Agricultural Commodity Outlook

Gerald A. BangeChairperson

World Agricultural Outlook BoardOffice of the Chief Economist

U.S. Department of Agriculture

Presented to

TD Newcrest Agriculture Conference –Harvesting Great Ideas

Toronto, CanadaNovember 20, 2008

Price Volatility Factors

• Strong Demand Worldwide for Agricultural Commodities

• Petroleum Prices have Dropped Sharply from Record Highs

• Increased Production of Renewable Fuels

• Tight Grain and Soybean Stocks

• Record World Wheat Production will Exceed Consumption in 2008/09

• Restrictions on World Exports of Grains – especially Rice – have been Lifted

• U.S. Cotton Area and Production Sharply Lower

• Input Costs have been Declining

• U.S. Dollar is Strengthening

World Wheat Production

Country or Region2007/08 estimate

2008/09 forecast

Change from 2007/08

Million Tons Percent

World 610.6 682.4 11.8United States 56.2 68.0 20.9

Foreign 554.3 614.3 10.8Argentina 16.3 11.0 -32.5Canada 20.1 27.3 36.2Australia 13.0 20.0 53.4European Union 119.4 150.6 26.1Russian Federation 49.4 63.0 27.5Ukraine 13.9 25.5 83.5China 109.3 113.0 3.4India 75.8 78.4 3.4

Indicates an increase in the estimate or forecast from the previous month. Indicates a decrease in the estimate or forecast from the previous month.

World Corn Production

Country or Region2007/08 estimate

2008/09 forecast

Change from 2007/08

Million Tons Percent

World 792.0 781.4 -1.3United States 332.1 305.3 -8.1

Foreign 459.9 476.0 3.5Argentina 20.9 18.0 -13.7Brazil 58.6 55.0 -6.1Mexico 22.7 24.0 6.0Canada 11.7 9.9 -15.0European Union 47.5 59.5 25.2FSU-12 13.8 19.3 40.1South Africa 12.5 11.5 -8.0China 152.3 156.0 2.4

Indicates an increase in the estimate or forecast from the previous month. Indicates a decrease in the estimate or forecast from the previous month.

World Coarse Grain Production

Country or Region2007/08 estimate

2008/09 forecast

Change from 2007/08

Million Tons Percent

World 1,077.9 1,091.7 1.3United States 351.1 323.8 -7.8

Foreign 726.9 767.9 5.6Argentina 25.8 24.5 -5.1Brazil 61.0 57.9 -5.2Mexico 29.7 31.2 4.9Canada 27.8 25.9 -6.8Australia 9.9 10.4 4.6European Union 136.4 158.3 16.0FSU-12 53.9 74.7 38.6China 159.5 163.6 2.6

Indicates an increase in the estimate or forecast from the previous month. Indicates a decrease in the estimate or forecast from the previous month.

World Soybean Production

Country or Region2007/08 estimate

2008/09 forecast

Change from 2007/08

Million Tons Percent

World 220.9 235.7 6.7United States 72.8 79.5 9.1

Foreign 148.1 156.3 5.5Argentina 46.2 50.5 9.3Brazil 61.0 60.0 -1.6China 14.0 16.8 20.0

Indicates an increase in the estimate or forecast from the previous month. Indicates a decrease in the estimate or forecast from the previous month.

World Oilseed Production

Country or Region2007/08 estimate

2008/09 forecast

Change from 2007/08

Million Tons Percent

World 391.3 417.8 6.8United States 82.4 88.2 6.9

Foreign 308.9 329.7 6.7Argentina 51.7 55.9 8.0Brazil 64.1 62.7 -2.2China 53.4 57.5 7.8India 33.9 33.9 0.2European Union 24.4 26.8 10.1FSU-12 17.2 22.5 31.0Canada 12.4 14.2 15.3

Indicates an increase in the estimate or forecast from the previous month. Indicates a decrease in the estimate or forecast from the previous month.

243.1

247.6

252.8

240

245

250

255

260

265

1996 1998 2000 2002 2004 2006 2008

Mil. acres

Source: USDA-NASS, Crop Production, November 10, 2008. Includes wheat, feed grains, soybeans, upland cotton, and rice.

