for Japan's smaller farms. Amidst a
44% decline in Japanese farming households over the past 20 years, Kubota aims to address labor shortages and attract younger
workers by enhancing efficiency and simplifying workloads through AI-driven farming machinery.
• In Pakistan, macroeconomic troubles, including the public deficit, severe pressure on the balance of payments, and the
depreciation of the Pakistani rupee (all worsened by the flooding of June to October 2022), will weigh on agricultural machinery
imports. Pakistan-based Millat Tractors, for example, announced in January 2023 that it would suspend its operations in the face
of cash flow problems and subdued demand. In July 2023, it was reported that the production of farm tractors in Pakistan saw a
significant decline of 46.11%, dropping to 31,726 units during FY2022/23, compared to 58,880 units in FY2021/22. The
weakness can be attributed to the balance of payments and fiscal issues plaguing Pakistan along with the currency pressures.
Some relief is expected over the next year as macroeconomic performance improves.
• Across Southeast Asia, we have identified significant growth opportunities in the sales of harvesting machinery, including
combine harvesters, to the sugar cane sector due to low levels of adoption and the search for further productivity
improvements.
It is our view that the evolution of three major dynamics will determine the pace of mechanisation across the
agricultural sectors of Asia between 2023 and 2027:
• the rate of farmer-income growth, the product of both enhanced productivity and elevated commodity prices (as has been the
case over the last 18 months);
• the continued extension of targeted state support and financial incentives to the domestic agricultural sector and agricultural
machinery manufacture sector;
• and, the expansion (or otherwise) of access to credit and favourable lending rates.
Monetary Tightening To Weigh On Machinery Purchases In 2023/24

Select Asia Markets - Real Lending Rate (%, aop)
f = BMI forecast. Source: National Sources, BMI
fitchsolutions.com This commentary is published by BMI – A Fitch Solutions Company, and is not a comment on Fitch Ratings' Credit Ratings. Any comments or data included in
the report are solely derived from BMI and independent sources. Fitch Ratings analysts do not share data or information with BMI.
Page 2
In the short term, we point to the following trends in the agricultural sector, against a backdrop of post-pandemic
base effects but steady investments in regional agribusiness as likely to have a positive impact on machinery sales
in Asia:
• elevated agricultural commodity prices, which we forecast to remain elevated by recent historical standards in 2023 despite an
easing from the highs of 2022;
• a positive outlook for the major grains and other key crop sectors across Asia (with the exception of flood-stricken Pakistan),
supported by rising rice yields, and a broader focus on enhancing yields as the pace of planted area expansion begins to slow;
• and, the catch-up potential offered by several non-grain agricultural sectors in terms of the adoption and deployment of
machinery.
Robust Regional Growth To Support Domestic Agricultural Sectors

Select Asia Markets - Real GDP Growth (%, y-o-y)
f = BMI forecast. Source: National Sources, BMI
However, we note that the recent year-on-year decrease in agricultural input prices, particularly the cost of fertiliser, is expected to
have a positive impact on farmer incomes in the near term. Over a longer period, lower input costs could lead to increased capital
expenditure on machinery like tractors and technologies that allow for the more efficient use of certain inputs.
1. India To Outperform In Asia
Sales and production of new agricultural machinery over the first nine months of 2023 has been relatively resilient with a strong
Q323 due to heavy domestic agricultural capital expenditure for the 2023/24 season. Preliminary data suggests Indian domestic
tractor sales over January to September 2023 came in at 860,500, up 3.9% y-o-y. We also note that demand for tractors will remain
well-above trend due to the structural growth of the domestic agricultural sector and the continued provision of generous state
support to the sector, intended to support farmer incomes and to stimulate efficiency and productivity improvements. In FY2022/
23 (April-March), data suggests that domestic tractor sales climbed by 12.0% y-o-y to reach almost 1.0mn units, while domestic
production is set surpass 1.0mn units for the first time. Through the medium term, we expect the same short-term drivers to
continue to support the further mechanisation of India’s domestic agricultural sector. It is our view that India’s expanding population
will establish a firm demand-side pull for the sector, while state support will be maintained in the face of the political relevance of the
farmer bloc and its commitment to tackling hunger and improving food security. Our production forecasts also indicate robust
output growth across India’s principal crops.
Page 3
On Track For A Strong Sales Performance In 2023

India - Tractor Production & Sales ('000 units)
Note: Q323 based on extrapolation of July and August figures. Source: Tractor Manufacturer Association of India, BMI.
Secondly, the administration of Indian Prime Minister Narendra Modi has consistently maintained financial support to the sector
with the stated aim of fuelling its continued expansion. Agricultural policies, such as the minimum support prices (MSP) scheme and
fertiliser subsidies, are designed to bolster farmer incomes, an important driver of rural economic development, as well as to
encourage spending on agricultural infrastructures (which remain patchy) and capital investment in the sector. Finally, we see the
uneven pace of agricultural machinery adoption in India, in terms of both international peers and on an intra-state basis, as allowing
for significant catch-up growth potential. Tractor ownership remains low at the national level, while adoption also lags in some of
India’s largest agricultural states, such as Rajasthan, Madhya Pradesh, and Andhra Pradesh. At the same time, replacement demand
will come from northern states, which are expected to move toward secondary mechanisation.
Elsewhere in Asia, it is our view that agricultural machinery sales growth in Mainland China is set to slow as the domestic agricultural
sector matures and catch-up growth capacity is consequently narrowed, although there still exists potential for higher rates of
tractor use in several regions. However, this does not preclude robust growth in the demand for upgrade items and repair and
maintenance services, supported, in turn, by firm state investments in mechanisation. We also highlight sales of efficiency-
enhancing machinery and technologies as set for upside due to the pressure on China’s agricultural land area. In addition, China’s
desire to advance up the agricultural value chain will necessitate investment in storage, aggregation, and processing facilities.
Analysing data on China's agricultural machinery from 2011 to 2021 reveals noteworthy trends. A steady increase in the total power
of agricultural machinery - growing from 9,773,500 kW to 10,776,400 kW, a rise of 10.3% - underscores China's ongoing
commitment to advancing agricultural mechanisation. In essence, the progressive mechanisation of China's agriculture sector is
evident in the growing use of powerful machinery and large tractors. The declining usage of smaller tractors reflects a shift in
farming practices, which bears implications for manufacturers and suppliers in this market segment.
Page 4
Shift Toward Larger Tractors As Efficiency Prioritised

