1. Grain Market Outlook Agricultural Exposition Goodland, Kansas February 21, 2008 Daniel OBrien & Mike Woolverton K-State Research and Extension dobrien@oznet.ksu.edu mikewool@agecon.ksu.edu

2. Historic vs Current Grain Prices 2000-06 USDA Average 2007/08 Wheat $3. 35 $6. 45 – $6. 85 Corn $2. 24 $3. 75 – $4. 25 Grain Sorghum $2. 20 $3. 65 – $4. 15 Soybeans $5. 66 $10. 00 – $10. 80 Sunflowers$11. 57 /cwt $20. 60 – $21. 90 1 National marketing year average price per unit, 2000-2006.

3. Wheat Markets

4. Current Wheat Market Factors World wheat stocks at a 30 year low Global shortage of quality milling wheat Strong support for U.S. Hard Red Spring Wheat prices Weak U.S. dollar & Lower Ocean Freight Rates Helping U.S. wheat exports Wheat export regulations in Argentina & Russia Attracting speculative interest to U.S. commodity markets U.S. wheat acreage & production concerns in 08 HRS vs soybeans in upper Great Plains; HRW production Need for greater 2008 U.S. / World wheat production in to rebuild stocks.

5. March 2008 HRW Wheat Futures KCBT: April 2006-February 2008 2008 Old Crop March HRW Contract Contract Volume & Open Interest

6. Goodland, Kansas Cash Wheat Prices Mueller Grain, Goodland, Kansas April 13, 2007 – Feb. 20, 2008 Source: DTN Bid Analyzer Basis: $0.62/bu under KC March 2008 Wheat

7. July 2008 HRW Wheat Futures KCBT: April 2006-February 2008 2008 New Crop July HRW Contract Contract Volume & Open Interest

8. Goodland, Kansas New Crop Wheat Prices Frontier Ag Inc., Goodland, Kansas Feb. 22, 2007 – Feb. 20, 2008 Source: DTN Bid Analyzer FC Basis: $0.75 /bu under July 2008 KC Wheat

9. March 2008 Hard Red Spring Wheat KCBT: April 2006-February 2008 2008 Old Crop March HRW Contract Contract Volume & Open Interest

10. U.S. Wheat Supply-Demand

11. U.S. Wheat Planted Acreage 1973-2007 + Projected 2008 Kansas HRW Acres Seeded down by 500K in 2007/08

12. U.S. Wheat Yields 1973-2007 + Trend

13. U.S. Wheat Production 1973-2007 + Projected 2008

14. U.S. Wheat Exports 1973/74 thru 2007/08 Marketing Years

15. World Wheat Supply-Demand 2005/06 thru 2007/08 Marketing Years

16. Production of World Wheat Exporters 2005/06 thru 2007/08 Marketing Years

17. Exports of World Wheat Exporters 2005/06 thru 2007/08 Marketing Years

18. U.S. Wheat Ending Stocks Wheat Ending Stocks as a % of Usage

19. U.S. Wheat Stocks/Use% vs Price

20. Impact of Scarce U.S. & World Wheat Supplies on Prices Wheat Quantity Wheat Price D Wheat S Large Supply S Medium Supply S Short Supply Q LS Q MS Q SS P SS P MS P LS Marketing Loan$

21. Soybean & Oilseed Markets

22. Current Oilseed Market Factors Brazilian soybean area up only 1% Recent South American rains helping soybean crop High soymeal-soyoil prices & exports High soyoil prices damaging U.S. soydiesel industry Weak U.S. dollar & lower ocean freight rates helping soybean exports Attracting speculative interest to U.S. commodity markets Critically low U.S. carryover Only 19 days inventory on hand at end of 2007/08 Need for U.S. acreage & production increase in 2008 to rebuild stocks

23. March 2008 Soybean Futures CBOT: October 2006-February 2008 2008 Old Crop Soybean Contract Contract Volume & Open Interest

24. Goodland, Kansas Cash Soybean $s Frontier Ag Inc., Goodland, Kansas Feb. 21, 2007 – Feb. 20, 2008 Source: DTN Bid Analyzer Basis: $1.54 ½ /bu under CBOT March 2008 Soybeans

