Global Market Dynamics

February 7, 2013

Commodity

Global Grain Prices

Volatile & High

3Grains

Live Hog Prices

4

15

25

35

45

55

65

75

85

95

105

115

125

135

145

Ja

n-0

8

Ma

r-0

8

Ma

y-0

8

Ju

l-0

8

Se

p-0

8

No

v-0

8

Ja

n-0

9

Ma

r-0

9

Ma

y-0

9

Ju

l-0

9

Se

p-0

9

No

v-0

9

Ja

n-1

0

Ma

r-1

0

Ma

y-1

0

Ju

l-1

0

Se

p-1

0

No

v-1

0

Ja

n-1

1

Ma

r-1

1

Ma

y-1

1

Ju

l-1

1

Se

p-1

1

No

v-1

1

Ja

n-1

2

Ma

r-1

2

Ma

y-1

2

Ju

l-1

2

Se

p-1

2

No

v-1

2

Ja

n-1

3

Ma

r-1

3

$/C

wt

Live Hog Prices - World MarketsChina: 118

EU: 76

Mexico: 75

Brazil: 74

Chile: 68

US: 64

Korea: 83

World Corn Prices

5

$3.00

$4.00

$5.00

$6.00

$7.00

$8.00

$9.00

$10.00

$11.00

$3.00

$4.00

$5.00

$6.00

$7.00

$8.00

$9.00

$10.00

$11.00

8/1

3/1

1

9/1

0/1

1

10

/8/1

1

11/5

/11

12

/3/1

1

12

/31

/11

1/2

8/1

2

2/2

5/1

2

3/2

4/1

2

4/2

1/1

2

5/1

9/1

2

6/1

6/1

2

7/1

4/1

2

8/1

1/1

2

9/8

/12

10

/6/1

2

11/3

/12

12

/1/1

2

12

/29

/12

1/2

6/1

3

$/B

us

he

l

Date

China $/bu US $/bu. Poland $/bu.

Romania $/bu Mexico $/bu Brazil $/bu.

World Soybean Meal Prices

6

$200

$250

$300

$350

$400

$450

$500

$550

$600

$650

$700

$200

$250

$300

$350

$400

$450

$500

$550

$600

$650

$700

08

/13

/11

09

/10

/11

10

/08

/11

11/0

5/1

1

12

/03

/11

12

/31

/11

01

/28

/12

02

/25

/12

03

/24

/12

04

/21

/12

05

/19

/12

06

/16

/12

07

/14

/12

08

/11

/12

09

/08

/12

10

/06

/12

11/0

3/1

2

12

/01

/12

12

/29

/12

01

/26

/13

Do

llars

pe

r S

ho

rt T

on

Date

Hamburg, Germany Sao Paulo, Brazil

Shandong,China Sonora, Mexico

Romania Central IL, U.S.

US Corn Price ($/bu) – Structural Shift

7

All Time High

$0

$1

$2

$3

$4

$5

$6

$7

$8

$9

'80 '82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12

EPA Biofuel Policy (Aug 2005)

2.75

6.50

5.50

2.00

4.75

3.50

What are the Factors Causing This?

• Low Grain Stocks

• Weather Problems in US & South America

• China Impact

• Government Bio-Fuel Policy

• Plateauing Yields

8Grains

Global Grain Stocks are Still Tight: Commodities to Remain High

* 2012

Source: USDA9

Ending Stocks Very Tight

Global Ending Stocks (mil bu) Stocks/Use Days of SuppliesCorn 4,617 13.7% 50Barley 908 14.8% 54Soybeans 2,115 22.2% 81Rice 102 21.8% 79Wheat 6,357 25.5% 93

U.S. Ending Stocks (mil bu) Stocks/Use Days of SuppliesCorn 619 5.6% 20Soybeans 130 4.4% 16Cotton 6 37.3% 136Wheat 654 26.3% 96

Feb 5, 2013

Feb 2012Feb 2011

July 2012

Major Change in US Weather Situation

10

Weather Extremes-- Global Warming or Extreme Event?