U.S. 8-Principle Crop Planted Area

…8-crop area up 5.2 million for 2008

U.S. Wheat Supply and Demand2008/09 forecast

Change from 2007/08Percent

Planted area (million acres) 60.4 63.0 4.3Harvested area (million acres) 51.0 55.7 9.2Yield (bushels per acre) 40.5 44.9 10.9

Million bushelsBeginning stocks 456 306 -33.0Production 2,067 2,500 20.9Imports 113 100 -11.2

Total supply 2,635 2,905 10.2Food use 948 960 1.3Seed 88 82 -6.4Feed and residual 30 260 763.1

Domestic use 1,066 1,302 22.2Exports 1,264 1,000 -20.9

Total use 2,330 2,302 -1.2Ending stocks 306 603 97.3

PercentStocks to use ratio 13.1 26.2

Dollars per bushelAverage market price 6.48 6.55/7.15 5.7

2007/08 estimate

Indicates an increase in the estimate or forecast from the previous month. Indicates a decrease in the estimate or forecast from the previous month.

60.4

63.0

50

55

60

65

70

75

80

1996 1998 2000 2002 2004 2006 2008

Mil. acres

U.S. Wheat Planted Area

…wheat acres up 2.6 million for 2008

Source: USDA-NASS, Crop Production, November 10, 2008.

2007 Energy Act

– Mandates very ambitious renewable fuel standard (RFS), starting at 9.0 billion gals in 2008 and increasing to 36 billion gals by 2022. 1

– Up to 15 billion gallons of the RFS can be met with corn-based ethanol starting in 2015.

– By 2016, all of the RFS increase must be met with cellulosic ethanol or other non-corn starch biofuels.

1 The 2005 Energy Act mandated 5.4 billion gals by 2008, rising to 7.5 billion by 2012.

Crude Oil Prices

20

40

60

80

100

120

140

Jan-04 Aug-04 Mar-05 Oct-05 May-06 Dec-06 Jul-07 Feb-08 Sep-08 Apr-09 Nov-09

$ per barrel

West Texas Intermediate(WTI) Average Refiner Acquisition Cost (RAC)

Source: DOE-Energy Information Administration, Short-Term Energy Outlook, November 2008.

Forecasts

U.S. Blended Motor Gasoline Consumption

130

135

140

145

150

155

2000 2002 2004 2006 2008F 2010F 2012F 2014F 2016F

Bil. gallons

Actual EIA Mar. Proj.

Source: DOE-Energy Information Administration.

U.S. Blended Motor Gasoline Consumption

130

135

140

145

150

155

2000 2002 2004 2006 2008F 2010F 2012F 2014F 2016F

Bil. gallons

Actual EIA Sep. Proj. EIA Mar. Proj.

Source: DOE-Energy Information Administration.

U.S. Blended Motor Gasoline Consumption

130

135

140

145

150

155

2000 2002 2004 2006 2008F 2010F 2012F 2014F 2016F

Bil. gallons

Actual EIA Oct. Proj. EIA Sep. Proj. EIA Mar. Proj.

Source: DOE-Energy Information Administration.

U.S. Blended Motor Gasoline Consumption

130

135

140

145

150

155

2000 2002 2004 2006 2008F 2010F 2012F 2014F 2016F

Bil. gallons

Actual EIA Nov. Proj. EIA Oct. Proj. EIA Sep. Proj. EIA Mar. Proj.

Source: DOE-Energy Information Administration.

U.S. Blended Motor Gasoline Consumption

130

135

140

145

150

155

2000 2002 2004 2006 2008F 2010F 2012F 2014F 2016F

Bil. gallons

Actual EIA Nov. Proj. EIA Oct. Proj. EIA Sep. Proj. EIA Mar. Proj.

Source: DOE-Energy Information Administration.

8-9 bil. gal.

U.S. Ethanol Production CapacityAnnual Capacity by Month

6.8

10.3

5.0

0

2

4

6

8

10

12

14

Sep-06 Mar-07 Sep-07 Mar-08 Sep-08 Mar-09

Bil. Gallons

Note: Sep. 2006 through Oct. 2008 from Renewable Fuels Association (RFA). Projections by USDA-WAOB as of November 2008.

U.S. Corn Supply and Demand2008/09 forecast

Change from 2007/08

Percent

Planted area (million acres) 93.6 85.9 -8.2

Harvested area (million acres) 86.5 78.2 -9.7

Yield (bushels per acre) 151.1 153.8 1.8

Million bushelsBeginning stocks 1,304 1,624 24.6

Production 13,074 12,020 -8.1

Total supply 14,398 13,659 -5.1

Feed and residual 5,974 5,300 -11.3

Food, seed, and industrial 4,364 5,335 22.3Ethanol 3,026 4,000 32.2

Domestic use 10,338 10,635 2.9Exports 2,436 1,900 -22.0

Total use 12,773 12,535 -1.9Ending stocks 1,624 1,124 -30.8

PercentStocks/use 12.7 9.0

Dollars/bushelAverage market price 4.20 4.00/4.80 4.8

2007/08 estimate

4.0

3.0

5.632 %

0.0

1.0

2.0

3.0

4.0

5.0

6.0

1995/96 1999/00 2003/04 2007/08 2011/12* 2015/16*

Bil. bushels

0

5

10

15

20

25

30

35Percent

Ethanol corn use

Ethanol share of corn use

Note: 2008/09 projection from the November 10, 2008, World Agricultural Supply and Demand Estimates. *Projections for 2009/10 and beyond based on maximum RFS level for corn starch based ethanol under the Energy Independence and Security Act of 2007.

