AGRICULTURAL COMMODITY FUNDAMENTALS AND OUTLOOK

Transcription

1 AGRICULTURAL COMMODITY FUNDAMENTALS AND OUTLOOK Lewis Hagedorn Agricultural Commodity Strategist, J.P. Morgan Chase Bank NA A L L Y P R I V A T E A N D CONFIDENTIA STRICTL

2 This presentation was prepared exclusively for the benefit and internal use of the JPMorgan client to whom it is directly addressed and delivered (including such client s subsidiaries, the Company ) in order to assist the Company in evaluating, on a preliminary basis, the feasibility of a possible transaction or transactions and does not carry any right of publication or disclosure, in whole or in part, to any other party. This presentation is for discussion purposes only and is incomplete without reference to, and should be viewed solely in conjunction with, the oral briefing provided by JPMorgan. Neither this presentation nor any of its contents may be disclosed or used for any other purpose without the prior written consent of JPMorgan. NTALS AND OUT LOOK DITY FUNDAME L TURAL COMMO AGRICUL The information in this presentation is based upon any management forecasts supplied to us and reflects prevailing conditions and our views as of this date, all of which are accordingly subject to change. JPMorgan s opinions and estimates constitute JPMorgan s judgment and should be regarded as indicative, preliminary and for illustrative purposes only. In preparing this presentation, we have relied upon and assumed, without independent verification, the accuracy and completeness of all information available from public sources or which was provided to us by or on behalf of the Company or which h was otherwise reviewed by us. In addition, i our analyses are not and do not purport to be appraisals of the assets, stock, or business of the Company or any other entity. JPMorgan makes no representations as to the actual value which may be received in connection with a transaction nor the legal, tax or accounting effects of consummating a transaction. Unless expressly contemplated hereby, the information in this presentation does not take into account the effects of a possible transaction or transactions involving an actual or potential change of control, which may have significant valuation and other effects. Notwithstanding anything herein to the contrary, the Company and each of its employees, representatives or other agents may disclose to any and all persons, without limitation of any kind, the U.S. federal and state income tax treatment and the U.S. federal and state income tax structure of the transactions contemplated hereby and all materials of any kind (including opinions or other tax analyses) that are provided to the Company relating to such tax treatment and tax structure insofar as such treatment and/or structure relates to a U.S. federal or state income tax strategy provided to the Company by JPMorgan. JPMorgan s policies prohibit employees from offering, directly or indirectly, a favorable research rating or specific price target, or offering to change a rating or price target, to a subject company as consideration or inducement for the receipt of business or for compensation. JPMorgan also prohibits its research analysts from being compensated for involvement in investment banking transactions except to the extent that such participation is intended to benefit investors. JPMorgan is a marketing name for investment banking businesses of JPMorgan Chase & Co. and its subsidiaries worldwide. Securities, syndicated loan arranging, financial advisory and other investment banking activities are performed by a combination of J.P. Morgan Securities Inc., J.P. Morgan plc, J.P. Morgan Securities Ltd. and the appropriately licensed subsidiaries of JPMorgan Chase & Co. in Asia-Pacific, and lending, derivatives and other commercial banking activities are performed by JPMorgan Chase Bank, N.A. JPMorgan deal team members may be employees of any of the foregoing entities. This presentation does not constitute a commitment by any JPMorgan entity to underwrite, subscribe for or place any securities or to extend or arrange credit or to provide any other services.

