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GRAIN OUTLOOK Risk & Profit 2006 Conference

GRAIN OUTLOOK Risk & Profit 2006 Conference. Mike Woolverton Kansas State University mikewool@agecon.ksu.edu. U.S. EXPORTS 2005/06 (millions of bushels). Projections 2005/06 2006/07est. Wheat 1,004 900 Corn 2,100 2,150 Sorghum 195 185

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GRAIN OUTLOOK Risk & Profit 2006 Conference

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  1. GRAIN OUTLOOKRisk & Profit2006 Conference Mike Woolverton Kansas State University mikewool@agecon.ksu.edu

  2. U.S. EXPORTS 2005/06(millions of bushels) Projections2005/062006/07est. Wheat 1,004 900 Corn 2,100 2,150 Sorghum 195 185 Soybeans 905 1,090 Source: World Agricultural Supply and Demand Estimates, USDA

  3. WHEAT

  4. Winter Wheat Estimates, USDA, 1 Aug. 2006 YieldProduction U.S. 41.2 1.283 bil. Kansas 32.0 300.8 mil. (40.0) (380.0 mil.)

  5. Current Market Influences - Wheat • Deterioration of U.S. Spring Wheat Crop (33% vs. 73%) • Australian Drought (-12%) • U.S. HRW Quality • Low Carryover

  6. PRODUCTION PROJECTIONS, U.S., 2006/07 • All Wheat – 1.801 bil. Bu. – down 14% • Hard Winter – 660 mil. Bu. – down 29% • Hard Spring – 423 mil. Bu. – down 9% • Soft Red – 380 mil. Bu. – up 23% • White – 284 mil. Bu. – down 5% • Durum – 55 mil. Bu. - down 46%

  7. Current Market Influences • Deterioration of U.S. Spring Wheat Crop (32% vs. 73%) • Australian Drought (-12%) • Drop in World Production • U.S. HRW Quality

  8. 2006 - 2005 HRW Wheat Quality 1 20062005 Test Weight lbs/bu 60.7 60.0 Wheat Protein % 13.9 12.1 Flour Yield 71.0 69.0 Wet Gluten % 33.8 29.5 1 Kansas State University harvest survey of Wheat Sheds in Kansas, Oklahoma, and Texas, Summer 2006, preliminary results.

  9. Soft Red Wheat Situation • Production up 23%; average protein 10.0%; test weight 60.1 July 26Aug 11 • Toledo Basis - -95 -99 Spot - $2.87 $2.74 • Kansas City Basis - +31 +28 Spot - $5.13 $4.87

  10. PRODUCTION PROJECTIONS, MAJOR WHEAT EXPORTERS, 2006/07 (MMT) 2006/072005/06 • EU-25 119.35 (-3.2%) 122.59 • United States 49.03 (-14%) 57.28 • Canada 25.5 (-2%) 25.98 • Australia 21.5 (-12%) 24.5 • Argentina 13.5(+8%)12.5 Total Exporters 228.88 (-6%) 242.85 Total World Prod. 598.00 (-4%) 621.86

  11. Wheat Balance Sheet 04-05 05-06 06-07 Plant A. (mil.) 59.7 57.2 57.9 Harvest A. (mil.) 50.0 50.1 47.1 Bu./A. 43.2 42.0 38.3 Production 2,158 2,150 1,801 Imports 71 85 105 Carryover 546 540 568 Total Supply 2,775 2,730 2,474 Utilization: Feed and Residual 201 200 145 Food 895 910 915 Seed 79 78 80 Exports 1,060 1,000 900 Total Utilization 2,235 2,188 2,040 Carryover 540 (24%) 542 (25%) 434 (21%) U.S. Farm Price $3.40 $3.35-$3.45 $3.90-$4.50

  12. CORN

  13. Corn Estimates, USDA, 1 Aug. 2006 YieldBushels U.S. 152.2 10.9 bil. Kansas 125.0 393 mil. (135.0) (465.8 mil.)

  14. Current Market Influences - Corn • Drought in Western and Northern Corn Belt • Latest USDA estimate • Demand from ethanol producers • Strong export demand

  15. Corn/Ethanol Projections, U.S. 06/07 07/08 Corn Acres 79.4 mil. 82.0 mil. Corn Production 11.0 bil. 12.3 bil. Corn Exports 2.15 bil. 2.0 bil. Corn for Ethanol 2.15 bil. 3.4 bil. Ethanol Production 6.4 bil. g. 8.6 bil. g. DDG Production 9.5 bil. T. 16.0 bil. T. (Thirty to 40 percent will replace corn in rations. Sixty to 70% will replace soybean meal.) Source: Paul Smolen, AgriNetwork Manangement and Mike Woolverton, KSU.