25. Cash Sunflower Prices Northern Sun - ADM., Goodland, Kansas Feb. 22, 2007 – Feb. 20, 2008 Source: DTN Bid Analyzer

26. November 2008 Soybean Futures CBOT: January 2006-February 2008 2008 Old Crop Soybean Contract Contract Volume & Open Interest

27. Goodland, Kansas New Crop Soybean Prices Frontier Ag Inc., Goodland, Kansas Feb. 21, 2007 – Feb. 20, 2008 Source: DTN Bid Analyzer FC Basis: $1.25 under CBOT NOV 2008 Soybeans

28. New Crop Sunflower Prices Northern Sun - ADM., Goodland, Kansas June 7, 2007 – Feb. 20, 2008 Source: DTN Bid Analyzer

29. U.S. Soybean Supply-Demand

30. U.S. Soybean Planted Acreage 1973-2007 + Projected 2008

31. U.S. Soybean Yields 1973-2007 + Trend

32. U.S. Soybean Production 1973-2007 + Projected 2008

33. U.S. Soybean Exports 1973/74 thru 2007/08 Marketing Years

34. World Soybean Supply-Demand 2005/06 thru 2007/08 Marketing Years

35. Production of World Soybean Exporters 2005/06 thru 2007/08 Marketing Years

36. Exports of World Soybean Exporters 2005/06 thru 2007/08 Marketing Years

37. U.S. Soybean Ending Stocks Soybean Ending Stocks as a % of Usage

38. U.S. Soybean Stocks/Use% vs Price

39. Impact of Scarce U.S. & World Soybean Supplies on Prices Soybean Quantity Soybean Price D Soybeans S Large Supply S Medium Supply S Short Supply Q LS Q MS Q SS P SS P MS P LS Marketing Loan$

40. Feedgrain Markets: Corn & Grain Sorghum

41. Current Feedgrain Market Factors U.S. Feedgrain stocks are adequate Feedgrain supplies not as tight as for wheat & soybeans Large 2008 crop (12.5–13.0 billion bu) needed to meet demand U.S. Ethanol demand continues strong Strong demand from overseas export buyers Reduced production in Argentina (dry Dec-Jan) & Mexico (lower area than expected), increases in South Africa (good rains) South hemisphere corn export competition to increase seasonally. Expected competition for U.S. crop acres vs other crops in Spring 2008 (bidding occurring Feb-April)

42. March 2008 Corn Futures CBOT: February 2006-February 2008 2008 Old Crop Corn Contract Contract Volume & Open Interest

43. Goodland, Kansas Corn Cash Prices Mueller Grain, Goodland, Kansas April 13, 2007 – Feb. 20, 2008 Source: DTN Bid Analyzer Basis: $0.32 1/2 /bu under CBOT March 2008 Corn

44. Goodland, Kansas Cash Grain Sorghum Price Frontier Ag Inc., Goodland, Kansas Feb. 23, 2007 – Feb. 20, 2008 Source: DTN Bid Analyzer Basis: $0.57/bu under CBOT March 2008 Corn

45. December 2008 Corn Futures CBOT: Jan 2006-February 2008 2008 New Crop Corn Contract Contract Volume & Open Interest

46. Goodland, Kansas New Crop Corn Prices Mueller Grain, Goodland, Kansas April 19, 2007 – Feb. 20, 2008 Source: DTN Bid Analyzer FC Basis: $0.30 /bu under CBOT December 2008 Corn

47. Goodland, Kansas New Crop Grain Sorghum Prices Frontier Ag Inc., Goodland, Kansas Feb. 22, 2007 – Feb. 20, 2008 Source: DTN Bid Analyzer FC Basis: $0.53/bu under CBOT December 2008 Corn

48. U.S. Corn Supply-Demand

49. Dynamics of U.S. Corn Usage USDA USDA USDA USDA 2006/07 2007/08 est. (Mln. Bu.) 2006/07 2007/08 est. (Mln. Bu.) Feed and Residual 5,598 5,950 1 (+6%) Food, Seed, and Industrial 1,371 1,355 2 ( ־ 1%) Ethanol for Fuel 2,117 3,200 (+51%) Net Exports 2,125 2,450 (+15%) Ending Stocks 1,304 1,438 (+10%) Total Usage 11,21012,995 (+16%) Production 10,53513,074 (+24%) 1 Assumes DDGS retain 30% of the feed value of corn and are included in the feed and residual category by the USDA. 2 Industrial, food, and seed less ethanol.

