Grain Marketing AG BM 102. Hard Red Wheat Price Bio-Fuel Ethanol Bio-diesel Both ethanol & bio-diesel rules controversial in Farm Bill debate Corn prices.

Grain Marketing

AG BM 102

Hard Red Wheat Price

Bio-Fuel

• Ethanol

• Bio-diesel• Both ethanol & bio-diesel rules

controversial in Farm Bill debate

• Corn prices much lower recently

Corn Supply Bil. Bu.

Year Beg stocks Production Supply

2009/10 1.67 13.10 14.77

2010/11 1.71 12.45 14.18

2011/12 1.13 12.36 13.51

2012/13 0.99 10.78 11.93

2013/14 0.82 13.92 14.78

2014/15 1.24 14.48 15.74

Source: USDA

Corn Usagebil. bu

Source: USDA

Year Feed Food Fuel Exports Total

2009/10 5.13 1.35 4.59 1.98 13.07

2010/11 4.79 1.41 5.02 1.84 13.05

2011/12 4.55 1.43 5.01 1.54 12.53

2012/13 4.33 1.37 4.64 0.73 11.11

2013/14 5.18 1.40 5.12 1.92 13.60

2014/15 5.38 1.41 5.12 1.75 13.66

Corn UsageCrop 2004 2010 2013 2014

Feed 57.8% 36.7% 38.2% 39.1%

Food 12.8% 10.8% 10.3% 10.3%

Exports 17.1% 14.0% 14.2% 12.9%

Ethanol 12.4% 38.5% 37.3% 37.7%

US65%

Argentina22%

Brazil9%

Other4%

World Corn Exports2009 Crop Year

Source: USDA

US32%

Argentina16%

Brazil18%

Other33%

World Corn Exports2012 Crop Year

Source: USDA

US39%

Argentina12%Brazil

18%

Other31%

World Corn Exports2014 Crop Year

Source: USDA

Other mostly Russia and Ukraine

15 25 35 45 55 65 75

Days Carryout

$0

$1

$2

$3

$4

$5

$6

$7

$8

Avg

Far

m P

rice

'04'05

'06

'07 '08'09

'10

'11

'12

'13

'14

US Corn Farm Price vs Days Carryout2004-2014 crop years

Corn futures prices11/28/14

Month Price (cts/bu.)

May 15 397

Sept 15 409

Dec 15 417

Dec 16 423

Dec 2014 Corn Contract

Source: CME Weekly Ethanol Outlook Report

Ethanol• 213 plants operating

• 5 under construction or expanding

• Current 14.4 bil. gal/yr – 5.1 bil. bu.

• Many were closed until corn price fell

Source: Renewable Fuels Association

Jul-06 Nov-06 Apr-07 Aug-07 Jan-08 Jun-08 Oct-08 Mar-09 Jul-09 Dec-090

5

10

15

20

25

30

35

40

Verasun EnergyAventine Renewable EnergyPacific Ethanol

Ethanol Company Stock PricesJuly 06- Jan10

PA Corn CropsYear Mil. Bu. Yield

2005 117.1 122

2006 117.1 122

2007 121.5 124

2008 117.0 133

2009 131.6 143

2010 116.5 128

2011 106.6 111

2012 132.0 132

2013 164.3 155

2014 152 152

160 acres of wheat

11 minutes 8 secondsWinkler,

Sask.100

combines

Old Mill

Mill

Wheat by Truck

Wheat by Railcar

Probing Truck

Testing Equipment

Dryer

Wheat Silos

Top of Silos

Rollstands

Roll Change

Sifter

Mill Spouting

Bulk Trailers Loading

Flour Trailer on Scale

Price Discovery

• Futures Market

• Local Supply and Demand

• Grades & Standards

Market Power

• Cargill & Continental

• Archer Daniels Midland

• Conagra

• Local Monopsony

International Trade

• Multinationals

• Wheat Boards

Summary

• Big Integrated System

• Price driven

• Market power important

• Space, time, and product form very important here

• The law of one price

• System works!