GRAIN OUTLOOKGRAIN OUTLOOK

Risk & ProfitRisk & Profit2006 Conference2006 Conference

Mike WoolvertonMike Woolverton

Kansas State UniversityKansas State Universitymikewool@agecon.ksu.edumikewool@agecon.ksu.edu

U.S. EXPORTS 2005/06U.S. EXPORTS 2005/06(millions of bushels)(millions of bushels)

ProjectionsProjections 2005/062005/06 2006/07est.2006/07est.

WheatWheat 1,004 1,004 900 900

CornCorn 2,100 2,100 2,150 2,150

Sorghum 195 185Sorghum 195 185

SoybeansSoybeans 905 1,090 905 1,090

Source: World Agricultural Supply and Demand Source: World Agricultural Supply and Demand Estimates, USDAEstimates, USDA

WHEATWHEAT

Winter Wheat Estimates, USDA, Winter Wheat Estimates, USDA, 1 Aug. 20061 Aug. 2006

YieldYield ProductionProduction

U.S.U.S. 41.241.21.283 bil.1.283 bil.

KansasKansas 32.032.0 300.8 mil. 300.8 mil.(40.0)(40.0) (380.0 mil.) (380.0 mil.)

Current Market Influences - WheatCurrent Market Influences - Wheat

Deterioration of U.S. Deterioration of U.S. Spring Wheat Crop Spring Wheat Crop (33% vs. 73%)(33% vs. 73%)

Australian Drought Australian Drought (-12%)(-12%)

U.S. HRW QualityU.S. HRW Quality Low CarryoverLow Carryover

PRODUCTION PROJECTIONS, PRODUCTION PROJECTIONS, U.S., 2006/07U.S., 2006/07

All Wheat – 1.801 bil. Bu. – down 14%All Wheat – 1.801 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 InfluencesCurrent Market Influences

Deterioration of U.S. Deterioration of U.S. Spring Wheat Crop Spring Wheat Crop (32% vs. 73%)(32% vs. 73%)

Australian Drought Australian Drought (-12%)(-12%)

Drop in World Production Drop in World Production U.S. HRW QualityU.S. HRW Quality

2006 - 2005 HRW Wheat Quality 2006 - 2005 HRW Wheat Quality 11

20062006 20052005

Test Weight lbs/bu Test Weight lbs/bu 60.7 60.7 60.0 60.0

Wheat Protein %Wheat Protein % 13.9 13.9 12.1 12.1

Flour YieldFlour Yield 71.0 71.0 69.0 69.0

Wet Gluten %Wet Gluten % 33.8 33.8 29.5 29.5

11 Kansas State University harvest survey of Wheat Sheds in Kansas, Kansas State University harvest survey of Wheat Sheds in Kansas, Oklahoma, and Texas, Summer 2006, preliminary results.Oklahoma, and Texas, Summer 2006, preliminary results.

Soft Red Wheat SituationSoft Red Wheat Situation Production up 23%; average protein Production up 23%; average protein

10.0%; test weight 60.110.0%; test weight 60.1

July 26July 26 Aug 11Aug 11 Toledo Basis - -95 Toledo Basis - -95 -99 -99

Spot -Spot - $2.87 $2.87 $2.74 $2.74 Kansas City Basis - +31 Kansas City Basis - +31 +28 +28

Spot - Spot - $5.13 $5.13 $4.87 $4.87

PRODUCTION PROJECTIONS, PRODUCTION PROJECTIONS, MAJOR WHEAT EXPORTERS, MAJOR WHEAT EXPORTERS,

2006/07 2006/07 (MMT)(MMT)

2006/072006/07 2005/062005/06 EU-25EU-25 119.35 119.35 (-3.2%)(-3.2%) 122.59 122.59 United StatesUnited States 49.03 49.03 (-14%)(-14%) 57.28 57.28 CanadaCanada 25.5 25.5 (-2%)(-2%) 25.98 25.98 AustraliaAustralia 21.5 21.5 (-12%)(-12%) 24.5 24.5 ArgentinaArgentina 13.5 13.5 (+8%)(+8%) 12.512.5

Total ExportersTotal Exporters 228.88 228.88 (-6%)(-6%) 242.85242.85

Total World Prod.Total World Prod. 598.00 598.00 (-4%)(-4%) 621.86621.86

WORLD WHEAT CARRYOVER 2002 TO 2007 est. (MMT)

0

20

40

60

80

100

120

140

160

180

2002/03 2003/04 2004/05 2005/06 2006/07 est

YEAR

MM

T

Wheat Balance SheetWheat Balance Sheet04-05 04-05 05-06 05-06 06-0706-07

Plant A. (mil.)Plant A. (mil.) 59.7 59.7 57.2 57.2 57.9 57.9

Harvest A. (mil.)Harvest A. (mil.) 50.0 50.0 50.1 50.1 47.1 47.1

Bu./A. Bu./A. 43.2 43.2 42.0 42.0 38.3 38.3

ProductionProduction 2,158 2,158 2,150 2,150 1,8011,801

ImportsImports 71 71 85 85 105 105

Carryover Carryover 546 546 540 540 568 568

Total Supply Total Supply 2,775 2,775 2,730 2,730 2,4742,474

Utilization:Utilization:

