Grain Transportation Demand for the Pacific Northwest 2008-2009

By John R. Kruse, PhD Managing Director, Agriculture Service Global Insight Email: John.Kruse@globalinsight.com Phone: 573-442-8165

November 13, 2008

Factors Affecting Grain Exports

US corn and soybean crops are being harvested later than usual due to late plantings. Freight rates Foreign demand Better production in 2008 Increased supply of feed wheat in Europe Economic slowdown

Copyright 2008 IHS Global Insight

Grain Deliveries to the Pacific Northwest via Rail

800 700 600

500 400 300 200 100 -

Rail deliveries down 11% in the last month compared with the same month last year

1000 Short Tons

Nov-04

Nov-05

Nov-06

Nov-07

Jan-05

Jan-06

Jan-07

Jan-08

Jul-05

Jul-06

Jul-07

Mar-05

Mar-06

Mar-07

Sep-04

Sep-05

Sep-06

Sep-07

Mar-08

Jul-08

May-05

May-06

May-07

Copyright 2008 IHS Global Insight

May-08

Sep-08

Trade in Markets Affecting PNW Exports

(1000 metric tons)

Wheat Imports in Markets Affecting PNW Exports Percentage Change -40% 12% 68% 19%

China Southeast Asia Pakistan Total

2007/08 2008/09 0.05 0.03 9.86 11.05 1.49 2.5 11.4 13.58

PNW Wheat trade volumes expected higher in 2008/09 Overall - US Wheat exports decline

Corn Imports in Markets Affecting PNW Exports Percentage Change -1% 21% -23% -5%

08-09 PNW Corn exports decline may decline further

Japan Southeast Asia South Korea Total

2007/08 2008/09 16.61 16.5 3.15 3.8 9.32 7.2 29.08 27.5

Size of Chinas corn crop could result in

more China to Korea and southeast Asia than expected. Strong export demand so far Total PNW soybean exports expected lower in 2008/09.

Soybean Imports in Markets Affecting PNW Exports Percentage Change -5% 1% -4%

China Japan Total

2007/08 2008/09 37.81 36 4.01 4.05 41.82 40.05

Copyright 2008 IHS Global Insight

US Corn Exports to Date

2500

2000

Million Bushels

1500

1000

500

Export pace is considerably slower than last year reflecting weaker demand from Europe
9/6 2/7 3/6 4/3 5/1 8/7 9/20 10/4 11/1 1/10 1/24 2/21 3/20 4/17 5/15 5/29 6/12 6/26 7/10 7/24 10/18 11/15 11/29 12/13 12/27 8/21 9/4

2004/05

2005/06

2006/07

2007/08

2008/09

Copyright 2008 IHS Global Insight

Accumulated Corn Exports and Outstanding Sales

3000

2500

Million Bushels

2000

1500 1000

500 0

Outstanding sales are considerably below last years levels with ample feed wheat supplies in Europe
9/6 2/7 3/6 4/3 5/1 8/7 9/20 10/4 11/1 1/10 1/24 2/21 3/20 4/17 5/15 5/29 6/12 6/26 7/10 7/24 10/18 11/15 11/29 12/13 12/27 8/21 9/4

2004/05

2005/06

2006/07

2007/08

2008/09
6

Copyright 2008 IHS Global Insight

US Soybean Exports to Date

1200 1000 800 600 400 200 0

Export pace is slower than last year reflecting the late harvest.
9/7 2/8 3/8 4/5 5/3 8/9 9/21 10/5 11/2 1/11 1/25 2/22 3/22 4/19 5/17 5/31 6/14 6/28 7/12 7/26 10/19 11/16 11/30 12/14 12/28 8/23 9/6

2004/05

2005/06

2006/07

2007/08

2008/09
7

Copyright 2008 IHS Global Insight

Accumulated Soybean Exports and Outstanding Sales

Sales continue to be strong reflecting uncertainty over the South American crop size and the US crop size estimates that continue to fall.

1200 1000

Million Bushels

800 600 400 200 0

9/6 9/20

1/24 2/7

3/6 3/20

4/3 4/17

5/1

7/24 8/7

10/18 11/1

12/27 1/10

11/15 11/29

2004/05

12/13

2005/06

2006/07

2007/08

2008/09

Copyright 2008 IHS Global Insight

8/21 9/4

10/4

2/21

5/15 5/29

6/12 6/26

7/10

US Soybeans Percent Harvested

Source: USDA/AMS
Copyright 2008 IHS Global Insight 9

US Wheat Exports to Date

1400 1200 1000

Million Bushels

Export pace is slightly weaker than last year.

800 600 400 200 0

6/1 6/15

8/24 9/7

2/8

2/22 3/8

4/5 4/19

6/29

7/13 7/27

8/10

9/21

10/5 10/19

11/2

1/11 1/25

3/22

5/3

11/16

11/30 12/14

2004/05

2005/06

2006/07

12/28

2007/08

2008/09

Copyright 2008 IHS Global Insight

5/17 5/31

10

Accumulated Wheat Exports and Outstanding Sales

1400 1200 1000

Outstanding sales are significantly weaker than last year

Million Bushels

800 600 400 200 0

6/1

9/7

2/8

3/8

4/5

6/15

6/29

7/13

7/27

8/10

8/24

9/21

10/5

11/2

1/11

1/25

2/22

3/22

4/19

5/3

5/17

10/19

11/16

11/30

12/14

2004/05

2005/06

2006/07

12/28

2007/08

2008/09

Copyright 2008 IHS Global Insight

5/31

11

Transportation Cost of Moving Grain from Minnesota to Japan

180 160
Dollars Per Metric Ton

140 120 100 80 60 40 20 0 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08
From MN By Rail to PNW to Japan From MN By Barge to Gulf to Japan
Oct 2008

Data Source: Weekly Grain Transportation Reports, USDA/AMS

Copyright 2008 IHS Global Insight

12

Transportation Cost of Moving Corn from Minnesota to Japan via Rail

140 120
Dollars Per Metric Ton

100 80 60 40 20 0 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08
Rail Cost MN to Portland,OR Ocean Rate PNW to Japan From MN By Rail to PNW to Japan
Oct 2008

Data Source: Weekly Grain Transportation Reports, USDA/AMS

Copyright 2008 IHS Global Insight

13

Transportation Cost of Moving Corn from Minnesota to Japan via Barge to Gulf

180 160
Dollars Per Metric Ton

140 120 100 80 60 40 20 0 Jan98 Jan99 Jan00 Jan01 Jan02 Jan03 Jan04 Jan05 Jan06 Jan07 Jan08
Oct 2008

Barge Rate - MN to Gulf

Ocean Rate - Gulf to Japan

From MN By Barge to Gulf to Japan

Data Source: Weekly Grain Transportation Reports, USDA/AMS

Copyright 2008 IHS Global Insight

14

US Ending Stocks Still Low

(million bushels)

Wheat Corn Soybeans

2007/08 2008/09 456 603 1624 1124 205 205

Percentage Change 32% -31% 0%

Copyright 2008 IHS Global Insight

15

Summary: Weaker PNW Grain Exports Expected

Dramatically lower ocean shipping rates making the gulf more competitive despite higher barge rates Large corn crop in China could further reduce the US export potential to Southeast Asia. However, the gulf ports will take the brunt of US corn export reductions due to declines in exports to Europe. South America soybean production could be larger than expected in future, reducing US soybean exports Weaker global economic growth may further weaken import demand
Copyright 2008 IHS Global Insight 16