1. Soybean Outlook Pat Westhoff (westhoffp@missouri.edu)westhoffp@missouri.edu Food and Agricultural Policy Research Institute (www.fapri.missouri.edu)www.fapri.missouri.edu Midwest and Great Plains/ Western Outlook Conference Indianapolis, August 15, 2007

2. Agenda  Outlook for related markets Petroleum and biofuel markets Corn and other crops  Soybean and soybean product outlook World U.S.

3. Petroleum Prices Source: WTI from Global Insight forecast, August 2007; light sweet crude oil from the NYMEX close for July contracts on Aug. 13, 2007

4. Rack Prices for Ethanol and Gasoline Source: Nebraska government website: http://www.neo.ne.gov/statshtml/66.html Note: AMS reported Iowa plant prices for ethanol of $1.80-$1.92/gallon Aug. 10http://www.neo.ne.gov/statshtml/66.html

5. Futures Prices for Ethanol, Gasoline Source: CBOT and NYMEX close for Aug. 13, 2007. Ratio of (ethanol price – tax credit) to RBOB gasoline price: 70% in Sep 2007; 61% in Sep. 2008

6. FAPRI Projections of Gasoline and Ethanol Prices Source: FAPRI baseline update, August 2007

7. FAPRI Projections of Diesel and Biodiesel Prices Source: FAPRI baseline update, August 2007

8. Economics of a Dry Mill Ethanol Plant (Dollars per Gallon of Ethanol) 2005/06 (estimate) 2006/07 (estimate) Jul. 2008 (futures) Value of ethanol 2.61 2.28 1.72 Value of distillers grains 0.27 0.33 0.28 Cost of corn-0.74-1.11-1.33 Cost of fuel, electricity-0.27 Other operating costs-0.31-0.32 Net return over operating costs 1.56 0.91 0.08 Ethanol value and corn costs for July 2008 based on CBOT futures, Aug. 10, 2007 (for corn, ($3.85-$0.20 basis)/2.75 gallons/bu.). Distillers grains based on Iowa prices ($92 per ton) reported by AMS on Aug. 10, 2007.

9. Source: FAPRI baseline update, August 2007

10. Wheat and Corn Farm Prices Source: FAPRI baseline update, August 2007

13. Wheat, Corn & Soybean Area Planted Source: FAPRI baseline update, August 2007

15. November 2007 Soybeans, CBOT

16. Source: Real price = Dollar price * real/dollar exchange rate (cal yr. t /3 + cal. yr. (t+1)*2/3)

17. Source: USDA estimates, August 2007

20. Source: Figures for 2006/07 from WASDE, August 2007

21. Source: FAPRI estimates

22. Biodiesel Statistics  National Biodiesel Board: June 2007 capacity: 1.39 bil. gal. 2005/06 production: 250 mil. gal.  Soyoil-based production based on Aug. 2007 USDA estimates of soyoil used for methyl ester 2005/06: 202 mil. gal. 2006/07: 325 mil. gal. 2007/08: 455 mil. gal.  Much new capacity; much existing capacity not fully utilized for biodiesel production

23. Economics of a Biodiesel Plant (Dollars per Gallon of Biodiesel) 2005/06 (estimate) 2006/07 (estimate) 2007/08 (proj.) Value of biodiesel 3.31 3.24 3.22 Value of glycerin 0.09 0.05 Cost of soyoil-1.80-2.39-2.63 Other operating costs-0.53 -0.54 Net return over operating costs 1.07 0.37 0.10 Source: FAPRI estimates, August 2007. Soyoil cost assumes 7.7 pounds of crude soybean oil per gallon of ethanol, and prices of 23.41 cents/lb. in 2005/06, 31.00 cents/lb. in 2006/07 and 34.16 cents/lb. in 2007/08

24. Biodiesel Plant Costs and Returns Source: FAPRI baseline update, August 2007

27. Soybean Meal and Oil Prices Source: FAPRI baseline update, August 2007

29. Relative Meal and Oil prices  In 2003/04, soymeal accounted for 65% of combined value of meal and oil in 1 bushel of soybeans  By 2006/07, that has declined to 58%  FAPRI projects a further decline to 53% by 2012/13  Biodiesel here and abroad increases demand and prices for soybean oil  Increased availability of distillers’ grains puts some downward pressure on meal prices, even though DDGS primarily displaces corn in feed rations

30. Soybean Meal and Corn Co-Products Domestic Use Source: FAPRI baseline update, August 2007

31. Feed and Residual Use Source: FAPRI baseline update, August 2007

32. U.S. Soybean Use Source: FAPRI baseline update, August 2007

33. Soybean Acreage and Yields Source: FAPRI baseline update, August 2007

34. Other Issues  Basis is currently very weak $7.74 National Soybean Index, 8/13/07 $8.61/bu. CBOT Aug. contract, 8/13/07 $0.87/bu. implied basis  Consumer demand for “healthy” oils  Roundup Ready 2 and other new technologies  Soybean rust  ???