3 Agenda Section 21 in Context 1 Corn 2 Wheat 3 AGRICUL TURAL COMMODITY FUNDAMENTALS AND OUT LOOK

4 Today, Agricultural Commodities Can Be Divided Into Two Groups Based on Fundamentals 1.Those Driven by Large Demand Corn Soybeans 2.Those Vulnerable to Supply Loss Wheat Sorghum 21 IN CONTEXT

5 Comparing the Growth of Global Consumption ' mmt Consumption (left ax is) 'mt 75, Stocks (right ax is) 25, 5, 2, 15, ' mt Consumption ' mt 75, Ending Stocks (right ax is) 25, 25, ` 1, 5, 5, 2, 15, CONTEXT 21 IN Corn Consumption 95% Higher than 198 ' mt ' mt Consumption (left ax is) 25, 7, Stocks (right ax is) 6, 2, 5, 15, 1, 5, 4, 3, 2, 1, Soybean Consumption 244% Higher than 198 Source: JPMorgan Soft Commodity Strategy, USDA/FAS. 1, 25, 5, Wheat Consumption 45% Higher than 198

6 Corn Price History: Comparing with 26-Present US cents/bu Spot Month Futures Price Annual Average Price CONTEXT Source: JPMorgan Soft Commodity Strategy, Bloomberg IN 21

7 Soybean Price History: Comparing with 26-Present US cents/bu Spot Month Futures Price Annual Average Price CONTEXT Source: JPMorgan Soft Commodity Strategy, Bloomberg IN 28 21

8 Wheat Price History: 1972-Present US cents/bu Spot Month Futures Price Annual Average Price CONTEXT Source: JPMorgan Soft Commodity Strategy, Bloomberg IN 21

9 Rising Standards of Living UN/FAO Sources of Dietary Consumption UN/FAO Protein & Fat Consumption 175 China 155 India United Kingdom 135 United States of America 115 World Protein Fat CONTEXT 21 IN UN/FAO Shares of Dietary Components of Total Energy COUNTRIES Cereals Veg oils Sugar & Sweeteners Meat & Offals Roots and Tubers Milk, Eggs & Fish Fruits & Veg. Animal fats Pulses Others China India United Kingdom USA World Source: JPMorgan Soft Commodity Strategy, UN/FAO, FAOStat

10 A Limited Supply Response US Acreage Allocated to Three Major Crops ' acres 25, 2, 15, 1, 5, Soy beans Corn All Wheat Brazil Land Area by Use 1,, 8, 6, 4, 2, Forest area Agricultural l area Permanent meadow s and pastures IN CONTEXT Source: JPMorgan Soft Commodity Strategy, USDA/FAS, FAOSTAT.

11 A Limited Supply Response US v China Corn Yield Performance mt/ha China US Effect of Lost Chinese Production Potential mt/ha 5% Yield Improv ement ' mt 25, Actual Production 18, Ending Stocks With Yield Improv ement Actual Ending Stocks 16, 2, 14, 15, 1, , 12, 1, 8, 6, 4, 2, US, Brazil, China Soybean Yields mt/ha US Brazil China US, Canada, Australia & China Wheat Yields mt/ha US Australia Canada China CONTEXT 21 IN Source: JPMorgan Soft Commodity Strategy, USDA/FAS

12 26-29 vs 21: What s Changed, What s the Same? New/Changed Themes CONTEXT 21 IN Structural change these are not the same markets as in the past Remarkable domestic and international demand across agricultural commodities; the continued ascendancy of Asian demand Price-borne optimization and risk assessment. Low inventories across commodities limit full-fledged resource reallocation, increase importance of achieving optimum yields. Growing importance of the South American supply relief valve Growth of index and relative value long/short investment interest Wheat market production shortfalls left supplies low Corn, soybean and wheat supplies all appear comfortable Prices to remain well below highs from 28 with lower volatility Some reduction in investor interest in the sector Record large yields in US, South America have afforded larger than expected supply response, may mean less stress on acreage US, Global wheat market has moved to increasingly large surplus, allowing for (some) diversion of wheat acres into other crops Policy support for biofuel programs in US now appears more secure

13 Price Forecasts Grains & Oilseeds In $/bu. 29 1Q1 2Q1 3Q1 4Q1 21 1Q11 2Q11 3Q11 4Q Corn Spot Month Current Forecast* Actual To Date CME Wheat Spot Month Current Forecast* Actual To Date Soybeans Spot Month Current Forecast* Actual To Date *Quarterly Average of Spot Month Futures. Source: JPMorgan Soft Commodity Strategy 21 IN CONTEXT

