Issuu

Global Grains 2012 – Can World Farmers Keep Up? AgResource Company Daniel Basse, President 200 W Jackson Blvd Chicago, IL 60606

World Grain Market Price Performance Since January ‘11 Corn

Soybeans

Wheat

100%

80% 60% 40% 20% 0% -20% -40% Nov 11

Sep 11

Jul 11

May 11

Mar 11

Jan 11

Nov 10

Sep 10

Jul 10

May 10

Mar 10

Jan 10

Nov 09

Sep 09

Jul 09

May 09

Mar 09

Jan 09

The Fundamental Drivers of the World Grain Bull?

Rising SE Asian Caloric Intake and US Ethanol Demand –the Chart That Started the Ag Bull Market (MMTs) in 2006 US Corn FSI Use

Chinese Soy Imports

180

160

140 50

120 100

40 10

20 0

0 2012

2011

2010

2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

1994

1993

1992

Change in World Grain Use Since 2000 – 135 MMTs of Grain for Biofuels in ‘12 MMT 450

Food

Biofuels

400 350 300 250 200

150 100 50 0 2012

2011

2010

2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

Chinese World Soybean Imports – Record 55-56.5 MMTs in 2011/12? MMTs 60 50 40

Delta in World Meat Demand BRIC

EU & US

140%

120% 100% 80% 60% 40% 20%

Spot CBOT Corn Prices – New Range of $3.50-6.50! $/Bu $7 $6

$5 $4 $3 $2 $1 $0 2011 2006 2001 1996 1991 1986 1981 1976 1971 1966 1961 1956 1951 1946 1941 1936 1931 1926 1921 1916 1911 1906 1901 1896 1891 1886 1881 1876 1871 1866 Copyright © 2011 AgResource Company. All Rights Reserved.

Changing Structure of World Grain Pricing since 2008 Dalian Corn

US Gulf Corn

US SRW Gulf

Black Sea Wheat

$550 $500 $450 $400

Widening World FOB Spreads

$350

$300 $250 $200 $150 $100 Jan 12 Nov 11 Sep 11 Jul 11 May 11 Mar 11 Jan 11 Nov 10 Sep 10 Jul 10 May 10 Mar 10 Jan 10 Nov 09 Sep 09 Jul 09 May 09 Mar 09 Jan 09 Nov 08 Sep 08 Jul 08 May 08 Mar 08 Jan 08 Copyright ÂŠ 2011 AgResource Company. All Rights Reserved.

2012 – The Structural Ag Bull Market at a Crossroads?

A Crisis in Market Confidence!

Reducing Risk Exposure! Index Fund Net Positions Corn, Wheat, Soybeans, Hogs, Live and Feeder Cattle

Managed Money Positions Corn, Wheat, Soybeans, Hogs, Live and Feeder Cattle

1,200,000

900,000

800,000 1,100,000 700,000 1,000,000 600,000

500,000

900,000

400,000 800,000 300,000 700,000 200,000

100,000

600,000

Dec 11

Sep 11

Jun 11

Mar 11

Dec 10

Sep 10

Jun 10

Mar 10

Dec 09

(100,000)

Sep 09

Jun 09

Mar 09

Dec 08

Sep 08

Jun 08

Mar 08

Dec 07

Sep 07

Jun 07

Mar 07

Dec 06

Jan 12

Oct 11

Jul 11

Apr 11

Jan 11

Oct 10

Jul 10

Apr 10

Jan 10

Oct 09

Jul 09

Apr 09

Jan 09

Oct 08

Jul 08

Apr 08

Jan 08

Oct 07

Jul 07

Apr 07

Jan 07

Oct 06

Jul 06

Apr 06

Jan 06

Sep 06

Jun 06

500,000

CME Corn/Wheat Open Interest – Investors not Fully Back Yet! 3,000,000

Corn

Wheat

2,500,000 2,000,000

1,500,000 1,000,000 500,000 0 Jan 12

Sep 11

May 11

Jan 11

Sep 10

May 10

Jan 10

Sep 09

May 09

Jan 09

Sep 08

May 08

Jan 08

Sep 07

May 07

Jan 07

Sep 06

May 06

Jan 06

Ag ETF Share Prices DBA

CORN

JJG

$80.00 $70.00 $60.00

$50.00 $40.00 $30.00 $20.00 $10.00 $0.00 Jan 12

Oct 11

Jul 11

Apr 11

Jan 11

Oct 10

Jul 10

Apr 10

Jan 10

Oct 09

Jul 09

Apr 09

Jan 09

Oct 08

Jul 08

Apr 08

Jan 08

Oct 07

Jul 07

Apr 07

Jan 07

DBA Trading Volume 35,000,000 30,000,000 25,000,000 20,000,000 15,000,000 10,000,000 5,000,000 0 Jan 12

Oct 11

Jul 11

Apr 11

Jan 11

Oct 10

Jul 10

Apr 10

Jan 10

Oct 09

Jul 09

Apr 09

Jan 09

Oct 08

Jul 08

Apr 08

Jan 08

Oct 07

Jul 07

Apr 07

Jan 07

Ag Stock Valuations – Under Performed ADM

Monsanto

John Deere

Bunge

Potash

$140.00 $120.00 $100.00 $80.00 $60.00 $40.00 $20.00

$0.00 2012

2011

2010

2009

2008

2007

2006

2005

2004

2003

2002

2001

CME Corn Volatility Since 2010 – Weekly Price Change $/Bu $1.00 $0.80 $0.60 $0.40 $0.20 $0.00 -$0.20 -$0.40 -$0.60 -$0.80 -$1.00 Jan-12 Dec-11 Nov-11 Oct-11 Sep-11 Aug-11 Jul-11 Jun-11 May-11 Apr-11 Mar-11 Feb-11 Jan-11 Dec-10 Nov-10 Oct-10 Sep-10 Aug-10 Jul-10 Jun-10 May-10 Apr-10 Mar-10 Feb-10 Jan-10 Copyright © 2011 AgResource Company. All Rights Reserved.