Mainland China - Tractors By Type ('000 units) & Medium- And Agri Machinery Power (kW): 2011-2021
Source: NBS, BMI
2. Healthy Capital Expenditure Geared Towards Production Growth
We believe that the combined effect of strong domestic agricultural consumption growth and a desire to stimulate food exports
represents a bullish signal for the tractor manufacturing sectors of both India and Mainland China, the former of which, in particular,
has made a concerted effort to increase the foreign sales of India-made tractors, whether produced by domestic firms or on a
domestic basis in partnership with foreign partners. Within India, established firms such as Mahindra & Mahindra, TAFE, and Escorts
Kubota Limited (the result of a 2019 joint venture between the Japanese automotive manufacturer and India-based Escorts Limited,
followed by a JPY16bn investment in 2020 by the former in the latter) will be well-placed to capitalise on these positive growth
trends. The interest of foreign firms in India’s agricultural machinery manufacturing base is also reflected in the 2021 signing of an
agreement between India-based Erisha Agritech and the Belarusian firm Minsk Tractor Works for the localisation (in India) of tractor
assembly under the brand name ‘Darsh Belarus’.
Mahindra & Mahindra Sales Growth To Maintain Upward Trajectory

Mahindra & Mahindra - Domestic Tractor Sales (units) & Unit Sales Growth (%, y-o-y)
Source: Company Data, BMI
3. Cautious Outlook For Mainland China But 14th Five-Year Plan Poses Upside Risks
Compared to India, we hold a more muted outlook for agricultural machinery manufacturers in Mainland China where the rapid
sales growth of the past decade, support by favourable terms and generous state-extended subsidies, is set to mature and slow.
Moreover, the domestic manufacturing space has become more competitive over time as the high rates of return and profitability
of the sector has encouraged market entry. A turning point is evident in 2013, after which time the pace of new tractor sales eased
Page 5
and stabilised while the absolute size of the tractor fleet remained broadly flat. However, the 14th Five-Year Plan (2021-2025), with
its emphasis on enhancing domestic food security, improving agricultural productivity, and stimulating rural economic
development, has improved the medium-term outlook for the domestic machinery sector. We note too that China's agriculture is
facing the challenge of rising rural labour costs, a reflection both of the pace of domestic rural-to-urban migration and the broader
ageing of the rural population, which will encourage investment in labour-saving technologies.
The ‘No.1 Central Document’ for 2023, issued in February, also made clear the renewed focus of the authorities on ‘rural
revitalisation’, which, amongst other measures, included calls for support for agricultural science, technology, and machinery to be
strengthened. Looking further back, one of the consequences of the 2018 China-US trade tensions has been the increased
emphasis placed on developing China’s agricultural self-sufficiency, which has seen trade-partner diversification (in the main, away
from the US) and a clear awareness of the need to accelerate domestic agricultural production, which we expect to be to the
benefit of agricultural machinery sales. There are a number of sizeable players active in China's agricultural machinery market,
which continues to be dominated by domestic brands, including YTO Group, Weichai Lovol Heavy Machinery, and Dongfeng
Agricultural Machinery Group. Foreign companies, such as John Deere (which owns 50% of Xuzhou Xuwa Excavator Machinery),
attracted by the scale and growth potential of China's market, have entered China and continue to establish their presence.
4. Sugar Cane Represents Opportunity For Niche Manufacturing Segment
We draw attention to the fact that the mechanisation of the sugar cane sector across much of Southeast Asia remains in its infancy,
especially when compared to established markets such as Mainland China and India. In Thailand, a major global exporter of sugar
cane, about 30% of the crop is harvested by machine, while the comparable figures for neighbouring producers, such as Indonesia
and the Philippines, are lower. This low rate of adoption reflects the prevalence of the smallholder farm structure across Southeast
Asia, which reduces both the incentive for and the ability of farmers to invest in machinery. In broad terms, the small harvested area
means that the potential efficiency gains from mechanisation are limited, while restricted production volumes limit the ability of
individual farmers to fund capital investment. In addition, the uneven topography of much of the region causes operational
challenges and limits the area under sugar cane that is available for mechanisation.
However, regional and domestic initiatives to encourage the development of the sugar cane sectors have identified the deployment
of machinery as a means by which to improve efficiency and thereby increase the export competitiveness of harvests. The
rationalisation and consolidation of existing plots will hasten this deployment and increase the demand for imported mechanical
harvesters. We believe that Thailand’s established sugar cane export base positions the domestic market as a leading growth
opportunity in this regard.
Thailand Emerging As A Major Combined Harvester Exporter