14 Agenda Section 21 in Context 1 Corn 2 Wheat 3 AGRICUL TURAL COMMODITY FUNDAMENTALS AND OUT LOOK

15 Corn Market Outlook Uncertainty t over 29 US crop size Need to encourage at least 2 mil acres of additional US plantings in 21 Profitable ethanol production margins Comfortable 29/1 US and global l inventories i Weak US and international feed demand Competitive global l feed wheat market More exportable supplies from South America CORN

16 US Corn Production in was a record year, but by how much is not clear Record-large yields should not be counted on for future years US Corn Yields, Present Historical Yearly Corn Yield Variability bu/acre '9 '92 '94 '96 '98 ' '2 '4 '6 '8 '1 '12 '14 Source: JPMorgan Soft Commodity Strategy, USDA. bu/acre 5% 4% 3% 2% 1% % -1% -2% -3% -4% Observ ed Baseline Forecast 1 y ears = a long interv al w ithout negativ e y ield ev ent '7 '75 '8 '85 '9 '95 ' '5 '1 '15 CORN

17 US Corn Plantings in revenue potential appears better than last year for some producers, but is not as large as 27 Soybean prices are still encouraging production interest outside Corn Belt November Soybeans vs December Corn Futures Central IL Corn Revenue en e and Acreage Year Range Sep Oct Nov Jan Feb Apr Source: JPMorgan Soft Commodity Strategy, USDA ' acres $/acre 2, 4 1,9 35 1,8 3 1,7 25 1,6 1,5 1,4 1,3 1,2 1,1 1, : More Corn Acres 28: More Soybean Acres CORN

18 US Ethanol: Production Profitable and Increasing Estimated Blending Economics E1 in Midwest Profitable Jan 8 Jun 8 Nov 8 Apr 9 Sep 9 Feb 1 Estimated Iowa Production Profitability (Variable) cents/bu Source: Sep JPMorgan Nov Soft Commodity Jan Strategy, Mar USDA. May Jul Sep Nov Jan Ethanol Production and Draw mil gals 1,2 1, 8 Production Production Reqd to Meet USDA Forecast Production Reqd to Meet Mandate Begin Stocks + Production + Imports - End Stocks Sep 5 Sep 6 Sep 7 Sep 8 Sep 9 CORN Source: JPMorgan Soft Commodity Strategy, EIA.

19 US Ethanol Demand: Policy Update Renewable Fuel Standard mandates: US Mandates Implied Corn Demand Conv entional Biofuels Adv anced Biofuels Cellulosic Biofuels Biodiesel Total RFS mil gals Production Production Reqd to Meet Mandate 1,2 1, Source: JPMorgan Soft Commodity Strategy, USDA. EPA Ruling on Higher Blend Rates CORN

20 US Corn Balance Sheet J.P. Morgan Forecast 23/4 24/5 25/6 26/7 27/8 28/9* 29/1* 29/1 21/11 Beginning Stocks (M bu) 1, ,114 1,967 1,34 1,624 1,673 1,672 1,63 Planted Acreage (M. acres) Harv ested Acreage (M. acres) x Yield (bu/acre) Production 1,89 11,87 11,112 1,535 13,38 12,11 13,151 13,85 12,998 + Imports Total Supply (M bu) 11,19 12,776 13,237 12,512 14,362 13,739 14,834 14,769 14,611 Feed & Residual (M bu) 5,795 6,158 6,141 5,75 5,938 5,254 5,55 5,6 5,325 Food, Seed, Industrial 2,537 2,686 2,975 3,529 4,363 4,953 5,565 5,617 5,827 Ethanol 1,168 1,323 1,6 2,15 3,26 3,677 4,3 4,315 4,5 Ex ports 1,9 1,818 2,15 2,1 2,436 1,858 2, 1,95 2,25 Total Use (M bu) 1,232 1,662 11,266 11,379 12,737 12,65 13, , , Ending Stocks 958 2,114 1,971 1,133 1,624 1,674 1,719 1,63 1,434 Stocks/Use 9.4% 19.8% 17.5% 1.% 12.8% 13.9% 13.1% 12.2% 1.9% Source: JPMorgan Soft Commodity Strategy, USDA. CORN

