Iowa Minn. Wisc. Ill. Mo. Kansas Nebr. S.Dakota Ohio Ind. Mi. The U.S. Corn/Soybean Belt 83% of U.S. corn & soybeans are grown outside Iowa N. Dak.. Ky.

Grain Market Setting : U U.S. corn supply down 7%, processing up 211 mil. bu., exports down 139 m. b. U foreign feed gr.prod’n down 504 mil. bu. U U.S. Soybean supplies down 6%, S. Am mil. bu. after +247 mil. Y/A U U.S. soybean use to be cut 6% U EU, Japan ban on meat meal feeding  GMOs: still some concern U 2002-crop: more corn acres needed?

Fundamental Analysis Key Concepts How Freedom to Farm Has Changed Fundamental Analysis Analyzing Supply Analyzing Export Demand Analyzing Domestic Demand Seasonality Some Key Web Sites Current Examples

3/05/02 Closing prices 3/31/03 March 2.03 May July Sept Dec July Dec The time dimension in prices 9/23/02 quotes in white

Land set-asides before FTF

SOURCES OF SUPPLY INFORMATION USDA: Farmer surveys & aerial photos – for stocks & production Census reports (Exports, Mill stocks) Checks from processing & exports (wheat & soybeans) (production + stocks + imports – utilization = ending stocks) 4.USDA Objective yield plots & surveys

OTHER SOURCES OF DATA Monthly USDA crop forecasts Weekly crop & weather bulletin Census exports & processing reports National Oilseed Processors Association Private crop forecasts USDA World S-D Reports USDA Weekly Export Inspections Weekly price support activity

Export Sales & Shipments 9/01- 3/20/03 Vs. a Year Earlier l Corn -12% Japan+11%, Korea -83%,Taiwan -6%, Mexico +11%, Canada +91%, Egypt -45%, other Asia & Ocn. -74% l Soybeans +2% l SB Meal -17% l SB Oil -2%

FORECASTING FEED USE OF CORN Key Variables: Grain-consuming animal numbers Availability of substitutes  U.S. feed wheat  Grain sorghum  Barley  Corn quality  Livestock marketing weights  Livestock/crop price ratio  Time trend (incl. New technologies)

Forecasting U.S. Corn Yields §Yield: The biggest uncertainty in the Supply-Demand equation §Corn Yield: 5% below trend for 2003 cuts potential production 500 mil. bu. §10% above trend in 2002 would add 1,015 mil. bu. to supply  Price implications: Large

FORECAST VS. ACTUAL U.S.CORN YIELD BU./ACRE Forecast Actual

Corn Price Forecasting March 31, 2003 for : Meth. I, Normal U.S. yield  Price Elasticity of Demand: -0.5  1% Change in Supply = 2% Change in Price  Supply up 11% vs  Adjustment for Demand Increase: +100 Mil. Bu., or 8% net increase in supply  Forecast U.S. Season Avg. Price: $2.13/Bu.  Balance Sheet forecast: $2.10 (Adjustment for China uncertainty& historical stocks/use)

Forecasting Model Result Meth. II, normal yields Coefficients:  Exports/Supply 1.46  Stocks/use-0.76  Weather variable 0/1  Loan rate $1.98  Prev. Price 2.32  Wheat Price 2.60  Forecast U.S. avg. corn price $2.13. Freedom-to-farm adjust. = $0.03

Soybean Price Forecasting l 1% change in supply brings 2.5% change in avg. price, all else constant l U.S. supply up 4% or 113 mil. bu. l World demand growth: +430 mil. bu. l Foreign production +480 mil. bu. l Net chg. for U.S. supply: = 163 mil. bu. or 6% increase Price: 6x2.5=-15%, gives $4.60/Bu.

Typical dirt road in Brazil during the beginning of the dry season. Brazil Cerados