Grain and Oilseeds Outlook for 2011

Michael Jewison

Foreign Agricultural ServiceU.S. Department of Agriculture

Agricultural Outlook ForumArlington, Virginia

February 25, 2011

Cash Prices in Illinois Are Near Record Levels of 2007/08

8/22

/07

12/2

2/07

4/22

/08

8/22

/08

12/2

2/08

4/22

/09

8/22

/09

12/2

2/09

4/22

/10

8/22

/10

12/2

2/10

$0.00

$3.00

$6.00

$9.00

$12.00

$15.00

$18.00

Soybeans Wheat Corn

$/bu

11.82

7.10

7.31

16.18 12.69

6.53

U.S. Factors Shaping 2011

Tight supplies of corn and soybeans, relatively abundant wheat

Little supply cushion for corn and soybeans in the event of adverse weather

Strong corn, wheat, and soybean exports

Projected 10 Million More Acres: 75 Percent Going to Corn and Wheat

1996 ………. 2006 2007 2008 2009 2010 20110

50

100

150

200

250

300

350

79.2 86.0 88.2 92.0

64.275.7 77.4 78.0

75.163.2 53.6 57.0

42.3 28.2 26.0 28.1

34.5 34.631.4

31.9

Corn Soybeans Wheat Other Feed Grains, Rice & Cotton CRPMil. acres

288295 287277

New Crop Soy/Corn Price Relationship Favors Corn

1-Se

p

14-S

ep

27-S

ep

10-O

ct

23-O

ct

5-Nov

18-N

ov

1-Dec

14-D

ec

27-D

ec9-

Jan

22-Ja

n

4-Feb

17-F

eb

2-M

ar

15-M

ar

28-M

ar

10-A

pr

23-A

pr1.9

2

2.1

2.2

2.3

2.4

2.5

2.6

2.7

2007 2010 2011

Corn Acres Increased While Soy Was Flat in 2010

Corn Acres Increased in 2007

Soybean/Corn

Net Returns for Corn and Soybeans Historically High

2006 2007 2008 2009 2010 20110

100

200

300

400

500

600

700

Corn Soybeans Wheat

$/acre

$173

95/

96

97/

98

99/

00

01/

02

03/

04

05/

06

07/

08

09/

10

11/

12

0

5000

10000

15000

20000

Production Beg. Stocks

95/

96

97/

98

99/

00

01/

02

03/

04

05/

06

07/

08

09/

10

11/

12

0

5000

10000

15000

20000

Ethanol Feed Exports Other

U.S. Corn: A Record Crop, Tight Carry-In Stocks, Strong Use

Bil. Bu Supply

UseBil. Bu

Gradual Recovery in Gasoline Consumption Supports Growth in Ethanol

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011F 2012F130

132

134

136

138

140

142

144

Actual EIA Feb. 2011 Forecast

Bil. gallons

Source: Energy Information Administration

But Ethanol Usage Constrained By Market For E10

1/6/061/13/061/20/061/27/062/3/062/10/062/17/062/24/063/3/063/10/063/17/063/24/063/31/064/7/064/14/064/21/064/28/065/5/065/12/065/19/065/26/066/2/066/9/066/16/066/23/066/30/067/7/067/14/067/21/067/28/068/4/068/11/068/18/068/25/069/1/069/8/069/15/069/22/069/29/0610/6/0610/13/0610/20/0610/27/0611/3/0611/10/0611/17/0611/24/0612/1/0612/8/0612/15/0612/22/0612/29/061/5/071/12/071/19/071/26/072/2/072/9/072/16/072/23/073/2/073/9/073/16/073/23/073/30/074/6/074/13/074/20/074/27/075/4/075/11/075/18/075/25/076/1/076/8/076/15/076/22/076/29/077/6/077/13/077/20/077/27/078/3/078/10/078/17/078/24/078/31/079/7/079/14/079/21/079/28/0710/5/0710/12/0710/19/0710/26/0711/2/0711/9/0711/16/0711/23/0711/30/0712/7/0712/14/0712/21/0712/28/071/4/081/11/081/18/081/25/082/1/082/8/082/15/082/22/082/29/083/7/083/14/083/21/083/28/084/4/084/11/084/18/084/25/085/2/085/9/085/16/085/23/085/30/086/6/086/13/086/20/086/27/087/4/087/11/087/18/087/25/088/1/088/8/088/15/088/22/088/29/089/5/089/12/089/19/089/26/0810/3/0810/10/0810/17/0810/24/0810/31/0811/7/0811/14/0811/21/0811/28/0812/5/0812/12/0812/19/0812/26/081/2/091/9/091/16/091/23/091/30/092/6/092/13/092/20/092/27/093/6/093/13/093/20/093/27/094/3/094/10/094/17/094/24/095/1/095/8/095/15/095/22/095/29/096/5/096/12/096/19/096/26/097/3/097/10/097/17/097/24/097/31/098/7/098/14/098/21/098/28/099/4/099/11/099/18/099/25/0910/2/0910/9/0910/16/0910/23/0910/30/0911/6/0911/13/0911/20/0911/27/0912/4/0912/11/0912/18/0912/25/091/1/101/8/101/15/101/22/101/29/102/5/102/12/102/19/102/26/103/5/103/12/103/19/103/26/104/2/104/9/104/16/104/23/104/30/105/7/105/14/105/21/105/28/106/4/106/11/106/18/106/25/107/2/107/9/107/16/107/23/107/30/108/6/108/13/108/20/108/27/109/3/109/10/109/17/109/24/1010/1/1010/8/1010/15/1010/22/1010/29/1011/5/1011/12/1011/19/1011/26/1012/3/1012/10/1012/17/1012/24/1012/31/101/7/111/14/111/21/111/28/112/4/112/11/110.0