21 A Look at the Longer Term J.P. Morgan Forecast 29/1* 29/1 21/11 211/12 212/13 213/14 214/15 215/16 Beginning Stocks (M bu) 1,673 1,672 1,63 1,434 1,425 1,528 1,715 1,84 Planted Acreage (M. acres) Harvested Acreage (M. acres) x Yield (bu/acre) Production 13,151 13,85 12,998 13,365 13,716 14,71 14,274 14,477 + Imports Total Supply (M bu) 14,834 14,769 14,611 14,89 15,151 15,69 15,999 16,327 Feed & Residual (M bu) 5,55 5,6 5,325 5,362 5,391 5,412 5,447 5,56 Food, Seed, Industrial 5,565 5,617 5,827 5,972 6,157 6,382 6,537 6,572 Ethanol 4,3 4,315 4,5 4,64 4,82 5,4 5,19 5,22 Exports 2, 1,95 2,25 2,5 2,75 2,1 2,175 2,175 Total Use (M bu) 13,115 13,167 13,177 13,384 13,623 13,894 14,159 14,253 Ending Stocks 1,719 1,63 1,434 1,425 1,528 1,715 1,84 2,74 Stocks/Use 13.1% 12.2% 1.9% 1.7% 11.2% 12.3% 13.% 14.6% Source: JPMorgan Soft Commodity Strategy, t USDA. CORN

22 What-If? Several Hypothetical Supply and Demand Scenarios for Corn Negative Yield 211/12 212/13 213/14 214/15 215/16 Beginning Stocks (M bu) 1,434 1,425 1,25 1,392 1,517 Planted Acreage Harv ested Acreage x Yield (bu/acre) Production 13,365 12,42 14,71 14,274 14,477 Event + Imports Total Supply (M bu) 14,89 13,855 15,286 15,676 16,4 Feed & Residual (M bu) 5,362 5,1 5,412 5,447 5,56 Food, Seed, Industrial 5,972 5,65 6,382 6,537 6,572 Ethanol 4,64 4,44 5,4 5,19 5,22 Ex ports 2,5 1,9 2,1 2,175 2,175 Total Use (M bu) 13,384 12,65 13,894 14,159 14,253 Ending Stocks 1,425 1,25 1,392 1,517 1,751 Stocks/Use 1.7% 9.5% 1.% 1.7% 12.3% CORN

23 What-If? Several Hypothetical Supply and Demand Scenarios for Corn Slower Acreage G 211/12 212/13 213/14 214/15 215/16 Beginning Stocks (M bu) 1, ,362 1, ,473 1,62 Planted Acreage Harv ested Acreage x Yield (bu/acre) Production 13,214 13,563 13,916 14,274 14,477 Gains + Imports Total Supply (M bu) 14,659 14,935 15,35 15,757 16,17 Feed & Residual (M bu) 5,325 5,35 5,375 5,425 5,475 Food, Seed, Industrial 5,972 6,157 6,382 6,537 6,572 Ethanol 4, ,82 5, ,19 5,22 Ex ports 2, 2,5 2,75 2,175 2,175 Total Use (M bu) 13,297 13,557 13,832 14,137 14,222 Ending Stocks 1,362 1,379 1,473 1,62 1,885 Stocks/Use 1.2% 1.2% 1.6% 11.5% 13.3% CORN

