Market Outlook for Wheat & Feedgrains WKARC Field Day, Hays, Kansas August 26, 2008 Daniel OBrien - Extension Ag Economist K-State Research and Extension

Current vs Historic Grain Prices Average Cash Prices Received Crop Average2007/08 Mktg. Year KC MO. August 25, 08 Wheat$3. 35 /bu $6. 48 /bu $8. 48 /bu Corn$2. 24 /bu $4. 25 /bu $5. 62 /bu Grain Sorghum$2. 20 /bu $4. 15 /bu $5. 00 /bu Soybeans$5. 66 /bu $ /bu $ /bu

U.S. Cropland Inventory Millions of Acres 5 yr. Ave. 07/08 USDA Proj. 08/09 1 Corn (-7%) Soybeans (+18%) Hay (-2%) Wheat (+5%) Cotton (-15%) Grain Sorghum (-5%) Principle Crops CRP (-3%) Total U.S. Cropland = million acres 1 USDA, WASDE, Released August 12, 2008.

Crop Acres Coming Out of CRP 2007–2017 (Source: USDA, FSA)

U.S. Dollar Index: Monthly Price Chart (DX – NYBOT)

Light Crude Oil Futures: Monthly Price Chart (CL – NYMEX)

U.S. Gross Domestic Product Quarterly 2000 – 2008 (Nominal vs Real)

U.S. Gross Domestic Product Changes Year-to-Year Quarterly Changes (2000 – 2008)

U.S. Corn Price Flexibility Example $ Response to 2008 U.S. Corn Production

Inelastic – Highly Flexible Demand Inelastic – Highly Flexible Demand Implications for Farm & Other Commodity Prices Record High & Volatile Grain Prices Record High & Volatile Grain Prices Record low Grain Stocks/Use pushed markets into the Inelastic, highly Flexible parts of their market demand curves P Grains responded to their own & other grains tight S/D prospects Expect Market Volatility to Continue Farm markets to remain Inelastic with high Price Flexibility into the forseeable future

Wheat Markets

Wheat Market Factors World & U.S. Wheat Stocks recovering in 2008/09 from 30 / 60 year lows in 2007/08 World Production 10%; Ending Stocks 18% U.S. Production 19%; Ending Stocks 87% Current Negative Impacts on Wheat Market Larger World Wheat Supplies Some strengthening of U.S. Dollar ( U.S. Exports) Cross-Grain Market $ Effects in 2008/09?? Fall Winter Wheat seeding? Spring acres bidding?

SEPT 2008 HRW Wheat Futures KCBT: March 2007 – August 25, 2008 Contract Volume & Open Interest

Cash Wheat Prices Hays, Kansas Midland Marketing, Hays, KS August 27, 2007 – August 25, 2008 Source: DTN Bid Analyzer $7.98 /bu on 8/25/08 Basis: $0.80 /bu under KC SEP 2008 Wheat

U.S. Wheat Supply-Demand USDA WASDE Report: August 12, 2008

U.S. Wheat Planted Acreage 1973 through 2008 Kansas HRW Acres Seeded down 500K in 2007/08 – What of 2008/09??

World Wheat Supply-Demand 2005/06 thru 2008/09 Marketing Years

World Wheat Exporters 2005/06 thru 2008/09 Marketing Years

U.S. Wheat Ending Stocks Wheat Ending Stocks as a % of Total Use ( )

U.S. Wheat Stocks/Use% vs Price 1973/74 through 2008/09 Marketing Years

Feedgrain Markets: Corn & Grain Sorghum

Feedgrain Market Factors Pre-Freeze Maturity of the 2008 Corn Crop? Freeze risk - crop development questions in U.S. Corn Belt Price Competition Rationing Tight U.S. Supplies Livestock Feed 5.3 bln bu ( 14%) Grain-Ethanol 4.1 bln bu ( 36%) Export 2.0 bln bu ( 18%) Ending 1.1 bln bu ( 28%) Corn-Bean Bidding for Acres in Spring 2009 Market Comfort with Lower just-in-time Stocks

DEC 2008 Corn Futures CBOT: December 2005 – August 25, 2008 Contract Volume & Open Interest

Cash Corn Prices Hays, Kansas Midland Marketing, Hays, KS August 27, 2007 – August 25, 2008 Source: DTN Bid Analyzer $5.27 /bu on 8/25/08 Basis: $0.53 /bu under CBOT SEPT 2008 Corn

Cash Grain Sorghum Prices Hays, Kansas Midland Marketing, Hays, KS August 27, 2007 – August 25, 2008 Source: DTN Bid Analyzer $4.79/bu on 8/25/08 Basis: $1.01/bu under CBOT SEPT 2008 Corn

U.S. Corn Supply-Demand 2006/07 through 2008/09 Marketing Years

U.S. Grain Sorghum Supply-Demand 2006/07 through 2008/09 Marketing Years

U.S. Corn Food, Seed & Industrial Use 1973/74 thru 2008/09 Marketing Years

U.S. Ethanol Industry Development No. operating Ethanol Plants: Plants under construction or expanding: Announced plants: 300 (17%) ??? Current production capacity: (BGPY) Projected production capacity: 12.4 BGPY end of BGPY end of 2009 Corn Used for Ethanol Production & % of U.S. Corn Crop: Mktg. Year Mln. Bu. % of Crop 2006/07 2,119 20% 2007/08 3,00023% 2008/09 4,100 33%

Ethanol Profit Margin Est. ($ / gallon) Prices July 07Aug 08Change Corn ($/bu.) $3.27 $ % Ethanol $/gal $1.91 $ % RBOB Gas $/gal$1.98 $ % Profit Margin Prices Aug 12, Breakeven corn price - $ Ethanol profit for a 100 million gallon plant = $1 million Distillers Grain revenue would be about $54.6 million. Distillers Grain revenue would be about $54.6 million. To compete with gasoline as substitute, ethanol $ would need to fall to $1.88/gal

Corn Ethanol & WDG $Value vs Corn $ Nebraska / Kansas #s, Feb August 15, 2008

World Coarse Grain Supply-Demand 2005/06 thru 2008/00 Marketing Years

World Coarse Grain Exporters 2005/06 thru 2008/09 Marketing Years

U.S. Corn Ending Stocks Corn Ending Stocks as a % of Total Use

U.S. Corn Stocks/Use% vs Price 1973/74 through 2008/09 Marketing Years

Soybean & Oilseed Markets

NOV 2008 Soybean Futures CBOT: April 2006 – August 25, 2008 Contract Volume & Open Interest

Cash Soybean Prices Hays, Kansas Midland Marketing, Hays, KS August 27, 2007 – August 25, 2008 Source: DTN Bid Analyzer $11.99 /bu on 8/25/08 Basis: $1.48 /bu under CBOT NOV 2008 Soybeans

U.S. Soybean Supply-Demand 2006/07 through 2008/09 Marketing Years

World Soybean Supply-Demand 2005/06 thru 2008/09 Marketing Years

World Soybean Exporters 2005/06 thru 2008/09 Marketing Years

U.S. Soybean Ending Stocks Soybean Ending Stocks as a % of Total Use

U.S. Soybean Stocks/Use% vs Price 1973/74 through 2008/09 Marketing Years

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