1. Challenges and Opportunities for the U.S. Wheat Industry presented to Presented by World Perspectives, Inc. October 30, 2014

2. Presentation Roadmap Introduction Challenges Review of Methodology 1. 2. 4. 3. Opportunities Conclusions 5.

3. Review of Methodology 1.Macro and microeconomic analysis 2.Agricultural industry data analysis – market/policy 3.Review of relevant industry reports 4.ROI calculations 5.Collaborative discussion, fact-checking, and interviews with industry stakeholders from the farm- level on up 6.Development of key findings and recommendations

4. Challenges Production Competition Consumption Alternatives Profitability Trade policy Free riders Political stature Future challenges? The global market is fluid!

5. Profitability Comparing net returns per acre for big three over the two previous production seasons Nowhere was wheat most profitable; 80 percent of the time when a crop was grown at a financial loss, it involved wheat

6. Alternative Crops Markets are fluid, but trends are clear here

7. The Global Market The demand is there

8. The Gluten Issue Nearly one in five Americans now buys gluten-free products (Arlon Capital) Benefits of wheat consumption overlooked Estimate: $30-40 million minimum for 2-3 years to have a reasonable chance of altering consumer attitudes For perspective: U.S. wheat production is worth about $16 billion under normal carryout conditions; loss to U.S. wheat producers based on inaction will be much greater than the cost of better informing consumers

9. Opportunities Positive impact on demand Negative net cost Free riders National stature National problems High-priced supplier Supply/demand dynamics International marketing Trade policy

10. U.S. has a comparative advantage in being a stable wheat producer Comparative Advantage The 15-year average U.S. wheat yields are only surpassed by intensive farming practices in the EU and China China’s production will be eaten up by domestic demand; the EU does not have the land resources of the U.S. to expand wheat acreage substantially U.S. wheat yields are not stagnating, but they are growing slowly

11. Return on Investment

12. ROI Cont’d

13. Proxy Industry Scenarios Cotton Pork Avocadoes Almonds Peanuts

14. Cotton Competitive Threat: Loss of market share to new "easy- care" synthetic fibers (1960s) Industry Action: Passage of the Cotton Research & Promotion Act of 1966 re-established the market for cotton; was expanded in 1990 to include the cotton content of imported apparel and other products Result: Today cotton is the best-selling textile fiber in the U.S., plus one of the top selling fibers in the world

15. Pork Competitive Threat: poor genetics; fatty product amid period of low-fat nutritional guidance Industry Action: Creation of the Pork Promotion, Research, and Consumer Information Order in the late 1980s; led to leaner genetics, total factor productivity growth of over 6 percent per year, and a focus on specific marketing to HRI venues Result: The U.S. pork industry went from being a net importer to a net exporter of pork within a decade; now exports ¼ of production and fulfills 1/3 of globally traded demand; cash returns have consistently trended upward

16. Concluding Remarks The industry has two choices: 1.Continue the status quo. The caution associated with this choice is the old adage that doing the same thing again and again may not change the end result, which on present trend means the continued decline of the U.S. wheat industry 2.Strategize on how to improve the production, marketing and thus profitability of the industry Potential actions to improve the industry: 1.Retain the current organizational structure but commit to increased investment in the research and promotion currently carried out by the industry’s national organizations (NAWG, NWF, USW and WFC) 2.Compel those states currently lacking a checkoff program to contribute to the national effort 3.Initiate a national checkoff program that inherently collects investment resources from all wheat growers

17. Thank you for your attention!