Grain Market Outlook Agricultural Exposition Goodland, Kansas February 21, 2008 Daniel OBrien & Mike Woolverton K-State Research and Extension

Historic vs Current Grain Prices USDA Average 2007/08 Wheat $3. 35 $6. 45 – $6. 85 Corn $2. 24 $3. 75 – $4. 25 Grain Sorghum $2. 20 $3. 65 – $4. 15 Soybeans $5. 66 $ – $ Sunflowers$ /cwt $ – $ National marketing year average price per unit,

Wheat Markets

Current Wheat Market Factors World wheat stocks at a 30 year low Global shortage of quality milling wheat Strong support for U.S. Hard Red Spring Wheat prices Weak U.S. dollar & Lower Ocean Freight Rates Helping U.S. wheat exports Wheat export regulations in Argentina & Russia Attracting speculative interest to U.S. commodity markets U.S. wheat acreage & production concerns in 08 HRS vs soybeans in upper Great Plains; HRW production Need for greater 2008 U.S. / World wheat production in to rebuild stocks.

March 2008 HRW Wheat Futures KCBT: April 2006-February Old Crop March HRW Contract Contract Volume & Open Interest

Goodland, Kansas Cash Wheat Prices Mueller Grain, Goodland, Kansas April 13, 2007 – Feb. 20, 2008 Source: DTN Bid Analyzer Basis: $0.62/bu under KC March 2008 Wheat

July 2008 HRW Wheat Futures KCBT: April 2006-February New Crop July HRW Contract Contract Volume & Open Interest

Goodland, Kansas New Crop Wheat Prices Frontier Ag Inc., Goodland, Kansas Feb. 22, 2007 – Feb. 20, 2008 Source: DTN Bid Analyzer FC Basis: $0.75 /bu under July 2008 KC Wheat

March 2008 Hard Red Spring Wheat KCBT: April 2006-February Old Crop March HRW Contract Contract Volume & Open Interest

U.S. Wheat Supply-Demand

U.S. Wheat Planted Acreage Projected 2008 Kansas HRW Acres Seeded down by 500K in 2007/08

U.S. Wheat Yields Trend

U.S. Wheat Production Projected 2008

U.S. Wheat Exports 1973/74 thru 2007/08 Marketing Years

World Wheat Supply-Demand 2005/06 thru 2007/08 Marketing Years

Production of World Wheat Exporters 2005/06 thru 2007/08 Marketing Years

Exports of World Wheat Exporters 2005/06 thru 2007/08 Marketing Years

U.S. Wheat Ending Stocks Wheat Ending Stocks as a % of Usage

U.S. Wheat Stocks/Use% vs Price

Impact of Scarce U.S. & World Wheat Supplies on Prices Wheat Quantity Wheat Price D Wheat S Large Supply S Medium Supply S Short Supply Q LS Q MS Q SS P SS P MS P LS Marketing Loan$

Soybean & Oilseed Markets

Current Oilseed Market Factors Brazilian soybean area up only 1% Recent South American rains helping soybean crop High soymeal-soyoil prices & exports High soyoil prices damaging U.S. soydiesel industry Weak U.S. dollar & lower ocean freight rates helping soybean exports Attracting speculative interest to U.S. commodity markets Critically low U.S. carryover Only 19 days inventory on hand at end of 2007/08 Need for U.S. acreage & production increase in 2008 to rebuild stocks

March 2008 Soybean Futures CBOT: October 2006-February Old Crop Soybean Contract Contract Volume & Open Interest

Goodland, Kansas Cash Soybean $s Frontier Ag Inc., Goodland, Kansas Feb. 21, 2007 – Feb. 20, 2008 Source: DTN Bid Analyzer Basis: $1.54 ½ /bu under CBOT March 2008 Soybeans

Cash Sunflower Prices Northern Sun - ADM., Goodland, Kansas Feb. 22, 2007 – Feb. 20, 2008 Source: DTN Bid Analyzer

November 2008 Soybean Futures CBOT: January 2006-February Old Crop Soybean Contract Contract Volume & Open Interest

Goodland, Kansas New Crop Soybean Prices Frontier Ag Inc., Goodland, Kansas Feb. 21, 2007 – Feb. 20, 2008 Source: DTN Bid Analyzer FC Basis: $1.25 under CBOT NOV 2008 Soybeans

New Crop Sunflower Prices Northern Sun - ADM., Goodland, Kansas June 7, 2007 – Feb. 20, 2008 Source: DTN Bid Analyzer

U.S. Soybean Supply-Demand

U.S. Soybean Planted Acreage Projected 2008

U.S. Soybean Yields Trend

U.S. Soybean Production Projected 2008

U.S. Soybean Exports 1973/74 thru 2007/08 Marketing Years

World Soybean Supply-Demand 2005/06 thru 2007/08 Marketing Years

Production of World Soybean Exporters 2005/06 thru 2007/08 Marketing Years

Exports of World Soybean Exporters 2005/06 thru 2007/08 Marketing Years

U.S. Soybean Ending Stocks Soybean Ending Stocks as a % of Usage

U.S. Soybean Stocks/Use% vs Price

Impact of Scarce U.S. & World Soybean Supplies on Prices Soybean Quantity Soybean Price D Soybeans S Large Supply S Medium Supply S Short Supply Q LS Q MS Q SS P SS P MS P LS Marketing Loan$

