2005 Marketing and Outlook

1. 2005 Marketing and Outlook February 2, 2005 Food and Agricultural Policy Research Institute www.fapri.missouri.edu

4. Gas Fuels Price Index Source: Global Insight

5. Interest Rates Source: Global Insight

6. Corn outlook

8. Corn Feed & Residual Use and Corn Production

9. Corn Ethanol Gross Profit Margins

10. Ocean-Going Dry Cargo Vessel RatesU.S. to Japan Rates down $5/mt in Jan ‘05 Source: Baltic Exchange (www.balticexchange.com)

11. Accumulated Corn Exports and Outstanding Sales Source: USDA’s Weekly Export Sales Report

12. U.S. Corn Exports By Destination in 2003/04 Canada 79 mil bu Taiwan, 185 mil bu Japan, 575 mil bu Israel, 46 mil bu S. Korea, 144 mil bu Algeria, 50 mil bu Egypt, 125 mil bu Mexico, 216 mil bu Columbia, 66 mil bu Others, 411 mil bu Total U.S. Corn Exports in 2003/04: 1.897 billion bu.The listed countries account for 80% of U.S. corn exports. Source: USDA/ERS/FATUS, WASDE – November 2004

14. U.S. and China Net Corn Trade

15. Argentina Corn Production

16. Used with permission from Richard Brock and Associates. www.brockreport.com , Phone: 1-800-558-3431

17. Corn March 2005 Futures

19. Corn December 2005 Futures

20. Corn December 2005 Futures Aligned with Historical Average of December Corn Futures What does the 25 year average suggest for pricing the 2005 corn crop?

21. Corn Marketing – 2004 Crop Sellers: • If you’ve taken your LDP, but are still storing your crop without any futures contracts, you have zero downside price protection. • A possible trigger point for cash prices may be anything above $2.20 through March. Weather scares may bring additional opportunities after May. • Barring a weather shock or exports shock, prices above $2.40 appear unlikely. • The March 31 Planting Intentions report could cause significant movement in market prices depending on farmer reaction to Asian rust. Buyers: • Some recommending week to week corn purchases. • Not much fundamental strength in the market to raise corn prices. • Watch exports to and from China carefully.

22. Corn Marketing – 2005 Crop • Not many clear opportunities available. • Watch for pricing opportunities above $2.50 Program Opportunities • Revenue Assurance default option - 100% of price, 70% of yield • Additional yield insurance may be as attractive as futures options, depending on your proven yield level and the variability in yield you have experienced

23. Estimating the 2004/05 Season Average Farm Price for Corn USDA est. $1.95 Source: USDA’s “Agricultural Prices”

24. Corn Price and Ending StocksMaximum corn price obtained over the Sept – June period Bottom Line: Difficult to get to corn prices over $2.20 through June

25. Upside Price Risks Ethanol demand U.S. feed & residual demand Weaker dollar Falling ocean shipping rates Low world stocks Downside Price Risks Soybean Rust & Planting Intentions Chinese exports Argentina exports U.S. Crop Corn Price Outlook Risks

26. 2005 Cash Corn Price Seasonality One of many possible scenarios Prospective Plantings Report implies acreage shift from soybeans to corn Normal 2005 South American Soybean Crop Adverse weather speculation stimulates variance in corn prices creating marketing opportunities Market overreacts running corn prices lower and bidding up soybean prices to increase soybean area Heavy Jan/Feb marketings pressure prices lower Corn prices recover as acreage shifts back into soybeans Normal 2005 corn production China exports 250 million bu $1.90 $1.90 Jan ’05 March 31, ’05 Apr ’05 Jun ‘05 Jul/Aug ‘05 Sep/Oct ‘05

27. Soybean outlook

28. Asian Rust • Two types of soybean rust – most aggressive type (Asian rust) found in Missouri, South Carolina, Tennessee, Mississippi, Georgia, Alabama, Louisiana, Arkansas and Florida. • Thought to be transferred to the U.S. via the hurricanes in 2004. • Soybean rust is a fungus that is transferred via the wind and can survive and propagate on numerous host plants. • Soybean rust does not thrive in cold climates and may not be able to over winter in the northern states. • Ample supply of fungicides – 7 registered products, 6 additional products approved under EPA emergency exemptions. • Treatment cost of $15 - $30/acre, two treatments may be needed. USDA estimates $20 on average per treatment. • Extension personnel planning to use Sentinel plots with early soybeans as an early warning indicator of the presence of Asian rust.

29. Soybean Rust Locations

31. U.S. Soybean Crush By Month Source: U.S. Census Bureau

32. Soybean Crush and Gross Crush Margin Sources: USDA’s Grain and Feed Market News and U.S. Census Bureau

33. Accumulated Soybean Exports and Outstanding Sales Source: USDA’s Weekly Export Sales Report

34. Accumulated Soybean Exports and Outstanding Sales to China Source: USDA’s Weekly Export Sales Report

35. U.S. Soybean Exports By Destination in 2003/04 Canada 22 mil bu The Netherlands, 22 mil bu China: Mainland, 327 mil bu Taiwan, 50 mil bu Germany, 28 mil bu Japan, 131 mil bu Spain, 33 mil bu S. Korea, 42 mil bu Indonesia, 40 mil bu Mexico, 117 mil bu Others, 73 mil bu Total U.S. Soybean Exports in 2003/04: 885 million bu.The listed countries account for 92% of U.S. soybean exports. Source: USDA/ERS/FATUS, WASDE – November 2004

36. Update on Brazilian Crop Size

37. Estimating the 2004/05 Season Average Farm Price for Soybeans USDA est. $5.10 Source: USDA’s “Agricultural Prices”

38. 2005 Cash Soybean Price Seasonality One of many possible scenarios Adverse weather and Asian Rust speculation stimulates variance in soybean prices creating marketing opportunities Market overreacts running corn prices lower and bidding up soybean prices to increase soybean area Prospective Plantings Report implies acreage shift from soybeans to corn Soybean prices fall as acreage shifts back into soybeans Normal South American Production Normal 2005 soybean production, minimal Asian Rust Impact $5.30 $4.50 Jan ’05 Feb/Mar ’05 Apr ’05 Jun ‘05 Jul/Aug ‘05 Sep/Oct ‘05

39. Soybean March 2005 Futures

41. Soybean November 2005 Futures

42. Soybean November 2005 Futures Aligned with Historical Average of November Soybean Futures What does the 5 year average suggest for pricing the 2005 soybean crop?

43. Soybean Prices and 2005 Marketing

44. Upside Price Risks Asian rust Harvesting losses Domestic crush demand Weaker dollar Falling ocean shipping rates Downside Price Risks South American crop size Chinese imports U.S. Crop Soybean Price Outlook Risks

45. Soybean Marketing – 2004 Crop Sellers: • Very few opportunities to collect LDP’s so far, but assuming the large projected South American crop is realized, additional opportunities may be available in Feb/Mar. Soybean Meal Buyers: • When meal prices edge below $160 per ton, it may be a good time to consider some pricing options. Prices could be lower in the Feb/Mar timeframe with the South American crop. • Watch out for possible movement in soybean and soybean meal prices after the March 31 Planting Intentions report.

46. Soybean Marketing – 2005 Crop • Watch for volatility in bean prices with the South American crop and Asian rust and its impacts on planting intentions. • A November 2005 soybean futures above $5.70 may represent a good marketing opportunity to price some 2005 soybeans. • Do not speculate on a low U.S. soybean crop next year due to soybean rust.

47. Wheat Outlook

49. 2005 Winter Wheat Planting

50. U.S. Wheat Accumulated Sales and Exports