Optimising Biofuels and Feedstock Risk Management Joachim Emanuelsson, COO Starsupply Commodity Brokers

Today’s Topics Market Factors affecting the Biofuel “paper” markets Managing Risk Across the Biofuel Supply Chain Physical and Derivative price differences

Market Factors affecting the Biofuel “paper” markets Related markets, Agricultural and Soft commodity markets and their movements plays more and more of a role Changes in Foreign Exchange $/€ and $/myr Gasoil price moves Transportation and Logistical issues Global growth and super cycles

Market Factors Physical Supply & Demand Vegetable Oil Blend Economics Gasoil Price Ags/Soft $/€ Bio- Fuels Regulations Commodity Super Trends Food vs. Fuel Global Growth

Corn and FAME 0

Sugar and FAME 0

Wheat and FAME 0

Super Cycles

Managing Risk Across the Bio-Fuels Chain Managing risk across the bio fuel chain is crucial, gone are days of flat price trading Correlation hedges Instruments; Swaps, Options and Futures Clearing and counterpart risk control

Bio-Fuel Supply Chain Soy Beans Rapeseed Bean Oil CPO RSO SME RME PME FAME +5 FAME 0 FAME -5 FAME -10 FAME -15 RME Ethanol T1 Ethanol T2 Hedges Available Sugar/Corn/ Wheat Ethanol

Signs of a Good Hedge Basis for a good hedge – Liquid markets – Data availability – Price discovery is easy – Access to clearing or credit lines – High correlation

Good Correlation

Poor correlation

RME Swaps vs. Physical RME Proportional Change Correlation:

CPO Swaps

Physical and paper price differences We have seen paper trade at a significant discount to physical Inherent cost handling physical, financing, transport etc. Gasoil is averaging -12 USD/MT FAME 0 is averaging USD/MT More Liquidity and counterparts Limited risk limits available globally

FAME Paper vs. FAME Physical

Physical vs. Paper Spread

Gasoil Paper vs. Physical

Joachim Emanuelsson Starsupply Commodity Brokers T F M 41-(0) yahoo: joachim_starsupply