Wheat and Feed Grain Market Outlook and Situation

Southern Extension Outlook ConferenceTunica, Mississippi

September 24, 2002

Kurt M. GuidryLSU Agricultural Center

Current Market Situation

•Supply Driven Rally

•Improved Fundamentals Increase Market Sensitivity

•Since June, Futures Prices Have Increased

Wheat Futures Moved Over $1.00 Per Bushel Higher Corn Futures Moved Over $0.70 Per Bushel Higher

•Significantly Improved Markets From Last 3 Years

Where Will Prices Go ?

•Prices Have Softened With Harvest Pressure And Likelihood Of Increased Acres For Wheat

•Demand Will Likely Play Big Role In Continued Price Movement

•Increased Prices Will Likely Bring More Acreage Into Production

•Improved Supply and Demand Fundamentals Should Provide Support

Estimated Costs and Returns For Selected Commodities - Southern StatesCorn Wheat Soybeans Cotton Grain Sorghum

Yield 103.5 45.0 27.3 628.0 63.1Price $2.59 $3.52 $5.21 $0.53 $2.46 Revenue $267.99 $158.23 $142.23 $332.85 $155.28

Variable Cost $151.14 $87.85 $85.60 $334.24 $94.63

Returns Above Variable Cost $116.85 $70.38 $56.63 -$1.40 $60.66

U.S. Corn Supply and Use (Domestic Measure)

2001/02 2001/02 ------------------ 2002/03-------------------

2002/03

Item Estimate (Sept. - Aug.) August September (Sept. - Aug.)

Million Acres Change Million Acres Million Acres ChangeArea Planted 75.8 0.00 78.8 78.8 0.00 Harvested 68.8 0.00 71.0 70.5 -0.50

Bushels Bushels BushelsYield per harvested acre 138.2 0.00 125.2 125.4 0.20

Million Bushels Million Bushels Million BushelsBeginning stocks 1,899 0.00 1,636 1,636 0.00 Production 9,507 0.00 8,886 8,849 -37.00 Imports 10 0.00 15 15 0.00 Supply, total 11,416 0.00 10,537 10,499 -38.00 Feed and residual 5,825 0.00 5,600 5,600 0.00 Food, seed, & industrial 2,055 0.00 2,170 2,170 0.00

Domestic, total 7,880 0.00 7,770 7,770 0.00 Exports 1,900 0.00 2,000 2,000 0.00 Use, total 9,780 0.00 9,770 9,770 0.00 Ending Stocks 1,636 0.00 767 729 -38.00 Stocks To Use 16.73% 7.85% 7.46%

Avg. Farm Price ($/bu) 1.97 2.30 - 2.70 2.35 - 2.75

Source: USDA, World Agricultural Supply and Demand Report, September 12, 2002.

U.S. Corn Production

8,000

8,500

9,000

9,500

10,000

1998/99 1999/00 2000/01 2001/02 2002/03

Marketing Year

Mill

ion

Bush

els

U.S. Corn Food, Seed, and Industrial Use

1,600

1,700

1,800

1,900

2,000

2,100

2,200

1998/99 1999/00 2000/01 2001/02 2002/03

Marketing Year

Mill

ion

Bus

hels

Source: DTN AgDayta

U.S. Corn Exports

1,850

1,900

1,950

2,000

2,050

1998/99 1999/00 2000/01 2001/02 2002/03

Marketing Year

Mill

ion

Bus

hels

Source: DTN AgDayta

U.S. Corn Ending Stocks

0

500

1,000

1,500

2,000

1998/99 1999/00 2000/01 2001/02 2002/03

Marketing Year

Mill

ion

Bus

hels

World Corn Production

575000

580000

585000

590000

595000

600000

605000

610000

1998/99 1999/00 2000/01 2001/02 2002/03

Marketing Year

1,00

0 M

etric

Ton

s

Corn Production Of Selected Countries

0

20000

40000

60000

80000

100000

120000

140000

Argentina Brazil China Hungary South Africa

1,00

0 M

etri

c To

ns

1998/99 1999/00 2000/01 2001/02 2002/03

World Corn Imports

64000

66000

68000

70000

72000

74000

76000

78000

1998/99 1999/00 2000/01 2001/02 2002/03

Marketing Year

1000

Met

ric T

ons

Corn Exports Of Selected Countries

0

2000

4000

6000

8000

10000

12000

14000

Argentina Brazil China Hungary South Africa

1,00

0 M

etric

Ton

s

1998/99 1999/00 2000/01 2001/02 2002/03

Corn Ending Stocks

0

50000

100000

150000

200000

China United States World

1,00

0 M

etric

Ton

s

1998/99 1999/00 2000/01 2001/02 2002/03

U.S. Sorghum S upply and Use (Dome stic M ea sure)2001/02 2001/02 - --- --- --- ---- --- - 2002/03 ---- --- --- ---

-- --- -2002/03

Item Es tim ate (Sept. - A ug.) A ugust S eptem ber (S ept. - A ug.)