Corn Volatility Since 2010 – Weekly Price Change $/Bu $1.00

Aussie Floods

China Tightening

$0.80

Greek Debt EU Crisis

$0.60 $0.40 $0.20 $0.00 -$0.20 -$0.40 -$0.60 -$0.80

-$1.00

Japan Quake

China Corn Buy USDA June Stocks

Jan-12 Dec-11 Nov-11 Oct-11 Sep-11 Aug-11 Jul-11 Jun-11 May-11 Apr-11 Mar-11 Feb-11 Jan-11 Dec-10 Nov-10 Oct-10 Sep-10 Aug-10 Jul-10 Jun-10 May-10 Apr-10 Mar-10 Feb-10 Jan-10 Copyright © 2011 AgResource Company. All Rights Reserved.

CME Corn on February 1st since 1990 – “Record High Price!” $/Bu 7.00 6.00 5.00 4.00 3.00 2.00 1.00

0.00 2011

2010

2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

1994

1993

1992

1991

1990

2011 - Was not how much $$ you made, but how much you kept!

What Economics & Grains Imply

“Macros” Weakly Correlated with Corn & Wheat Futures CORN

WHEAT

Corn Vs. "Macros": R2

Wheat Vs. "Macros": R2

Months US$ Index S&P 500

WTI Crude

Months US$ Index

S&P 500

WTI Crude

0.76

0.77

0.72

0.36

0.34

0.35

0.40

0.02

0.24

0.27

0.00

0.12

0.55

0.01

0.14

0.59

0.00

0.05

0.38

0.08

0.24

0.25

0.09

0.24

0.65

0.19

0.42

0.00

0.23

0.09

0.43

0.05

0.49

0.45

0.17

0.49

“Macros” Weakly Correlated with Soybeans Futures - But Soyoil Linked to Crude Oil SOYBEANS

SOYOIL

Soybeans Vs. "Macros": R2

Months US$ Index

S&P 500

WTI Crude

Soyoil Vs. "Macros": R2

Months US$ Index

S&P 500 WTI Crude

0.42

0.36

0.23

0.51

0.46

0.35

0.26

0.00

0.10

0.28

0.00

0.14

0.45

0.00

0.08

0.37

0.01

0.14

0.48

0.12

0.23

0.43

0.25

0.39

0.14

0.26

0.18

0.19

0.41

0.35

0.58

0.00

0.60

0.65

0.08

0.77

Global Grain 2012 Outlook

World Grain Area and Production in 2011/12 Area (Mil HA)

2009

2010

2011

Change

Total

440.597

436.628

440.638

+4.010

438.915

Wheat

227.166

222.627

222.309

-.318

223.112

Corn

157.763

163.221

168.036

+4.815

161.797

Barley

55.668

50.780

50.293

-.487

54.007

Production (MMTs)

2009

2010

2011

Change

5 Yr Avg

Total

1,654.357

1,601.470

1,675.440

+90.745

1,621.723

Wheat

684.306

651.678

691.503

+ 39.820

662.238

Corn

819.607

828.687

868.060

+ 40.710

820.298

Barley

150.444

124.085

133.152

+10.215

139.188

5 Yr Avg

US/China Corn Production MMTs 600 500

China

Stagnation

400 300

200 100

1960 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010

ROW World Corn Production - 30 MMTs of gain LY- a record 42% of Total MMTs 400 350 300 250 200 150 100

1960 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010

Thousands

World Corn, Soybean & Wheat Consumption Delta vs. World GDP Growth Rate Grain Consumption Delta World GDP Growth Rates

MMT 100

6.0% 5.0%

4.0%

3.0%

2.0% 20

1.0%

0.0%

-20

-1.0%

-40

-2.0% 2011

2009

2007

2005

2003

2001

1999

1997

1995

1993

1991

1989

1987

1985

1983

1981

Thousands

World Beef, Pork and Poultry Consumption Delta vs. World GDP Growth Rate Meat Consumption Delta World GDP Growth Rates

MMT 10

6.0% 5.0%

4.0% 6

3.0%

2.0% 1.0%

0.0% 0

-1.0%

-2

-2.0% 2012

2010

2008

2006

2004

2002

2000

1998

1996

1994

1992

1990

1988

1986

1984

1982

1980

World Major Grain Production – Up 35 MMT’s in 2012/13 MMT

Corn

Wheat

1,800 1,600 1,400 1,200 1,000

800 600 400 200 0 ARC 12 2010 2008 2006 2004 2002 2000 1998 1996 1994 1992 1990 1988 1986 1984 1982 1980 1978 1976 1974 1972 1970 1968 1966 1964 Copyright © 2011 AgResource Company. All Rights Reserved.