U.S. Corn Used for Ethanol

Note: Central Illinois cash bids.

Daily Cash Market Corn Prices2004/05 through 2008/09 to date

1.00

2.00

3.00

4.00

5.00

6.00

7.00

8.00

Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug

$/bu.2004/05 2005/06 2006/07 2007/08 2008/09

U.S. Biodiesel Mandate . . .(2007 Energy Act)

0

200

400

600

800

1,000

1,200

2001/02 2003/04 2005/06 2007/08F 2009/10 2011/12 2013/14 2015/16

0

5

10

15

20

25

30

35

Biodiesel Consumption Mandate

Share of Soybean Oil Prod.

Million gallons

14%

U.S. Soybean Supply and Demand2008/09 forecast

Change from 2007/08Percent

Planted area (million acres) 64.7 75.9 17.2Harvested area (million acres) 64.1 74.4 16.0Yield (bushels per acre) 41.7 39.3 -5.9

Million bushelsBeginning stocks 574 205 -64.3Production 2,676 2,921 9.1Imports 10 7 -29.1

Total Supply 3,260 3,133 -3.9Crush 1,801 1,745 -3.1Seed and Residual 92 163 76.6

Domestic use 1,893 1,908 0.8Exports 1,161 1,020 -12.1

Total Use 3,054 2,928 -4.1Ending stocks 205 205 -0.1

PercentStocks/use ratio 6.7 7.0

Dollars/bushelAverage market price 10.10 9.10/10.60 -2.5

2007/08 estimate

Indicates an increase in the estimate or forecast from the previous month. Indicates a decrease in the estimate or forecast from the previous month.

China Soybean Import Dependence Growing

0

10

20

30

40

50

60

1994 1996 1998 2000 2002 2004 2006 2008

0

10

20

30

40

50

60

70

80

Imports

Production

Import Dependence

Million Tons Percent

0

25

50

75

100

125

150

175

200

225

250

1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016

U.S. Brazil Argentina

Soybean Production Trends

Million Tons

U.S. Soybean Oil Supply and Demand

2008/09 forecast

Change from 2007/08

Million pounds PercentBeginning stocks 3,085 2,471 -19.9Production 20,568 19,895 -3.3Imports 65 50 -23.1

Total supply 23,718 22,416 -5.5Domestic use 18,272 18,100 -0.9

Methyl ester 2,983 3,100 3.9Exports 2,975 2,300 -22.7

Total use 21,247 20,400 -4.0Ending stocks 2,471 2,016 -18.4

Cents per pound

Average market price 52.03 37.50/41.50 -24.1

2007/08 estimate

Indicates an increase in the estimate or forecast from the previous month. Indicates a decrease in the estimate or forecast from the previous month.

Soybean Oil Futures Prices

25

30

35

40

45

50

55

60

65

70

75

Aug-06 Nov-06 Feb-07 May-07 Aug-07 Nov-07 Feb-08 May-08 Aug-08 Nov-08

Cents/lb.

Note: Chicago Board of Trade daily settlement prices.

December 2008 Contract

U.S. Domestic Biodiesel Production Margin

-200

-150

-100

-50

0

50

100

150

7/1/0

6

9/1/0

6

11/1/

06

1/1/0

7

3/1/0

7

5/1/0

7

7/1/0

7

9/1/0

7

11/1/

07

1/1/0

8

3/1/0

8

5/1/0

8

7/1/0

8

9/1/0

8

11/1/

08

Cents per Gallon

Biodiesel Production Trends in 2007/08

0

200

400

600

Oct-0

6

Dec-0

6

Feb-0

7

Apr-0

7

Jun-0

7

Aug-0

7

Oct-0

7

Dec-0

7

Feb-0

8

Apr-0

8

Jun-0

8

Aug-0

8

Soybean Oil Other Oils and Fats

Soybean oil share61% for 2007/08

vs 86% for 2006/07

Million lbs.

85.9

93.6

75.9

64.7

55

60

65

70

75

80

85

90

95

1996 1998 2000 2002 2004 2006 2008

Mil. acres

Corn Soybeans

U.S. Corn & Soybean Planted Area…soybean acres up 11.2 million for 2008

Source: USDA-NASS, Crop Production, November 10, 2008.

