GRAIN OUTLOOK Risk & Profit 2006 Conference Mike Woolverton Kansas State University

U.S. EXPORTS 2005/06 (millions of bushels) Projections 2005/ /07est. Projections 2005/ /07est. Wheat 1, Wheat 1, Corn 2,100 2,150 Corn 2,100 2,150 Sorghum Sorghum Soybeans 905 1,090 Soybeans 905 1,090 Source: World Agricultural Supply and Demand Estimates, USDA Source: World Agricultural Supply and Demand Estimates, USDA

WHEAT

Winter Wheat Estimates, USDA, 1 Aug YieldProduction U.S bil. Kansas mil. (40.0) (380.0 mil.)

Current Market Influences - Wheat Deterioration of U.S. Spring Wheat Crop (33% vs. 73%) Deterioration of U.S. Spring Wheat Crop (33% vs. 73%) Australian Drought (-12%) Australian Drought (-12%) U.S. HRW Quality U.S. HRW Quality Low Carryover Low Carryover

PRODUCTION PROJECTIONS, U.S., 2006/07 All Wheat – bil. Bu. – down 14% All Wheat – bil. Bu. – down 14% Hard Winter – 660 mil. Bu. – down 29% Hard Winter – 660 mil. Bu. – down 29% Hard Spring – 423 mil. Bu. – down 9% Hard Spring – 423 mil. Bu. – down 9% Soft Red – 380 mil. Bu. – up 23% Soft Red – 380 mil. Bu. – up 23% White – 284 mil. Bu. – down 5% White – 284 mil. Bu. – down 5% Durum – 55 mil. Bu. - down 46% Durum – 55 mil. Bu. - down 46%

Current Market Influences Deterioration of U.S. Spring Wheat Crop (32% vs. 73%) Deterioration of U.S. Spring Wheat Crop (32% vs. 73%) Australian Drought (-12%) Australian Drought (-12%) Drop in World Production Drop in World Production U.S. HRW Quality U.S. HRW Quality

HRW Wheat Quality Test Weight lbs/bu Wheat Protein % Flour Yield Wet Gluten % Kansas State University harvest survey of Wheat Sheds in Kansas, Oklahoma, and Texas, Summer 2006, preliminary results.

Soft Red Wheat Situation Production up 23%; average protein 10.0%; test weight 60.1 Production up 23%; average protein 10.0%; test weight 60.1 July 26 Aug 11 Toledo Basis Toledo Basis Spot - $2.87 $2.74 Kansas City Basis Kansas City Basis Spot - $5.13 $4.87 Spot - $5.13 $4.87

PRODUCTION PROJECTIONS, MAJOR WHEAT EXPORTERS, 2006/07 (MMT) 2006/072005/06 EU (-3.2%) EU (-3.2%) United States (-14%) United States (-14%) Canada 25.5 (-2%) Canada 25.5 (-2%) Australia 21.5 (-12%) 24.5 Australia 21.5 (-12%) 24.5 Argentina 13.5 (+8%) 12.5 Argentina 13.5 (+8%) 12.5 Total Exporters (-6%) Total Exporters (-6%) Total World Prod (-4%) Total World Prod (-4%)

Wheat Balance Sheet Plant A. (mil.) Harvest A. (mil.) Bu./A Production 2,158 2,150 1,801 Production 2,158 2,150 1,801 Imports Imports Carryover Carryover Total Supply 2,775 2,7302,474 Total Supply 2,775 2,7302,474Utilization: Feed and Residual Feed and Residual Food Food Seed Seed Exports 1,060 1, Exports 1,060 1, Total Utilization 2,235 2,1882,040 Carryover 540 (24%) 542 (25%) 434 (21%) U.S. Farm Price $3.40 $3.35-$3.45 $3.90-$4.50

CORN

Corn Estimates, USDA, 1 Aug YieldBushels U.S bil. Kansas mil. (135.0)(465.8 mil.) (135.0)(465.8 mil.)