Combined Harvester Exports By Market (USDmn)
Note: May include territories, special administrative regions, provinces and autonomous regions. Source: Trade Map, BMI
Page 6
Over the past decade, Thailand has significantly bolstered its domestic manufacturing of combined harvesters, resulting in an
increase in export value from USD194.1mn in 2015 to USD275.5mn in 2021. Demonstrating a resilient export market, Thailand has
consistently outperformed other Asian markets in terms of the export value of combined harvesters, thus solidifying its
commanding position in the regional agricultural machinery economy. Despite its successes, Thailand experienced a slowdown in
2022, with export values of combined harvesters dropping to USD177mn, indicating challenges within the domestic manufacturing
sector as well as fluctuations in global demand. Concurrently, competition from China has been escalating, with China's export value
of combined harvesters growing steadily, reaching USD263.3mn in 2022. For now, we expect Thai producers to once again look to
capitalise on emerging demand trends across Asia and further afield over 2023 as they look to find new markets abroad. We retain
a generally positive outlook for the Thai sugar sector over our forecast period. It is our view that this trend will encourage investment
in specialised harvesters and other productivity-enhancing agricultural machinery. Moreover, we expect this trend to become
evident in other Southeast Asian sugar producers, such as Indonesia and the Philippines, but from a lower base and with a
noticeable lag.
5. Scaled Markets To Establish Growing Export Presence
Both Mainland China and India have benefitted from the size of their domestic markets to establish increasingly competitive
agricultural machinery manufacturing bases, albeit at the lower-value end of the global market. In 2022, China's agricultural
machinery exports were valued at USD4.87bn, up from USD3.2bn in 2018. India’s agricultural machinery exports have also surged
over recent years, jumping from USD1.1bn in 2018 to almost USD2bn in 2022. Moreover, both markets generated a tractor trade
surplus in 2022, an indication of the strength of their respective domestic machinery manufacturing industries. While we believe
that both China and India's sectors will look to climb up the agricultural machinery value chain (ie to export higher-value items to
more developed markets, perhaps in partnership with foreign firms), it is our view that their now well-established presence in
regional markets across Asia and Africa represents their principal growth driver through the medium term.
Steady Export Growth

Select Asia Markets - Agricultural Machinery Exports (USDbn)
Source: Trade Map, BMI
In 2022, India exported 131,850 tractors (up from 93,988 in 2018), which represented 13.1% of total domestic tractor production.
The most recent preliminary data from the first nine months of 2023 suggests that Indian tractor exports came in at 78,519 units,
down by 23.4% y-o-y from the 112,500 units exported over the same period in 2022. Indian tractor manufacturers have identified
Sub-Saharan Africa as a major source of potential demand for lower-end tractor imports, leveraging the lower-cost and competitive
Indian manufacturing base, and have thus targeted sales to the region. These manufacturers have adopted a so-called ‘glo-cal’
approach, which has seen them establish production efficiencies over the scale of the domestic Indian market while expanding
their regional and global presence into appropriate import markets, often in the form of a partnership with either a foreign
manufacturer or a local partner, the latter in order to develop technological capabilities and the latter to provide local market
Page 7
knowledge and to advise on specific local requirements. In addition, the breadth of product offered by a number of Indian
manufacturing firms, including those used outside agriculture, such as machinery for construction, allows for horizontal efficiencies.
Recent Growth In India's Tractor Exports

India - Tractor Exports (units)
Note: 9M23 refers to January-September 2023. Source: Tractor Manufacturers Association Of India, BMI
6. Adoption Of Innovative Technologies And Agtech On The Rise
Agricultural machinery manufacturers operating in Asia have started to enhance the technological capabilities of their products
lines. Whether foreign firms, such as John Deere, which launched its JDLink connectivity and remote monitoring system on the
Indian market, or indigenous, such as the Malaysia-based start-up Poladrone, which utilises drone technologies to provide pest
management services to palm oil farmers, the adoption of novel digital technologies continues to be driven by multiple factors,
including the rising cost of agricultural and rural labour, the mounting variability of weather and climatic systems, and the depletion
of new agricultural land into which to expand cultivation. In India, Mahindra & Mahindra has committed itself to innovation in the
field of smart tractor solutions. Its initial offering, Digisense, launched in 2016, constitutes a 4G-enabled application that allows
remote monitoring of tractors through a smartphone interface, demonstrating a significant leap in agricultural technology. The firm
further expanded its portfolio in 2017 with the introduction of Trringo, a strategic initiative for agricultural machinery rental services.
Their latest endeavour, deployed in 2022, is the Krish-e Smart Kit, an Internet of Things-based (IoT) solution specifically designed to
assist tractor owners and operators in optimizing machinery performance.
In July 2023, Tube Investments of India (TII), a division of the substantial Murugappa Group, stated its intention to become a
significant contender in the electric vehicle sector. The company's strategy, which mainly focuses on the electric three-wheelers
under the Montra Electric brand, electric tractors, and medium & heavy commercial vehicles, is fuelled by a projected investment of
around INR300bn. TII is planning the launch of three electric tractor variants by March 2024. The company's vision is to harness the
enormous growth potential in the EV market and operate across multiple platforms within the productive sector of the EV
spectrum. With its subsidiary TI Clean Mobility, the firm has acquired Celestial E-Mobility, thereby securing access to e-tractor
technology, a strategic move that further strengthens their foothold in the green mobility space.
India is well-placed to see considerable growth in the use of mobile technology solutions, applicable to wide range of agricultural
activities. Like Mahindra & Mahindra, Aeris and Hello Tractor partnered in 2018 to launch an IoT application that serves the
agricultural machinery market. In 2020, Hewlett Packard, in collaboration with the Agastya International Foundation, announced the
establishment of a research centre dedicated to stimulating the use of IoT solutions throughout the Indian agricultural sector. We
also note that India stands to benefit from its strong IT-knowledge base and has the potential to significantly reduce inefficiencies
across the domestic agricultural supply chain.
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KEY MACROECONOMIC & AGRIBUSINESS FORECASTS (2020-2027)

