1. Grain & Oilseed Situation and Outlook
Prepared by
Stephen S. Nicholson
February 12, 2013
1

2. U.S. Real Gross Domestic Product Growth
U.S. GDP in the next year is not expected to exceed 1.5-2.5% annual growth.
Percent Change based on annual rates
18.0
16.0
14.0
12.0
10.0
8.0
6.0
4.0
2.0
0.0
-2.0
-4.0
-6.0
-8.0
-10.0
-12.0
Source: U.S. Department of Commerce, Bureau of Economics Analysis
2

3. World Gross Domestic Product
Percent Change from year ago
16.0
15.0
14.0
13.0
12.0
11.0
10.0
9.0
8.0
7.0
6.0
5.0
4.0
3.0
2.0
1.0
0.0
-1.0
-2.0
-3.0
-4.0
-5.0
World Advanced Economies Emerging Economies China
Source: IMF, World Economic Database, October 2012 3

4. Weekly Crude Oil Futures
4

5. U.S. Dollar Index (top) vs. GS Commodity Index (bottom)
5

6. Dow Jones—Monthly
6

7. U.S. Drought Monitor—February 7, 2012
7

8. U.S. Drought Monitor—February 5, 2013
We are not out of the woods yet--drought is still a threat to U.S. Corn Belt, particularly the Western Corn Belt
8

9. Major U.S. Row Crop Planted Acres
Record planted acres of these crop in 2012: 242.4 mln acres
Million Acres
250
225
200
175
150
125
100
75
50
25
0
Corn Soybeans All Wheat Cotton
Source: USDA, Economic Research Service 9

10. Major U.S. Row Crop Planted Acres
Million Acres
100
95
90
85
80
75
70
65
60
55
50
*Projection Corn Soybeans All Wheat
Source: USDA, Economic Research Service
10

11. Corn Supply/Demand Situation and Outlook
• EPA recently issued 2013 Renewable Fuel Standards (RFS)
– No change to corn-based ethanol at 13.8 bln gallons—increase came in advanced
biofuels to 2.75 bln from 1.35 bln
– The industry is struggling--operating at 85% plant capacity
– 10% blending wall may make it difficult to reach the mandate, but economics will result in
producers maximizing blending up to the wall.
• U.S. corn exports have been disappointing.
– U.S. continues to lose share to others—Argentina, Brazil & Ukraine
– In 2005/06, U.S. share of world corn export market was nearly 70%, now just under 30%.
• South American weather and corn production prospects
– Argentine corn production was decreased1.0 MMT to 27.0 MMT
– Which was offset by an increase in Brazilian production of 1.5 MMT to 72.5 MMT.
• Market’s attention will now turn to Prospective Plantings report.
– Spring weather?
– Trade looking for increase in corn acres
– USDA reports HRW acres down 735,000 acres in 2013.
– 2.6 mln acres of CRP land coming back into production, some potential corn acres.
• Price prospects
– It is all about weather, but market will more reluctant to drive prices lower on good spring
weather after last year’s experience.
– Currently market is under pressure, but expect market to remain range bound.
11

12. U.S. Corn Balance Sheet (million bushels)
2007/08 2008/09 2009/10 2010/11 2011/12 2012/13* 2013/14*
Planted Acres (mln) 93.5 86.0 86.4 88.2 91.9 97.2 98.4
Harvested Acres (mln 85.5 78.6 79.5 81.4 84.0 87.4 89.8
Yield (bu./acre) 150.7 153.9 164.7 152.8 147.2 123.4 149.0
Supply
Beginning Stocks (9/1) 1,304 1,624 1,673 1,708 1,128 989 632
Production 13,038 12,092 13,092 12,447 12,360 10,780 13,384
Total Supply 14,362 13,729 14,774 14,182 13,516 11,869 14,036
Disappearance
Feed 5,858 5,182 5,140 4,795 4,548 4,450 4,750
Food, Seed & Industrial 4,420 5,025 5,939 6,426 6,437 5,887 6,000
Ethanol for Fuel 3,049 3,709 4,568 5,019 5,011 4,500 5,000
Exports 2,437 1,849 1,987 1,834 1,543 900 1,750
Total Disappearance 12,737 12,056 13,066 13,055 12,527 11,237 12,500
Ending Stocks 1,624 1,673 1,708 1,128 989 632 1,536
Stocks-to-Use Ratio (%) 12.8% 13.8% 13.1% 8.6% 7.9% 5.6% 12.3%
Average Farm Price ($/bu.) $4.20 $4.06 $3.55 $5.18 $6.22 $7.20 $5.75
12
* Projections

