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Daniel O’Brien & Mike Woolverton K-State Research and Extension

Feedgrain Market Outlook & Pricing Opportunities Grain Sorghum School Ness City, Kansas February 29, 2008. Daniel O’Brien & Mike Woolverton K-State Research and Extension dobrien@oznet.ksu.edu mikewool@agecon.ksu.edu. Historic vs Current Grain Prices. Land in Crops (Millions of acres).

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Daniel O’Brien & Mike Woolverton K-State Research and Extension

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  1. Feedgrain Market Outlook& Pricing OpportunitiesGrain Sorghum SchoolNess City, KansasFebruary 29, 2008 Daniel O’Brien & Mike Woolverton K-State Research and Extension dobrien@oznet.ksu.edumikewool@agecon.ksu.edu

  2. Historic vs Current Grain Prices

  3. Land in Crops(Millions of acres) 5yr. Ave.07/08USDA Proj. 08/09 1 Corn 79.6 93.6 90.0 (-4%) Soybeans 74.2 63.6 71.0 (+11%) Hay 62.4 61.8 61.8 (--) Wheat 59.5 60.4 64.0 (+6%) Cotton 14.1 10.8 9.5 (-13%) Grain Sorghum 8.1 7.7 7.4 (-4%) Principle Crops 2 297.9 297.9 303.7 CRP 35.9 34.9 (-3%) 1Estimates for corn, soybeans, wheat, and cotton from the USDA Commodity Outlook Forum, released February 22, 2008. 2 Total crop land in the United States – 441.6 million acres

  4. Feedgrain Markets:Corn & Grain Sorghum

  5. Current Feedgrain Market Factors • U.S. Feedgrain stocks are adequate • Feedgrain supplies not as tight as for wheat & soybeans • Large 2008 crop (12.5–13.0 billion bu) needed to meet demand • U.S. Ethanol demand continues strong • Strong demand from overseas export buyers • Reduced production in Argentina (dry Dec-Jan) & Mexico (lower area than expected), increases in South Africa (good rains) • Southern hemisphere corn export competition to increase seasonally. • Expected competition for U.S. crop acres vs other crops in Spring 2008(“bidding” during Feb-May)

  6. MAY 2008 Corn Futures CBOT: April 2006-February 2008 “2008 MAY Old Crop Corn Contract” Contract Volume & Open Interest

  7. Ness City, KansasCash Grain Sorghum Price De Bondurant Grain Co., Ness City, Kansas March 2, 2007 – February 28, 2008 Source: DTN Bid Analyzer $4.97/bu on 2/28/08 Basis: $0.46/bu under CBOT March 2008 Corn

  8. Ness City, KansasCash Corn Price De Bondurant Grain Co., Ness City, Kansas March 2, 2007 – February 28, 2008 Source: DTN Bid Analyzer $5.30/bu on 2/28/08 Basis: $0.13/bu under CBOT March 2008 Corn

  9. December 2008 Corn Futures CBOT: Jan 2006-February 2008 “2008 New Crop Corn Contract” Contract Volume & Open Interest

  10. Wakeeney, KansasNew Crop Grain Sorghum Prices Midwest Coop, Wakeeney, Kansas March 2, 2007 – February 28, 2008 Source: DTN Bid Analyzer $5.18/bu on 2/28/08 FC Basis: $0.47/bu under CBOT DEC 2008 Corn

  11. Scott City, KansasNew Crop Corn Prices Scott Coop Assn., Scott City, Kansas March 2, 2007 – Feb. 28, 2008 Source: DTN Bid Analyzer $5.51/bu on 2/28/08 FC Basis: $0.14/bu under CBOT DEC 2008 Corn

  12. U.S. Corn Supply-Demand

  13. Dynamics of U.S. Corn Usage USDA USDA 2006/072007/08 est. (Mln. Bu.) Feed and Residual 5,598 5,9501 (+6%) Food, Seed, and Industrial 1,371 1,3552 (־1%) Ethanol for Fuel 2,117 3,200(+51%) Net Exports 2,125 2,450 (+15%) Ending Stocks 1,3041,438 (+10%) Total Usage 11,210 12,995 (+16%) Production 10,535 13,074 (+24%) 1 Assumes DDGS retain 30% of the feed value of corn and are included in the feed and residual category by the USDA. 2 Industrial, food, and seed less ethanol.