11

China – Major Influence in Commodities

12China

China

Source: Financial Times, Morgan Stanley

13China

Industrial Commodity

China % of World

Food Commodity

China % of World

Cement 53.2% Pigs 46.4%Iron Ore 47.7% Eggs 37.2%Coal 46.9% Rice 28.1%Steel 45.4% Soybeans 24.6%Lead 44.6% Wheat 16.6%Zinc 41.3% Chickens 15.6%Aluminum 40.6% Cattle 9.5%Cotton 39.9% GDP 7.3%Copper 38.9% Population 19.2% (1.3 Billion)Nickel 36.3% Arable Land 9.0% (142 Million HA)Oil 10.3% Arable Land Per Capita .08 HA

% of World's Fresh Water 6%

China's Share of World Commodity Consumption

China Crop Dynamics

2000 2012Self-

Sufficiency

Area Harvested (1,000 HA) 23,056 34,300 Production (1,000 MT) 106,000 200,000 Yield (MT/HA) 4.6 5.83

Area Harvested (1,000 HA) 26,962 30,500 Production (1,000 MT) 131,536 143,000 Yield (MT/HA) 6.3 6.7

Area Harvested (1,000 HA) 26,650 24,300 Production (1,000 MT) 99,640 118,000 Yield (MT/HA) 3.74 4.86

Area Harvested (1,000 HA) 9,300 7,200 Production (1,000 MT) 15,400 12,600 Yield (MT/HA) 1.7 1.8

Area Harvested (1,000 HA) 4,058 5,000 Production (1,000 480 lb bales) 20,300.0 31,500.0 Yield (KG/HA) 1,089 1,372

88%

100%

101%

97%

17%

Cotton

Rice

Corn

Soybeans

Wheat

14China

China/Hong Kong Pork Imports

<2% 0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

0

200

400

600

800

1,000

1,200

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

000

MT

China/HK Pork Imports from Other

China/HK Pork Imports from the U.S

China/HK Pork Imports from the U.S % of Total Imports

China/HK Imports % of Total Consumption

Up 282% Since 2005

15

China

16

China’s Influence on Soybeans

0

500

1,000

1,500

2,000

2,500

3,000

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Mil

lio

n B

ush

els

World Ending Stocks China Soybean Imports114% of 2012 Ending Stocks

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Me

tric

To

nn

es

World Ending Stocks China Imports 114% of 2012 Ending Stocks

China

0

1,000

2,000

3,000

4,000

5,000

6,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

1,0

00

Bu

US Corn Usage for Ethanol Production - 10% Blend

10% Blend40% of Corn Crop

Plateauing Out

Corn Usage for Ethanol – 10% Blend

17Gov’t needs to review mandate and modify it

Ethanol Mandate Hitting Blend Wall

18

0

5

10

15

20

25

30

35

110

115

120

125

130

135

140

145

150

1995 2000 2005 2010 2015

Etha

nol P

rodu

ction

(Bln

Gal

lons

)

Gas

olin

e Co

nsum

ption

(Bln

Gal

lons

)

US Gasoline Consumption 10% Blend Level US Ethanol Production

Gov't Ethanol Mandate (15 Bln Gal)

Surplus Ethanol -Need to change

blend rate

World Crude Demand

While US Moves toward Energy Independence, Asian Demand May Prevent Lower Prices

19

10

12

14

16

18

20

22

24

26

28

19

80

19

85

19

90

19

95

20

00

20

05

20

10

Mln

Ba

rre

ls

US Europe

Asia Rest of World

Asian Compound Annual Growth Rate: 3.0%

1979 Mideast Oil CrisisWhen oil prices spiked af ter the 1979 Iranian revolution, consumption fell sharply in the US and Europe and was f lat elsewhere in the world.

Recent High PricesCrude oil climbed to nearly $150 a barrel in 2008. The f inancial crisis in the US and Europe led to a sharp drop in consumption, but demand in the rest of the world has risen unabated.

50

55

60

65

70

75

80

85

90

95

100

1970 1975 1980 1985 1990 1995 2000 2005 2010 2015

Plan

ted

Acr

es (M

ln)

New Corn Planted Acres Range

Planted Corn Acres – Steady Increase

20

0

20

40

60

80

100

120

140

160

180

1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 2020

Bu/A

cre

40% increase in yield over 55 years

307% increase in yield over 50 years

A new trend?