13. Weekly Corn Futures ($/bu)
13

14. Funds’ Net Position and Nearby Corn Futures Price
# of Contracts $/bushel
550,000 $8.50
500,000 $8.00
450,000 $7.50
400,000 $7.00
350,000 $6.50
300,000 $6.00
250,000 $5.50
200,000 $5.00
150,000 $4.50
100,000 $4.00
50,000 $3.50
0 $3.00
# of Contracts Nearby Futures Price
Source: CFTC
14

15. Estimated Net Corn Costs
Net corn costs have risen sharply, primarily due to sharp rise in cash corn prices.
$ per Bushel
$5.25
$5.00
$4.75
$4.50
$4.25
$4.00
$3.75
$3.50
$3.25
$3.00
$2.75
$2.50
$2.25
$2.00
$1.75
$1.50
$1.25
$1.00
$0.75
$0.50
$0.25
$0.00
Net Corn Costs = Cash Corn Price - CoProduct Revenue (Corn Oil, Corn Gluten Feed, Corn Gluten Meal)
15

16. U.S. Corn Yield
Trend line yield is 156.0 bushels per acre, while 10-year average yield is 149.2 bu. per acre.
Bushels per Acre
170
165
160
155
150
145
140
135
130
125
120
115
110
105
100
95
16

17. U.S. Fuel Ethanol Production
1,000 Barrels
30,000
27,500
25,000
22,500
20,000
17,500
15,000
12,500
10,000
7,500
5,000
2,500
0
Source: Energy Information Agency
17

18. Selected Products of U.S. Corn FSI Demand Component
Corn use for ethanol has dropped back, reflecting shuttering of plants due to poor economics.
Million Bushels
6,500
6,000
5,500
5,000
4,500
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
0
HFCS Glucose & Dextrose Starch Ethanol
Source: USDA, Economic Research Service
18

19. Reformulated Gasoline/Ethanol Futures Spread
Ethanol’s discount to RBOB is widening—won’t discourage use of the ethanol
19

20. U.S. Corn Exports
Smallest export program since 1971/72 crop year.
Mln bushels
2,500
2,250
2,000
1,750
1,500
1,250
1,000
750
500
250
0
* Projection
20

21. U.S. Monthly Corn Exports
6,000,000 Metric Tons
5,500,000
5,000,000
4,500,000
4,000,000
3,500,000
3,000,000
2,500,000
2,000,000
1,500,000
1,000,000
500,000
0
ROW China
Source: USDA/FAS & U.S. Census
21

22. U.S. Corn Ending Stocks vs. Average Farm Price
Mln bushels $ per bushel
2,250 $7.50
2,000
$6.50
1,750
1,500 $5.50
1,250
$4.50
1,000
750 $3.50
500
$2.50
250
0 $1.50
Ending Stocks Average Farm Price
* Projection
22

23. U.S. and World Soybean Supply/Demand Situation and Outlook
• It is all about South America!
– In Brazil, conditions are very favorable for crop development.
– However, it is too wet in northern Brazil and too dry in areas of southern Brazil.
– The most concern is in Argentina, where it has been dry going on five weeks.
– USDA forecast Argentina and Brazilian production at 53.0 MMT (-1.0 MMT) and 83.5
MMT (+1.0 MMT), respectively.
– Logistical bottlenecks in South America are likely to delay movement of record crop into
world trade channels.
• World soybean stocks are down from peak of 2010/11, but…
• China continues to buy U.S. soybeans, old-crop and new-crop!
• U.S. soybean stocks are going to reach bare minimum pipeline levels.
– U.S. usage pace is going to make it a difficult job to ration soybeans in LH of crop year.
– There will need to be a significant drop in LH crop year usage—where does it come
from?
– In addition, every day delay in harvest South American harvest pushes export business
back to the U.S.
• Like corn market, soybean market’s attention will turn Prospective Plantings
– Trade looking for 1.5-2.0 mln acre increase.
– Primary driver for increased acres is weather and crop rotation.
• Like corn, soybean futures prices are range bound for now.
– Watch for price spike to ration demand.
23