World Major Crop Demand: Up to Record 1,576 MMTs in 12/13 Corn

Wheat

ARC 12 2010 2008 2006 2004 2002 2000 1998 1996 1994 1992 1990 1988 1986 1984 1982 1980 1978 1976 1974 1972 1970 1968 1966

MMT 1,800 1,600 1,400 1,200 1,000 800 600 400 200 0

Thousands

2012/13 World Grain Stocks to Rise 3 MMTs to 388 MMTs Corn

Wheat

ARC 12 2010 2008 2006 2004 2002 2000 1998 1996 1994 1992 1990 1988 1986 1984 1982 1980 1978 1976 1974 1972 1970 1968 1966

MMT 450 400 350 300 250 200 150 100 50 0

World Major Crop Trend Yields 3.73 MT/HA Weighted Area Basis MT/HA 5.50 Corn

5.00

Wheat

Soybeans

4.50 4.00 3.50 3.00 2.50 2.00 1.50 1.00 ARC 12

2010

2008

2006

2004

2002

2000

1998

1996

1994

1992

1990

1988

1986

1984

1982

1980

1978

1976

1974

1972

1970

1968

1966

Delta in Global Average Yield – A Trend Increase in 2012 (6.5% chance) MT/HA 0.4 0.3 0.2 0.1 0 -0.1 -0.2

2012 Global Area Harvested; 502.1 Mil HA– up 7.8 Mil HA (19.3 Mil acres) Mil HA

Soybeans

Corn

Wheat

500 450 400 350 300 250 200 150 ARC 12 2010 2008 2006 2004 2002 2000 1998 1996 1994 1992 1990 1988 1986 1984 1982 1980 1978 1976 1974 1972 1970 1968 1966 Copyright © 2011 AgResource Company. All Rights Reserved.

Delta in Global Harvested Area – Difficulty Expanding amid High Price! Mil HA 25 20 15 10 5 0 -5 -10 -15 -20 2011 2009 2007 2005 2003 2001 1999 1997 1995 1993 1991 1989 1987 1985 1983 1981 1979 1977 1975 1973 1971 1969 1967 1965 Copyright © 2011 AgResource Company. All Rights Reserved.

World Population – 7 Billion! Mil Persons 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0

Global Per Capita Harvested Ag Hectares – New Record Low .09 0.16 0.15

0.14 0.13 0.12

0.11 0.10 0.09 0.08

Global Coarse Grain, Wheat, and Oilseed Yield Rise! MTs/HA 4.00 3.50

3.00 2.50 2.00 1.50 1.00 2012 2010 2008 2006 2004 2002 2000 1998 1996 1994 1992 1990 1988 1986 1984 1982 1980 1978 1976 1974 1972 1970 1968 1966 1964 Copyright ÂŠ 2011 AgResource Company. All Rights Reserved.

Global Per capita corn, wheat and soy demand – Slowing? Kg/Capita 310 290

Bio Fuel/SE Asian Demand

270 250 230 210 190 2012 2010 2008 2006 2004 2002 2000 1998 1996 1994 1992 1990 1988 1986 1984 1982 1980 1978 1976 1974 1972 1970 1968 1966 1964 Copyright © 2011 AgResource Company. All Rights Reserved.

2012 Global Per Capita Grain/Soy Stocks: Above Critical 50 KG/Capita Kg/Capita 110.00

100.00 90.00 80.00 70.00 60.00 50.00

40.00 30.00 20.00 2012 2010 2008 2006 2004 2002 2000 1998 1996 1994 1992 1990 1988 1986 1984 1982 1980 1978 1976 1974 1972 1970 1968 1966 1964 Copyright ÂŠ 2011 AgResource Company. All Rights Reserved.

Delta in World Wheat Demand (MMTs) FSU-12

EU N America +.8

+2.4

+2.2 +2.3

+4.5 -2.7

+12.7 +7.7

-4.1

+6.8

-2.0 -3.0

C&S America +1.3

Asia

+.4

World 2009 +12.4 MMT

-0.8

Delta in World Corn Demand (MMTs) +20.0

N America +1.5

+2.8

+.2

FSU-12

+3.5

+.5 -2.1

+14.9

-1.8 -.2 +11.0

+2.5

+3.3

+3.7

Asia

World 2009 +34.0 MMT 2010 +26.8 MMT

C&S America

+13.1

Delta in World Soybean Demand (MMTs) EU

N America +2.6

+.4

FSU-12

+.05 +.7

+.2

+.5

-2.2 -.7 -.7

+8.9

+9.2 +6.7

+5.2 +5.4 +3.7

Asia

World 2009 +16.8 MMT 2010 +12.9 MMT

C&S America

World Grain Trade in 2011/12

World Corn and Wheat Trade – A 15.2 MMT’s increase in 2011/12! 1,000 MT

Corn

Wheat

160,000 140,000 120,000 100,000 80,000 60,000 40,000 20,000

2011

2009

2007

2005

2003

2001

1999

1997

1995

1993

1991

1989

1987

1985

1983

1981

US/EU and Corn/Wheat Annual Exports – 9 Year Low!! MMTs

Wheat

Corn

140 120 100 80 60 40 20 0 2011

2009

2007

2005

2003

2001

1999

1997

1995

1993

1991

1989

1987

1985

1983

1981

1979

1977

1975

1973

1971

1969

1967

1965

US Share of World Trade – Corn, Wheat, Soy – Record low 32% 70% 65% 60% 55% 50% 45% 40%