Feed and ResidualFeed and Residual 201 201 200 200 145 145

FoodFood 895 895 910 910 915 915

Seed Seed 79 79 78 78 80 80

ExportsExports 1,060 1,060 1,000 1,000 900 900

Total UtilizationTotal Utilization 2,235 2,235 2,188 2,188 2,0402,040CarryoverCarryover 540 540 (24%)(24%) 542 542 (25%)(25%) 434 434

(21%)(21%)

U.S. Farm PriceU.S. Farm Price $3.40 $3.35-$3.45 $3.90-$4.50 $3.40 $3.35-$3.45 $3.90-$4.50

CORNCORN

Corn Estimates, USDA, Corn Estimates, USDA, 1 Aug. 20061 Aug. 2006

YieldYield BushelsBushels

U.S.U.S. 152.2152.2 10.9 bil.10.9 bil.

KansasKansas 125.0125.0 393 mil.393 mil. (135.0)(135.0) (465.8 mil.)(465.8 mil.)

Current Market Influences - CornCurrent Market Influences - Corn

Drought in Western and Drought in Western and Northern Corn BeltNorthern Corn Belt

Latest USDA estimateLatest USDA estimate

Demand from ethanol Demand from ethanol producersproducers

Strong export demandStrong export demand

Corn/Ethanol Projections, U.S.Corn/Ethanol Projections, U.S.

06/0706/07 07/0807/08Corn AcresCorn Acres 79.4 mil. 79.4 mil. 82.0 mil.82.0 mil.Corn ProductionCorn Production 11.0 bil. 11.0 bil. 12.3 bil. 12.3 bil.Corn ExportsCorn Exports 2.15 bil. 2.15 bil. 2.0 bil. 2.0 bil.Corn for EthanolCorn for Ethanol 2.15 bil. 2.15 bil. 3.4 bil. 3.4 bil.Ethanol ProductionEthanol Production 6.4 bil. g. 6.4 bil. g. 8.6 bil. g. 8.6 bil. g.DDG ProductionDDG Production 9.5 bil. T. 16.0 bil. T. 9.5 bil. T. 16.0 bil. T. (Thirty to 40 percent will replace corn in rations. Sixty to 70% will replace (Thirty to 40 percent will replace corn in rations. Sixty to 70% will replace

soybean meal.)soybean meal.)

Source: Paul Smolen, AgriNetwork Manangement and Mike Woolverton, KSU.Source: Paul Smolen, AgriNetwork Manangement and Mike Woolverton, KSU.

Corn Balance SheetCorn Balance Sheet04-05 04-05 05-06 05-06 06-0706-07

Plant A. (mil.)Plant A. (mil.) 80.9 80.9 81.8 81.8 79.4 79.4

Harvest A. (mil.)Harvest A. (mil.) 73.6 73.6 75.1 75.1 72.1 72.1

Bu./A. Bu./A. 160.4 160.4 147.9 147.9 152.2 152.2

Production 11,807Production 11,807 11,112 11,112 10,976 10,976

ImportsImports 11 11 11 11 10 10

Beginning Carryover Beginning Carryover 958 958 2,114 2,114 2,062 2,062

Total Supply Total Supply 12,776 12,776 13,23713,237 13,047 13,047

Utilization:Utilization:

Feed and ResidualFeed and Residual 6,162 6,100 6,162 6,100 6,050 6,050 Food, seed, industrialFood, seed, industrial 2,686 2,686 2,975 2,975 3,540 3,540 Ethanol Ethanol

for fuelfor fuel 1,323 1,323 (11%) (11%) 1,600 1,600 (14%)(14%) 2,150 2,150 (20%)(20%)

ExportsExports 1,814 1,814 2,100 2,100 2,150 2,150

Total UtilizationTotal Utilization 10,662 10,662 11,17511,175 11,815 11,815

Ending CarryoverEnding Carryover 2,114 2,114 (20%)(20%) 2,062 2,062 (18%)(18%) 1,232 1,232 (10%)(10%)

U.S. Farm PriceU.S. Farm Price $2.06 $1.95-$2.05 $2.06 $1.95-$2.05 $2.15-$2.55$2.15-$2.55

GRAIN SORGHUMGRAIN SORGHUM

Sorghum Estimates, USDA, Sorghum Estimates, USDA, 1 Aug. 20061 Aug. 2006

YieldYield ProductionProduction

U.S.U.S. 55.855.8393.9 mil.393.9 mil.

KansasKansas 57.057.0131.1 mil.131.1 mil.(75.0)(75.0) (195.0 mil.) (195.0 mil.)