24. World Soybean Ending Stocks
Stocks levels are good, but down from high of 2010/11 crop year.
Million Metric Tons Percent
80 24%
70 22%
60 20%
50 18%
40 16%
30 14%
20 12%
10 10%
0 8%
Ending Stocks Stocks-to-Use Ratio (Y2)
* Projection
24

25. Annual Change in World Soybean Domestic Disappearance
World has adjusted to higher prices and year-over-year demand remains positive—2012 prices higher than in 2008!
1,000 Metric Tons
17,000
15,000
13,000
11,000
9,000
7,000
5,000
3,000
1,000
-1,000
-3,000
-5,000
-7,000
-9,000
-11,000
* Projection
25
25

26. World Soybean Imports
In 2000/01 China accounted for 25% of the world’s soybean imports, today over 65%.
1,000 Metric Tons
110,000
100,000
90,000
80,000
70,000
60,000
50,000
40,000
30,000
20,000
10,000
0
China ROW
* Projection
26

27. Chinese Soybean Situation
China’s imports are soaring, due to growing consumption and positive crush margins
1,000 Metric Tons
90,000
80,000
70,000
60,000
50,000
40,000
30,000
20,000
10,000
0
Production Imports Total Domestic Consumption Ending Stocks
* Projection
27

28. U.S. Soybean Balance Sheet (million bushels)
2007/08 2008/09 2009/10 2010/11 2011/12 2012/13* 2013/14*
Planted Acres (mln) 64.7 75.7 77.5 77.4 75.1 77.2 78.7
Harvested Acres (mln 64.2 74.7 76.4 76.6 73.8 76.1 77.8
Yield (bu./acre) 41.7 39.7 44.0 43.5 41.9 39.6 43.0
Supply
Beginning Stocks (9/1) 574 205 138 151 215 169 125
Production 2,677 2,967 3,359 3,329 3,094 3,015 3,344
Imports 10 13 15 14 16 20 15
Total Supply 3,261 3,185 3,512 3,494 3,325 3,204 3,483
Disappearance
Crush 1,803 1,662 1,752 1,648 1,703 1,615 1,650
Exports 1,159 1,279 1,499 1,501 1,362 1,345 1,500
Seed, Feed & Residual 94 106 110 130 91 119 90
Total Disappearance 3,056 3,047 3,361 3,279 3,155 3,080 3,240
Ending Stocks 205 138 151 215 169 125 243
Stocks-to-Use Ratio (%) 6.7% 4.5% 4.5% 46.6% 5.3% 4.1% 7.5%
Average Farm Price ($/bu.) $10.10 $9.97 $9.59 $11.30 $12.50 $14.30 $12.65
28
* Projections

29. Weekly Soybean Futures ($/bu)
29

30. Funds’ Net Position and Nearby Soybean Futures Price
# of Contracts $/bushel
320,000 $18.00
300,000 $17.50
280,000 $17.00
260,000 $16.50
240,000 $16.00
220,000 $15.50
200,000 $15.00
180,000 $14.50
160,000 $14.00
140,000 $13.50
120,000 $13.00
100,000 $12.50
80,000 $12.00
60,000 $11.50
40,000 $11.00
20,000 $10.50
0 $10.00
# of Contracts Nearby Futures Price
Source: CFTC
30

31. U.S. Soybean Yield
In short crop years, the yield always seems to return to 1.0 standard deviation below trend.
Bushels per Acre
45
40
35
30
25
20
1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010

32. U.S. Soybean Crush
Billion bushels
1.85
1.75
1.65
1.55
1.45
1.35
1.25
1.15
1.05
0.95
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012*
* Projection
Crop Year beginning with Sept. 1
32

33. NOPA Soybean Crush
Note, that crush has exceeded previous year in the past 10 months…how to cut off demand?
Million bushels
175
150
125
100
75
50
25
0
Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug
2008/09 2009/10 2010/11 2011/12 2012/13
33