35% 30%

The Biggest Statistical Change in 2011– The Return of the Black Sea

FSU-12 Corn/Wheat/Barley Annual Exports 36 MMTs Larger in 11/12 – An All time Record High Change from prior crop year! MMTs

Wheat

Corn

Barley

60 50 40 30 20

10 0 2011

2009

2007

2005

2003

2001

1999

1997

1995

1993

1991

1989

1987

1985

1983

1981

1979

1977

1975

1973

1971

1969

1967

1965

FSU Grain Production Exports MMT 80

Production

Exports

60 40 20 0 -20 -40 -60 2010

2008

2006

2004

2002

2000

1998

1996

1994

1992

1990

1988

1986

1984

1982

1980

A Russian Remake in 25 years!

World Wheat Trade by Origin – FSU 12 Back on Top? MMTs 45 40 35 Argentina Australia Canada EU-27 US FSU-12

Is Russia a Reliable Grain Supplier?

World Corn Trade MMTs 70

South America + FSU

US + EU

60 50 40 30 20

10 0 2010

2008

2006

2004

2002

2000

1998

1996

1994

1992

1990

1988

1986

1984

1982

1980

1978

1976

1974

1972

1970

The Drivers of 2012 World Grain

Adverse Midwest Weather and the 2011 US Corn Yield

Illinois July Temperatures 80.4 degrees- warmest since 1955 82 ºF 80 78 76 74 72 70 68 66 64 2010

2008

2006

2004

2002

2000

1998

1996

1994

1992

1990

1988

1986

1984

1982

1980

Corn Yield – 147 BPA – It should have been worse!

US Corn Yields below trend for 2nd Year in a Row! Can it happen 3X? BPA

Yield

Biotech %

180

100%

90% 160

80% 70%

140

60% 120

50% 40%

100

30%

20%

10% 60

US Corn Yield Deviation from 20-Year Trend – Note the 30’s/50’s MT/HA 1.50 1.00 0.50 0.00 -0.50 -1.00 -1.50 -2.00 -2.50 2010 2007 2004 2001 1998 1995 1992 1989 1986 1983 1980 1977 1974 1971 1968 1965 1962 1959 1956 1953 1950 1947 1944 1941 1938 1935 1932 1929 1926 1923 1920 Copyright © 2011 AgResource Company. All Rights Reserved.

The Importance of 2012 Global Weather- Just like the Old Days!

2012 Weak LA Nina/ +NAO

Weather Extremes with a Drier Central US Bias

La Nina to Persist into April

Global Drought Worry – A large number of “hot spots”!

China’s Fight against Inflation

Chinese Core and Food Inflation Index 50

Core Food 40

-10

May-11 Jul-10 Sep-09 Nov-08 Jan-08 Mar-07 May-06 Jul-05 Sep-04 Nov-03 Jan-03 Mar-02 May-01 Jul-00 Sep-99 Nov-98 Jan-98 Mar-97 May-96 Jul-95 Sep-94 Nov-93 Jan-93 Copyright ÂŠ 2011 AgResource Company. All Rights Reserved.

Yearly Change in China Ag Consumption (MMTs, Mil Bales) Population Wheat Corn Rice Rape Meal Soy Meal Cotton Soy Oil Palm Oil Poultry Pork Dairy

2010/11 1.348 Billion 109.5 176.0 135.0 10.3 43.4 46.0 11.1 5.8 12.5 51.2 31.8

2011/12 1.355 Billion 113.0 189.0 139.0 9.7 47.6 45.5 12.2 6.2 13.0 49.8 33.4

% Change .5% 3% 7% 3% -6% 10% -1% 9% 7% 5% -3% 5%

US/Chinese Corn Prices China

$/Bu $10.00

$9.00 $8.00 $7.00 $6.00 $5.00 $4.00 $3.00 $2.00 $1.00

$0.00 2012

2011

2010

2009

2008

2007

Chinese Corn Feed Demand – 150160 MMTs? Who Knows? MMTs 160 140 120 100 80 60 40 20 0 2012

2010

2008

2006

2004

2002

2000

1998

1996

1994

1992

1990

1988

1986

1984

1982

1980

Chinese Corn Imports/Exports – Imports of 5-6 MMTs in 2011/12 1,000 MT

Imports

Exports

18,000 16,000 14,000 12,000 10,000

8,000 6,000 4,000 2,000 0 2012 2010 2008 2006 2004 2002 2000 1998 1996 1994 1992 1990 1988 1986 1984 1982 1980 1978 1976 1974 1972 1970 1968 1966 1964 1962 1960 Copyright © 2011 AgResource Company. All Rights Reserved.

Chinese Money Supply (M1) Bil Yuan

35,000

30,000

25,000

20,000

15,000

10,000

5,000

Feb-11 Mar-10 Apr-09 May-08 Jun-07 Jul-06 Aug-05 Sep-04 Oct-03 Nov-02 Dec-01 Jan-01 Feb-00 Mar-99 Apr-98 May-97 Jun-96 Jul-95 Aug-94 Sep-93 Oct-92 Nov-91 Dec-90 Jan-90 Copyright ÂŠ 2011 AgResource Company. All Rights Reserved.