Trends in Corn Yields Since 1900

21

Down 17% from 2011

Corn Balance Sheet Changes

22

USDA USDA Jan USDA Dec USDA Jan YoY %2010/11 2011/12 2012/13 2012/13 Change

Planted (mil. ac) 88.2 91.9 96.9 97.2 6%Harvested (mil. ac) 81.4 84 87.7 87.4 4%

Yield (bpa) 152.8 147.2 122.3 123.4 -16%Beginning Stocks (mbu) 1,708 1,128 988 989

Production (mbu) 12,447 12,360 10,725 10,780 -13%Imports (mbu) 28 29 100 100 245%

Total Supply (mbu) 14,182 13,516 11,814 11,869 -12%Feed & Residual (mbu) 4,795 4,548 4,150 4,450 -2%

Industrial Use (mbu) 1,407 1,426 1,367 1,367 -4%Ethanol for Fuel (mbu) 5,019 5,011 4,500 4,500 -10%

Total Domestic Use (mbu) 11,221 10,985 10,017 10,317 -6%Exports (mbu) 1,834 1,543 1,150 950 -38%

Total Use (mbu) 13,055 12,527 11,167 11,267 -10%Ending Stocks (mbu) 1,128 989 647 602 -39%

Stocks to Use Ratio 8.6% 7.9% 5.8% 5.3%Days Supply 32 29 21 20

USDA Est. Farm Price ($/bu) $5.18 $6.22 6.80 - 8.00 6.80 - 8.00

Corn

30

35

40

45

50

55

60

65

70

75

80

1970 1975 1980 1985 1990 1995 2000 2005 2010 2015

Plan

ted

Acr

es (M

ln)

Soybean Planted Acres Range

Soybean Planted Acres – Stuck In Neutral

23

Trends in Soybean Yields Since 1990

24

35.3 USDA

Down 19% from 2011

0

5

10

15

20

25

30

35

40

45

50

1925 1930 1935 1940 1945 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020

Bu/

Acr

e

Approximately 3% increase in yield per year over 85 years.

US Soybean Balance Sheet--- Heading to zero

25

USDA USDA Jan USDA Dec USDA Jan YoY %2010/11 2011/12 2012/13 2012/13 Change

Planted (mil. ac) 77.4 75.0 77.2 77.2 3%Harvested (mil ac) 76.6 73.8 75.7 76.1 3%

Yield (bpa) 43.5 41.9 39.3 39.6 -5%Beginning Stocks (mbu) 151 215 169 169

Production (mbu) 3,329 3,094 2,971 3,015 -3%Imports (mbu) 14 16 20 20 25%

Total Supply (mbu) 3,495 3,325 3,160 3,204 -4%Crush (mbu) 1,648 1,703 1,570 1,605 -6%Seed (mbu) 87 90 89 89 -1%

Residual (mbu) 43 1 26 30Total Domestic Use (mbu) 1,778 1,794 1,685 1,724 -4%

Exports (mbu) 1,501 1,362 1,345 1,345 -1%Total Use (mbu) 3,280 3,155 3,031 3,070 -3%

Ending Stocks (mbu) 215 169 130 135 -20%Stocks to Use 6.6% 5.4% 4.3% 4.4%

Days Supply 24 20 16 16

USDA Est. Farm Price ($/bu) $11.30 $12.50 13.55 - 15.55 13.50 - 15.00

Soybeans

Outlook

SOI Values -- El Nino / La Nina Update

-30

-20

-10

0

10

20

30

401/

1/20

10

4/1/

2010

7/1/

2010

10/1

/201

0

1/1/

2011

4/1/

2011

7/1/

2011

10/1

/201

1

1/1/

2012

4/1/

2012

7/1/

2012

10/1

/201

2

1/1/

2013

2013/14 Corn Balance Sheet Scenarios

Planted (1,000 acres) 97,200 97,200 97,200 97,200 98,500 98,500 98,500 100,000 100,000Harvested (1,000 acres) 88,452 88,452 88,452 88,452 89,635 89,635 89,635 91,000 91,000 Yield (bu/acre) 135.0 142.0 146.0 154.0 142.0 144.0 154.0 142.0 154.0

Beginning Stocks (mln bu) 602 602 602 602 602 602 602 602 602 Production (mln bu) 11,941 12,560 12,914 13,622 12,728 12,907 13,804 12,922 14,014 Imports (mln bu) 25 25 25 25 25 25 25 25 25 Total Supply (mln bu) 12,568 13,187 13,541 14,249 13,355 13,534 14,431 13,549 14,641

