Michael Drury PPT June 0611

CAPITAL MARKETS IN THE POST-CRISIS ENVIRONMENT Part V Michael Drury Chief Economist, McVean Trading & Investments, LLC

Sponsored by Global Interdependence Center and Bank of Finland Helsinki, Finland June 5-7, 2011

Past Performance Is Not Necessarily Indicative Of Future Results.

0

China’s Share of World Commodity Consumption Commodity

China % of World

Cement

53.2%

Iron Ore

47.7%

Coal

46.9%

Pigs

46.4%

Steel

45.4%

Lead

44.6%

Zinc

41.3%

Aluminum

40.6%

Copper

38.9%

Eggs

37.2%

Nickel

36.3%

Rice

28.1%

Soybeans

24.6%

Wheat

16.6%

Chickens

15.6%

PPP GDP

13.6%

Oil

10.3%

Cattle

9.5%

GDP

9.4%

Source: Barclays 2010

Past Performance Is Not Necessarily Indicative Of Future Results.

1

WTI vs Brent Crude Oil 150

130

110

90

70

50

30 Jan-06

Jan-07

Source: Bloomberg

Jan-08

Jan-09 WTI

Brent

Past Performance Is Not Necessarily Indicative Of Future Results.

Jan-10

Jan-11

Apr-11 2

Gasoline

350

300

250

200

150

100

50

0 Jan-89

Jan-93

Jan-97

Jan-01

Jan-05

Source: Bloomberg

Jan-09

Apr-11 Past Performance Is Not Necessarily Indicative Of Future Results.

3

Corn 800

700

600

500

400

300

200

100 Jan-89

Jan-93

Jan-97

Jan-01

Jan-05

Source: Bloomberg

Jan-09

Apr-11 Past Performance Is Not Necessarily Indicative Of Future Results.

4

US CORN ENDING STOCKS 5,000 4,500 4,000

3,500

MIL BU

3,000 2,500 2,000 1,500 1,000 500 0

Source: McVean Trading Calculation

PIPELINE

USDA ESTIMATE

Past Performance Is Not Necessarily Indicative Of Future Results.

5

Gasoline (Wholesale) vs Corn 350

800

300

700

250

600

200

500

150

400

100

300

50

200

0 Jan-89

100 Jan-91

Jan-93

Jan-95

Source: Bloomberg

Jan-97

Jan-99

Jan-01

Jan-03

Gasoline

Jan-05 Corn

Past Performance Is Not Necessarily Indicative Of Future Results.

Jan-07

Jan-09

Jan-11

Apr-11 6

Corn / Wheat

1

0.9

0.8

0.7

0.6

0.5

0.4 Jan-89

Jan-91

Jan-93

Jan-95

Jan-97

Jan-99

Jan-01

Jan-03

Jan-05

Source: Bloomberg

Jan-07

Jan-09

Jan-11

Apr-11 Past Performance Is Not Necessarily Indicative Of Future Results.

7

Corn / Soybeans

0.65

0.6

0.55

0.5

0.45

0.4

0.35

0.3

0.25 Jan-89

Jan-91

Jan-93

Jan-95

Jan-97

Jan-99

Jan-01

Jan-03

Jan-05

Source: Bloomberg

Jan-07

Jan-09

Jan-11

Apr-11 Past Performance Is Not Necessarily Indicative Of Future Results.

8

Ethanol Production as a percent of US CORN CROP 45%

40%

35%

30%

25%

20%

15%

10%

5%

0%

02/03

03/04

04/05

05/06

06/07

07/08

08/09

09/10

10/11

Source: USDA Past Performance Is Not Necessarily Indicative Of Future Results.

9

US CORN DOMESTIC DISAPPEARANCE 14,000

12,000

10,000

MIL BU

8,000

6,000

4,000

2,000

0 00/01 Source: USDA

01/02

02/03

03/04

04/05

05/06

ETHANOL

06/07

07/08

08/09

09/10

10/11

OTHER

Past Performance Is Not Necessarily Indicative Of Future Results.

10

US PLANTED ACRES 350

300

250

MIL ACRES

200

150

100

50

2000

2001

Source: USDA

2002

2003

2004 CORN

2005

2006

SOYBEANS

2007

2008

2009

2010

2011

OTHER CROPS

Past Performance Is Not Necessarily Indicative Of Future Results.

11

E10 Penetration – 2010

% of state gasoline blended with ethanol

Past Performance Is Not Necessarily Indicative Of Future Results.

12

Ethanol Margins, Calculated From Board Values Variable Costs are Covered at 20-40 Cents

58 56 54

CENTS/GAL

52 50 48 46 44 42 40 K11

N11

U11

Source: McVean Trading Calculation

Z11

H12

K12

N12

CONTRACT MONTH

Past Performance Is Not Necessarily Indicative Of Future Results.

13

Ethanol, Gasoline and Crude Oil Board Curves

3.40

$/GAL

3.20

3.00

2.80

2.60

2.40 K11

N11

U11

Z11

H12

K12

N12

CONTRACT MONTH Source: CME

ETHANOL

GASOLINE

CRUDE OIL

Past Performance Is Not Necessarily Indicative Of Future Results.

14

Global Stocks-To-Use Ratio

0.30

0.25

0.20

0.15

0.10

Source: USDA

WHEAT

CORN

SOYBEANS

Past Performance Is Not Necessarily Indicative Of Future Results.

15

World Corn Stocks 250

200

MMT

150

100

50

0

Source: USDA

USA

CHINA

OTHER COUNTRIES

Past Performance Is Not Necessarily Indicative Of Future Results.