24 Key World Corn Fundamental Trends y-o-y World Production & Stocks Changes mmt 1, Ending Stocks 8, Production 6, 4, 2, -2, -4, Source: JPMorgan Soft Commodity Strategy, USDA/FAS. CORN

25 US Corn Export Demand is Down in US Weekly Corn Exports and Implied Pace Monthly Export Volumes in 29/1 Crop Year ' bu 2, % of USDA 1% ' bu 6, 6 15, 1, 5, 28,41 Implied Weekly Sales to Meet USDA Est 9/3 11/12 1/21 4/1 6/1 8/19 8% 6% 4% 2% % 5, 4, 3, 2, 1, 5-Yr Range 5-Yr Av erage 29/1 Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Source: JPMorgan Soft Commodity Strategy, USDA. WHEAT

26 Key World Corn Fundamental Trends Mexico Corn Production, Exports & Yield ' mt Production (Left Ax is) ' mt 3, 25, Imports Stocks (Right Axis) 5, 4, 2, 15, 1, 5, 3, 2, 1, Source: JPMorgan Soft Commodity Strategy, USDA/FAS. CORN

27 Key World Corn Fundamental Trends Mexico Food and Feed Demand To 215 Mexico Imports To 215 ' mt Food/Industrial ' mt 18, 2, Feed 16, 18, 14, 16, 14, 12, 12, 1, 1, 8, 8, 6, 6, 4, 4, 2, 2 2, ' mmt 12, 1,5 9, 7,5 6, 4,5 3, 1, CORN Source: JPMorgan Soft Commodity Strategy, USDA/FAS.

28 Key World Corn Fundamental Trends China Corn Production, Use, Exports & Stocks ' mt. 18, 16, 14, 12, 1, 8, 6, 4, 2, Source: JPMorgan Soft Commodity Strategy, USDA/FAS. Production Total Use Ending Stocks Ex ports (Right Ax is) , 16, 14, 12, 1, 8, 6, 4, 2, CORN

29 Key World Corn Fundamental Trends China and US Feed Demand To 215 China Yields To 215 ' mt 18, China US 16, 14, 12, 1, 8, 6, 4, 2, US CAGR = 1.2% China CAGR = 5.% mt/ha China CORN Source: JPMorgan Soft Commodity Strategy, USDA/FAS.

30 Key World Corn Fundamental Trends China Corn Production, Use, Exports & Stocks: The View to 215 ' mt. 2, 15, 1, 5, Source: JPMorgan Soft Commodity Strategy, USDA/FAS. Production Total Use Ending Stocks Ex ports (Right Ax is) Imports (Right Ax is) , 1, 8, 6 6, 4, 2, CORN

31 Key World Corn Fundamental Trends Argentina Corn Production, Exports & Yield ' mt Production (Left Ax is) mt/ha 25, 2, 15, 1, 5, Ex ports Yield (Right Ax is) Source: JPMorgan Soft Commodity Strategy, USDA/FAS CORN

32 Key World Corn Fundamental Trends Brazil Corn Production, Exports & Yield ' mt Production ' mt 7, 6, 5, 4, Total Use Ex ports (Right Ax is) 1, 8 8, 6, 3, 2, 1, Source: JPMorgan Soft Commodity Strategy, USDA/FAS. 4, 2, CORN

33 Key World Corn Fundamental Trends Brazil First Crop Production Brazil Second Crop Production ' ha 5, 4, 3, 2, South Southeast Center-West Northeast North * ' mt 2, 15, 1, * 1, 5, CORN Source: JPMorgan Soft Commodity Strategy, USDA/FAS.

