1. 1 Oklahoma State University Corn &Wheat Situation and Outlook Corn &Wheat Situation and Outlook Kim B. Anderson

2. 2 Policy comes and policy goes but weather determines prices. Luther Tweeten Policy comes and policy goes but weather determines prices. Luther Tweeten

3. 3 Corn production area

4. 4 Soybean production area

5. 5 Cotton production area

6. 6 HRW wheat production area

7. 7 SRW wheat production area

8. 8 Corn

9. 9 CornusedforEthanol billion bushels) Corn used for Ethanol (billion bushels) ’07/08 3.2 bb ’08/09 4.0 bb ’09/10 4.3 bb ’06/07 2.1 bb

10. 10 U.S. Corn Situation (Billion Bushels)(Million Bushels) Planted Acres Harvested Acres Yield Production Year 200079.672.4 (91.0) 136.910.0 200175.768.8 (90.9) 138.29.5 200278.969.3 (87.8) 129.39.0 200378.670.9 (90.2) 142.210.1 200480.973.6 (91.0) 160.411.8 200581.875.1 (91.8) 148.011.1 200678.370.7 (90.3) 149.110.5 200793.686.1 (92.0) 154.713.2 7-YR Avg. 79.1143.410.371.5 Percentage harvested in parenthesizes

11. 11 U.S. Corn Situation ProductionConsumption Ending Stocks U. S. Price Year (Billion Bushels) 200010.09.62.1$1.82 20019.59.81.6$1.85 20029.09.51.0$1.97 200310.110.21.0$2.30 200411.810.62.2$2.42 200511.1 2.0$2.06 200610.511.41.3$3.00 200713.212.61.9$3.50 7-YR Avg. 10.3 1.6$2.20

12. 12 World Corn Situation ProductionConsumption Ending Stocks Year (Billion Bushels) 200023.223.86.0 200123.624.55.8 200223.724.74.9 200324.325.54.1 200427.826.95.1 200527.3 4.8 200627.628.54.1 200730.330.13.9 7-YR Avg. 25.425.94.8

13. 13 2008 Corn Production 2007 use + ethanol increase – 1 bb ending stocks = required production ÷ yield = acres harvested ÷ % harvested = required planted acres 12.6 bb + 0.7 bb – 1 bb = 12.3 bb ÷ 153 bu/ac = 80 ma ÷.91 = 88 million acres

14. 14 CBT Corn Monthly Nearest Before ethanol Weather Ethanol

15. 15 CBT Soybeans Monthly Nearest Before ethanol & bio-diesel Weather Ethanol & bio-diesel

16. 16 U.S. Corn Situation (Billion Bushels) 06/07 Month 07/08 Ending Stocks (Cents per Bushel) (± 30) USDA Cash Est. Price Range Open/Close CBT Nearby May0.9370.947345-390345-395340 June0.9370.997388-329323-426340 July1.1371.502332-326308-344310 Aug1.516326-324310-354310 Sept1.675327-373320-390310 Oct1.997375-372335-376320 Nov1.897374-379367-390350

17. 17 Key points  2007 corn production 13.2 billion bushels (bb).  2007 corn use 12.6 bb.  2007 ethanol corn use 3.2 bb.  2008 projected ethanol corn use 3.9 bb.  corn end stocks ~ 1.9 bb  $3.50 avg. annual price.  corn end stocks ~ 1.0 bb  $3.90 avg. annual price.  2008 planted acres 88 mil., production of 12.3 bb, ending stocks 1.0 bb & $3.70 avg. annual price.

18. 18 Wheat

19. 19 U.S. Wheat Situation (Billion Bushels)(Million Bushels) Planted Acres Harvested Acres Yield Production Year 200062.553.1 (85.0) 42.02.23 200159.448.5 (81.6) 40.21.95 200260.345.8 (76.0) 35.01.61 200362.153.1 (85.5) 44.22.34 200459.750.0 (83.8) 43.22.26 200557.250.1 (87.6) 42.02.10 200657.346.8 (81.7) 38.71.81 200760.451.0 (84.4) 40.52.07 7-YR Avg. 59.940.72.0049.8 (83.2) Percentage harvested in parenthesizes

20. 20 ProductionConsumption Ending Stocks U. S. Price Year (Billion Bushels) U.S. Wheat Situation 20002.232.39.873$2.62 20011.502.15.777$2.78 20021.611.99.492$3.56 20032.342.35.546$3.40 20042.162.24.540$3.40 20052.112.16.571$3.42 20061.802.05.456$4.26 20072.072.30.312$6.10 7-YR Avg. 1.962.19.608$3.35 13.6%

21. 21 World Wheat Situation (Billion Bushels) ProductionConsumption Ending Stocks Year 200021.421.57.4 200121.321.57.4 200220.822.26.2 200320.421.64.8 200423.022.35.5 200522.923.15.4 200621.822.74.6 200722.222.74.0 7-YR Avg. 21.722.15.9 17.8%

22. 22 KCBT Monthly Nearest Before ethanol Weather Ethanol

23. 23 KCBT March ‘08

24. 24 KCBT July “08

25. 25 U.S. Wheat Situation (Billion Bushels) 06/07 USDA Cash Est. Month 07/08 Ending Stocks (Cents per Bushel) (± 30) Price Range Open/Close KCBT Nearby May412469480-504462-512465 June417443504-597500-630480 July456418604-629573-657510 Aug404629-721617-733540 Sept362751-929751-950580 Oct307947-827815-950610 Nov312831-905756-925610

26. 26 U.S. Wheat Supply and Use Beginning stocks Production Supply, Total Exports Use, Total Ending Stocks Avg. farm price 307 2,350 2,657 1,050 2,250 407 $5.20 million bushels Kim’s 08/09 456 2,067 2,608 1,150 2,301 307 $6.10 USDA 07/08

27. 27  KCBT July wheat contract price $7.98  Elevator forward contract basis -$0.53  Forward contract offer $7.45  Buy KCBT July 800 call -$0.70  FC/Call minimum price $6.75  Buy KCBT July 800 Put (800¢ - 70¢) $7.30  Expected June 2008 basis -$0.45  Expected minimum price $6.85 June 2008 wheat delivery prices

28. 28 Key Points  Weather is the major price factor.  Corn continues to set the floor for wheat prices.  U.S. and world wheat stocks below average.  Wheat planted acres increase ~5% (63 ma).  Wheat stocks increase in 2008/09 – below avg.  2008/09 wheat price range $3.75 to $8.50.  June 2008 wheat price ~ $6.00  $4.50 to $8.50.