Chinese Real Estate Climate Index 115

110

105

100

May-11 Sep-10 Jan-10 May-09 Sep-08 Jan-08 May-07 Sep-06 Jan-06 May-05 Sep-04 Jan-04 May-03 Sep-02 Jan-02 May-01 Sep-00 Jan-00 May-99 Sep-98 Jan-98 May-97 Sep-96 Jan-96 Copyright ÂŠ 2011 AgResource Company. All Rights Reserved.

A Managed Economy or House of Cards? Our bet is a 7-8% GDP rate

World Energy and Crops

Global Petroleum Consumption – Record 90.3 Mil Barrels/Day 1,000 BBL/Day 95,000 90,000 85,000 80,000 75,000

70,000 65,000 60,000 55,000

2011

2010

2008

2006

2004

2002

2000

1998

1996

1994

1992

1990

1988

1986

1984

1982

1980

Chinese Crude Oil Supply/Demand Chinese Domestic Production

Chinese Domestic Consumption

1,000 BBL/Day 1,200 1,000 800 600 400 200 0 2010 2008 2006 2004 2002 2000 1998 1996 1994 1992 1990 1988 1986 1984 1982 1980 1978 1976 1974 1972 1970 1968 1966 1964 1962 1960 Copyright ÂŠ 2011 AgResource Company. All Rights Reserved.

US Petroleum Demand 1,000 BBL/Day 22,000 21,000 20,000 19,000

18,000 17,000 16,000 15,000

2012

2010

2008

2006

2004

2002

2000

1998

1996

1994

1992

1990

1988

1986

1984

1982

1980

US Corn Used for the Production of Ethanol Mil Bu 6,000 5,000 4,000 3,000 2,000 1,000

2011

2009

2007

2005

2003

2001

1999

1997

1995

1993

1991

1989

1987

1985

Delta in US Corn Ethanol Production –The need for Acres! Mil Bu 1600 1400 1200 1000 800 600 400 200 0 -200

US Gasoline Demand/Ethanol Daily Use: 10.2% Ethanol 1,000 BBL/Day (Ethanol) 1,000 900 800 700 600 500 400 300 200 100 0

1,000 BBL/Day (Gas) 10,000 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0

2011

2009

2007

2005

2003

2001

1999

1997

1995

1993

1991

1989

1987

1985

1983

US Corn Ethanol Profitability – Start from 2007 $3.00 $2.50 $2.00 $1.50 $1.00 $0.50 $0.00 -$0.50 -$1.00 Jan 12

Oct 11

Jul 11

Apr 11

Jan 11

Oct 10

Jul 10

Apr 10

Jan 10

Oct 09

Jul 09

Apr 09

Jan 09

Oct 08

Jul 08

Apr 08

Jan 08

Oct 07

Jul 07

Apr 07

Jan 07

Total US Ethanol Exports (Denatured & Undenatured, Non Beverage) Mil Gal 180

160 140 120 100 80 60 40 20 0 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995 1994 1993 1992 1991 1990 1989 Copyright ÂŠ 2011 AgResource Company. All Rights Reserved.

Brazil FOB Sugar Price $/MT 900

800

700

600

500

400

300

200

100

Dec 11 Sep 11

Jun 11 Mar 11 Dec 10 Sep 10 Jun 10 Mar 10 Dec 09

Sep 09 Jun 09 Mar 09 Dec 08 Sep 08 Jun 08 Mar 08

Dec 07 Sep 07 Jun 07

Mar 07 Dec 06 Sep 06

March Corn Futures Vs. January WASDE Stocks/Use $7.00 $6.50

Pre-Ethanol

'11

$6.00 $5.50

Post-Ethanol

'10

$5.00 $4.50

'08 '74 '09 '80 '07 '83 '95

$4.00 $3.50 $3.00 $2.50 $2.00

'87

'86

$1.50 $1.00 0%

10%

20%

30% 40% 50% 60% Oct WASDE Stocks/Use

70%

80%

90%

Adding to Market Volatility - USDA

Mar-Nov US Corn Feed/Residual Use – Lowest since 1986! Mil Bu

Sep-Nov

Jun-Aug

Mar-May

5,000 4,500

4,000 3,500 3,000 2,500 2,000

1,500 1,000 500 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986 1985 1984 1983 Copyright © 2011 AgResource Company. All Rights Reserved.

We Analysts are Partly to Blame

This Has Happened Before!

Totals in all Quarters are in Retreat

US 2011/12 Corn Feed/Resid of 4,400-4,500 Mil Bu?

Dec 1st US Farm Stocks as % of Production – Record Low!! 90% 85% 80% 75% 70% 65% 60% 55% 50% 45%

Midwest Cash Corn Basis Cents/Bu

2009/10

2010/11

2011/12

60 50 40 30 20 10 0 -10

-20 -30 -40 -50

Aug

Jul

Jun

May

Mar

Feb

Jan

Dec

Nov

Oct

Sep

Accuracy of USDA Reports: Initial vs. Final Since 1996 Correlation Coefficient 0.30 0.20 0.10

0.00 -0.10 -0.20 -0.30

-0.40 -0.50 -0.60 FSU-12 China Soy Brz + Arg US Wheat US Corn US Soy Wheat Imports Soy Crop Crop (Jun) Crop (Jun) Crop (Jun) Crop (May) (Jul) (Jan) Copyright ÂŠ 2011 AgResource Company. All Rights Reserved.