34 World Corn Balance Sheet CORN J.P. Morgan Forecast 23/4 24/5 25/6 26/7 27/8* 28/9* 29/1* 29/1 21/11 Beginning Stocks (' mt) 126,733 14, , ,292 18, ,66 145, , ,88 Harv ested Area (' ha.) 141, , , , , , , ,82 157,916 x Yield (mt/ha) Production 626, , , ,38 791, , , ,639 86,577 of which Major Ex porters United States 256, , , ,53 331, , ,52 332, ,171 Argentina 15, 2,5 15,8 22,5 22, 12,6 15, 19,68 16,875 Brazil 42, 35, 41,7 51, 58,6 51, 51, 49,692 54,6 China 115,83 13,29 139, ,6 152,3 165,9 155, 15,45 16,38 FSU-12 11,58 15,424 13,289 12,849 13,79 21,315 17,865 17,384 17,477 South Africa 97 9,7 11, , ,3 13, ,567 11,5 11,51 12,474 Major Importers Mex ico 21,8 22,5 19,5 22,35 23,6 24,226 22, 22,5 22,8 EU-27 39,876 66,471 6,668 53,829 47,555 62,71 56,126 56,14 58,784 Egy pt 5,74 5,84 5,932 6,149 6,174 6,217 6,3 6,314 6,192 Others India 14,98 14,18 14,71 15,1 18,96 19,29 18,5 18,6 19,41 Canada 9,587 8,837 9,332 8,99 11,649 1,592 9,56 9,54 11,36 Thailand 4,1 4,21 4, 3,8 3,85 4,2 4,25 4,252 4,172 Turkey 2,5 3, 3,7 2,8 2,9 4,15 3,8 3,8 3,254 Total Supply (' mt) 753, ,732 83, ,672 9, , , ,61 938,666 Feed & Residual (M bu) 445, ,77 477, , , , ,524 49, ,998 Food, Seed, Industrial 22, , , , , ,29 311, , ,41 Total Use (' mt) 648,3 686,35 75, ,135 77, ,393 83,97 85, ,48 Ending Stocks 14, , ,292 18, ,66 145, , ,88 131,564 Trade 79,66 77,645 8,955 93,96 98,69 82,2 84,557 82,275 85,84 Stocks/Use 16% 19% 18% 15% 17% 19% 17% 16% 16% Source: JPMorgan Soft Commodity Strategy, USDA.

35 Agenda Section 21 in Context 1 Corn 2 Wheat 3 AGRICUL TURAL COMMODITY FUNDAMENTALS AND OUT LOOK

36 Wheat Market Outlook Large drop in US winter wheat plantings Lower prices may improve end-user interest Possible yield risks to N Hemisphere production Large Net-Short Market Structure Large stocks in US, World US acrege decline not bullish itself Poor global l demand, d plentiful l exporter supplies WHEAT

37 The Wheat Market May Be Setting Up for Short-Term Unwind Non-Commerical Net Long Positions vs Price Positions 2, -2, -4, -6, -8, -1, Non-Comml W Net Length (Left) Price (Right) Feb-8 Jun-8 Oct-8 Feb-9 Jun-9 Oct-9 Feb-1 /bu. 1,3 1, Source: JPMorgan Soft Commodity Strategy, CFTC. WHEAT

38 US Wheat Supply in 21: Lower, but Not Necessarily Bullish 21 All-Wheat Acreage Declines, Led by SRW......but this Alone is Not Enough to Justify Bullishness ' acres Hard Red Winter Durum mil. bu. A big SRW supply buffer in stks/use 9 White Wheat Hard Red Spring 25 Soft Red Winter 29 cushions 21 5% Ending Stocks 7 2 4% Stocks/Use 6 * % % 1% % Hard Red Winter Supplies Likely Remain Comfortable mil. bu Ending Stocks Stocks/Use stks/use 55% 45% 35% 25% 15% 5% WHEAT Source: JPMorgan Soft Commodity Strategy, USDA %

39 US Demand Trends in 21 are Poor 21 US Weekly Wheat Exports and Implied Pace Monthly Export Volumes in 29/1 Crop Year ' bu 4, 35, 3, 25, 2, 15, 1, 5, 8,223 Implied Weekly Sales to Meet USDA Est 6/4 8/13 1/22 12/31 3/11 5/2 US Prices Have Been Uncompetitive % of USDA 1% 8% 6% 4% 2% % ' bu 5-Yr Range 5-Yr Av erage 45, 29/1 4, 35, 3, 25, 2, 15, 1, 5, Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May WHEAT 5 US-Russia 4 3 US-France Jul 9 Aug 9 Sep 9 Oct 9 Nov 9 Dec 9 Jan 1 Source: JPMorgan Soft Commodity Strategy, USDA.

