BRAZILIAN COTTON GROWERS ASSOCIATION

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2 THE WORK DEVELOPED BY ABRAPA TO ATTEND THE NATIONAL AND INTERNATIONAL MARKET

3 EVOLUTION OF THE BRAZILIAN COTTON WITH ABRAPA 1. INTEGRATION WITH THE COTTON CHAIN 2. INTEGRATION WITH THE GOVERNMENT 3. SEEKING THE NATIONAL MARKET 4. SEEKING THE INTERNATIONAL MARKET 5. INTEGRATION WITH OTHER MAJOR PRODUCING COUNTRIES

4 BRAZILIAN COTTON: NEW REGIONS, NEW REALITY Area, production, and productivity evolution 2.500,0 ABRAPA PERIOD 2.000, , ,0 500,0 - BRAZILIAN COTTON GROWERS ASSOCIATION AREA (1000 ha) PRODUCTION (1000 ton) PRODUCTIVITY (kg/ha) THE CHANGE OF POSITIONING OF THE BRAZILIAN COTTON, WHICH TOOK PLACE FROM THE LATE 1980'S, IS DUE TO TWO FACTORS: 1. Installation of cotton in cerrado: research, mechanization, large-scale cultivation, among other innovations. 2. Incentive to associativity: creation of Abrapa, in 1999, and the state growers associations. BRAZIL TODAY: The 5 th largest global producer: it cultivates an average of 1.2 million hectares and produces 1.7 million tons of lint. The 2 nd highest global productivity: 1,520 kg/ha, among the major producing countries.

5 CHANGE OF POSITIONING OF THE BRAZILIAN COTTON Change in the cotton balance of trade BRAZILIAN COTTON GROWERS ASSOCIATION 1.200, ,0 800,0 600,0 400,0 200,0 0, IMPORTS (1000 ton) EXPORTS (1000 ton) * UNTIL 2001, BRAZIL WAS ONE OF THE LARGEST IMPORTERS OF COTTON IN THE WORLD In 2001, we achieved self-sufficiency. Today, we are the 5 th largest global exporter, with an average volume of 700 thousand tons per year. The largest volume took place in 2012, when we achieved million tons.

6 INTERNATIONAL MARKET RESUMPTION OF EXPORTS BRAZILIAN COTTON GROWERS ASSOCIATION

7 RESUMPTION OF EXPORTS: A WORK PERFORMED IN SEVERAL FRONTS ATTENDANCE IN INTERNATIONAL EVENTS CONTACT WITH THE MARKET FOCUS ON QUALITY FOCUS ON TRACEABILITY

8 RESUMPTION OF EXPORTS Attendance in international events From 2000, Abrapa started to be invited to attend in major international forums related to the cotton industry, such as ICA, ICAC, Bremen Conference and ITMF. ITMF 2009 Bremen 2010 ICAC 2012

9 RESUMPTION OF EXPORTS Contact with the market VISITATION TO THE MAJOR CONSUMPTION COUNTRIES INVITATION FOR MAJOR TRADERS INVITATION FOR MAJOR BUYERS

10 RESUMPTION OF EXPORTS Focus on quality CHANGE OF THE COTTON CLASSIFICATION SYSTEM, ADOPTING THE INTERNATIONAL SYSTEM INTRODUCTION OF THE INSTRUMENTAL CLASSIFICATION STANDARDIZATION OF BALES SEARCH OF NEW SEED VARIETIES INVESTMENT ON TECHNOLOGY

11 RESUMPTION OF EXPORTS Focus on traceability PROOF OF ORIGIN: THE ACCESS TO NEW MARKETS WENT THROUGH THE COTTON IDENTIFICATION AND TRACEABILITY In 2003, to example and with the colaboration of USDA, the Association implemented the Abrapa Identification System (SAI). ABRAPA IDENTIFICATION SYSTEM

12 PROMOTION OF THE BRAZILIAN COTTON

13 PROMOTION OF THE BRAZILIAN COTTON IN THE INTERNATIONAL MARKET

14 PROMOTION IN THE INTERNATIONAL MARKET FIRST COMMITMENT OF ABRAPA: SUBSTITUTE THE IMPORTATION BY NATIONAL COTTON Only after supplying the national market and as the unique alternative to increase the production, that resulted on seeking the international market. FIRST COMMITMENT OF ABRAPA:

15 PROMOTION IN THE INTERNATIONAL MARKET Pillars THROUGHOUT THE YEARS, WITH THE NEED TO KEEP EVOLVING, THE ACTING FOCUSED ON INTERNATIONAL MARKET HAS BEEN SUSTAINED ON THREE BASIC PILLARS: 1. MISSIONS OF BUYERS TO BRAZIL 2. MISSIONS OF PROMOTION ABROAD 3. RELATIONSHIP WITH TRADERS Constant proximity to and conversation with the agents trading the Brazilian cotton in the world.

