COMMODITY OUTLOOK 2012 RANDALL LOWRY LEIS FEEDS MILVERTON, FEB 1, 2012

QUESTION ASKED WHAT ARE THE GOOD BUYS AND WHICH ONES SHOULD WE STAY AWAY FROM?

AS WE ANSWER THIS KEEP IN MIND…………. THIS IS A YEAR OF BOTH MARKET AND QUALITY RISK THE ANSWERS TO THIS QUESTION WILL DEPEND ON YOUR OWN OPERATIONS AND RISK PROFILE

WHERE ARE WE VS 2011? 1/27/2011 CORN DEL’D $237 MT SBM HAM $411 SRW DEL $275 DDGS DEL $205/$235 HOG FUT $85.75 $CAN $0.994 U.S 1/27/2012 CORN DEL’D $260 SBM HAMILTON $373 SRW DEL $256 DDGS DEL $170/190 HOG FUT $ $CAN $1.003 U.S

WHAT CHANGED SINCE ’11? CORN HAS BEEN THE STRONG PLAYER BUT HAS TOXIN ISSUES LOCALLY S.R.W. WHEAT HAS RETURNED AS A FEEDING VALUE DDGS ARE A BETTER VALUE BUT WITH SIGNIFICANT TOXIN ISSUES PROTEIN PRICES LOWER

WHY DID IT CHANGE? ALTHOUGH U.S. CORN SUPPLY WAS INCREASED IN JAN 12 USDA REPORT, IT IS STILL TIGHT WITH RISK PREMIUM IN THROUGH OLD CROP MONTHS SOYMEAL AND PROTEIN MARKET IS BETTER SUPPLIED BIG ETHANOL GRIND IN LATE 2011 BETTER WHEAT SUPPLY X-BLACK SEA

HOW DID PRICES EVOLVE? FROM THIS POINT LAST YEAR GRAIN PRICES ROSE INTO SUMMER, THEN DECLINED IN NEW CROP PROTEIN PRICES STAYED STEADY AND THEN DECLINED WITH GRAINS HOG PRICES ALSO WERE STRONG INTO SUMMER AND THEN CAME BACK DOWN IN GENERAL COMMODITY DECLINE

WHAT MOVES PRICES? THE MARKET IS ALWAYS TRYING TO MATCH CURRENT AND FUTURE SUPPLY AND DEMAND. MUCH OF THIS IS PHYSICAL S&D, BUT IN RECENT YEARS IT HAS INCREASINGLY BEEN FINANCIAL (HEDGE AND INDEX FUNDS) MARKET MOVES MOSTLY ON DATA IN WINTER AND WEATHER IN SUMMER

WHAT DATA MOVES WINTER AND SPRING PRICES? THERE IS A FIXED PROGRESSION OF COMMODITY REPORTS STARTING IN JANUARY THROUGH UNTIL LATE JUNE WHEN WEATHER TAKES OVER WE HAVE ALREADY HAD THE USDA STOCKS AND FINAL S&D REPORT JAN 12 NEXT IS THE USDA OUTLOOK CONFERENCE FEB 23, 24. THEN STOCKS AND PLANTING INTENSIONS MARCH 30 AND JUNE 29

WHAT DID THE JAN 12 REPORTS TELL US? DEC 1/2011 U.S CORN STOCKS WERE DOWN VS 2O10 (BUT WERE HIGHER THAN THE MARKET EXPECTED). U.S. ENDING STOCKS LOWER FOR GLOBAL STOCKS STEADY U.S CORN STOCK TIGHTEST SINCE 95/96 U.S WHEAT STOCKS WERE DOWN FROM U.S STOCKS BUT GLOBAL STOCKS ARE PROJECTED HIGHER IN 2012

MORE FROM JAN 12 U.S ENDING SOYBEAN STOCKS GROWING ON LOWER CRUSH/EXPORTS GLOBAL SUPPLY WILL BE REDUCED BY SOUTH AMERICA DRY WEATHER CORN FOR ETHANOL USE DROPPING BACK IN 2012 VS STRONG 2011, BUT ETHANOL USE NOW 110% OF FEED USE WHEAT AND BYPRODUCT FEEDING IS REPLACING CORN IN FEED USE.

UPCOMING REPORTS USDA OUTLOOK CONFERENCE FEB 23/24 GIVES THE FIRST INDICATION OF PLANTING INTENTIONS. THIS CAN SET OFF AN ACREAGE BATTLE IF NEEDED MARCH 30 STOCKS AND ACREAGE INTENTIONS IS ALWAYS A BIG REPORT, ESPECIALLY WITH CORN TIGHT JUNE 30 ACREAGE REPORT CLOSES THAT BOOK, THEN IT’S WEATHER

OTHER THINGS TO WATCH SOUTH AMERICAN WEATHER IS KEY ETHANOL GRIND HAS BEEN DECLINING LOWER BYPRODUCTS PRICES INDICATE LOWER FEED DEMAND CANOLA MEAL BECOMING BETTER VALUE VS SBM BROILER NUMBERS LOW IN U.S. WILL REDUCE GRAIN AND SBM DEMAND

MORE THINGS TO WATCH UNSETTLED GLOBAL FINANCIAL ISSUES IS LIMITING SPECULATIVE DEMAND, ESPECIALLY FOR LONGER TERM CORN IN PARTICULAR WILL KEEP A WEATHER PREMIUM IN UNTIL MARKET IS CONFIDENT THAT SUFFICIENT U.S. PRODUCTION IS ASSURED. A STRONG ECONOMY, AND INCREASED DEMAND CAN SET OFF A RALLY, BUT BIG ACRES ARE ALSO EXPECTED

SO, WHAT DON’T WE BUY? ANYTHING WITH A TOXIN LEVEL THAT WILL HURT YOUR FEEDING RESULTS IT’S HARD FOR A PRODUCER TO HAVE FULL TOXIN SECURITY ON DDGS BUY THE CORN YOU NEED, BUT SUBSTITUTE WHERE YOU CAN ANYTHING FOR SUMMER AT A BIG PREMIUM. IT’S STILL TOO EARLY

WHAT DO WE BUY? IF YOU HAVE TOXIN PROBLEMS, BLENDERS OR COMPLETES WILL HELP WHEAT IS A GOOD FEEDING VALUE TO PROTECT AGAINST SPRING SEASON PRICE INCREASES, BOOK A PORTION OF YOUR FEED NEEDS OUT FOR 3 OR 4 MONTHS ON MARKET DIPS. BE CAREFUL PAST MID JUNE UNTIL WE HAVE MORE ACCURATE WEATHER IDEA

WHAT’S MOST IMPORTANT? IDENTIFY THE COMMODITY PRICE RISKS THAT AFFECT YOUR OPERATION QUANTIFY THOSE RISKS AND DETERMINE HOW THEY COULD HURT CURRENT RESULTS, LONG TERM PLANS WATCH FOR OPPORTUNITIES THAT CAN HELP SOLIDIFY OR PROTECT MARGINS IT’S A JOURNEY, NOT A DESTINATION!

MANY THANKS!! TO LEIS FEEDS AND THEIR CUSTOMERS FOR THEIR INTEREST AND ATTENTION