Feed & Residual (mln bu) 4,598 4,598 4,598 4,598 4,598 4,598 4,598 4,598 4,598 Exports (mln bu) 1,442 1,442 1,442 1,442 1,442 1,442 1,442 1,442 1,442 FSI Consumption (mln bu) 6,243 6,243 6,243 6,243 6,243 6,243 6,243 6,243 6,243 Total Demand (mln bu) 12,283 12,283 12,283 12,283 12,283 12,283 12,283 12,283 12,283

Ending Stocks (mln bu) 285 904 1,258 1,966 1,072 1,251 2,148 1,266 2,358

Stocks/Use Ratio 2.3% 7.4% 10.2% 16.0% 8.7% 10.2% 17.5% 10.3% 19.2%Days Supply 8 27 37 58 32 37 64 38 70

2013/14 Soybean Balance Sheet Scenarios

Planted (1,000 acres) 77,198 77,198 77,198 78,000 78,000 78,000 79,000 79,000 79,000Harvested (1,000 acres) 76,194 76,194 76,194 76,986 76,986 76,986 77,973 77,973 77,973 Yield (bu/acre) 39 41 43 39 41 43 39 41 43

Beginning Stocks (mln bu) 135 135 135 135 135 135 135 135 135Production (mln bu) 2,972 3,124 3,276 3,002 3,156 3,310 3,041 3,197 3,353 Imports (mln bu) 15 15 15 15 15 15 15 15 15Total Supply (mln bu) 3,122 3,274 3,426 3,152 3,306 3,460 3,191 3,347 3,503

Crush (mln bu) 1,652 1,652 1,652 1,652 1,652 1,652 1,652 1,652 1,652 Exports (mln bu) 1,403 1,403 1,403 1,403 1,403 1,403 1,403 1,403 1,403 Seed & Residual (mln bu) 114 114 114 114 114 114 114 114 114 Total Demand (mln bu) 3,168 3,168 3,168 3,168 3,168 3,168 3,168 3,168 3,168

Ending Stocks (mln bu) (47) 106 258 (16) 138 292 23 179 335

Stocks/Use Ratio -1.5% 3.3% 8.2% -0.5% 4.4% 9.2% 0.7% 5.6% 10.6%Days Supply (5) 12 30 (2) 16 34 3 21 39

Mexico Economy Snapshot

Source: USDA, EIA 30

GDP $1.155 TrillionGDP Growth Rate 3.3%GDP Per Capita $15,100Unemployment Rate 4.5%Inflation Rate 3.6%Population 115,000,000Trade Balance $962 mlnCurrent Account Balance - $8.8 Bln

Mexico Agriculture Snapshot

Source: USDA, EIA

2011Production Consumption

Net Export (Import)

Chicken (Mln Lbs) 6,442 7,698 (1,257) Swine (Mln Lbs CWE) 2,579 3,803 (1,224) Cattle (Mln Lbs CWE) 4,034 4,167 (132) Wheat (Mln bu) 139 263 (125) Corn (Mln bu) 807 1,193 (382) Sorghum (Mln bu) 260 341 (63) Fruit (Mln Lbs) 13,316 10,260 472 Oil Production (Barrels/day) 2,983,000 2,073,000 910,000

31

Protein

Global Protein Consumption

7.9

11.6

0.7

14.8

0

25

50

75

100

125

150

175

200

225

250

19

80

19

82

19

84

19

86

19

88

19

90

19

92

19

94

19

96

19

98

20

00

20

02

20

04

20

06

20

08

20

10

20

12

Mill

ion

MT

Beef

Turkey

Chicken

Pork

*Source: USDA

1980 kg per Capita: 25

2012 kg per Capita: 35

33Pork

Per Capita Pork Consumption

34Pork

U.S. Pork Exports – Significant Demand Factor

*China includes: China/HK and Taiwan *Includes pork and pork variety meats

Estimated 24% of Production

35

Japan21%

Other12%

Russia5%

China19%

Korea7%

Canada11%

Mexico25%

Japan22%

Other11%

Russia2%

China22%

Korea8% Canada

9%

Mexico25%

2011: 4,892 Million Pounds Jan-Nov 2012: 4,502 Million Pounds

Jan – Nov 2012

Up 2%2011

Up 18%

23% of Production

2012 Exports will be key in sustaining current prices

2012 USDA Forecast: 3%

US Pork Exports

0

100

200

300

400

500

600

700

800

900

1000

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%1

99

0

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

Mill

ion

Po

un

ds

% o

f U

.S.