Geography Indicator 2020 2021 2022 2023f 2024f 2025f 2026f 2027f
Global Real GDP growth, % y-o-y -3.0 6.1 3.1 2.5 2.2 3.2 2.9 2.9
Global Wheat Price, Usc/bushel, ave 551 707 910 671 633 623 610 600
Global Soybean Price, Usc/bushel, ave 956 1,362 1,515 1,405 1,350 1,300 1,220 1,220
Global Corn Price, USc/bushel, ave 368 564 681 555 500 450 400 350
Global Rice Price, USD/cwt, ave 12.89 13.59 16.81 16.80 15.50 14.75 14.00 13.25
Asia (Region) Real GDP growth, % y-o-y -0.7 6.5 3.4 4.2 4.3 4.3 4.3 4.3
China (Mainland) Real GDP growth, % y-o-y 2.2 8.1 3.0 5.2 5.0 5.0 4.9 4.9
India Real GDP growth, % y-o-y -5.7 9.1 7.2 6.3 6.7 6.5 6.5 6.5
f = BMI forecast. Source: National Sources, USDA, BMI
Asia GM Outlook: Upside To Demand Likely As Food Prices Remain High

Key View
• With food prices remaining high in 2023, we expect attitude toward GM seeds to experience a shift. The Asia-Pacific region's GM
seed adoption levels are low and uptake growth is likely to remain weak in the coming years. Among hurdles for biotech
companies are staunch public opposition, regulatory gaps and intellectual property laws. Within the region, India will remain a
complex market for GM cultivation adoption due to regulatory weakness and improper control and monitoring of field trials,
although sentiment is improving due to surging global grain prices that are weighing food security concerns. Parts of South East
Asia have been open to GM crops, particularly the Philippines and Vietnam, but the cultivated area for GM corn has not expanded
in recent years.
• The presence of economies like China and India has led to high growth potential for the genetically modified seeds market in the
Asia Pacific. The Asia Pacific genetically modified (GM) seeds market has also been geographically segmented mainly into China,
India, Philippines, Japan, and South Korea.
• On August 17 2023, new Japanese government data has found that local GM food crops have shown no evidence of posing
risk to surrounding biodiversity in the past year. Japan has long faced dilemma when it comes to GM foods and introducing GM
foods on a larger scale in order to address food security issues.
• In terms of boosting nutritional contents, "golden rice" bio-fortified with vitamin A (GMO) is being cultivated in the Philippines .
• Asia presents many challenges to biotech companies amid general public opposition to GM food and a weak regulatory
environment, especially in terms of GM cultivation approval processes, proper monitoring of the field trials, and intellectual
property policies.
• Although Asia is a major importer of GM food, GM seed cultivation is low and will only make slow progress in the coming years.
• In India, only BT cotton has so far been permitted by the government for cultivation amid longstanding opposition. GM brinjal
and mustard were developed by Indian scientists, but both crops remain unapproved for commercial cultivation. India allowed
the import of 550,000 tonnes of GM soymeal in April 2022 to address feed demand concerns, especially as global cereal prices
have skyrocketed. In Q222, the Indian Ministry of Environment, Forest and Climate Change also relaxed regulation relating to two
gene editing techniques: SDN-1 and SDN-2. That being said, India will remain a difficult market for wider adoption. However,
GMO are being pushed through all fronts of India and field trials of food and non-food GM crops are granted by the local
authorities.
• In April 2022, the New Zealand Productivity Commission published a new report stating that the market needed to undertake a
regulatory review of its biotech regulations. The government entity noted that significant changes in GM technology since the
national regulation was implemented necessitate a fundamental rethink.
• In July 2021, New South Wales lifted a ban on GM after 18 years, a year after South Australia removed its ban. For now, only three
GM crops - Bt and HT cotton, HT canola, and sunflower are grown in Australia and the Commonwealth Gene Technology
Regulator will thoroughly undertake future studies on potential varieties. Other GM crops are undergoing experimental field
Page 9
plantings.
• As China is moving to expand production of genetically modified crops, it's taking steps to counter sectors of GMO opposition
that have prevented the progress from adoption of the technology. However, Mainland China will make slow but steady progress
towards the commercialisation of GM seeds on a five-year horizon. China is on an elaborate roadmap to bolster the country's
innovation capacity in agriculture science and technology and the move is in line with a five-year development guideline of The
Chinese Academy of Agricultural Sciences (CAAS) .
• The Philippines continues to lead in the adoption of GM crops in South East Asia. While the Philippines are having the largest
number of commercial planting of GMO, increasing prices of GM seeds and the dramatic decline of farmers' income, driving
them deeper into indebtedness, are other major concerns against GMOs. Parts of South East Asia have been open to GM crops
with the Philippines leading the change. The Philippines authorised a number of crops, including eggplant and rice in Q321 while
also updating its biotech policies in Q122.
Mainland China: Robust Investment Likely To Benefit Domestic Seeds
With the USD46bn Syngenta acquisition by state-owned enterprise ChemChina in 2016, Mainland China has become a global
leader in seeds and biotechnology. Until recently, China had been investing heavily to develop its own research on genetically
modified (GM) seeds, but results were mixed, prompting the country to look to new ways of obtaining the technology. The need to
adopt GM crops in order to boost yields is also more pressing now in the eyes of the authorities given the recent trade tensions
between Washington and Beijing, leading to the imposition of tariffs on US agricultural goods exports to China despite it being a key
importer of grains and meat, among others. Adopting GM seeds for grains would help it move closer to self-sufficiency, which is
gaining in importance in the context of the country’s surge in grain imports.
In 2022, safety certificates for production and planting were granted to four GM corn varieties resistant to herbicides and pests as
well as three herbicide-resistant GM soybean varieties that were pilot tested in 2021, paving the way for commercial cultivation.
In June 2020, China allowed its first ever GM soybean imports. The strains, developed by Beijing-based Da Bei Nong Group in
Argentina, are engineered to tolerate pesticides and herbicides. In December 2020, Beijing approved two GM corn varieties from
Bayer and Syngenta. In this respect, although the government has made some progress, approval of domestic grain and oil seed
GM cultivation in China will take time to be granted as strong public opposition to GM food remains a key hurdle (this is partly a
function of misinformation about biotech safety on social media). In 2020, there were some moves made by Beijing to
accommodate GM foods including the approval of 192 traits of GM and additional regulation on GM herbicide in Q421. Except for
GM papaya and cotton, as of the beginning of Q122 Beijing had not yet approved any GM food or feed products for domestic
cultivation despite issuing biosafety certificates for cultivation to some products by Mainland Chinese developers. Nevertheless, the
government is committed to commercialisation and is likely to approve it in the coming few years. In March 2021, Beijing released
the full details of its 14th Five-Year Plan, which will span 2021-2025. Maintaining food security is presented as an even more
pressing priority, which will lead to a re-acceleration of agricultural production in the coming years and to continued efforts to
diversify imports. The authorities' general renewed and urgent focus on technology, innovation and digitalisation as a key policy
priority will also feed through to agribusiness via investment in domestic seed sector (aiming for locally developed GM organism -
GMO - cultivation).
Page 10
Mainland China Set To Revive GM Plantings In Years Ahead

