Soybean Outlook Pat Westhoff Food and Agricultural Policy Research Institute ( Midwest and Great Plains/ Western Outlook Conference Indianapolis, August 15, 2007

Agenda  Outlook for related markets Petroleum and biofuel markets Corn and other crops  Soybean and soybean product outlook World U.S.

Petroleum Prices Source: WTI from Global Insight forecast, August 2007; light sweet crude oil from the NYMEX close for July contracts on Aug. 13, 2007

Rack Prices for Ethanol and Gasoline Source: Nebraska government website: Note: AMS reported Iowa plant prices for ethanol of $1.80-$1.92/gallon Aug. 10http://

Futures Prices for Ethanol, Gasoline Source: CBOT and NYMEX close for Aug. 13, Ratio of (ethanol price – tax credit) to RBOB gasoline price: 70% in Sep 2007; 61% in Sep. 2008

FAPRI Projections of Gasoline and Ethanol Prices Source: FAPRI baseline update, August 2007

FAPRI Projections of Diesel and Biodiesel Prices Source: FAPRI baseline update, August 2007

Economics of a Dry Mill Ethanol Plant (Dollars per Gallon of Ethanol) 2005/06 (estimate) 2006/07 (estimate) Jul (futures) Value of ethanol Value of distillers grains Cost of corn Cost of fuel, electricity-0.27 Other operating costs Net return over operating costs Ethanol value and corn costs for July 2008 based on CBOT futures, Aug. 10, 2007 (for corn, ($3.85-$0.20 basis)/2.75 gallons/bu.). Distillers grains based on Iowa prices ($92 per ton) reported by AMS on Aug. 10, 2007.

Source: FAPRI baseline update, August 2007

Wheat and Corn Farm Prices Source: FAPRI baseline update, August 2007

Wheat, Corn & Soybean Area Planted Source: FAPRI baseline update, August 2007

November 2007 Soybeans, CBOT

Source: Real price = Dollar price * real/dollar exchange rate (cal yr. t /3 + cal. yr. (t+1)*2/3)

Source: USDA estimates, August 2007

Source: Figures for 2006/07 from WASDE, August 2007

Source: FAPRI estimates

Biodiesel Statistics  National Biodiesel Board: June 2007 capacity: 1.39 bil. gal. 2005/06 production: 250 mil. gal.  Soyoil-based production based on Aug USDA estimates of soyoil used for methyl ester 2005/06: 202 mil. gal. 2006/07: 325 mil. gal. 2007/08: 455 mil. gal.  Much new capacity; much existing capacity not fully utilized for biodiesel production

Economics of a Biodiesel Plant (Dollars per Gallon of Biodiesel) 2005/06 (estimate) 2006/07 (estimate) 2007/08 (proj.) Value of biodiesel Value of glycerin Cost of soyoil Other operating costs Net return over operating costs Source: FAPRI estimates, August Soyoil cost assumes 7.7 pounds of crude soybean oil per gallon of ethanol, and prices of cents/lb. in 2005/06, cents/lb. in 2006/07 and cents/lb. in 2007/08

Biodiesel Plant Costs and Returns Source: FAPRI baseline update, August 2007

Soybean Meal and Oil Prices Source: FAPRI baseline update, August 2007

Relative Meal and Oil prices  In 2003/04, soymeal accounted for 65% of combined value of meal and oil in 1 bushel of soybeans  By 2006/07, that has declined to 58%  FAPRI projects a further decline to 53% by 2012/13  Biodiesel here and abroad increases demand and prices for soybean oil  Increased availability of distillers’ grains puts some downward pressure on meal prices, even though DDGS primarily displaces corn in feed rations

Soybean Meal and Corn Co-Products Domestic Use Source: FAPRI baseline update, August 2007

Feed and Residual Use Source: FAPRI baseline update, August 2007

U.S. Soybean Use Source: FAPRI baseline update, August 2007

Soybean Acreage and Yields Source: FAPRI baseline update, August 2007

Other Issues  Basis is currently very weak $7.74 National Soybean Index, 8/13/07 $8.61/bu. CBOT Aug. contract, 8/13/07 $0.87/bu. implied basis  Consumer demand for “healthy” oils  Roundup Ready 2 and other new technologies  Soybean rust  ???