New-crop Soybean/Corn Futures Price Ratios 2007-crop, 2008-crop, & 2009-crop thru Nov. 12, 2008

1.80

1.90

2.00

2.10

2.20

2.30

2.40

2.50

2.60

2.70

2.80

Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug

Soybean/corn

Nov 2007 Soy/Dec 2007 Corn Nov 2008 Soy/Dec 2008 Corn Nov 2009 Soy/Dec 2009 Corn

Note: Chicago Board of Trade daily settlement prices.

200

300

400

500

600

700

800

900

1,000

1,100

Jan04

Apr04

Jul04

Oct04

Jan05

Apr05

Jul05

Oct05

Jan06

Apr06

Jul06

Oct06

Jan07

Apr07

Jul07

Oct07

Dec07

Mar08

Jun08

Sep08

New Orleans Barge

Mid Corn Belt

$ per short tonU.S. Ammonia Prices, weekly

Source: Green Markets Fertilizer Market Intelligence Weekly

0

50

100

150

200

250

300

350

400

450

500

Corn Soybeans

$ per acre 2006 2007 2008 2009

Note: Net returns are above variable costs. 2009-crop outlook reflects current estimated costs and Nov. and Dec. 2009 futures adjusted for current Central IL basis (11/12/08).

Net Returns Outlook Corn and SoybeansSpring 2006, 2007 & 2008 vs. Fall 2008 (2009 crop)

0

5

10

15

20

25

30

35

Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08

Reals Per Bushel

Devaluation: Effect on Brazilian Soybean Price

Planting time last year

U.S. Soybean Meal Supply and Demand2008/09 forecast

Change from 2007/08

Thousand short tons Percent

Beginning stocks 346 294 -15.0

Production 42,242 41,491 -1.8

Imports 140 165 17.9

Total supply 42,728 41,950 -1.8

Domestic 33,234 33,050 -0.6

Exports 9,200 8,600 -6.5

Total use 42,434 41,650 -1.8

Ending stocks 294 300 2.1

Dollars/short ton

Average market price 335.94 255.00/315.00 -15.2

2007/08 estimate

Indicates an increase in the estimate or forecast from the previous month. Indicates a decrease in the estimate or forecast from the previous month.

U.S. Meat Production and Prices2009

forecastChange from

2008Production Billion pounds Percent

Beef 26.70 26.65 -0.2Pork 23.45 23.08 -1.6Broilers 37.14 36.74 -1.1Turkey 6.27 6.11 -2.6

Total meat 94.45 93.41 -1.1

Prices Dollars/cwtSteers 93.22 96.75 3.8Hogs 47.86 49.75 4.0

Cents/lbBroilers 79.8 84.5 5.8Turkey 89.0 91.3 2.6

2008 forecast

Indicates an increase in the estimate or forecast from the previous month. Indicates a decrease in the estimate or forecast from the previous month.

U.S. Meat TradeMillion Pounds

2009 forecast

Change from 2008

Exports Percent

Beef 1,841 1,920 4.3

Pork 5,068 4,500 -11.2

Broilers 6,719 6,275 -6.6

Turkey 643 605 -6.0

Mature Chickens 138 150 8.8

Total Meat 14,418 13,462 -6.6

Imports

Beef 2,443 2,595 6.2

2008 forecast

Indicates an increase in the estimate or forecast from the previous month. Indicates a decrease in the estimate or forecast from the previous month.

U.S Livestock Trade with Canada1,000 head

Cattle

0

200

400

600

800

1000

1200

1400

1600

1800

Hogs

0

2000

4000

6000

8000

10000

12000

ImportsImports

ExportsExports

* Jan-Sep data

* Jan-Sep data

U.S. Meat Trade with Canada million lbs.

Beef

0

200

400

600

800

1000

1200

2000 2002 2004 2006 2008*

Pork

0

200

400

600

800

1000

1200

2000 2002 2004 2006 2008*

Imports

Exports

Imports

Exports

* Jan-Sep data * Jan-Sep data

50

60

70

80

90

100

110

120

130

140

150

Dec 05 Mar 06 Jun 06 Sep 06 Dec 06 Mar 07 Jun 07 Sep 07 Dec 07 Mar 08 Jun 08 Sep 080.75

0.80

0.85

0.90

0.95

1.00

1.05

1.10

1.15

West Texas Intermediate Crude

U.S. Dollars per Canadian Dollar

$US per barrel $US per $CanThe Canadian Dollar and Oil

Source: Reuters/Datastream

End