Asia - Area Dedicated To GM Crops By Market, mn ha & Total Asia, % of global total (2004-2019)
Note: May include territories, special administrative regions, provinces and autonomous regions. Source: ISAAA, BMI
As part of this effort, Mainland Chinese authorities are revising some GM-related regulations, streamlining them and making them
more favourable to research and development, while many other markets are simplifying their safety assessment regulations,
according to the USDA. In late December 2021, the Standing Committee of the National People’s Congress of the People’s Republic
of China outlined its latest Seed Law which which will offer greater protection to seed variety owners while also establishing a
mechanism of essentially derived varieties. The new regulation came into effect in March 2022. Beijing committed to a number of
reforms to its agricultural biotechnology policies and procedures under chapter 3 of the US-China phase one trade agreement,
which compels China to 'implement a transparent, predictable, efficient, science- and risk-based regulatory process for safety
evaluation and authorization of products of agricultural biotechnology.' Ultimately, we believe that progress will remain slow.
Food Gaining Momentum

Select Asian Markets - Number Of Biotech Event Approvals
Note: May include territories, special administrative regions, provinces and autonomous regions. Total event approvals as of May 2022. Source: ISAAA, BMI
India: Gradual Improvements In Sentiment
India remains a highly challenging market for GM seedmakers owing to the market's prolonged regulatory uncertainty, weak
intellectual proprietary rules and vocal public opposition to GMOs. As of the end of 2021, only Bt cotton is allowed for commercial
cultivation, and this accounts for around 95% of India’s total cotton production. GM soybeans and canola-based vegetable oils are
the only products approved for importation. Although Prime Minister Narendra Modi appears to be generally in favour of expanding
the cultivation of GMOs to food crops, actual approval is uncertain at this stage. Approval of the cultivation of DMH-11 HT mustard
remained in limbo as of early-2022. The Indian Genetic Engineering Approval Committee (GEAC) approved DMH-11 HT mustard
type for use in May 2017, developed by Delhi University's Centre for Genetic Manipulation of Crop Plants. However, fierce opposition
Page 11
to the cultivation of the crop by farmers and social groups alike have pressured the GEAC to defer the decision pending further
review. Elsewhere, the commercialisation of GM mustard seeds was intended to boost India's domestic mustard seed production,
which has been stagnating over the past decade owing to the competition from cheaper imported vegetable oils, particularly palm
oil. The use of high-yield GM mustard could improve production. Several attempts were made by the developers in the past to seek
commercial release of GM mustard, but was not successful for commercial cultivation.
Despite moratorium decisions on GM crops and parliament recommendations to stop all open field trials, permission are still
granted for open field trials for numerous food and and non-food GM crops across the country, and inability of regulatory agencies
has given way to the contamination and illegal planting of GM crops. Although India doesn't allow GM rice cultivation, there are
various GM rice varieties at confined field trials. The weakening of GMO regulations in India also opened the door to new breeding
techniques, such as CRISPR, exempting these products from the GMO 1989 rules. Although India doesn't allow GM rice cultivation,
there are various GM rice varieties at confined field trials.
There is some upside as in Q321 and Q222 GM soymeal was imported to address the feed requirements of the domestic poultry
industry, which has been facing surging global grain prices. This decision was not without significant opposition and backlash.
Robust Oil Imports Growth Mandates High Yielding GM Mustard

