U.S.

Production System for Corn and Other Grains

Presented by
Jay ONeil Senior Agricultural Economists International Grains Program Kansas State May 2010

Number of Farms Decreasing, Size of Farms Increasing

Distribution of Farms & Farm Product Sales

Farms Individl/Fam. Partnerships Corp.: Family Corp.: Other
Other
99%

Product Sales 54.1% 18.0 21.1 6.0

0.7

85.9% 9.7 3.4 0.4

0.6

2008-09 U.S. CROP LAND FOR GRAIN

Corn = 35.2 mil. HA = 35% Soybeans = 31.4 mil. HA. = 32 % Wheat = 24.2 mil. HA = 24 % Sorghum = 7.0 mil. HA = 7 % Barley = 1.7 mil HA = 2 % TOTAL = 99.5 mil HA
SORGHUM, 8.3 3% WHEAT, 63.1 27%

ACRES

BARLEY, 4.2 2%

CORN, 86.0 36%

CORN SOYBEANS
SOYBEANS, 75.7 32%

WHEAT SORGHUM BARLEY

Total 237.3 million acres or 96.0 million HA

Average Yield Data

Bushel Price
$153.53 mt

2008-09

Bushels/ Acre 154 39.6 65.0 44.9

Metric ton/ Hectare 9.67 2.663 4.08 3.02

Revenue/ Acre
$1,484.63 HA

Corn
$339.87 mt

$3.90 $9.25 $3.20 $6.80

$600.60
$905.07 HA

Soybeans
$125.98 mt

$366.30
$514.00 HA

Sorghum
$249.85 mt

$208.00
$754.55 HA

Wheat

$305.32

CZ09 = $4.05, SN09 = $8.92, KWN09 = $5.92 per bushel on 13 February 2009
Based on USDA estimates as of 11February 2009

Wheat

Overview of the U.S. DISTRIBUTION SYSTEM

Farmer to Market

FLOW of GRAIN

West Central Co-Op Templeton, IA

AgMark Co-Op Concordia, KS 4.75 million Bushels = 120,656 mt storage capacity

2008 U.S. Grain Export Movement by Vessel

Pacific Northwest 32.202 mt (33 %) Great Lakes 1.44 (1.5 %)

Atlantic Coast 2.06 ( 2 %)

Wheat Corn Soybean Sorghum

Interior Shipments to Mexico

Texas 11.341 (11.5 %)

Mississippi River 50.780 ( 52 %)

U.S. RIVER SYSTEM Barge Rates per short ton @ 100 % Tariff

Mississippi River Barges Carrying 1,400 mt of Grain

RIVER BARGES

Grain Shipments in Barges

Barge Rates
As of 7 August 2009
Illinois River @ 315 % of Tariff = $16.11mt (.41/bu for Corn or .44/bu for Soybeans) Mid-Mississippi @ 315 % of tariff = $18.47 mt (.47/bu corn and .50/bu Soybeans) Upper Mississippi @ 340 % of Tariff = $23.20 mt ($0.59/bu Corn - $0.63/bu Soybeans)

* Ocean Freight from the U.S. Gulf to Japan or Korea is $57.00/mt

Barge Freight Costs

RAIL TRANSPORTATION

Union Pacific Rail Road SYSTEM MAP

Railroad Volume
2006
Volume by Railroad and % of Ag volume
Units in Thousands

Volume
10,024 9,533 7,779 7,299

Ag

4,600 2,683

9%

9%

6%

6%

9%

1,055

819

13%

9%

17%

BNSF

UP

NS

CSX

CN

CP

KCS

TFM

Source BNSF

100-110 CAR SHUTTLE TRAIN

10,000 12,100 MT of CORN CARGO

Western US Railroads state that approximately 55 % of their Domestic Grain business moves by Shuttle Train. An estimated 90 % of Western US corn is transported by shuttle train. 98 % of all Export business to the Ports moves by Shuttle and close to 75 % of the Grain movement to Mexico is done via Shuttle Trains.

BNSFs Mid and Short-Term Leased Fleet

Shuttles are more efficient than unit/singles Tons/year delivered

4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0 2001 2002 Tons/Shuttle Car 2003 2004 2005

Tons/Unit/Single Cars

Source BNSF

RAIL FREIGHT RATES

UPRR Rates : Bayard, IA to Hereford, TX, Fall 2008 1-50 Cars @ $3,847 per car ($42.75/mt) 110 Cars @ $2,960 per car ($32.89 mt if 90 tons or $ 26.910/mt. if 110 tons) Difference between 50 and 110 car shipment = $887 per car or $9.85/mt Shuttle Train incentives can add $200-$300 of additional savings or $2.22 to $3.33/mt to the above. Potential savings for Shuttle Train vs. 50 Car shipments = $1,087 - $1,187/car or $12.00 - $13.00/mt on domestic shipments to feed yards up to $1,430 per car or $13.00/mt on export shipments to Mexico.

Ruff Bros. Grain Co. Ruff, IL 6 million bushels = 152,0000 mt storage capacity

Secondary Rail Freight Market

Ocean Freight

Vessel Loading

LDC Houston, TX

Seaborne Dry Bulk Trade by Commodity, 2008

Grains 10 % or less in 2007-08 14% Iron ore 27% Agribulks 6% Other 5% Forestry 8% Coking coal 8% Steel Steel RMs 9% 3%

Total trade billion tonnes

2.3

Steel sector 45% of total

Thermal coal 20%

OCEAN FREIGHT RATES

7 April 2010

2010 Calendar Year U.S. Gulf to Japan = $61.00/mt PNW to Japan = $71.00/ mt

Gulf Range for year 2009: Low = $22.00 /tonne High = $72.00 /tonne

USD/Mt

$110.00

$100.00

$120.00

$130.00

$140.00

$150.00

$10.00

$20.00

$30.00

$40.00

$50.00

$60.00

$70.00

$80.00

$90.00

$9/4/2003 10/22/2003 12/12/2003 2/20/2004 4/6/2004 5/26/2004 7/19/2004 9/3/2004 10/18/2004 12/6/2004 1/28/2005 3/16/2005 5/4/2005 6/20/2005 8/1/2005 9/14/2005 11/2/2005 12/14/2005 2/8/2006 3/22/2006 5/8/2006 6/21/2006 8/3/2006 9/15/2006 10/27/2006 12/8/2006 2/22/2007 5/17/2007 7/5/2007 8/17/2007 10/1/2007 12/6/2007 5/21/2008 10/10/2008 4/17/2009 11/20/2009

Baltic Dry-Bulk Ocean Freight Index- US Gulf- Japan

Date

$67.00

Year to Year Market Changes

The laws of Supply and Demand greatly affect Transportation markets. There's an old saying you cant build a church for Easter This applies to transportation infrastructure too. High freight markets motivate investors to build. After they build, and over build, we often get a shift in supply of barges or rail cars or ships verses the demand.

CONTAINER SHIPMENTS

DDGS SHIPPING ECONOMICS

13 March 2009

Barge Freight at 325% Tariff

= $ 16.62/ tonne

Fobbing Charge Barge to Vessel = $ 6.00 / tonne Panamax Ocean Freight = $ 40.00 / tonne

Total Transportation Cost to Korea = $ 62.62 / tonne ($154.40 in August 2008)

Verses

Container Freight from USA = $900 = $39.13 ($2,300= $100/mt in August 2008).

THANK YOU

QUESTIONS ?