Confidence in USDA Amid Budget CutsCensus Crush/Soy Product Stocks?

World Wheat 2012

World Wheat Production/Demand Production

Demand

2004

2007

MMT 750 700

650 600 550 500 2012

2011

2010

2009

2008

2006

2005

2003

2002

2001

2000

World Wheat Ending Stocks 11/12 Second Highest on Record MMT 230 210 190 170 150 130 110 90 2012

2010

2008

2006

2004

2002

2000

1998

1996

1994

1992

1990

1988

1986

1984

1982

1980

World Wheat Stocks Less China/India – Still Too High! MMTs 160

140 120 100 80 60 40 20

0 2012

2010

2008

2006

2004

2002

2000

1998

1996

1994

1992

1990

1988

1986

1984

1982

1980

World Wheat Feed Demand – Largest since 1990 based on China MMTs 140 130 120 110 100 90 80 2010

2008

2006

2004

2002

2000

1998

1996

1994

1992

1990

1988

1986

1984

1982

1980

Chinese Wheat Feed Use 1,000 MTs 20,000 18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0

ARC 12

2010

2008

2006

2004

2002

2000

1998

1996

1994

1992

1990

1988

1986

1984

1982

1980

Chinese Wheat/Corn PriceShandong

Corn Wheat $/MT

400

350

300

250

200

150

100

Feb-12 Nov-11 Aug-11 May-11 Feb-11 Nov-10 Aug-10 May-10 Feb-10 Nov-09 Aug-09 May-09 Feb-09 Nov-08 Aug-08 May-08 Feb-08 Nov-07 Aug-07 May-07 Feb-07 Nov-06

US Gulf Wheat/Corn Spread $/MT

250

200

150

100

-50

-100

Nov-11 Aug-11 May-11 Feb-11 Nov-10 Aug-10 May-10 Feb-10 Nov-09 Aug-09 May-09 Feb-09 Nov-08 Aug-08 May-08 Feb-08 Nov-07 Aug-07 May-07 Feb-07 Nov-06 Aug-06 May-06 Feb-06 Nov-05 Aug-05 Copyright ÂŠ 2011 AgResource Company. All Rights Reserved.

World Wheat Production by Traditional Exporters - Stable MMT 300

Argentina

Australia

Canada

250 200 150 100 50

2012 2010 2008 2006 2004 2002 2000 1998 1996 1994 1992 1990 1988 1986 1984 1982 1980 1978 1976 1974 1972 1970 1968 1966 1964 1962 1960

World Wheat Exports by Traditional Exporters MMT 120

Argentina

Australia

Canada

Black Sea Drought

100 80 60

40 20

2012 2010 2008 2006 2004 2002 2000 1998 1996 1994 1992 1990 1988 1986 1984 1982 1980 1978 1976 1974 1972 1970 1968 1966 1964 1962 1960

World Wheat Stocks by Traditional Exporters MMT

Argentina

Australia

Canada

100 90 80 70

60 50 40 30 20 10 2012 2010 2008 2006 2004 2002 2000 1998 1996 1994 1992 1990 1988 1986 1984 1982 1980 1978 1976 1974 1972 1970 1968 1966 1964 1962 1960

2012 US Wheat Production – 58.7 MMTs or 2,156 Mil Bu. MMTs 80 70 60 50 40 30 20 10 0 2012 2010 2008 2006 2004 2002 2000 1998 1996 1994 1992 1990 1988 1986 1984 1982 1980 1978 1976 1974 1972 1970 1968 1966 1964 1962 1960 Copyright © 2011 AgResource Company. All Rights Reserved.

US Wheat Exports – A Modest Recovery to 28 MMTs/1,025 Mil Bu MMTs 53 48 43 38 33 28 23

18 13 8 2011

2009

2007

2005

2003

2001

1999

1997

1995

1993

1991

1989

1987

1985

1983

1981

1979

1977

1975

1973

1971

US Wheat End Stocks - 24.3 MMTs or 894 Mil Bu in 2012/13 MMTs 60 50

40 30 20 10 0 2012

2010

2008

2006

2004

2002

2000

1998

1996

1994

1992

1990

1988

1986

1984

1982

1980

1978

1976

1974

1972

1970

Russian Wheat Production and Yield – 55 MMTs 2012 forecast MMTs

MT/HA Production

Yield

2.5

40 1.5 30 1

0.5

10 0

Russia Wheat Exports MMT 25

2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987 0

World Stock/Use Price Indicator $6.42 Average price CME $/Bu

1990-2006

2007-2011

14 12 10 2011 8 6 4 2 0 0.120

0.170

0.220 0.270 Stocks/Use

0.320

0.370

World FOB Wheat Prices $/MT $400 France Black Sea

$350

Australian Argentina

$300

US SRW $250

$200

$150 Jan 12

Nov 11

Sep 11

Jul 11

May 11

Mar 11

Jan 11

Nov 10

Sep 10

Jul 10

May 10

Mar 10

Jan 10

Nov 09

Sep 09

Jul 09

May 09

Mar 09

Jan 09

KC vs. Chicago Spread – Depends on 2012 Plains/Black Sea Weather Cents/Bu

140 120 100 80 60 40 20

0 -20 -40 -60 2012

2010

2008

2006

2004

2002

2000

1998

1996

1994

1992

1990

Monthly CBOT Wheat Price – Support at $5.50-5.80 – Rallies hard fought above $7.20 $12 $11 $10 $9 $8