India - Select Oil Imports, 1,000MT
Source: USDA, BMI
Intellectual property concerns remain elevated in India as the government has in the past imposed price controls and fixed royalties
on sales of GM seeds (for example, on Monsanto's GM cotton). In light of these risks, the company formerly known
as DowDuPont (now Corteva Agriscience) decided in 2018 to put off trials needed for approval to sell a GM variety of corn. This
comes in the wake of a long-running dispute between Indian authorities and Monsanto relating to royalties and GM patenting, as
the Modi government remains committed to agricultural productivity.
We expect greater interest from India in GM seeds in the near future. Ramesh Chand, member of the Niti Aayog policy thinktank and
the ruling Bharatiya Janata Party, stated in mid-2020 that the future of GM crops in India will depend on which varieties can address
the market’s three pressing needs of improving farm efficiency, sustainability, and food security. He also stated that the current
political environment towards GM seeds is not as hostile as it once was. In March 2021, Bayer (Monsanto’s parent) stated that it had
reached an agreement with Nuziveedu Seeds in a dispute over royalties, which means an end to all litigation. However, issues
remain in the form of public fear in India and domestic public opposition.
Page 12
South East Asia: General Stagnation With Few Bright Spots
The South East Asia region has been gradually making progress in terms of GM cultivation approval over the past few years. The
Philippines continues to lead the region’s GM market, Vietnam commercialised GM corn in 2015 and Indonesia may be the next
market to adopt GM plantings, especially GM sugarcane, as significant numbers of corn, soybean and other crop varieties have
undergone risk assessments since 2017/18. Cambodia and Laos could potentially follow suit in the long term once adequate
biosafety regulations have been established. Despite authorities' approval for cultivation, we note that GM crop plantings have
stagnated at very low levels over recent years due to public opposition. This, coupled with the fact that South East Asia
cultivates limited volumes of corn and soybean, means that the region will remain a small market for GM seeds at present.
Philippines - Early GM Adopter With Revised Regulations In 2022: The Philippines is a regional leader regarding GM adoption
and production as it was the first market in Asia to plant GM corn in 2003. GM corn area increased from 10,769 hectares in 2003 to
677,644 hectares in 2021. The Covid-19 pandemic resulted in the government taking food security concerns much more seriously
and aggressively working towards its long-term reform policies. In 2021, the government approved a commercial propagation
authorisation for the Bt Golden Rice variety and also cleared Bt eggplant in the same month.
Recently the researchers are working on golden rice, have also developed a variety of GM rice using gene editing technology
inserting other traits like draught and pest resistance.
In February 2022, the government approved the Joint Department Circular No. 1 (JDC) which reforms the process of
commercialising Bt crops. The government has stated that this is in line with long-term Sustainable Development Goals (SDGs) and
will work towards addressing hunger and food security. We expect Philippines to remain at the forefront of Bt adoption in the region
over the coming years.
Vietnam - Slow Start To GM Cultivation Since Adoption In 2015: With the adoption of GM corn in 2015, Vietnam became the
29th market globally to commercialise a biotech crop. GM corn cultivation came in at 3,500ha planted in 2015 and grew to
45,000ha in 2017, which is low compared with the 1.1mn ha of corn cultivated in the market. From January to October 2020, the
Ministry of Agriculture and Rural Development approved 14 more GM products for corn, soybeans, canola, cotton and sugar beets.
Among those, six cotton products were approved only for feed use. These approvals bring the total number of products approved
for food and feed use in Vietnam to 45. There have also been attempts by the sector to convince the government to conduct field
trials to show the effect of GM corn hybrids in combating the fall armyworm, which is an ongoing issue in the market.
Thailand - Blanket Ban For Now: Thailand appears to be one of the South East Asian markets most opposed to GMOs as it has a
de facto ban on GM crop cultivation. In 2019, authorities had drafted a new Biosafety act which offers improved regulatory
framework for agricultural biotechnology - including research, field trial and commercialisation. Few additional details have emerged
as of May 2022 but should the act be adopted, GM commercialisation would still take years.
Page 13
STATE OF AREA PLANTED WITH GMOS BY MARKET, MN HA

