Wheat

July 25, 2011

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

high protein vs. low proteinred vs. whitehard vs. soft

common vs. durumfood 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. CanadaB. United StatesC. RussiaD. Australia

Quiz Time!

A. CanadaB. United StatesC. RussiaD. 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

19

72

1974

19

76

1978

19

80

1982

19

84

1986

19

88

1990

19

92

1994

19

96

1998

20

00

2002

20

04

2006

20

08

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

Prem

ium

or d

isco

unt t

o 14

% p

rote

in v

alue

s (c

ents

/bu)

2703

127

39527

76228

12928

49428

85929

22429

59029

95530

32030

68531

05031

41631

78132

14632

51232

87733

24233

60733

97334

33834

70335

06935

44135

81336

19136

55536

92137

27737

64938

01338

37938

74039

11239

47339

83440

20640

544

(150)

(100)

(50)

0

50

100

150

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

Series1

Series2

cent

s pe

r bus

hel

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. BarleyB. OatsC. Sorghum D. other

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

A. BarleyB. OatsC. Sorghum D. other (wheat!)→

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007

2009

2011

proj.

0%

5%

10%

15%

20%

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

Marketing Year

Feed

ing

as a

per

cent

of p

rodu

ctio

n

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

proj.

0

100

200

300

400

500

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

illio

n bu

shel

s

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