Feedgrain Markets: Corn & Grain Sorghum

Current Feedgrain Market Factors U.S. Feedgrain stocks are adequate Feedgrain supplies not as tight as for wheat & soybeans Large 2008 crop (12.5–13.0 billion bu) needed to meet demand U.S. Ethanol demand continues strong Strong demand from overseas export buyers Reduced production in Argentina (dry Dec-Jan) & Mexico (lower area than expected), increases in South Africa (good rains) South hemisphere corn export competition to increase seasonally. Expected competition for U.S. crop acres vs other crops in Spring 2008 (bidding occurring Feb-April)

March 2008 Corn Futures CBOT: February 2006-February Old Crop Corn Contract Contract Volume & Open Interest

Goodland, Kansas Corn Cash Prices Mueller Grain, Goodland, Kansas April 13, 2007 – Feb. 20, 2008 Source: DTN Bid Analyzer Basis: $0.32 1/2 /bu under CBOT March 2008 Corn

Goodland, Kansas Cash Grain Sorghum Price Frontier Ag Inc., Goodland, Kansas Feb. 23, 2007 – Feb. 20, 2008 Source: DTN Bid Analyzer Basis: $0.57/bu under CBOT March 2008 Corn

December 2008 Corn Futures CBOT: Jan 2006-February New Crop Corn Contract Contract Volume & Open Interest

Goodland, Kansas New Crop Corn Prices Mueller Grain, Goodland, Kansas April 19, 2007 – Feb. 20, 2008 Source: DTN Bid Analyzer FC Basis: $0.30 /bu under CBOT December 2008 Corn

Goodland, Kansas New Crop Grain Sorghum Prices Frontier Ag Inc., Goodland, Kansas Feb. 22, 2007 – Feb. 20, 2008 Source: DTN Bid Analyzer FC Basis: $0.53/bu under CBOT December 2008 Corn

U.S. Corn Supply-Demand

Dynamics of U.S. Corn Usage USDA USDA USDA USDA 2006/ /08 est. (Mln. Bu.) 2006/ /08 est. (Mln. Bu.) Feed and Residual 5,598 5,950 1 (+6%) Food, Seed, and Industrial 1,371 1,355 2 ( ־ 1%) Ethanol for Fuel 2,117 3,200 (+51%) Net Exports 2,125 2,450 (+15%) Ending Stocks 1,304 1,438 (+10%) Total Usage 11,21012,995 (+16%) Production 10,53513,074 (+24%) 1 Assumes DDGS retain 30% of the feed value of corn and are included in the feed and residual category by the USDA. 2 Industrial, food, and seed less ethanol.

U.S. Grain Sorghum Supply-Demand

U.S. Corn Planted Acreage Projected 2008

U.S. Corn Yields Trend

U.S. Corn Production Projected 2008

U.S. Corn Food, Seed & Industrial Use 1973/74 thru 2007/08 Marketing Years

U.S. Ethanol Industry at a Glance Number of operating ethanol plants: Under construction or expanding: Announced plants: 300 (17%) 100 (?) Current production capacity: (BGPY) Projected production capacity: 11.7 BGPY end of BGPY end of 2009 Feedstock Use Proportion: Corn 97% Sorghum 2% Other 1%

Ethanol vs RBOB Prices March 2007 – February 2008 (Source: DTN)

Corn Demand Increase Due to Ethanol Development Corn Quantity Corn Price D Corn D Corn w. Ethanol

U.S. Corn Exports 1973/74 thru 2007/08 Marketing Years

Total U.S. Corn Use 1973/74 thru 2007/08 Marketing Years

World Corn Supply & Demand Global production up 9% from 2006/07. Use up 7% Production will be MMT (212 mil. Bu.) less than Usage World Ending Stocks to decrease MMT from last year, down to 13 % of Usage. Million MT

World Coarse Grain Supply-Demand 2005/06 thru 2007/08 Marketing Years

Production of World Coarse Grain Exporters 2005/06 thru 2007/08 Marketing Years

Exports of World Coarse Grain Exporters 2005/06 thru 2007/08 Marketing Years

U.S. Corn Ending Stocks Corn Ending Stocks as a % of Usage

U.S. Corn Stocks/Use% vs Price

Short Run Ethanol Effect on Prices Corn Quantity Corn Price D Corn D Corn w. Ethanol Short Run Supply ( Corn Crop & Stocks) Q P SR P0P0

Long Run Effect of Ethanol on Corn-Feedgrain Prices Corn Quantity Corn Price D Corn D Corn w. Ethanol S Sht Run Q 07 P SR Long Run Supply ( Corn Supplies) P LR Q

Long Run Grain Market Perspectives

Land in Crops (Millions of acres) 5 yr. Ave. 07/08USDA Proj. 08/09 5 yr. Ave. 07/08USDA Proj. 08/09 Corn (-6%) Soybeans (+10%) Hay (--) Wheat (+3%) Cotton (-7%) Grain Sorghum (-4%) Principle Crops CRP (-3%) Total crop land in the United States – million acres

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

Long Run Grain Prices USDA Long Run Average 2007/08 Projection Wheat $3. 35 $6. 45 – $6. 85 $5. 00 Corn $2. 24 $3. 70 – $4. 30 $3. 50 Grain Sorghum $2. 20 $3. 60 – $4. 20 $3. 40 Soybeans $5. 66 $9. 90 – $ $7. 50 Sunflowers$ $ – $ $ National marketing year average price per unit,

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