Market 2013 2014 2015 2016 2017 2018 2019 GM Crops
US 70.1 73.1 70.9 72.9 75.0 75.0 71.5 Maize, soybean, cotton, canola, sugar beet, alfalfa,
papaya, squash, potato, apples
Brazil 40.3 42.2 44.2 49.1 50.2 51.3 52.8 Soybean, maize, cotton
Argentina 24.4 24.3 24.5 23.8 23.6 23.9 24.0 Soybean, maize, cotton
Canada 10.8 11.6 11.0 11.6 13.1 12.7 12.5 Canola, maize, soybean, sugar beet, alfalfa, potato
India 11 11.6 11.6 10.8 11.4 11.6 11.9 Cotton
Paraguay 3.6 3.9 3.6 3.6 3.0 3.8 4.1 Soybean, maize, cotton
Pakistan 2.8 2.9 2.9 2.9 3.0 2.9 2.5 Cotton
China (Mainland) 4.2 3.9 3.7 2.8 2.8 2.8 3.2 Cotton, papaya
South Africa 2.9 2.7 2.3 2.7 2.7 2.7 2.7 Maize, soybean, cotton
Uruguay 1.5 1.6 1.4 1.3 1.1 1.3 1.2 Soybean, maize
Bolivia 1.0 1.0 1.1 1.2 1.3 1.3 1.4 Soybean
Australia 0.6 0.5 0.7 0.9 0.9 0.8 0.6 Cotton, canola, safflower
Philippines 0.8 0.8 0.7 0.8 0.6 0.6 0.9 Maize
Myanmar 0.3 0.3 0.3 0.3 0.3 0.3 0.3 Cotton
Vietnam na na Approved <0.1 <0.1 <0.1 0.1 Maize

in 2015
Bangladesh Approved in <0.05 <0.1 <0.1 <0.1 <0.1 <0.1 Brinjal

2013
Global total 175 182 180 185 190 191 190 na
Note: May include territories, special administrative regions, provinces and autonomous regions. New approvals in 2020-2021 not included in table. na = not applicable. Source: ISAAA, BMI
Global
Soybean Prices: Forecast Revised Downwards Over Robust Global
Supplies
Key View
• We are revising our 2023 average annual price forecast for soybean down from USc1,430/bu to USc1,405/bu for the second
month CBOT contract.
• Global consumption is expected to reach 383.2mn tonnes in 2023/24, up 5.6% y-o-y.
• On the production side, we expect global output to reach 400.5mn tonnes, representing a y-o-y increase of 8.0%.
• We expect prices to ease beyond 2023, forecasting a decline in the average annual price from USc1,405/bu in 2023 to
USc1,300/bu in 2024, representing a y-o-y decline of 7.5%.
Page 14
BMI SOYBEAN PRICE FORECAST (USC/BU, AVE)

Current 2022 2023 YTD 2023f 2024f 2025f 2026f 2027f
BMI Solutions 1313 1515 1415 1405 1300 1250 1220 1220
Bloomberg
n/a n/a n/a 1420 1271 1288 1245 1230
Consensus
Note: Second-month generic soybean prices. Last Updated: October 9 2023. n/a = not applicable/available. f = BMI forecast. Source: Bloomberg, BMI
No Recovery To 2022 Highs

CBOT Second Month Soybean Futures Prices (USc/bu) & BMI Forecasts
Source: Bloomberg, BMI
We are revising our 2023 second-month soybean 2023 average annual price forecast down from USc1,430/bu to
USc1,405/bu. Throughout Q323, second-month soybean futures came under significant downward pressure, losing 10.3%
between June 30-September 29, with prices closing on September 29 at USc1,294/bu and hovering around USD1,289/bu on
October 9. Easing prices throughout 2023 has brought the average price in the year-to-date down to USc1415/bu as of October 9,
marginally below our previous forecast of USc1430/bu. Despite a deteriorating US crop outlook, market sentiment has become
increasingly bearish. The latest crop condition report shows that just 50.0% of the US soybean crop is seen as good or excellent,
down from 59.0% on August 21, which contributed to 59.0mn bushel downward revision in the latest WASDE US soybean
production estimates. Even then, increasingly bearish market sentiment is evidenced in a reduction in the managed money CBOT
soybean futures and options net long positions. According to Commodity Futures Trading Commission data, net long positions in
CBOT soybean futures and options reached 45,832 contracts as of September 19, down from 90,985 as of August 29, with a
reduction in the net long position every week in between due to both a decrease in total long positions and an increase in short
positions.
Page 15
Managed Money Net Long Positions Reaches Lowest Level Since June 13
Managed Money Net Long Positions, Number of Contracts
Source: Commodities Futures Trading Commission, BMI
Global consumption is expected to reach 383.2mn tonnes in 2023/24, up 5.6% y-o-y. We expect continued import
demand strength in Mainland China to place a floor under prices. According to the latest customs data, Chinese soybean imports
from January to August reached 71.6mn tonnes, up from 61.3mn tonnes during the same period in 2022, supported by improving
crush margins.
However, we note that crush margins have started to ease in recent weeks, and with it, Chinese monthly import demand has cooled
since May 2023, with August imports 22.1% lower than in the peak month of May and 3.8% down on July’s volumes. That said,
demand remains elevated, with August imports up 30.5% y-o-y.
We expect China’s import demand to remain supported over the near term due to the size of the country’s domestic herd, an effect
of the ‘pig cycle’ that supported domestic pork prices in 2022. That being said, domestic pork prices in the country has been
pressured throughout 2023, which is likely to result in reduced domestic herd numbers heading into 2024, reducing demand for
soymeal.
Mainland China Soybean Import Demand Up In 2023, But Eases In July And August
Mainland China - Soybean Imports, '000 Tonnes
'Total' refers to Mainland China's imports through January-August of each year. Source: General Administration Of Customs People's Republic Of China, BMI
On the production side, we expect global output to reach 400.5mn tonnes, representing a y-o-y increase of 8.0%. This
will be driven by improved output in key south American markets, including Argentina, which we expect to increase production by
92.0% y-o-y in 2023/24, following a severe drought-affected crop in 2022/23. Additionally, an increase is expected in neighboring
Uruguay (136.1% y-o-y). However, most significant from a global perspective is an expected second-successive record Brazilian
Page 16
harvest of 160.0mn tonnes, up 3.9% y-o-y. On the other hand, after facing adverse weather conditions, the US soybean crop has
been subjected to several downgrades, with our forecasts indicating total output at 115.2mn tonnes, representing a y-o-y decline of
1.0%. Despite a downturn in US production, the global production balance surplus is expected to widen significantly in 2023/24 to
17.3mn tonnes, up from 7.8mn tonnes in 2022/23, which we expect to pressure prices in 2024.
Long-Term Outlook
We expect prices to ease beyond 2023, forecasting a decline in the average annual price from USc1,405/bu in 2023 to
USc1,300/bu in 2024, representing a y-o-y decline of 7.5%. Throughout the remainder of the forecasting period, we expect
prices to continue easing, reaching USc1,220/bu in 2026, which means that we anticipate prices to remain elevated above
historical levels. While we expect global production to grow steadily throughout the forecasting period, we note that sustained high
input costs, combined with a recovery in demand from Mainland China and persistent concerns over the effect of an adverse
weather event in the two major producing countries as the major contributing factors towards elevated prices. In Mainland China,
we forecast consumption growth to outpace domestic production growth, leading to a narrowing of the domestic production
balance throughout the forecasting period, which we anticipate will lead to strong demand for imports, helping to support global
prices. Next, with global soybean exports concentrated between the US and Brazil, accounting for approximately 84.0% of global
soybean exports, we expect prices to remain sensitive to harvest expectations in those two countries.
Additionally, we expect prices to find ongoing support from changes to the Brazilian biodiesel blending mandate. Following an
increase in the biodiesel blending mandate from 10.0% to 12.0% in April 2023, Brazil is expected to increase the mandate to 13.0%
in April 2024, followed by two more annual 1% increments, reaching a blended rate of 15.0% by 2026. With soy oil remaining Brazil’s
most crucial biodiesel feedstock, accounting for 70% of the country’s biodiesel, each increase will require greater feedstock levels.
According to our estimates, assuming the share of biodiesel feedstock accounted for by soy oil remains constant to 2026, for Brazil
to achieve a 15.0% blend, it will likely require an additional 10.9mn tonnes of soybean, without even factoring in increases in overall
diesel sales, providing support for global prices.
Prices To Remain Sensitive To The US And Brazil Production