  16. Corn Balance Sheet 04-05 05-06 06-07 Plant A. (mil.) 80.9 81.8 79.4 Harvest A. (mil.) 73.6 75.1 72.1 Bu./A. 160.4 147.9 152.2 Production 11,807 11,112 10,976 Imports 11 11 10 Beginning Carryover 958 2,114 2,062 Total Supply 12,776 13,237 13,047 Utilization: Feed and Residual 6,162 6,100 6,050 Food, seed, industrial 2,686 2,975 3,540 Ethanol for fuel 1,323 (11%) 1,600 (14%) 2,150 (20%) Exports 1,814 2,100 2,150 Total Utilization 10,662 11,175 11,815 Ending Carryover 2,114 (20%) 2,062 (18%) 1,232 (10%) U.S. Farm Price $2.06 $1.95-$2.05 $2.15-$2.55

  17. GRAIN SORGHUM

  18. Sorghum Estimates, USDA, 1 Aug. 2006 YieldProduction U.S. 55.8 393.9 mil. Kansas 57.0 131.1 mil. (75.0) (195.0 mil.)

  19. Sorghum Balance Sheet 04-05 05-06 06-07 Plant A. (mil.) 7.5 6.5 6.3 Harvest A. (mil.) 6.5 5.7 5.3 Bu./A. 69.9 68.7 55.8 Production 454 394 296 Imports 0 0 0 Beginning Carryover 34 57 51 Total Supply 487 451 347 Utilization: Feed and Residual 191 150 85 Food, seed, industrial 55 55 55 Exports 184 195 165 Total Utilization 430 400 305 Ending Carryover 57 (13%) 51 (13%) 42 (14%) U.S. Farm Price $1.79 $1.75-$1.80 $1.95-$2.35

  20. SOYBEANS

  21. Soybean Estimates, USDA, 1 Aug. 2006 YieldProduction U.S. 39.6 2.928 bil. Kansas 31.0 93 mil. (37.0) (105.5 mil.)

  22. Current Market Influences - Soybeans • Hot, dry conditions during bloom and pod filling • August rains • Large Carryover • Bio-diesel potential

  23. Soybean/Bio-diesel Projections, U.S. 06/07 07/08 Soybean Acres 74.9 mil. 73.0 mil. Soybean Production 3 bil. bu. 3.1 bil. bu. Soybean Exports 1.1 bil bu. 900 mil. bu. Soybean Oil for BD 2.35 bil lbs. 4.65 bil. lbs. Bio-diesel Production 400 mil. g. 730 mil. g. (330 from SBO) (600 from SBO) Soybean Meal Exports 7.5 mil. T. 11 mil. T. Source: Paul Smolen, AgriNetwork Management and Mike Woolverton, KSU

  24. Soybean Balance Sheet 04-05 05-06 06-07 Plant A. (mil.) 75.2 72.1 74.9 Harvest A. (mil.) 74.0 71.4 73.9 Bu./A. 42.2 43.3 39.6 Production 3,124 3,086 3,010 Imports 6 4 4 Beginning Carryover 112 256 515 Total Supply 3,242 3,346 3,446 Utilization: Crushings 1,696 1,725 1,750 Seed 88 92 91 Exports 1,103 930 1,090 Residual 99 85 65 Total Utilization 2,986 2,832 2,996 Ending Carryover 256 (9%) 515 (19%) 450 (15%) U.S. Farm Price $5.74 5.70 $5.00-$6.00

  25. Former Soviet Union, Production, 2002/03, MMT CountryWheatCornSoybeans Russia 50,550 1,550 .42 Ukraine 20,556 4,180 .13 Kazakhstan 12,600 - - Moldova - 1,200 - For Comparison: United States 43,705 256,046 75,010 (Short crop) Source: USDA, Agricultural Statistics, 2005.

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