$7 $6 $5 $4 $3 2010

2008

2006

2004

2002

2000

1998

1996

1994

1992

1990

Wheat Summary • The Black Sea has returned as a aggressive wheat exporter following a record 54 MMTs increase in 2011 production (from the 2010 drought). Snarled logistics and aggressive exports have hurt wheat quality and forward supply availability. Russia is no longer the world’s low cost seller with 3.5 MMTs left to ship! The US and Aussie will share that crown into late spring. • Kazakh wheat should replace Russian now that Iran faces banking and credit woes! • The Ukraine and US Plains are embroiled in droughts. Spring weather will be closely followed. • 2012/13 world wheat stocks are in surplus and although world feed demand is robust, higher prices hinge on adverse weather and a decline in 2012 N Hemisphere production. • Ending of the CWB likely to push more protein wheat on the market from the Western Canadian farmer. • AgResource research argues for 2012 world wheat prices to trade between $240-290 FOB basis the Black Sea with Chicago price range at $5.70-7.20. No passion on class spreads! Copyright © 2011 AgResource Company. All Rights Reserved.

2012 Corn – Its all about Weather!

World Corn Production – A Record in 2012/13 at 877 MMTs MMT 1,000 900 800 700 600 500 400 300 2011

2009

2007

2005

2003

2001

1999

1997

1995

1993

1991

1989

1987

1985

1983

1981

1979

1977

1975

1973

1971

200

Global Corn Demand – 5 Year Average Gain is +25.9 MMTs/Yr MMT 1,000

900 800 700 600 500 400 300 200 100 0 2011

2009

2007

2005

2003

2001

1999

1997

1995

1993

1991

1989

1987

1985

1983

1981

1979

1977

1975

1973

1971

Contribution to World Corn Demand Increase: 2002-2008

China 16% Rest of World 42%

US 42%

Contribution to World Corn Demand Increase: 2008-2013

Rest of World 37%

China 43%

US 20%

2012 Global Corn Stocks - 125 MMTs – Record Low Stock/Use Ratio MMT 250 200 150

100 50 0 2011

2009

2007

2005

2003

2001

1999

1997

1995

1993

1991

1989

1987

1985

1983

1981

1979

1977

1975

1973

1971

World Corn Stocks/Use World

World less China

50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986 1985 1984 1983 1982 1981 Copyright ÂŠ 2011 AgResource Company. All Rights Reserved.

World Corn Stocks/Use vs. Price $6.52 forecast average $/Bu 9.00 2011/12

8.00 7.00 6.00 5.00 4.00 3.00 2.00 1.00 0.00 0

0.05

0.1

0.15 0.2 Stocks/Use

0.25

0.3

0.35

0.4

Argentine Corn Production at 21 MMTs and Exports at 13 MMTs MMT

Production

Exports

25 20 15 10 5

0 2010

2008

2006

2004

2002

2000

1998

1996

1994

1992

1990

1988

1986

1984

1982

1980

1978

1976

1974

1972

1970

Ukraine/Russia Corn Production and Yield MMTs

Production

Yield

MT/HA 6

20 3 15 2

10 5

Ukraine Corn Exports MMTs

11/12 US Corn Exports 1,775 Mil Bu – up 175 Mil Bu MMTs 70

60 50 40 30

20 10 0 ARC 2011

2010

2008

2006

2004

2002

2000

1998

1996

1994

1992

1990

1988

1986

1984

1982

1980

1978

1976

1974

1972

1970

US Corn Total Demand High Prices – Rationing? MMTs 350 300 250 200 150 100 50 2010

2008

2006

2004

2002

2000

1998

1996

1994

1992

1990

1988

1986

1984

1982

1980

1978

1976

1974

1972

1970

US Monthly WASDE Corn End Stocks/Use vs. Price for 2011/12 $9.00 ARC 2011

$8.00

$7.00 $6.00 $5.00 $4.00 $3.00

$2.00 $1.00 $0

0.05

0.1

0.15

0.2

0.25

0.3

US Corn Ending Stocks – Again Rising with normal weather MMTs 140

120

100

ARC 12 ARC 11 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986 1985 1984 1983 1982 1981 1980 Copyright © 2011 AgResource Company. All Rights Reserved.

World Oilseed Outlook – The coming bull starting in early 2012?

Global Consumption % Since 1997/98 120%

Coarse Grains

Vegoils

Wheat

Rice

100% 80% 60% 40% 20% 0% -20% 2012 ARC

2011

2010

2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

World Oilseed Production Less Demand: Negative in 2012 Following 2 Years of Surplus MMT 25 20 15 10 5 0

-5 -10 -15 2011

2009

2007

2005

2003

2001

1999

1997

1995

1993

1991

1989

1987

1985

1983

1981

1979

1977

1975

Global Soybean Production MMTs 300 250 200 150 100 50 0

Latin American Soybean Production MMTs

Paraguay

Argentina

Brazil

140 120

100 80 60 40 20 0 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986 Copyright ÂŠ 2011 AgResource Company. All Rights Reserved.