34. Board Crush Margin ($/bu)
34

35. U.S. Weekly Soybean Export Inspections
Export are running 30.1% ahead of the last year pace—weekly inspections of 10.5 mln bu. needed to meet USDA forecast.
1,000 Bushels
95,000
90,000
85,000
80,000
75,000
70,000
65,000
60,000
55,000
50,000
45,000
40,000
35,000
30,000
25,000
20,000
15,000
10,000
5,000
0
Week #
2009/'10 2010/'11 2011/'12 2012/'13
35

36. Monthly U.S. Soybean Exports
In December, China accounted for 63% of total exports
.
1,000 Metric Tons
8,500
8,000
7,500
7,000
6,500
6,000
5,500
5,000
4,500
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
0
China ROW
36

37. U.S. Soybean Ending Stocks vs. Price
Million Bushels $/bushel
600 $16.00
500 $14.00
400 $12.00
300 $10.00
200 $8.00
100 $6.00
0 $4.00
Ending Stocks (Y1) Price (Y2)
* Projection
37

38. U.S. and World Vegetable Oil Supply/Demand Situation and Outlook
• Malaysian palm oil prices are extremely attractive
– Palm oil holds a steep discount to soybean oil.
– Malaysian palm oil stocks are at all-time record levels.
– Import and export taxes continue to distort trade flows
• World vegetable oil stocks are more than adequate.
• Keep eye on canola oil prices
– Canadian canola seed stocks are down significantly from last year.
– Canola oil prices didn’t see the harvest or post-harvest drop—they have remained firm.
• U.S. soybean oil stocks continue to decline year-over-year.
– The market is showing little concern.
– However, basis levels are likely to firm through the 2012/13 crop year.
• Soybean oil futures rally has been driven by…
– The dryness in Argentina
– Rally in palm oil prices
– Renewed enthusiasm for biodiesel, but initial euphoria is waning.
– Like other commodities, soybean oil futures are range bound.
– What about crude oil prices and investment money flow?
38

39. World Vegetable Oil Stocks
Million Metric Tons Percent
18.0 11.0%
16.0
10.0%
14.0
9.0%
12.0
10.0 8.0%
8.0 7.0%
6.0
6.0%
4.0
5.0%
2.0
0.0 4.0%
Ending Stocks Stocks-to-Use Ratio
* Projection
39

40. Annual Change in World Vegetable Oil Domestic Disappearance
Despite price spikes, domestic vegetable oil demand had never gone down
1,000 Metric Tons
9,000
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
* Projection
40

41. Monthly Malaysian Palm Oil Stocks
Stocks at all-time record high as well as global stocks.
1,000 metric tons
2,800
2,600
2,400
2,200
2,000
1,800
1,600
1,400
1,200
1,000
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2008 2009 2010 2011 2012
Source: Malaysian Palm Oil Board
41

42. China and India Vegetable Oil Imports
. Million Metric Tons
11
10
9
8
7
6
5
4
3
2
1
0
China India
Source: USDA, Economic Research Service 42

43. U.S. Soybean Oil Balance Sheet (million pounds)
2007/08 2008/09 2009/10 2010/11 2011/12 2012/13* 2013/14*
Supply
Beginning Stocks (10/1) 3,085 2,485 2,861 3,406 2,425 2,540 1,615
Production 20,580 18,745 19,615 18,888 19,740 18,975 19,140
Total Supply 23,730 21,320 22,579 22,453 22,314 21,865 20,955
Disappearance
Domestic Use 18,335 16,265 15,814 16,795 18,310 17,900 18,000
Biodiesel 3,245 2,013 1,680 2,737 4,870 4,900 5,000
Exports 2,911 2,193 3,359 3,233 1,464 2,300 1,750
Total Disappearance 21,246 18,458 19,173 20,028 19,774 20,200 19,750
Ending Stocks 2,485 2,861 3,406 2,425 2,540 1,665 1,205
Stocks-to-Use Ratio (%) 11.7% 15.5% 17.8% 12.1% 12.9% 8.2% 6.1%
43.00- 48.00-
Price-Decatur (cents/lb.) 52.03 32.16 35.95 53.20 51.90 53.00 58.00
Crush (mln bushels) 1,777 1,648 1,769 1,625 1,703 1,615 1,650
Yield (lbs. per bu.) 11.58 11.37 11.09 11.62 11.59 11.75 11.60
43