16 PROMOTION IN THE INTERNATIONAL MARKET Missions of buyers to Brazil TODAY, THE MISSIONS OF BUYERS ALLOW TO: Promote knowledge of the cotton cultivation in the country. Highlight that the Brazilian lint is a qualified product and feel the need of our buyers. Show that the country is able to supply the international market at the intercrop period of other countries or when occur reduce of production because of weather. Build the clients' loyalty, who may personally know the farms in which the cotton they purchase or will purchase is produced. Show the constant evolution of the level of professionalism of the cotton production in Brazil.

17 MISSIONS OF BUYERS TO BRAZIL 2012 ASIAN MISSION: REPRESENTATIVES FROM INDIA, INDONESIA, AND THAILAND

18 MISSIONS OF PROMOTION ABROAD_2011 SOUTH KOREA 2011 SINGAPORE 2011 HONG KONG 2011

19 MISSIONS OF PROMOTION ABROAD_2012 CHINA 2012

20 MISSIONS OF PROMOTION ABROAD_2013 VIETNAM 2013 THAILAND 2013 INDONESIA 2013

21 PROMOTION IN THE INTERNATIONAL MARKET Currently destinations and export figures of Brazilian cotton COUNTRIES JANUARY TO DECEMBER/13 Value - US$ 1000 Volume - Ton THE FIGURES OF EXPORTS IN 2013 SHOW THAT THE MISSIONS OF PROMOTION ABROAD BRING RESULTS. A good example is the increase in exports to Asia. ASIA 1. SOUTH KOREA 252, , INDONESIA 231, , CHINA 189,924 97, VIETNAM 75,759 38, TAIWAN 70,471 37, THAILAND 66,438 35, MALAYSIA 53,968 27, PAKISTAN 48,587 24, TURKEY 44,971 24, JAPAN 20,901 10, PORTUGAL 9,656 6, BANGLADESH 8,647 4, ARGENTINA 8,113 4, ECUADOR 5,361 2,703 Subtotal 1,086, ,476 OTHERS 19,388 9,437 TOTAL 1,106, ,913

22 PROMOTION IN THE INTERNATIONAL MARKET Relationship with traders THE ROOM FOR MEETINGS WITH THE TRADERS IN THE ANNUAL EVENT OF ICA MEETING ROOM PURPOSES: To make an assessment of the crop that had just been harvested and processed. To know the market tendencies. To talk about the positive points, the acceptance of our cotton, and the difficulties or non-compliances that need to be improved. TO ALL, GENERALLY, THE ENTITY RECEIVES 13 COMPANIES, WHICH ARE RESPONSIBLE FOR THE TRADE OF THE COTTON THAT IS EXPORTED BY BRAZIL AND CONSUMED WORLDWIDE.

23 RELATIONSHIP WITH TRADERS Meeting room in the annual event of ICA LIVERPOOL 2010 HONG KONG 2012 LIVERPOOL 2011

24 PROMOTION OF THE BRAZILIAN COTTON IN THE NATIONAL MARKET

25 PROMOTION IN THE NATIONAL MARKET BRAZIL IS THE 6 th LARGEST COTTON CONSUMER IN THE WORLD The demand for internal consumption was 900 thousand tons of lint in the average of the last three crop years. SINCE 2010, ABRAPA HAS SOUGHT TO KNOW BETTER THE HABITS OF THE BRAZILIAN CONSUMER IN RELATION TO COTTON. TWO ACTIONS WERE MADE IN 2010: 1 st ) Abrapa requested a qualitative survey in order to know what the consumer thought about cotton. The survey revealed that there is a general lack of knowledge about the advantages of the natural lint. 2 nd ) Meeting with the National Cotton Council (NCC), to know its marketing project and define strategies.

26 PROMOTION IN THE NATIONAL MARKET Search for resources and timely actions The obstacle consists in the fact that all marketing actions made for the Brazilian cotton are exclusively funded from funds raised with the growers. A mass-marketing operation requires resources that the entity still cannot provide. WE HAVE DEVOTED OURSELVES TO TIMELY AND STRATEGIC ACTIONS The latest of them is taking place: on November 4 and 5 (this week), Abrapa is using, for the first time, an exhibition stand in order to promote the national lint at Première Vision, a fashion event taking place in São Paulo.