40 US Wheat Balance Sheet J.P. Morgan Forecast 23/4 24/5 25/6 26/7 27/8* 28/9* 29/1* 29/1 21/11 Beginning Stocks (M bu) ,11.83 Planted Acreage (M. acres) Harv ested Acreage (M. acres) x Yield (bu/acre) Production 2, , ,15. 1,812. 2,67. 2,499. 2,216. 2, , Imports Total Supply (M bu) 2, , ,727. 2,53. 2,635. 2,932. 2,988. 2, , Feed & Residual (M bu) Food Seed Ex ports 1, ,62.7 1, ,264. 1, ,. Total Use (M bu) 2, , ,155. 2,48. 2,33. 2,675. 2,7. 1,977. 2, Ending Stocks , Stocks/Use 23.2% 24.2% 26.5% 22.2% 13.1% 24.6% 48.9% 51.2% 39.8% Source: JPMorgan Soft Commodity Strategy, USDA. WHEAT

41 US, Sub-Class Balance Sheet J.P. Morgan Forecast 25/6 26/7* 27/8* 28/9* 29/1* 29/1 21/11 US HRW Beginning Stocks (M bu) Production , Imports Total Supply (M bu) 1, ,127. 1,174. 1,174. 1, ,27.82 Domestic Use (M bu) Ex ports Total Use (M bu) Ending Stocks US SRW Beginning Stocks (M bu) Production Imports Total Supply (M bu) Domestic Use (M bu) Ex ports Total Use (M bu) Ending Stocks US HRS Beginning Stocks (M bu) Production Imports Total Supply (M bu) Domestic Use (M bu) Ex ports Total Use (M bu) Ending Stocks Source: JPMorgan Soft Commodity Strategy, USDA. WHEAT

42 US, Sub-Class Balance Sheet J.P. Morgan Forecast 25/6 26/7* 27/8* 28/9* 29/1* 29/1 21/11 US White Beginning Stocks (M bu) Production Importst Total Supply (M bu) Domestic Use (M bu) Ex ports Total Use (M bu) Ending Stocks US Durum Beginning Stocks (M bu) Production Imports Total Supply (M bu) Domestic Use (M bu) Ex ports Total Use (M bu) Ending Stocks Source: JPMorgan Soft Commodity Strategy, USDA. WHEAT

43 A Look at the Next Five Years for US Wheat US Ending Stocks and Stocks/Use to 215 Domestic and Export Demand Remains Weak To 215 mil. bu. 2, 1,5 1, 5 Ending Stocks Stocks/Use stks/use 1% 8% 6% 4% 2% % mil. bu. 16, 14, 12, 1, 8, 6, 4, 2, Wheat Use Corn Use WHEAT Source: JPMorgan Soft Commodity Strategy, USDA/FAS.

44 A Look at the Next Five Years for US Wheat J.P. Morgan Forecast 29/1* 29/1 21/11 211/12 212/13 213/14 214/15 215/16 Beginning Stocks (M bu) , Planted Acreage (M. acres) Harvested Acreage (M. acres) x Yield (bu/acre) Production 2,216. 2, , ,83.7 2, , , , Imports Total Supply (M bu) 2,988. 2, , , , , , , Feed & Residual (M bu) Food Seed Exports ,. 1,. 1,25. 1,5. 1,1. 1,1. Total Use (M bu) 2,7. 1,982. 2, , , , , , Ending Stocks , Stocks/Use 48.9% 5.8% 4.6% 37.% 33.9% 31.6% 27.1% 23.5% Source: JPMorgan Soft Commodity Strategy, USDA. WHEAT