44. Weekly Soybean Oil Futures ($/bu)
44

45. Funds’ Net Position and Nearby Soybean Oil Futures Price
# of Contracts $ per pound
90,000 $0.60
80,000 $0.59
70,000 $0.58
60,000 $0.57
50,000 $0.56
40,000 $0.55
30,000 $0.54
20,000 $0.53
10,000 $0.52
0 $0.51
-10,000 $0.50
-20,000 $0.49
-30,000 $0.48
-40,000 $0.47
-50,000 $0.46
-60,000 $0.45
# of Contracts Nearby Futures Price
Source: CFTC
45

46. U.S. Soybean Oil Domestic Disappearance
Million pounds
20,000
18,000
16,000
14,000
12,000
10,000
8,000
6,000
4,000
2,000
0
Food Use/Misc. Biodiesel
* Projection
46

47. U.S. Palm Oil Imports
Million pounds
1,300
1,200
1,100
1,000
900
800
700
600
500
400
300
200
100
0
* Projection
47

48. Monthly B-100 Production
Million Gallons
120
100
80
60
40
20
0
2010 2011 2012
Source: U.S. Energy Information Administration
48

49. Monthly U.S. Soybean Oil Consumption for Methyl Ester Production
Crushers are extremely bullish soybean oil market with reinstatement of blender’s tax credit.
Million Pounds
600
550
500
450
400
350
300
250
200
150
100
50
0
2009/10 2010/11 2011/12 2012/13
Source: U.S. Energy Information Administration
49

50. U.S. Soybean Oil Accumulative Export Shipments
Total export commitments are running nearly 242.2% ahead of last year’s pace.
1,000 Metric Tons
1,600
1,400
1,200
1,000
800
600
400
200
0
Week
2008/'09 2009/'10 2010/'11 2011/'12 2012/'13
Source: USDA Export Sales Reports
50

51. U.S. Soybean Oil Ending Stocks vs. Price
Million Pounds Cents per pound
4,500 57.00
4,000 52.00
3,500 47.00
3,000 42.00
2,500 37.00
2,000 32.00
1,500 27.00
1,000 22.00
500 17.00
0 12.00
Ending Stocks (Y1) Price (Y2)
* Projection
51

52. U.S. and World Wheat Supply/Demand Situation and Outlook
• The world wheat production is expected to rebound this year.
• The wheat market’s major focus is on weather
– HRW crop was in the worse condition going into dormancy in 40 years.
– Western parts of the U.S. HRW wheat are extremely dry—concern about
winterkill, etc.
– Growing conditions for SRW have been good.
– Wheat field in Russia have also been stressed over the winter.
• U.S. wheat exports continue to be disappointing.
– Current pace is below what is needed to reach USDA forecasts.
• Price spread between corn and wheat continues to narrow—
encouraging increased wheat feeding.
– However, supplies are tight in the cash markets which may temper some
switching.
• Wheat futures prices are expected remain range-bound.
– End users have been unwilling to chase prices higher.
– Export pace or lack thereof, condition of crop as it breaks dormancy and
spring wheat planting will determine price direction.
52

53. World Wheat Balance Sheet (million metric tons)
2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13*
Harvested Acres ( mln ha) 211.7 217.1 224.3 225.3 217.1 221.8 215.9
Yield (mt/ha) 2.82 2.82 3.05 3.05 3.00 3.14 3.03
Supply
Beginning Stocks 153.4 133.8 128.2 168.1 201.0 197.9 196.5
Production 596.3 612.3 683.4 686.7 652.0 696.6 653.6
Imports 114.1 113.5 137.9 133.8 131.6 148.5 139.3
Total Supply 863.8 859.6 949.6 988.7 984.7 1,043.0 989.4
Disappearance
Feed & Residual 110.2 102.3 121.3 120.4 116.1 147.0 133.1
Food, Seed & Industrial 508.0 512.0 515.6 530.2 537.9 542.2 548.0
Exports 111.8 117.2 144.5 137.0 132.8 157.3 131.7
Total Disappearance 618.1 614.2 636.9 650.7 654.0 689.2 681.0
Ending Stocks 133.8 128.2 168.1 201.0 197.9 196.5 176.7
Stocks-to-Use Ratio (%) 21.6% 20.9% 26.4% 30.9% 30.3% 28.5% 26.0%
* Projections 53