Ha

m P

rod

uc

tio

n E

xp

ort

ed

U.S. Ham Exports % of U.S. Ham Production Exported

Jan-Nov 2012 up 25% YOY

US Ham Exports

37

0

100

200

300

400

500

600

700

800

900

1000

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%1

99

0

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

Mill

ion

Po

un

ds

% o

f U

.S.

Ha

m P

rod

uc

tio

n E

xp

ort

ed

U.S. Ham Exports % of U.S. Ham Production Exported

Jan-Aug 2012 up 48% YOY

US Monthly Ham Exports to Mexico

38

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

0

10

20

30

40

50

60

70J

an

-07

Ma

r-0

7M

ay

-07

Ju

l-0

7S

ep

-07

No

v-0

7J

an

-08

Ma

r-0

8M

ay

-08

Ju

l-0

8S

ep

-08

No

v-0

8J

an

-09

Ma

r-0

9M

ay

-09

Ju

l-0

9S

ep

-09

No

v-0

9J

an

-10

Ma

r-1

0M

ay

-10

Ju

l-1

0S

ep

-10

No

v-1

0J

an

-11

Ma

r-11

Ma

y-1

1J

ul-

11S

ep

-11

No

v-1

1J

an

-12

Ma

r-1

2M

ay

-12

Ju

l-1

2S

ep

-12

No

v-1

2

% o

f U

.S.

Ha

m E

xp

ort

s

Mill

ion

Po

un

ds

U.S. Ham Exports to Mexico % of Total U.S. Ham Exports

2007-2011 Monthly Average:Sept-Jan 38.5 million poundsFeb-May: 30.2 million pounds

US Hog Breeding Herd – SeptStabilized – Moderate Expansion

0

2,000

4,000

6,000

8,000

10,000

12,0001

980

19

82

19

84

19

86

19

88

19

90

19

92

19

94

19

96

19

98

20

00

20

02

20

04

20

06

20

08

20

10

(1,0

00

He

ad

)

40% Decline

USDA

PPL = 7.88

PPL = 10.03

PPL = +27%

39

Lowest Cattle Inventory Since Truman

40

0

25,000

50,000

75,000

100,000

125,000

150,000

1920 1930 1940 1950 1960 1970 1980 1990 2000 2010

US Jan 1 Cattle Inventory (1,000 hd)

Truman Presidency - (1945 - 1953) 2012: US Population: 310+ mil

US Cattle Inventory: 91 mil

* Since Truman, Population has Doubled

Avg Cattle Inv.: 83 milAvg US Pop.: 150 mil

Global Protein Outlook

• Cutback in EU pork of 3 – 5%• Stable pork production in US and Canada• China +/- 0.5% ???• Global beef production down 3 – 5%• Global chicken production up 1 – 2%• Global pork production flat to down 0.5%

Social Media & Public Concerns

• LFTB Beef• Cage Free• No Antibiotics• No Hormones• Gestation Crate Free

These changes in current production systems will add cost and reduce supply

42

Key Takeaways

• US needs good weather for ideal crop on largest acreage since 1930s. Corn could approach $4 - $5/bu

• South American soybean crop important to keep meal prices in check.

• China to be the wildcard

United States China India Brazil

Total Actual Renewable Water Resources per Capita (m3/inhab/yr)

9,974 2,080 1,582 42,604

Percent of Freshwater Resources Withdrawn

15.6% 19.5% 39.8% 0.7%

Agricultural Water Withdrawal as a Percent of Total Withdrawal

40.2% 64.6% 90.4% 54.6%

Water….The New Oil• Total volume of water on Earth is 1.4 billion km3

• 97.5% saltwater, 2.5% freshwater• 70% of freshwater in icecaps or permanent snow cover• 30% of freshwater is stored underground, < 1% in rivers and lakes

• 70% of water used for irrigations, 22% for industry, 8% for domestic use• By 2025, 1.8 bln people will be living in regions with absolute water scarcity• By 2025, 66% of world population living under water stress conditions

Water Resources

Water Uses

(m3/inhab/yr) = Cubic meters per inhabitant per yearTotal Actual Renewable Water = maximum yearly amount of water available for a country at a given moment% of Freshwater Resources Withdrawn = % of freshwater withdrawn from total actual renewable water resourcesAg Water Withdrawal = Amount of water withdrawn by ag sector as a % of all water withdrawn

Water Scarcity