1. FSA-EPAS 1 Food Aid Costs and Prospects IFADC Kansas City June 29, 2011 Pete Riley Economic and Policy Analysis Staff USDA/Farm Service Agency Washington, DC 20250 202-720-7787 Pete.Riley@wdc.usda.gov

2. FSA-EPAS Wheat Supplies Ample, Although There are Quality Concerns 2 percent

3. FSA-EPAS Rice Ending Stocks in 2011/12 Forecast 21 million MT Higher Than Recent Low in 2004 3 percent

4. FSA-EPAS Current Supply Concerns Mainly Focus on Corn 4 percent

5. FSA-EPAS 5 Commodity Markets are Volatile: An Example from Dairy $ per cwt.

6. FSA-EPAS 6 Despite the Highest Stocks in 23 Years, U.S. Wheat Prices Doubled Last Season $ per bu. Daily Cash Prices from June 2010

7. FSA-EPAS Food Aid Cost Data Summary, 2004-2010 ( for bulk and processed commodities combined ) Costs Quantities 7 Mil $ Source: FSA/KC Commodity Office 1000 MT

8. FSA-EPAS Bulk vs. Processed Commodity Volume by Year BulkProcessed 8 1000 MT

9. FSA-EPAS Bulk vs. Processed Commodity Costs by Year BulkProcessed 9 Mil $

10. FSA-EPAS Freight Rates Have Dropped from 2008 Highs Bulk freight accounted for 35-40 percent of total costs Processed freight accounted for 25-30 percent of total costs 10

11. FSA-EPAS Cost Analysis and Projections Methodology and Caveats Constructed simple models for key commodities to analyze relationship between food aid commodity costs and market prices. Value of results vary by commodity. Projections based on USDA baseline market prices for 5 years out. Results need to be interpreted with caution, but should provide some rough indications of future trends. Note: These are not official USDA projections! 11

12. FSA-EPAS Food Aid Costs Wheat History and 5-Year Projection * 12 $/MT

13. FSA-EPAS Food Aid Costs Corn History and 5-Year Projection 13 $/MT

14. FSA-EPAS Food Aid Costs Vegetable Oil History and 5-Year Projection 14 $/MT

15. FSA-EPAS Food Aid Costs Corn Soy Blend History and 5-Year Projection 15 $/MT

16. FSA-EPAS A Look at Commodity Plus Freight Costs: An Example for Wheat 16 $/MT

17. FSA-EPAS 17 Very Wet and Flooding in North, Drought Across the South and Southern Plains

18. FSA-EPAS Near Term Risk Factors Higher Prices More flood and/or drought damage Poor summer growing weather Limited early corn from the South and late Midwest crop Late summer bidding war for old crop corn Bigger corn imports by China Lower Prices Softer oil prices Reduced economic growth Less investor interest in commodities Strong global acreage response to high prices Favorable summer weather Higher-than-expected yields 18