54. World Wheat Stocks
Wheat stocks are declining, but we are not in a shortage situation.
Million Metric Tons Percent
250 38.0%
225 36.0%
200 34.0%
175 32.0%
150 30.0%
125 28.0%
100 26.0%
75 24.0%
50 22.0%
25 20.0%
0 18.0%
Ending Stocks Stocks-to-Use Ratio
* Projection
54
54

55. U.S. All-Wheat Balance Sheet (million bushels)
2006/07 2007/08 2008/09 2009/10 2010/11 2011/12* 2012/13*
Planted Acres (mln) 57.3 60.5 63.2 59.2 53.6 54.4 55.7
Harvested Acres (mln 46.8 51.0 55.7 49.9 47.6 45.7 49.0
Yield (bu./acre) 38.6 40.2 44.9 44.5 46.3 43.7 46.3
Supply
Beginning Stocks (6/1) 571 456 306 657 976 862 743
Production 1,808 2,051 2,499 2,218 2,207 1,999 2,269
Imports 122 113 127 119 97 112 130
Total Supply 2,501 2,620 2,932 2,993 3,279 2,974 3,142
Disappearance
Food 938 948 927 919 926 941 950
Exports 908 1,263 1,015 879 1,289 1,050 1,050
Seed, Feed & Residual 199 104 333 219 203 240 450
Total Disappearance 2,045 2,314 2,275 2,018 2,417 2,231 2,450
Ending Stocks 456 306 657 976 862 743 691
Stocks-to-Use Ratio (%) 22.2% 13.2% 28.9% 48.4% 35.7% 33.3% 28.2%
Average Farm Price ($/bu.) $4.26 $6.48 $6.78 $4.87 $5.70 $7.24 $7.90
55

56. U.S. Winter Wheat Crop Condition Ratings
U.S. winter wheat crop went into dormancy at 33% rated good-to-excellent & 26% rated very poor-to-poor.
.
% Good-to-Excellent
70
65
60
55
50
45
40
35
30
2007 2008 2009 2010 2011 2012
56

57. Weekly Kansas City Wheat Futures ($/bu)
(Hard Red Winter)
57

58. Chicago Wheat-Corn Price Spread ($/bu)
58

59. U.S. Wheat Planted and Harvested Acres
2013 winter wheat seeding are up 1.2%, to 41.82 mln acres from 41.32 mln in 2012.
Million Acres
77
74
71
68
65
62
59
56
53
50
47
44
Planted Acres Harvested Acres
* Projection
59

60. U.S. Wheat Accumulative Export Shipments
Shipments are running nearly 8.3% behind last year’s pace.
1,000 Metric Tons
40,000
35,000
30,000
25,000
20,000
15,000
10,000
5,000
0
2009/10 2010/11 2011/'12 2012/13
Source: USDA Export Sales Reports
60

61. U.S. Wheat Stocks
Million Bushels $ per Bushel
1200 $8.00
1100 $7.50
1000 $7.00
900 $6.50
800 $6.00
700 $5.50
600 $5.00
500 $4.50
400 $4.00
300 $3.50
200 $3.00
100 $2.50
0 $2.00
Ending Stocks Average Farm Price
* Projection
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62. Some Closing Thoughts…
• While down from highs, world commodity stock levels for
most commodities are still at or near record levels.
• However, commodity prices remain historically high?
• Global demand continues to increase.
• Global wealth continues to grow.
• Futures markets are still important to price, but don’t forget
that cash markets are doing more of the work of price
discovery.
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63. Contact Information:
Stephen S. Nicholson
Commodity Procurement/Economist
International Food Products
St. Louis, Missouri U.S.A.
636-717-2100, x-1292
snicholson@ifpc.com
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