Iowa State Presentation April 2006 Neal Dueker

1. Iowa State PresentationApril 2006Neal Dueker

2. Snapshot of West Central Coop • Headquarters in Ralston • Full service coop with grain, agronomy, seed, chemicals, feed • 17 elevators that buy grain • 4 UP shuttle loaders • Ralston, Jefferson, Gowrie, Jordan • 1 BN shuttle loader • Templeton • 1 IA Interstate train loader • Adair

3. Contracts that we offer • Cash Contract • Cash Sale for Forward Delivery • Price Later Contract • Basis Contract • Futures Only or Hedge to Arrive Contract • Offer Contract • Deferred Payment Contract • Cargill and E-Markets Contracts

4. Cash Contract • Simplest contract • Sell grain at current market price to a specific location • No longer have to store the grain • Can receive payment when grain is delivered

5. Cash Sale for Forward Delivery • Lock in cash price for some future delivery period to a specific location • Producer is obligated to deliver the grain at the specified time and location and is responsible for maintaining grain quality until then • Producer is paid when grain is delivered during the specified time period

6. Price Later Contract • Allows the producer to deliver grain to the elevator and establish the price on or before a predetermined expiration date (currently Oct 4 for WCC) • Elevator takes title of the grain when PL contract is written (could have FSA implications) • Condition of the grain is elevator’s responsibility after the producer delivers it • Some elevators may offer zero charge price later during the off season • Otherwise, the producer may incur a service charge as well as storage costs

7. Basis Contract • Producer locks in the basis on the grain • The futures price is still open until the producer sets that as well • Title of grain is turned over (FSA implications) • A cash advance of approximately 70-80% of the value of the grain can be made to the producer

8. Futures Only Contract • Producer locks in CBOT Futures price • Basis, and therefore cash price, is not set • Elevator places hedges so the producer doesn’t have to worry about margin calls or fees • Typically, minimum bushel requirement of 1000 bu. • Can be rolled to next futures month for 2c fee

9. Offer Contract • Offer certain number of bushels for sale at a predetermined price for a selected delivery period and location • If the market hits the predetermined price, the elevator fills that price with a regular grain contract • Takes some of the emotion out of marketing • Normally written to be valid for 30 day period • After the 30 days, the offer contract expires, and the producer could write a new one at the same price, a new one at a different price, or do nothing

10. Deferred Payment Contract • Add-on contract to any grain sale • Allows producer to take payment of grain that was delivered at some later time that is suitable for cash needs and tax purposes • Title of the grain is the elevator’s • Carrying costs are stopped and elevator is responsible for quality

11. Cargill and E-Markets Contracts • Allows producers to set the futures price • Basis is still up to the producer to set • Producers can use futures averaging over a period of time (usually seasonal highs) to set futures prices, or they have some other options • There is a fee for these contracts

12. Grain Marketing • We try to work with the producers to help them (producers own the coop) • We typically have informational grain meetings once a month • We are available all week, either in person or via phone, to discuss marketing with producers • Most producers will use a combination of the contracts that we mentioned today

13. Grain Processing • How many plants are in operation • How this affects supply and demand on different levels • Implications of the industry

14. Soybean Processing Industry • Very mature industry • Unlike the ethanol industry, the soy processing industry is dominated by 3 major companies (Cargill, ADM, Bunge) and a handful of smaller companies • We have excess crushing capacity in the U.S. • New capacity is being built in China • Some U.S. plants have closed in recent years and some plants only run seasonally

15. Iowa Bean Processors • AGP-Eagle Grove, Emmetsburg, Manning, Mason City, Sergeant Bluff, Sheldon • ADM-Des Moines • Bunge-Council Bluffs • CF-Creston • Cargill-Cedar Rapids, Des Moines, Iowa Falls, Sioux City • West Bend-West Bend • West Central-Ralston

16. Corn Processing • Wet Mills • Large mills that make an array of products ranging from ethanol, sweeteners, starches, oil, gluten feeds, etc. • Dry Mills or Ethanol Plants • Smaller mills that make basically 3 products (CO2, ethanol, and DDG’s)

17. Currently, there are 95 ethanol plants in production in the U.S. with capacity of more than 4.3 billion gallons a year • There are 31 plants and 9 expansions under construction with a combined capacity of more than 1.9 billion gallons • (according to the Renewable Fuels Association)

19. Snapshot of typical ethanol plant • “Cookie-cutter” plant consumes about 18 million bushels of corn per year (50,000 bu/day) • Example would be Coon Rapids • Produce about 50 million gallons of ethanol per year • Most are locally owned coop ventures • Most have about 10 days worth of storage • Most are built in major corn growing areas and buy corn locally via truck and rail

20. Snapshot (cont.) • Ethanol plants typically get 80-90% of their corn from commercial elevators instead of farmers • Most have tough discount schedules due to lack of storage and fact grain goes right to production • No grade averaging • Tough discounts on moisture above 15%

24. Iowa Supply and Demand

25. Breakdown of corn ending stocks • World corn ending stocks at 130.2 mill metric tons (5.126 bln bu) • U.S. corn ending stocks of 2.351 bln bu (45.86% of world stocks) • Iowa corn ending stocks of 563 million bu • (23.94% of U.S. stocks and 10.98% of World stocks)

29. Iowa Production and Exports

30. County Corn Production in 2004 • Boone County- 28,450,000 bu • Dallas County- 23,890,000 bu • Greene County- 29,680,000 bu • Story County- 30,280,000 bu • Hamilton County- 31,830,000 bu • 5 County production of 144,130,000 bu • Or the equivalent of about 8 “Cookie-cutter” ethanol plants • There is currently 1 ethanol plant in these 5 counties (Jewell), but will be 2 soon (Nevada) • That will still leave over 100 million bu. of excess supply

31. County Bean Production in 2004 Boone County-56.9 bu ave. 6,850,000 bu Dallas County-58.7 bu ave. 6,668,000 bu Greene County-54.4 bu ave. 7,801,000 bu Hamilton County-53.1 bu ave. 6,869,000 bu Story County-59.1 bu ave. 7,068,000 bu 5 County Total 35,256,000 bushels

32. What does this all mean? • Ethanol is an important end-user of corn and certainly helps demand • Iowa produces enough corn for the ethanol plants, livestock consumption, and exports out of state • At times, we might compete with the ethanol plants for corn, but a lot of times we will be a big customer of theirs • It will take an adjustment period to see where the grain and DDG’s will flow • Sometimes we will have the best bid and sometimes the ethanol plant will have the best bid

33. DISCLAIMER: • West Central assumes no liability for the use of any information contained herein. Information contained herein was obtained from sources believed to be reliable but is not guaranteed as to its accuracy. Neither the information nor any opinion expressed constitute a solicitation for a specific transaction.