Global Soybean Demand – Record high at 262 MMTs in 2011/12 MMTs 300

250 200 150 100 50 0

Global Soybean Ending Stocks MMTs 80 70 60 50 40 30 20 10 0

2010 2008 2006 2004 2002 2000 1998 1996 1994 1992 1990 1988 1986 1984 1982 1980

1978

1976

1974

1972

1970

1968

1966

1964

Chinese Soybean Futures CNY/MT ￥6,300 ￥5,800 ￥5,300 ￥4,800 ￥4,300 ￥3,800 ￥3,300 ￥2,800

￥2,300 ￥1,800 2011

2010

2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

1999

Chinese Crushing Margins on Imported Soybeans S America

CNY/MT 300

US Gulf

200

100 0

-100 -200 -300 -400 -500 Dec 11

Nov 11

Oct 11

Sep 11

Aug 11

Jul 11

Jun 11

May 11

Apr 11

Mar 11 Feb 11

Jan 11

Dec 10

Nov 10

Oct 10

Sep 10

Aug 10

Jul 10

Jun 10

May 10

Apr 10

US Soybean Stocks MMTs 18

Global Soybean FOB Prices Top between $12.60-12.80! $/MT 650

Argentina

Brazil

600 550

500 450 400 350 300 Nov-11

Sep-11

Jul-11

May-11

Mar-11

Jan-11

Nov-10

Sep-10

Jul-10

May-10

Mar-10

Jan-10

Nov-09

Sep-09

Jul-09

May-09

Mar-09

Jan-09

Nov-08

Sep-08

Jul-08

May-08

Mar-08

Jan-08

ARC US Corn Seeded Acres 2012 – 92.9-93.7 Mil acres Mil HA 40 38 36 34 32 30 28 26 24 22

20 2012

2010

2008

2006

2004

2002

2000

1998

1996

1994

1992

1990

1988

1986

1984

1982

1980

1978

1976

1974

1972

1970

Corn and Soybean Planting Intentions have Increased

USDA’s Outlook Conference not to be overlooked!

Estimated Net Returns To Farmers

Key Revenue Deviations From Year Prior

The US Ethanol Build Out Has Boosted Corn on Corn Acres

US Acreage of 4 Major Crops: Surplus/Deficit from May WASDE Demand – up some 8.2 Mil Acres Mil Acres 10 5 0 -5 -10

-15 2012

2011

2010

2009

2008

2007

2006

2005

US Total Corn, Soy, Wheat Stocks MMTs 200 180 160

140 120 100 80 60 40 20 0 2012 2010 2008 2006 2004 2002 2000 1998 1996 1994 1992 1990 1988 1986 1984 1982 1980 1978 1976 1974 1972 1970 1968 1966 1964 Copyright ÂŠ 2011 AgResource Company. All Rights Reserved.

Chicago Wheat Market Volatility – Annual Range 1960-2011 ($5.20-7.50) $/Bu $16.00 $14.00 $12.00

2008:$8.80

$10.00

2009: $2.52

$8.00 2010: $4.16

$6.00 2011: $3.28

$4.00 $2.00 $0.00 2011

2008

2005

2002

1999

1996

1993

1990

1987

1984

1981

1978

1975

1972

1969

1966

1963

1960

Corn Market Volatility – Annual Price Ranges 1960-2011($4.40-7.20) $/Bu $9.00 $8.00

$7.00

2008:$4.75

$6.00 2009: $1.53

$5.00 $4.00

2010: $3.06

$3.00 2011: $2.28

$2.00 $1.00 $0.00

2011

2008

2005

2002

1999

1996

1993

1990

1987

1984

1981

1978

1975

1972

1969

1966

1963

1960

Soy Market – Annual Price Ranges 1960-2011 ($9.80-13.50) $/Bu $18.00 $16.00 $14.00

2008:$8.87

$12.00 2009: $4.48

$10.00 $8.00

2010: $4.95

$6.00 2011: $3.04

$4.00 $2.00 $0.00 2011

2008

2005

2002

1999

1996

1993

1990

1987

1984

1981

1978

1975

1972

1969

1966

1963

1960

Inflation Adjusted Grain Prices – Just in case there is a Drought! $/Bu 25

Corn

Wheat

Soybeans

20 15 10 5 0 2010

2007

2004

2001

1998

1995

1992

1989

1986

1983

1980

1977

1974

1971

1968

1965

1962

1959

1956

1953

1950

Conclusion • Feedgrains (corn) to underpin grain prices over the next 3-4 months as spot CME trades in a range of $5.80-7.20. • Heightened volatility in profit matrix for US ethanol industry – sugar/ethanol exports and US blenders wall. US 2011/12 US corn ethanol grind could fall to 4,850 Mil Bu and hold sideways into 2013 if US corn prices remain high due falling world sugar prices. • Chinese corn at historically high at $9.30/Bu. Will China corn imports become the new growth engine of US corn demand? Can China keep raising their own corn yield? • Our view is that world major grain prices are right back to where this all started in 2006 with weather/supply being the big driver of price. Future Asian demand (imports) remains key for sustained higher grain/soy prices. Copyright © 2011 AgResource Company. All Rights Reserved.