[first sentense]

October 31, 2007

For reference: Commodity market trends for primary ingredients2

(1)Barley (source of malt)

European barley for use in 2008 (i.e.produced in 2007) was, for the second consecutive year, affected by crop failures due to high temperatures and low rainfall in early spring and persistent rainfall during the harvest season. In addition, drought in Australia also led to a concern of crop failures for the second consecutive year, resulting in an average price over twice that of 2007 (i.e. produced in 2006) barley. The impact of increased demand for bioethanol is causing a structural change that will prevent crop acreage for human consumption from increasing; consequently,the trend of increasing prices is expected to continue from the next fiscal year onward, even if the crop situation recovers.


As with barley, tight supply and demand for cereal due to escalating demand for bioethanol and an influx of speculative funds have caused prices to soar. In addition, immense demand for resources in China has inflated ocean freight costs to record highs, and Kirin's procurement cost per unit for 2007 corn is expected to increase by approximately 15% compared with the previous year.


In addition to increasing demand, caused mainly by China's economic growth, the apparent bargain price of aluminum compared with the prices of crude oil and other metals has prompted an influx of speculative funds. This has caused peaks 70% higher than the average price in January 2005 and 30%above the average price of January 2006. Circumstances are not envisaged changing significantly in the near future.

(4)Recycled waste paper (used in carton cases)

The rising prices of crude oil and China's rapid economic growth have caused an outflow of waste paper, the raw material used in carton cases, and prices have recently risen to roughly 50% above the average price at the start of 2006. This outflow is expected to continue, prompting concerns of further price rises.

2 Note: Charts have been prepared in English for illustrative purposes. Please refer to original materials in Japanese for details.