  14. U.S. Grain Sorghum Supply-Demand

  15. U.S. Corn Planted Acreage1973-2007 + Projected 2008

  16. U.S. Corn Yields1998-2007 + 2008 Trend Yield

  17. U.S. Corn Production1973-2007 + Projected 2008

  18. U.S. Corn Food, Seed & Industrial Use1973/74 thru 2007/08 Marketing Years

  19. U.S. Ethanol Industry at a Glance 20062008 • Number of operating ethanol plants:97139Under construction or expanding:3569 • Announced plants:300(17%)100(?) • Current production capacity: (BGPY) 4.87.9 • Projected production capacity: 11.7 BGPY end of 2008 13.5 BGPY end of 2009 • Feedstock Use Proportion: Corn 97% Sorghum 2% Other 1%

  20. Corn Demand IncreaseDue to Ethanol Development DCorn DCorn w. Ethanol Corn Price Corn Quantity

  21. Short Run Ethanol Effect on Prices DCorn DCorn w. Ethanol Corn Price Short Run Supply (2007-08 Corn Crop & Stocks) PSR P0 Corn Quantity Q 2007-08

  22. Ethanol vs RBOB PricesApril 2007 – February 2008 (Source: DTN)

  23. Ethanol Plant ProfitabilityFebruary 2007 – January 2008 (Source: DTN)

  24. Long Run Effect of Ethanol on Corn-Feedgrain Prices DCorn DCorn w. Ethanol Corn Price Long Run Supply (2008-2012 Corn Supplies) SSht Run PSR PLR Corn Quantity Q07 Q2008-2012

  25. U.S. Corn Exports1973/74 thru 2007/08 Marketing Years + Projected 2008/09

  26. Total U.S. Corn Use1973/74 thru 2007/08 Marketing Years

  27. World Coarse Grain Supply-Demand2005/06 thru 2007/08 Marketing Years

  28. Production of World Coarse Grain Exporters2005/06 thru 2007/08 Marketing Years

  29. Exports of World Coarse Grain Exporters2005/06 thru 2007/08 Marketing Years

  30. Global production up 9% from 2006/07. Use up 7% Production will be 5.37 MMT (212 mil. Bu.) less than Usage World Ending Stocks to decrease 5.37 MMT from last year, down to 13 % of Usage. World Corn Supply & Demand Million MT

  31. U.S. Corn Ending Stocks CornEnding Stocks as a % of Usage

  32. U.S. Corn Stocks/Use% vs Price

  33. WheatMarkets

  34. Current Wheat Market Factors • World wheat stocks at a 30 year low • Global shortage of quality milling wheat • Strong support for U.S. Hard Red Spring Wheat prices • Weak U.S. dollar & Lower Ocean Freight Rates Helping U.S. wheat exports • Wheat export regulations in Argentina & Russia • Attracting speculative interest to U.S. commodity markets • U.S. wheat acreage & production concerns in ’08 • HRS vs soybeans in upper Great Plains; HRW production • Need for greater 2008 U.S. / World wheat production in to rebuild stocks.

  35. MAY 2008 HRW Wheat Futures KCBT: February 2007-March 2008 “2008 MAY Old Crop HRW Contract” Contract Volume & Open Interest

  36. Ness City, Kansas Cash Wheat Prices De Bondurant Grain Co., Ness City, Kansas March 1, 2007 – Feb. 28, 2008 Source: DTN Bid Analyzer $11.55/bu on 2/28/08 Basis: $0.80/bu under KC March 2008 Wheat

  37. July 2008 HRW Wheat Futures KCBT: April 2006-February 2008 “2008 JULY New Crop HRW Contract” Contract Volume & Open Interest

  38. Scott City, Kansas New Crop Wheat Prices Scott Coop Assn., Scott City, Kansas March 1, 2007 – February 28, 2008 Source: DTN Bid Analyzer $10.71/bu on 2/28/08 FC Basis: $0.60 /bu under July 2008 KC Wheat

  39. March 2008 Hard Red Spring Wheat MGE: April 2006-February 2008 “2008 MARCH Old Crop HRS Contract” Contract Volume & Open Interest

  40. U.S. Wheat Supply-Demand

  41. U.S. Wheat Planted Acreage1973-2007 + Projected 2008 Kansas HRW Acres Seeded down by 500K in 2007/08

  42. U.S. Wheat Yields1973-2007 + 2008 Trend Yield

  43. U.S. Wheat Production1973-2007 + Projected 2008

  44. U.S. Wheat Exports1973/74 thru 2007/08 + Projected 2008/09

  45. World Wheat Supply-Demand2005/06 thru 2007/08 Marketing Years

  46. Production of World Wheat Exporters2005/06 thru 2007/08 Marketing Years

  47. Exports of World Wheat Exporters2005/06 thru 2007/08 Marketing Years

  48. U.S. Wheat Ending Stocks Wheat Ending Stocks as a % of Usage

  49. U.S. Wheat Stocks/Use% vs Price

  50. Impact of Scarce U.S. & World Wheat Supplies on Prices DWheat Wheat Price SMedium Supply SShort Supply SLarge Supply PSS PMS Marketing Loan$ PLS QSS QMS QLS Wheat Quantity

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