45 Key World Corn Fundamental Trends World Production, Consumption and Stocks World Production 29 vs 28 ' mt Production ' mt 75, Ending Stocks (right ax is) 22, Consumption 7, 2, 65, 6, 55, 5, 45, 4, 35, 18, 16, 14, 12, Ukraine Russia EU 25 Canada Australia Argentina 3, 1, mmt US World Production 21 vs 29 Ukraine Russia EU 25 Canada Australia Argentina US mmt WHEAT Source: JPMorgan Soft Commodity Strategy, USDA/FAS.

46 Key World Wheat Fundamental Trends Argentina Production, Exports & Stocks ' Production ' 18, Ex ports 3,5 16, Ending Stocks (right axis) 3, 14, 12, 2,5 1, 2, 8, 6, 4, 2, ,5 1, 5 Source: JPMorgan Soft Commodity Strategy, USDA/FAS. WHEAT

47 Key World Wheat Fundamental Trends Brazil Production, Imports & Stocks ' mt Production ' mt 9, Imports 1,6 Ending Stocks (right axis) 8, 1,4 7 7, 1,2 6, 1, 5, 8 4, 6 3, 2 2, 4 1, Source: JPMorgan Soft Commodity Strategy, USDA/FAS. WHEAT

48 Key World Wheat Fundamental Trends Russia & Ukraine Production, Exports and Stocks to 215 ' mt ' mt Production 1, Ex ports 3, Ending Stocks (right ax is) 8, 25, 6, 4, 2, 2, 15, 1, 5, Source: JPMorgan Soft Commodity Strategy, USDA/FAS. WHEAT

49 World Wheat Balance Sheet J.P. Morgan Forecast 23/4 24/5 25/6 26/7 27/8 28/9 29/1* 29/1 Beginning Stocks (' mt) 166, ,964 15, , , ,69 163, ,944 Harv ested Area (m ha.) 29, , , , ,1 224, , ,1 x Yield (mt/ha) Production 554,63 625, , ,72 61, , , ,45 of which Major Ex porters United States 63,85 58,698 57,243 49,217 55,821 68,16 6,314 6,359 Canada 23,49 24,796 25,748 25,265 2,54 28,611 26,5 26,55 EU-27 11, , , ,87 12, ,72 138, ,23 Russia 34,1 45,4 47,7 44,9 49,4 63,7 61,7 61,813 Australia 26,132 21,95 25,173 1,822 13,569 2,939 22,5 21,942 Argentina 14,5 16,1 14,6 16,1 18, 9, 8, 8,265 Kazakhstan 11,55 9, ,2 13,45 16,45 12,55 17, 17,52 Ukraine 3,6 17,5 18,7 14, 13,9 25,9 2,5 2,495 China 86,49 91,952 97,445 18,466 19, , ,5 114, Major Importers Brazil 5,851 5,845 4,873 2,234 3,825 5,88 4,8 4,56 Egypt 6,443 7,177 8,184 8,274 8,275 7,883 7,9 7,9 Mexico 2,7 2,42 3,2 3,24 3,593 4, 4,3 4,3 Others India 65,1 72,15 68,64 69,35 75,81 78,57 8,58 79,84 Pakistan 19,183 19,5 21,612 21,277 23,3 21,5 24, 24,3 Total Supply (' mt) 72, ,688 77, , ,5 83,751 84, , Feed & Residual (M bu) 96,298 15,37 11,935 15,877 96, ,71 11,67 111, Food, Seed, Other Domestic 484,262 5,155 56, , ,852 52, , , Total Use (' mt) 58,56 65, , , , , , , Ending Stocks 131,964 15, , , ,69 163, ,64 196,394 Trade 13,7 113, , , , , , ,5 WHEAT