Wheat

July 25, 2011

• Wheat is not wheat • Outlook• Bold predictions• 2012

high protein vs. low protein

red vs. white

hard vs. soft

common vs. durum

food vs. feed

Wheat is not wheat

World Outlook: Wheat stocks are comfortable, but declining for the second year in a row.

Quiz Time!Which country is the largest wheat exporter in the world?

A. Canada

B. United States

C. Russia

D. Australia

Quiz Time!

A. Canada

B. United States

C. Russia

D. Australia

→

Which country is the largest wheat exporter in the world?

Argentina10%

Australia16%

Canada17%

EU15%

Russia4%

Ukraine2%

Kazakhstan3%

United States27%

other8%

Key Wheat Exporters, share of World Exports, 1997-2001

Argentina6%

Australia11%

Canada13%

EU15%

Russia10%Ukraine

5%

Kazakhstan5%

United States23%

other11%

Key Wheat Exporters, share of World Exports, 2007-2011

U.S. Outlook: Wheat stocks are comfortable, but declining for the second year in a row.

U.S. Wheat Highlights

• HRW –smallest crop since 2006 (yields ) • HRS – smallest crop in 4 years (acres and yields ) • SRW – 2nd largest crop in 10 years (acres & yields ) • SWW – largest crop in six years (acres & yields )• Durum – 2nd smallest crop since 1988 (acres )

hard vs. soft

high protein vs. low protein

Wheat is not wheat

1970

1972

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

(150)

(100)

(50)

0

50

100

150

200

HRS Protein Premiums at the MGEX, 1970-2010 crop years

15% protein premium 13% protein discount

Pre

miu

m o

r d

isc

ou

nt

to 1

4%

pro

tein

va

lue

s (

ce

nts

/bu

)

2703

1

2739

5

2776

2

2812

9

2849

4

2885

9

2922

4

2959

0

2995

5

3032

0

3068

5

3105

0

3141

6

3178

1

3214

6

3251

2

3287

7

3324

2

3360

7

3397

3

3433

8

3470

3

3506

9

3544

1

3581

3

3619

1

3655

5

3692

1

3727

7

3764

9

3801

3

3837

9

3874

0

3911

2

3947

3

3983

4

4020

6

4054

4(150)

(100)

(50)

0

50

100

150

Minneapolis and Chicago Nearby Wheat Futures, Premium or Discount to Kansas City Futures, 1993-2010

Series1

Series2

ce

nts

pe

r b

us

he

l

Chicago

Minneapolis

Bold predictions

Quiz Time!After corn, which grain is most commonly used as feed in the U.S. and in the world?

A. Barley

B. Oats

C. Sorghum

D. other

Quiz Time!After corn, which grain is most commonly used as feed in the U.S. and in the world?

A. Barley

B. Oats

C. Sorghum

D. other (wheat!)→

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007

2009

2011 pro

j.0%

5%

10%

15%

20%

25%World Wheat Feeding as a Percent of Production, 1979-2011

Marketing Year

Fe

ed

ing

as

a p

erc

en

t o

f p

rod

uc

tio

n

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011 pro

j.0

100

200

300

400

500

600U.S. Wheat Feed & Residual, 1990-2011m

illio

n b

ush

els

USDA figures

Is there room for even more wheat feeding in the year ahead?

Jan-74Jan-75Jan-76Jan-77Jan-78Jan-79Jan-80Jan-81Jan-82Jan-83Jan-84Jan-85Jan-86Jan-87Jan-88Jan-89Jan-90Jan-91Jan-92Jan-93Jan-94Jan-95Jan-96Jan-97Jan-98Jan-99Jan-00Jan-01Jan-02Jan-03Jan-04Jan-05Jan-06Jan-07Jan-08Jan-09Jan-10Jan-11

90%

100%

110%

120%

130%

140%

150%

160%

170%

180%

190%

200%

210%

220%

230%

240%

250%CBOT Nearby Wheat/Corn Futures Price Ratio, 1974-2011

Long term aver-age

The CBOT July wheat contract averaged 97% of the July corn contract in the month of June, the lowest ratio in my records.

90%

100%

110%

120%

130%

140%

150%

160%

170%

180%

190%

200%

210%

220%

230%

240%

250%KCBOT Nearby Wheat/Corn Futures Price Ratio, 1974-2011

90%

100%

110%

120%

130%

140%

150%

160%

170%

180%

190%

200%

210%

220%

230%

240%

250%KCBOT Nearby Wheat/Corn Futures Price Ratio, 1974-2011

Wheat feeding in 1977/78 is greater than the previous 3 years combined.

90%

100%

110%

120%

130%

140%

150%

160%

170%

180%

190%

200%

210%

220%

230%

240%

250%KCBOT Nearby Wheat/Corn Futures Price Ratio, 1974-2011

Wheat feeding in 1984/85 tops 400 mb for the first time ever.

90%

100%

110%

120%

130%

140%

150%

160%

170%

180%

190%

200%

210%

220%

230%

240%

250%KCBOT Nearby Wheat/Corn Futures Price Ratio, 1974-2011

…and again tops 400 mb in 1986/87.

90%

100%

110%

120%

130%

140%

150%

160%

170%

180%

190%

200%

210%

220%

230%

240%

250%KCBOT Nearby Wheat/Corn Futures Price Ratio, 1974-2011

Wheat feeding in 1990/91 reaches 500 mb.

90%

100%

110%

120%

130%

140%

150%

160%

170%

180%

190%

200%

210%

220%

230%

240%

250%KCBOT Nearby Wheat/Corn Futures Price Ratio, 1974-2011

The last three years when wheat feeding topped 300 mb.

90%

100%

110%

120%

130%

140%

150%

160%

170%

180%

190%

200%

210%

220%

230%

240%

250%KCBOT Nearby Wheat/Corn Futures Price Ratio, 1974-2011

Wheat feeding of 220 mb in 2011/12?

100% 110% 120% 130% 140% 150% 160% 170% 180% 190% 200%0

100

200

300

400

500

600

U.S. Wheat Fed vs. KCBOT Wheat/CBOT Corn Nearby Futures Ratio, 1990-2010 crop years

KCBOT Nearby Wheat/CBOT Nearby Corn Futures (crop year average)

mill

ion

bush

els

1990

2007

2011 proj.

2012

• HRW – plant in the dust?• The future of the Canadian Wheat Board

[In Canada], the federal government intends to end the Canadian Wheat Board’s monopoly on wheat and barley by August 2012 and thereby permit western farmers to sell on an open market if they wish, just as farmers in the United States and throughout Europe do.

WINNIPEG FREE PRESS JUNE 11, 2011

The future of the Canadian Wheat Board

• Wheat is not wheat • Outlook: Wheat stocks are comfortable,

but declining for the 2nd year in a row.• Bold predictions: We will feed more

wheat and, as goes the price of corn, so goes the price of wheat

• 2012