Current Market Influences - Corn Drought in Western and Northern Corn Belt Drought in Western and Northern Corn Belt Latest USDA estimate Latest USDA estimate Demand from ethanol producers Demand from ethanol producers Strong export demand Strong export demand

Corn/Ethanol Projections, U.S. 06/0707/08 Corn Acres 79.4 mil.82.0 mil. Corn Production 11.0 bil bil. Corn Exports 2.15 bil. 2.0 bil. Corn for Ethanol 2.15 bil. 3.4 bil. Ethanol Production 6.4 bil. g. 8.6 bil. g. DDG Production 9.5 bil. T bil. T. (Thirty to 40 percent will replace corn in rations. Sixty to 70% will replace soybean meal.) Source: Paul Smolen, AgriNetwork Manangement and Mike Woolverton, KSU.

Corn Balance Sheet Plant A. (mil.) Harvest A. (mil.) Bu./A Production 11,807 11,112 10,976 Imports Imports Beginning Carryover 958 2,114 2,062 Beginning Carryover 958 2,114 2,062 Total Supply 12,77613,23713,047 Total Supply 12,77613,23713,047Utilization: Feed and Residual 6,162 6,100 6,050 Feed and Residual 6,162 6,100 6,050 Food, seed, industrial 2,686 2,975 3,540 Ethanol for fuel 1,323 (11%) 1,600 (14%) 2,150 (20%) Food, seed, industrial 2,686 2,975 3,540 Ethanol for fuel 1,323 (11%) 1,600 (14%) 2,150 (20%) Exports 1,814 2,100 2,150 Exports 1,814 2,100 2,150 Total Utilization 10,662 11,17511,815 Ending Carryover 2,114 (20%) 2,062 (18%) 1,232 (10%) Ending Carryover 2,114 (20%) 2,062 (18%) 1,232 (10%) U.S. Farm Price $2.06 $1.95-$2.05 $2.15-$2.55

GRAIN SORGHUM

Sorghum Estimates, USDA, 1 Aug YieldProduction U.S mil. Kansas mil. (75.0) (195.0 mil.)

Sorghum Balance Sheet Plant A. (mil.) Harvest A. (mil.) Bu./A Production Imports Imports Beginning Carryover Beginning Carryover Total Supply Total Supply Utilization: Feed and Residual Feed and Residual Food, seed, industrial Food, seed, industrial Exports Exports Total Utilization Ending Carryover 57 (13%) 51 (13%) 42 (14%) Ending Carryover 57 (13%) 51 (13%) 42 (14%) U.S. Farm Price $1.79 $1.75-$1.80 $1.95-$2.35

SOYBEANS

Soybean Estimates, USDA, 1 Aug YieldProduction U.S bil. Kansas mil. (37.0)(105.5 mil.)

Current Market Influences - Soybeans Hot, dry conditions during bloom and pod filling Hot, dry conditions during bloom and pod filling August rains August rains Large Carryover Large Carryover Bio-diesel potential Bio-diesel potential

Soybean/Bio-diesel Projections, U.S. 06/0707/08 06/0707/08 Soybean Acres 74.9 mil mil. Soybean Production 3 bil. bu. 3.1 bil. bu. Soybean Exports 1.1 bil bu. 900 mil. bu. Soybean Oil for BD 2.35 bil lbs.4.65 bil. lbs. Bio-diesel Production 400 mil. g. 730 mil. g. (330 from SBO) (600 from SBO) Soybean Meal Exports 7.5 mil. T. 11 mil. T. Source: Paul Smolen, AgriNetwork Management and Mike Woolverton, KSU

Soybean Balance Sheet Plant A. (mil.) Harvest A. (mil.) Bu./A Production 3,124 3,086 3,010 Imports Imports Beginning Carryover Beginning Carryover Total Supply 3,242 3,3463,446 Total Supply 3,242 3,3463,446Utilization: Crushings 1,696 1,7251,750 Crushings 1,696 1,7251,750 Seed Seed Exports 1, ,090 Residual Exports 1, ,090 Residual Total Utilization 2,986 2,8322,996 Ending Carryover 256 (9%) 515 (19%) 450 (15%) Ending Carryover 256 (9%) 515 (19%) 450 (15%) U.S. Farm Price $ $5.00-$6.00

Former Soviet Union, Production, 2002/03, MMT Country Wheat Corn Soybeans Russia 50,550 1, Ukraine 20,556 4, Kazakhstan 12, Moldova - 1,200 - For Comparison: United States 43, ,046 75,010 (Short crop) (Short crop) Source: USDA, Agricultural Statistics, Source: USDA, Agricultural Statistics, 2005.