Million Ac res Ch ange Million A cres M illion A c res C hangeA rea P lanted 10.3 0.00 9.3 9.3 0.00 H arves ted 8.6 0.00 7.5 7.5 0.00

Bushels B ushels B ushelsY ield per harvested acre 59.9 0.00 50.3 51.0 0.70

M illion Bushels Million Bushels Million B ushelsB eginning s tocks 42 0.00 56 56 0.00P roduc tion 515 0.00 3 80 384 4.00Im po rts 0 0.00 0 0 0.00 S upply, total 556 0.00 4 36 441 5.00Feed and residual 215 0.00 1 35 135 0.00Food, seed, & indus trial 45 0.00 45 45 0.00 D omes tic , total 260 0.00 1 80 180 0.00E xports 240 0.00 2 20 220 0.00 Use, total 500 0.00 4 00 400 0.00E nding S tocks 56 0.00 36 41 5.00S tocks To Use 11.20% 9.00% 10.25% A vg. Farm Price ($/bu) 1.95 2.30 - 2.70 2.35 - 2.75

S ource: US DA, W orld A gricultural S upply and Dem and Re port, Septem ber 1 2, 2002.

U.S. W hea t S upply and Use (Dom e stic M ea sure)2001/02 2 001/02 - --- --- --- ---- --- - 2002/03 ---- --- --- ---

-- --- -2002/03

Item Es tim ate (Sept. - Aug.) A ugust S eptem ber (S ept. - A ug.)

M illion Ac res Cha nge Million A cres M illion A c res C hangeA rea P lanted 59.6 0.00 60.1 60.1 0.00 H arves ted 48.7 0.00 47.6 47.6 0.00

Bushels B ushels B ushelsY ield per harvested acre 40.2 0.00 35.4 35.4 0.00

M illion Bushels Million Bushels Million B ushelsB eginning s tocks 876 0.00 772 772 0.00 P roduc tion 1,958 0.00 1,686 1,686 0.00 Im po rts 108 0.00 105 85 -20.00 S upply, total 2,941 0.00 2,563 2,543 -20.00 Food 928 -2.00 940 930 -10.00 S eed 81 0.00 81 81 0.00 Feed and Residual 199 2.00 175 175 0.00

D omes tic , total 1,208 0.00 1,196 1,186 -10.00 E xports 961 0.00 900 950 50.00 Use, total 2,169 0.00 2,096 2,136 40.00 E nding S tocks 772 0.00 467 407 -60.00 S tocks To Use 35.59% 22.28% 19.05% A vg. Farm Price ($/bu) 2.78 3.20 -3.80 3.45 - 4.05

Source: USDA, World Agricultural Supply and Demand Report, September 12, 2002

U.S. Wheat Production

0500

1,0001,5002,0002,5003,000

Marketing Year

Mill

ion

Bush

els

Source: DTN AgDayta

Source: DTN AgDayta

U.S. Wheat Food Use

860880900920940960

Marketing Year

Mill

ion

Bush

els

U.S. Wheat Feed And Residual Use

0100200

300400500

Marketing Year

Mill

ion

Bush

els

U.S. Wheat Exports

850900

9501,000

1,0501,100

Marketing Year

Mill

ion

Bush

els

U.S. Wheat Ending Stocks

0

200400

600800

1,000

Marketing Year

Mill

ion

Bush

els

World Wheat Production

560000565000

570000575000580000585000

590000595000

1998/99 1999/00 2000/01 2001/02 2002/03

Marketing Year

1,00

0 M

etric

Ton

s

Wheat Production Of Selected Countries

0

20000

40000

60000

80000

100000

120000

Argentina Australia Canada European Union

1,00

0 M

etric

Ton

s

1998/99 1999/00 2000/01 2001/02 2002/03

Source: DTN AgDayta

World Wheat Imports

90000

95000

100000

105000

110000

115000

1998/99 1999/00 2000/01 2001/02 2002/03

Marketing Year

1,00

0 M

etric

Ton

s

Wheat Exports Of Selected Countries

0

5000

10000

15000

20000

25000

Argentina Australia Canada European Union

1,00

0 M

etric

Ton

s

1998/99 1999/00 2000/01 2001/02 2002/03

World Wheat Ending Stocks

0

50000

100000

150000

200000

1998/99 1999/00 2000/01 2001/02 2002/03

Marketing Year

1,00

0 M

etric

Ton

s

CBOT Corn Futures Contract PricesContract Open High Low Last

2-Sep 2714 2714 2660 2664*

2-Dec 2650 2656 2600 2606*

3-Jan 2102 2102 2102*

3-Mar 2724 2724 2670 2680*

3-May 2750 2760 2712 2714*

3-Jul 2750 2764 2710 2712*

3-Sep 2640 2640 2584 2590*

3-Dec 2530 2540 2490 2490*

Source: DTN AgDayta

CBOT Wheat Futures Contract PricesContract Open High Low Last

2-Sep 4022 4040 3950 3950*

2-Dec 3930 4054 3910 4000*

3-Mar 3944 4050 3934 3980*

3-May 3750 3860 3750 3790*

3-Jul 3480 3550 3474 3516*

Source: DTN AgDayta

Conclusions

•Despite Improved Fundamentals, Increased Acres And A Return To More Typical Yields Will Place Pressure On Price

•Improved Fundamentals Likely Will Cause More Sensitivity To Production Difficulties And/Or Improved Demand

•Potential For Increased Production Provides Incentive To Consider Current Prices For Expected 2003 Production