500.0

1,000.0

1,500.0

2,000.0

2,500.0

3,000.0

All Finished Blends Ethanol Blends

Bil. gallons

U.S. Maintains Corn Exports While DDG Exports Grow

01/02

02/03

03/04

04/05

05/06

06/07

07/08

08/09

09/10

10/11

11/12

20

30

40

50

60

70

80

Corn

DDG

MMT

U.S. Corn Ending Stocks Would Be The Second Lowest Since 95/96

95/96 … 06/07 07/08 08/09 09/10 10/11 11/120

20

40

60

80

100

120

140

160

U.S. Foreign

MMT

95/9

6

97/9

8

99/0

0

01/0

2

03/0

4

05/0

6

07/0

8

09/1

0

11/1

2

0

1000

2000

3000

4000

5000

Production Beg. Stocks

95/9

6

97/9

8

99/0

0

01/0

2

03/0

4

05/0

6

07/0

8

09/1

0

11/1

2

0

1000

2000

3000

4000

5000

Domestic Use Exports

U.S. Wheat: Lower Production and Carry-In Stocks, Exports Still Strong

Bil. Bu Supply

UseBil. Bu

95/9

6

97/9

8

99/0

0

01/0

2

03/0

4

05/0

6

07/0

8

09/1

0

11/1

2

0

1000

2000

3000

4000

5000

Production Beg. Stocks

95/9

6

97/9

8

99/0

0

01/0

2

03/0

4

05/0

6

07/0

8

09/1

0

11/1

2

0

1000

2000

3000

4000

5000

Domestic Use Exports

U.S. Soybeans: Bumper Crop and Tight Carry-In Stocks, Strong Exports and Crush

Bil. Bu Supply

UseBil. Bu

Global Factors Shaping 2011

Degree of Russian crop recovery

Production responses: Canada, EU, South America, and Australia

Continued surging demand for feed ingredients, particularly in China

Wheat: Need More Production to Meet Rising Global Consumption

00/0

1

01/0

2

02/0

3

03/0

4

04/0

5

05/0

6

06/0

7

07/0

8

08/0

9

09/1

0

10/1

1

11/1

2

500

550

600

650

700

Production Consumption

MMT

?

05/06 06/07 07/08 08/09 09/10 10/110

50

100

150

200

Others* Black Sea** Exporter***

MMT

Wheat Stocks Held by Exporters Still Ample

*Most stocks unavailable to World **Kazakhstan, Russia and Ukraine ***Argentina. Australia, Canada, EU, U.S.

Global Corn Production Expands to Meet Rising Demand

00/0

1

01/0

2

02/0

3

03/0

4

04/0

5

05/0

6

06/0

7

07/0

8

08/0

9

09/1

0

10/1

1

11/1

2

400

500

600

700

800

900

Production Consumption

MMT

?

U.S. Corn Production Responds to Ethanol, Foreign Production Responds to Growing Feed Demand

05/0

6

06/0

7

07/0

8

08/0

9

09/1

0

10/1

1

11/1

2

0

100

200

300

400

500

600

Production Ethanol

05/0

6

06/0

7

07/0

8

08/0

9

09/1

0

10/1

1

11/1

2

0

100

200

300

400

500

600

Production Consumption

?

United States

ForeignMMT MMT

Soybeans: Higher Global Production Balances Rising Consumption

00/0

1

01/0

2

02/0

3

03/0

4

04/0

5

05/0

6

06/0

7

07/0

8

08/0

9

09/1

0

10/1

1

11/1

2

150

175

200

225

250

275

Production Consumption

MMT

?

United States, Argentina, and Brazil Dominate Growth In Global Soybean Production

00/01

01/02

02/03

03/04

04/05

05/06

06/07

07/08

08/09

09/10

10/11

0

50

100

150

200

250

300

ROW Argentina, Brazil and U.S.

MMT

Soybean Production Growth: Area in South America, Yield in the U.S.

Argentina Brazil U.S.0

5

10

15

20

25

30

35

Area Yield

MMT

Period is over the last 10 years

China: All of the Growth In Soybean Import Demand

00/01

01/02

02/03

03/04

04/05

05/06

06/07

07/08

08/09

09/10

10/11

20

40

60

80

100

ROW China

MMT

Soybean Stocks Available to The World: Record Low in 10/11

05/06 06/07 07/08 08/09 09/10 10/110

10

20

30

United States Argentina Brazil

MMT

China: The Wild Card!

China: Feed Ingredient Imports Double

2005 2006 2007 2008 2009 2010 -

10

20

30

40

50

60

70

80

Oilseeds Cereals & Energy Sources (Cassava)Protein Crops and Meals DDGs

MMT

China: Hog Operations Turn Profitable On Soaring Hog Prices Relative to Corn

0

2

4

6

8

10

12Hog/Corn Ratio

Breakeven Ratio

China’s Corn Imports: Economics Or Policy

200

225

250

275

300

325

350

375

400

0

100

200

300

400

500

600

U.S. Exports To China Imported U.S. Price

Over 1 MMT of U.S. purchases

$/MTU.S.

Exports TMT

Thank you!