16

Chinese Corn Stocks 140

120

100

MMT

80

60

40

20

0

Source: USDA Past Performance Is Not Necessarily Indicative Of Future Results.

17

Chinese Soybeans Imports 60

50

MMT

40

30

20

10

0 00/01

01/02

02/03

03/04

04/05

05/06

06/07

07/08

08/09

09/10

10/11

11/12

Source: USDA Past Performance Is Not Necessarily Indicative Of Future Results.

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Source: McVean Private Sources WHEAT--HENAN

Past Performance Is Not Necessarily Indicative Of Future Results.

INDICA RICE--HUNAN

2/26/11

10/26/10

6/26/10

2/26/10

10/26/09

6/26/09

2/26/09

10/26/08

6/26/08

2/26/08

10/26/07

6/26/07

2/26/07

10/26/06

6/26/06

2/26/06

10/26/05

6/26/05

2/26/05

10/26/04

6/26/04

2/26/04

10/26/03

6/26/03

2/26/03

10/26/02

6/26/02

2/26/02

10/26/01

US$/MT

Chinese Spot Cash Grain Prices

350

300

250

200

150

100

CORN--JILIN

19

CORN BALANCE SHEET

Planted Acres (mil.)

Harvested Acres (mil.) % Harvested Yield (Bu / acre) Production Ethanol use Ethanol as % of crop Non-Ethanol production Ending stocks Stocks as % of total production Non-ethanol supply Non-ethanol use Ending Stocks

06/07

07/08

08/09

09/10

10/11

11/12

ALT #1 11/12

ALT #2 11/12

78.3 70.6 90%

93.5 86.5 93%

86.0 78.6 91%

86.4 79.5 92%

88.2 81.4 92%

93.2 85.5 92%

93.2 83.9 90%

93.2 85.7 92%

149.1 10.526 2.119 20%

150.7 13.036 3.049 23%

153.9 12.097 3.709 31%

164.7 13.094 4.568 35%

152.8 12.438 4.975 40%

161.5 13.808 5.075 37%

154.2 12.938 5.075 39%

151.6 13.001 5.075 39%

8.407 1.967

9.987 1.304

8.388 1.624

8.526 1.673

7.463 1.708

8.733 0.696

7.863 0.696

7.926 0.696

19%

10%

13%

13%

14%

5%

10.374 9.070 1.304

11.291 9.667 1.624

10.012 8.339 1.673

10.199 8.491 1.708

9.171 8.475 0.696

9.429 8.575 0.854

8.559 8.575 -0.016

8.622 8.575 0.047

Source: McVean Trading , USDA Past Performance Is Not Necessarily Indicative Of Future Results.

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Minnesota Spring Wheat Price 20

18

16

14

12

10

8

6

4

2 Jan-04

Jan-05

Jan-06

Jan-07

Jan-08

Jan-09

Past Performance Is Not Necessarily Indicative Of Future Results.

Jan-10

Jan-11

Apr-11 21

U.S. Domestic Beef Availibility Boneless Equivalent

Past Performance Is Not Necessarily Indicative Of Future Results.

-3%

2011 JUL-DEC

2011 JAN-JUN

2010 JUL-DEC

2010 JAN-JUN

2009 JUL-DEC

2009 JAN-JUN

2008 JUL-DEC

2008 JAN-JUN

2007 JUL-DEC

2007 JAN-JUN

2006 JUL-DEC

2006 JAN-JUN

2005 JUL-DEC

2005 JAN-JUN

2004 JUL-DEC

2004 JAN-JUN

2003 JUL-DEC

2003 JAN-JUN

2002 JUL-DEC

2002 JAN-JUN

2001 JUL-DEC

2001 JAN-JUN

2000 JUL-DEC

2000 JAN-JUN

1999 JUL-DEC

1999 JAN-JUN

1998 JUL-DEC

1998 JAN-JUN

(Million Pounds)

U.S. Domestic Meat Availability of Beef (Boneless Equivalent)

9900

9700

9500

9300

9100

3% Increase since 1989

8900

-8%

8700

8500

8300

U.S. Domestic Beef Availibility Boneless Equivalent Estimate

Source: USDA 22

Monthly Kansas Slaughter Steer Price

$125.00

$115.00

$105.00

$85.00

$75.00

$65.00

$55.00

$45.00

$35.00

1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

($ per CWT.)

$95.00

Source: USDA

Through March

Past Performance Is Not Necessarily Indicative Of Future Results.

23

U.S. Domestic Meat Availability of Pork (Boneless Equivalent)

11,500

11,000

10,000

9,500

9,000

U.S. Domestic Pork Availibility Boneless Equivalent

Source: USDA

U.S. Domestic Pork Availibility Boneless Equivalent Estimate

Past Performance Is Not Necessarily Indicative Of Future Results.

24

2011

2010

2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

1994

1993

1992

1991

1990

8,500

1989

(Million Pounds)

10,500

USDA Pork Cutout

Source: USDA

Past Performance Is Not Necessarily Indicative Of Future Results.

25

U.S. Domestic Meat Availability of Broilers (Boneless Equivalent)

16,000

15,000

14,000

12,000

11,000

10,000

9,000

8,000

U.S. Domestic RTC Broiler Availability Boneless Equivalent

U.S. Domestic RTC Broiler Availability Boneless Equivalent Estimate

Source: USDA & McVean Estimate Past Performance Is Not Necessarily Indicative Of Future Results.

26

2011

2010

2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

1994

1993

1992

1991

1990

7,000

1989

(Million Pounds)

13,000

Source: USDA Past Performance Is Not Necessarily Indicative Of Future Results.

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