50. U.S. Grain Sorghum Supply-Demand

51. U.S. Corn Planted Acreage 1973-2007 + Projected 2008

52. U.S. Corn Yields 1973-2007 + Trend

53. U.S. Corn Production 1973-2007 + Projected 2008

54. U.S. Corn Food, Seed & Industrial Use 1973/74 thru 2007/08 Marketing Years

55. U.S. Ethanol Industry at a Glance 2006 2008 Number of operating ethanol plants: 97 139 Under construction or expanding: 35 69 Announced plants: 300 (17%) 100 (?) Current production capacity: (BGPY) 4.8 7.9 Projected production capacity: 11.7 BGPY end of 2008 13.5 BGPY end of 2009 Feedstock Use Proportion: Corn 97% Sorghum 2% Other 1%

56. Ethanol vs RBOB Prices March 2007 – February 2008 (Source: DTN)

57. Corn Demand Increase Due to Ethanol Development Corn Quantity Corn Price D Corn D Corn w. Ethanol

58. U.S. Corn Exports 1973/74 thru 2007/08 Marketing Years

59. Total U.S. Corn Use 1973/74 thru 2007/08 Marketing Years

60. World Corn Supply & Demand Global production up 9% from 2006/07. Use up 7% Production will be 5. 37 MMT (212 mil. Bu.) less than Usage World Ending Stocks to decrease 5. 37 MMT from last year, down to 13 % of Usage. Million MT

61. World Coarse Grain Supply-Demand 2005/06 thru 2007/08 Marketing Years

62. Production of World Coarse Grain Exporters 2005/06 thru 2007/08 Marketing Years

63. Exports of World Coarse Grain Exporters 2005/06 thru 2007/08 Marketing Years

64. U.S. Corn Ending Stocks Corn Ending Stocks as a % of Usage

65. U.S. Corn Stocks/Use% vs Price

66. Short Run Ethanol Effect on Prices Corn Quantity Corn Price D Corn D Corn w. Ethanol Short Run Supply (2007-08 Corn Crop & Stocks) Q 2007-08 P SR P0P0

67. Long Run Effect of Ethanol on Corn-Feedgrain Prices Corn Quantity Corn Price D Corn D Corn w. Ethanol S Sht Run Q 07 P SR Long Run Supply (2008-2012 Corn Supplies) P LR Q 2008-2012

68. Long Run Grain Market Perspectives

69. Land in Crops (Millions of acres) 5 yr. Ave. 07/08USDA Proj. 08/09 5 yr. Ave. 07/08USDA Proj. 08/09 Corn 79.6 93.6 88.0 (-6%) Soybeans 74.2 63.6 70.0 (+10%) Hay 62.4 61.8 61.8 (--) Wheat 59.5 60.4 62.2 (+3%) Cotton 14.1 10.8 10.0 (-7%) Grain Sorghum 8.1 7.7 7.4 (-4%) Principle Crops 297.9 297.9 299.4 CRP 35.9 34.9 (-3%) Total crop land in the United States – 441.6 million acres

70. Crop Acres Coming Out of CRP 2007–2017 (Source: USDA, FSA)

71. Long Run Grain Prices 2000-06 USDA Long Run Average 2007/08 Projection Wheat $3. 35 $6. 45 – $6. 85 $5. 00 Corn $2. 24 $3. 70 – $4. 30 $3. 50 Grain Sorghum $2. 20 $3. 60 – $4. 20 $3. 40 Soybeans $5. 66 $9. 90 – $10. 90 $7. 50 Sunflowers$11. 57 $19. 60 – $21. 20 $15. 50 1 National marketing year average price per unit, 2000-2006.

72. Questions??? K-State Extension Agricultural Economics: www.AgManager.info