Sorghum Balance SheetSorghum Balance Sheet04-05 04-05 05-06 05-06 06-0706-07

Plant A. (mil.)Plant A. (mil.) 7.5 7.5 6.5 6.5 6.3 6.3

Harvest A. (mil.)Harvest A. (mil.) 6.5 6.5 5.7 5.7 5.3 5.3

Bu./A. Bu./A. 69.9 69.9 68.7 68.7 55.8 55.8

Production 454 Production 454 394 394 296 296

ImportsImports 0 0 0 0 0 0

Beginning Carryover Beginning Carryover 34 34 57 57 51 51

Total Supply Total Supply 487 487 451 451 347 347

Utilization:Utilization:

Feed and ResidualFeed and Residual 191 150 191 150 85 85

Food, seed, industrialFood, seed, industrial 55 55 55 55 55 55

ExportsExports 184 184 195 195 165 165

Total UtilizationTotal Utilization 430 430 400 400 305 305

Ending CarryoverEnding Carryover 57 57 (13%)(13%) 51 51 (13%)(13%) 42 42 (14%)(14%)

U.S. Farm PriceU.S. Farm Price $1.79 $1.75-$1.80 $1.79 $1.75-$1.80 $1.95-$2.35$1.95-$2.35

SOYBEANSSOYBEANS

Soybean Estimates, USDA, Soybean Estimates, USDA, 1 Aug. 20061 Aug. 2006

YieldYield ProductionProduction

U.S.U.S. 39.639.62.928 bil.2.928 bil.

KansasKansas 31.031.093 mil.93 mil.(37.0)(37.0) (105.5 mil.)(105.5 mil.)

Current Market Influences - Current Market Influences - SoybeansSoybeans

Hot, dry conditions during Hot, dry conditions during bloom and pod fillingbloom and pod filling

August rainsAugust rains Large CarryoverLarge Carryover Bio-diesel potentialBio-diesel potential

Soybean/Bio-diesel Projections, U.S.Soybean/Bio-diesel Projections, U.S.

06/0706/07 07/0807/08Soybean AcresSoybean Acres 74.9 mil. 73.0 mil. 74.9 mil. 73.0 mil.Soybean ProductionSoybean Production 3 bil. bu. 3 bil. bu. 3.1 bil. bu. 3.1 bil. bu.Soybean ExportsSoybean Exports 1.1 bil bu. 1.1 bil bu. 900 mil. bu. 900 mil. bu.Soybean Oil for BDSoybean Oil for BD 2.35 bil lbs. 2.35 bil lbs. 4.65 bil. lbs.4.65 bil. lbs.Bio-diesel Production 400 mil. g. 730 mil. g. Bio-diesel Production 400 mil. g. 730 mil. g.

(330 from SBO) (600 from SBO)(330 from SBO) (600 from SBO)

Soybean Meal Exports 7.5 mil. T. 11 mil. T.Soybean Meal Exports 7.5 mil. T. 11 mil. T.

Source: Paul Smolen, AgriNetwork Management and Mike Woolverton, KSUSource: Paul Smolen, AgriNetwork Management and Mike Woolverton, KSU

Soybean Balance SheetSoybean Balance Sheet04-05 04-05 05-06 05-06 06-0706-07

Plant A. (mil.)Plant A. (mil.) 75.2 75.2 72.1 72.1 74.9 74.9 Harvest A. (mil.)Harvest A. (mil.) 74.0 74.0 71.4 71.4 73.9 73.9Bu./A. Bu./A. 42.2 42.2 43.3 43.3 39.6 39.6ProductionProduction 3,124 3,124 3,086 3,086

3,0103,010 ImportsImports 6 6 4 4 4 4 Beginning Carryover Beginning Carryover 112 112 256 256 515 515

Total Supply Total Supply 3,242 3,242 3,346 3,346 3,4463,446

Utilization:Utilization: Crushings Crushings 1,696 1,696 1,725 1,725

1,7501,750 Seed Seed 88 88 92 91 92 91 ExportsExports 1,103 1,103 930 930 1,090 Residual 1,090 Residual

99 99 85 85 65 65 Total UtilizationTotal Utilization 2,986 2,986 2,832 2,832 2,996 2,996

Ending CarryoverEnding Carryover 256 256 (9%)(9%) 515 515 (19%)(19%) 450 450 (15%)(15%)

U.S. Farm PriceU.S. Farm Price $5.74 $5.74 5.70 5.70 $5.00-$6.00$5.00-$6.00

Former Soviet Union, Production, Former Soviet Union, Production, 2002/03, MMT 2002/03, MMT

CountryCountry WheatWheat CornCorn SoybeansSoybeansRussiaRussia 50,550 1,550 50,550 1,550 .42 .42UkraineUkraine 20,556 4,180 20,556 4,180 .13 .13KazakhstanKazakhstan 12,600 - 12,600 - - - MoldovaMoldova - - 1,200 1,200 - -

For Comparison:For Comparison:United States 43,705 256,046 75,010United States 43,705 256,046 75,010

(Short crop)(Short crop)

Source: USDA, Agricultural Statistics, 2005.Source: USDA, Agricultural Statistics, 2005.