Global - Share Of Soybean Exports, %
Source: OEC, BMI
Risks To Outlook
As with all agricultural commodities, we identify adverse weather conditions as the primary upside risk to our outlook for soybean.
The drought in Argentina, attributed to the effects of the La Niña weather cycle, contributed to rallying prices throughout the latter
part of Q422 and early part of Q123, highlighting the commodity's price sensitivity to unfavourable weather. The CPC recognised
the transition to El Niño, increasing in strength in the coming months. Consequently, we expect regions which have suffered from La
Page 17
Niña, such as Argentina and Rio Grande Do Sul, Brazil’s most southern state, to benefit from improved precipitation levels. That said,
the increasing likelihood of El Niño will bring dryer weather to parts of Brazil, which have benefited from favourable weather
conditions during 2022/23, providing upside support for prices. The impact of El Niño on global prices and production will depend
upon its strength.
Secondly, while Brazil’s intention to reach a 15.0% blending mandate by 2026 is expected to occur over a series of incremental
increases, increases above market expectations will be bullish for prices. Additionally, changes to this target will have an effect on
prices, with an increase in the blending target helping to support prices, and a reduction, or a delay, in the target mandate will weigh
on prices.
Lastly, On the downside, with the import market dominated by China, we note that prices remain particularly sensitive to a decline in
Chinese consumption. Specifically, we report further outbreaks of ASF or other diseases or the continuation of subdued domestic
pork prices, which trigger a decrease in the animal herd population as a downside risk to our outlook.
GLOBAL SOYBEAN FORECASTS (2019-2027)

Indicator 2019 2020 2021 2022 2023f 2024f 2025f 2026f 2027f
Soybean Price, Usc/bushel, ave 901 956 1,362 1,515 1,405 1,350 1,300 1,220 1,220
Soybean Production, mn tonnes 362 340 367 361 370 400 408 418 428
Soybean Production, mn tonnes, % y-o-y 5.4 -6.1 8.2 -1.7 2.5 8.0 1.9 2.4 2.4
Soybean Consumption, mn tonnes 344 358 362 362 362 383 394 405 416
Soybean Consumption, mn tonnes, % y-o-y 1.5 4.1 1.1 0.1 0.1 5.6 2.9 2.8 2.8
Soybean Inventories, mn tonnes 115.2 96.8 103.1 99.9 105.3 120.1 131.6 141.8 150.5
Soybean Inventories, mn tonnes, % y-o-y 14.8 -16.0 6.5 -3.1 5.4 14.1 9.6 7.8 6.1
Soybean Stocks-to-Use, % 33.5 27.0 28.5 27.6 29.0 31.3 33.4 35.0 36.1
Soybean Stocks-to-Use, wks 17.4 14.1 14.8 14.3 15.1 16.3 17.4 18.2 18.8
Soybean Production Balance, mn tonnes 17.90 -18.30 5.40 -0.90 7.80 17.30 14.10 12.90 11.50
f = BMI forecast. Source: National Sources, USDA, BMI
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