27 COMPETITIVE ADVANTAGES: STRATEGIES TO REINFORCE THE PARTICIPATION OF THE BRAZILIAN COTTON IN THE MARKET

28 COMPETITIVE ADVANTAGES In order to bring the Brazilian lint to a satisfactory level, the country has been constantly investing in: BETTER QUALITY ASSURANCE OF TRACEABILITY SOCIO-ENVIRONMENTAL COMMITMENT ETHICS INCENTIVE TO RESEARCH BRAZILIAN COTTON GROWERS ASSOCIATION

29 COMPETITIVE ADVANTAGES_BETTER QUALITY PARTICIPATION IN THE ROUND TEST OF ICAC Since 2004, the Brazilian HVI laboratories have participated in the Round Tests promoted by Bremen with orientation of CSITC from ICAC. STANDARD BRASIL HVI A program being developed by Abrapa with the national laboratories It maintains partnerships with other important entities of the industry, such as the Brazilian Textile and Clothing Industries Association (Abit) and the National Cotton Exporters Association (Anea).

30 STANDARD BRASIL HVI PROGRAM Strategy ASSURE THAT PARTICIPATING LABORATORIES GET RESULTS WITH INTERNATIONAL ACKNOWLEDGMENT Program guidance: Commercial Standardization of Instrument Testing of Cotton, of Icac International Committee on Cotton Testing Methods, of ITMF Main goals: Add reliability to results of HVI analysis. Offer assurance to the industry that the result is original and true. Integrate to Abrapa Identification System (SAI), for knowledge of the intrinsic characteristics of each bale through the label. CENTRAL REFERENCE LABORATORY (UNDER EXECUTION) Quality monitoring of the analysis of participating laboratories Orientation, monitoring and standardization of the laboratories and the technical team

31 ABRAPA IDENTIFICATION SYSTEM (SAI) Single barcode per bale Registry of the cotton ginner Press number Bale number Link with Google Maps Location of the cotton ginner in satellite maps Mobile Technology Reading of the barcode also in Smartphones BRAZILIAN COTTON GROWERS ASSOCIATION COMPETITIVE ADVANTAGES_ ASSURANCE OF TRACEABILITY FUTURE INTEGRATION TO STANDARD BRASIL HVI PROGRAM Inclusion of the intrinsic characteristics in the data contained in the label affixed on the bales

32 Conduction through a role-model program RESPONSIBLE BRAZILIAN COTTON PROGRAM (ABR) BRAZILIAN COTTON GROWERS ASSOCIATION COMPETITIVE ADVANTAGES_SOCIO-ENVIRONMENTAL COMMITMENT COMMITMENT WITH THE THREE PILLARS SOCIAL, ENVIRONMENTAL AND ECONOMIC Benchmarking with Better Cotton Initiative (BCI) Allows the grower to opt, following the same verification process: ABR CONFORMITY CERTIFICATION + BCI COMMERCIALIZATION LICENSE EXCELLENT RESULTS The 2013/2014 results confirm the benchmarking success: 71% of the national production is ABR-certified, and 66% is BCI-licensed BCI-licensed cotton represents 60% of the entire global Better Cotton production: Brazil, the largest BC cotton supplier in the world.

33 COMPETITIVE ADVANTAGES_ETHICS In order to preserve the Sanctity of Contracts, we have the COTTON ETHICS COMMITTEE, comprised by entities wich represent the links of the chain: ABRAPA: THE BRAZILIAN COTTON GROWERS ASSOCIATION ANEA: THE NATIONAL COTTON EXPORTERS ASSOCIATION ABIT: THE BRAZILIAN TEXTILE AND CLOTHING INDUSTRIES ASSOCIATION BBM/BM&F: THE BRAZILIAN COMMODITIES EXCHANGE/BRAZILIAN SECURITIES, COMMODITIES AND FUTURES EXCHANGE OPERATION Mediation of conflicts between buyers and sellers GOAL Integrating all the links involved in the trade to defend the sanctity of contracts

34 COMPETITIVE ADVANTAGES_INCENTIVE TO RESEARCH BRAZILIAN COTTON GROWERS ASSOCIATION Support to official research bodies such as EMBRAPA Support to private companies working with research, in GM free and GM cotton Support to research bodies of the State Based Associations IT MUST BE HIGHLIGHTED THAT 99% OF THE BRAZILIAN CROP IS PRODUCED WITHOUT IRRIGATION Among many achievements, Brazil also has the highest productivity of rainfed cotton in the world.

35 THANK YOU ALL João Luiz Ribas Pessa Abrapa Consulting Advisor