1. Corn & Soybean Outlook AAEA Annual Meeting 14 August 2012 Matthew C. Roberts Roberts.628@osu.edu

2. Just Like Old Times… Grain markets are primarily being driven by fundamentals. Policy also very important, though. Corn: – Where does the rationing occur? – What will become of VEETC? Soybeans: – Final yield? – Global inventories situation www.matthewcroberts.com2

3. WAOB Corn Demand Rationing Feed & Residual: Ethanol: Exports: www.matthewcroberts.com3

4. 4 2009/102010/112011/122012/13 Final Current Area Planted86.488.291.996.4 Harvested79.581.48487.4 Yield per harvested acre164.7152.8147.2123.4 Beginning stocks1,6731,7081,1281,021 Production13,09212,44712,35810,779 Imports8282575 Supply, total14,77414,18213,51111,875 Feed and residual5,1244,7924,5504,075 Food, seed & industrial5,9616,4286,3905,850 Ethanol4,5915,0215,0004,500 Domestic, total11,08611,22010,9409,925 Exports1,9801,8351,5501,300 Use, total13,06613,05412,49011,225 Ending stocks, total1,7081,1281,021650 Avg. farm price ($/bu) 2/3.555.186.258.20 Stocks-to-Use Ratio13.1%8.6%8.2%5.8% Days Ending Inventory48323021

5. Even including DDGS, Feeding at 1996 Levels. Million Bushels Year 5537 6150 3876 4798 3941 5563 4075 5275 6726

6. www.matthewcroberts.com6 2009/102010/112011/122012/13 Final Current Area Planted86.488.291.996.4 Harvested79.581.48487.4 Yield per harvested acre164.7152.8147.2123.4 Beginning stocks1,6731,7081,1281,021 Production13,09212,44712,35810,779 Imports8282575 Supply, total14,77414,18213,51111,875 Feed and residual5,1244,7924,5504,075 Food, seed & industrial5,9616,4286,3905,850 Ethanol4,5915,0215,0004,500 Domestic, total11,08611,22010,9409,925 Exports1,9801,8351,5501,300 Use, total13,06613,05412,49011,225 Ending stocks, total1,7081,1281,021650 Avg. farm price ($/bu) 2/3.555.186.258.20 Stocks-to-Use Ratio13.1%8.6%8.2%5.8% Days Ending Inventory48323021

7. The irrelevance of an RFS waiver has been greatly exaggerated. Gasoline can be refined to very high octane levels—catalytic cracked gas is 95 octane. – But is costlier MTBE was added to gasoline as an oxygenate, not for octane. – But in 2007 EISA, explicit oxygenation requirements abolished. – Because of increased availability/RFS, blenders utilized EtOH for octane as well as O2. www.matthewcroberts.com7

8. The irrelevance of an RFS waiver has been greatly exaggerated. (2) But many other additives can supply octane. – The question is at what price. – Historical rule of thumb was 1-2c/g/pt 2012: 13.2bn gallon RFS, 2013: 13.8bn gallons Current Prices: www.matthewcroberts.com8 EthanolRBOB Cash2.513.10 U122.562.99 Z122.492.72 H132.462.73

9. Ethanol Production Volumes Down in Last Three Months www.matthewcroberts.com9

10. 10 2009/102010/112011/122012/13 Final Current Area Planted86.488.291.996.4 Harvested79.581.48487.4 Yield per harvested acre164.7152.8147.2123.4 Beginning stocks1,6731,7081,1281,021 Production13,09212,44712,35810,779 Imports8282575 Supply, total14,77414,18213,51111,875 Feed and residual5,1244,7924,5504,075 Food, seed & industrial5,9616,4286,3905,850 Ethanol4,5915,0215,0004,500 Domestic, total11,08611,22010,9409,925 Exports1,9801,8351,5501,300 Use, total13,06613,05412,49011,225 Ending stocks, total1,7081,1281,021650 Avg. farm price ($/bu) 2/3.555.186.258.20 Stocks-to-Use Ratio13.1%8.6%8.2%5.8% Days Ending Inventory48323021

11. World Wheat Supplies Far Better Situation than ’07/08 Production 662 Use 683 Stocks-to-Use Ratio (%) Source: WOAB, USDA

12. Global Corn Inventories Very Low Production 849 Use 861 Stocks-to-Use Ratio (%)

13. Corn Summary Feed Demand Drop Very Large… – Will this ever recover? Ethanol Demand Still Might be Able to Be Rationed Further, but price relative to RBOB will keep it blended, even with reduced RFS. www.matthewcroberts.com13

14. Soybeans: Global Situation Very Tight – 2012 Drought in US – 2012 Drought in S. Am How will August Treat Soybeans? – Poor Growth Prospects, Even with Moisture – What is the elasticity of Chinese Demand? www.matthewcroberts.com14

15. S.Am ‘13 forecast is 30mmt greater than ‘12 production… Production 260 Use 257 Million Metric Tons Stocks-to-Use Ratio (%)

16. www.matthewcroberts.com16 2010/112011/122012/13 FinalCurrentAugust Area Planted77.475.076.1 Harvested76.673.674.6 Yield43.541.536.1 Beginning stocks151215145 Production332930562692 Imports141520 Supply, total349532862857 Crushings164816901515 Exports150113501110 Seed878889 Residual431327 Use, total328031412742 Ending stocks215145115 Stocks/Use Ratio6.6%4.6%4.2% MYA Price11.3012.4516.00

17. Soybean Exports Fall to ’06/07 levels? Million Bushels 929 804 885 589 527 1063 1110

18. Some Optimism Over Recent Rain www.matthewcroberts.com18

19. Soybean Summary Global Markets Very Tight, Dependent on S. Am Crop. Weather related weakness overdone. Export Demand probably underestimated. Room for higher prices w/ Soy. www.matthewcroberts.com19

20. www.matthewcroberts.com20 Matt Roberts (614) 688-8686 roberts.628@osu.edu http://aede.osu.edu/people/roberts.628 Twitter: @YourEconProf