2010 World & U.S. Wheat Situation

2010 Hard Red Spring & Durum Quality

December 7, 2010

Jim PetersonMarketing Director

North Dakota Wheat Commissionjpeterso@ndwheat.com

www.ndwheat.com

World Wheat Situation• Production far below early summer projections…

but still 3rd highest on record– Russian drought, reduced Canadian acres, Western

Australian drought• Usage will reach record high

– Exceed production for first time in 3 years– Continued food growth– Increase in feed use…low quality wheat in

EU/CAN/AUS• Ending stocks expected to decline..but still

historically large• Supply situation different than in 2007-08 when

prices soared to double digits but concerns over 2011 prospects pushing prices

• U.S. export share up dramatically

WORLD WHEATPRODUCTION AND USE

00-01

01-02

02-03

03-04

04-05

05-06

06-07

07-08

08-09

09-10

Proj. 10-11

300

350

400

450

500

550

600

650

700

11,022

12,859

14,696

16,533

18,370

20,207

22,044

23,881

25,718

Production UseMillion Ton Million Bushel

WORLD WHEAT PRODUCTION – MAP(Million Bushels)

08-09 09-10 Proj 10-11

1051 988851

Canada

08-09 09-10 Proj 10-11

2498 2218 2208

U.S.

08-09 09-10 Proj 10-11

367 386496

Argentina

08-09 09-10 Proj 10-11

5551 5070 4982

EU 27

08-09 09-10 Proj 10-11

4247 41813108

FSU

08-09 09-10 Proj 10-11

4133 4225 4207

China

08-09 09-10 Proj 10-11

2888 2965 2965

India

08-09 09-10 Proj 10-11

768 827 882

Australia

USDA October 2010xldata./world/all/prod & use

WORLD WHEAT STOCKS

00-01

01-02

02-03

03-04

04-05

05-06

06-07

07-08

08-09

09-10

Proj 10-11

0

50

100

150

200

250

0

1,837

3,674

5,511

7,348

9,185Million Tons Million Bushels

Source: USDA

WORLD WHEAT EXPORTSMillion Bushels

EU-27 U.S. Canada Australia Argentina FSU-120

300

600

900

1200

1500

808

1250

643

588

294

614

07-08 08-09 09-10 Proj 10-11

Source: USDA

U.S. WHEAT PLANTINGS & PRODUCTIONAcres/Bushels

98 99 00 01 02 03 04 05 06 07 08 09 100

20

40

60

80

0

700

1400

2100

2800Planted Harvested Production

Source: USDA Small Grains Summary

Million Acres Million Bushels

Historically low winter wheat acres but offset by record national yield

Historical U.S. Wheat Yields

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 201020

25

30

35

40

45

50HRS Durum All Wheat

Bushels Per Acre

U.S. WHEAT SUPPLY & DEMAND Million Bushels

05-06 06-07 07-08 08-09 09-10 Proj10-11

Change

Beg Stocks 540 571 456 306 657 976 49%

Production 2,105 1,808 2,051 2,499 2,218 2,208 0%

Imports 82 122 113 127 119 110 -8%Tot Supply 2,727 2,501 2,620 2,932 2,993 3,294 10%

Dom Use 1,146 1,137 1,050 1,260 1,137 1,196 5%

Exports 1,009 908 1,263 1,015 881 1,250 42%Tot Use 2,155 2,045 2,314 2,275 2,018 2,446 21%End Stocks 571 456 306 657 976 848 -13%

S/U Ratio 26% 22% 13% 29% 48% 35%

Source: USDA

EXPORT PACE FOR U.S. WHEAT(Shipments and Sales as of November 25, 2010)

HRW SRW HRS WHITE DURUM0

50100150200250300350400

0.01.42.74.15.46.88.29.510.9

09-10 Pace 10-11 PaceMillion Bushels Million Tons

U. S. FUTURES TRENDSMinneapolis – Hard Red SpringKansas City – Hard Red Winter

Chicago – Soft Red Winter – World prices

$3.00

$4.50

$6.00

$7.50

$9.00

$110.22

$165.33

$220.44

$275.55

$330.66MGE KCBOT CBOT $ per Ton$ per Bushel

Shortage of quality wheat in world market and strong U.S. exports have pushed MPLS and KC prices higher.

U.S. Hard Red Spring Wheat Share of production by state

18% 49% 15%

10%

U.S. HARD RED SPRIJNG2010 Overview

A second year of very strong yields with little to no disease pressures but a more challenging harvest in western areas compared to 2009

Planting / Emergence Timely in the central and east but some delays in western

areas Growing Season

Excellent subsoil moisture and timely rains Minimal disease pressures No excessive heat Record yields for the region

Harvest Timely, rapid harvest in eastern half of the region Later than normal in western areas with parts of Montana and

northwest North Dakota hit by long delay in September

U.S. SPRING WHEAT PLANTINGS & PRODUCTION

98-9

9

99-

00

00-

01

01-

02

02-

03

03-

04

04-

05

05-0

6

06-0

7

07-

08

08-

09

09-

10

10-

11

0

4

8

12

16

20

0

130

260

390

520

650

Planted Harvested Production

Source: USDA Small Grains SummaryXldata/HRS/Acres

* Typically includes 30-60 million bushels of white spring wheat.

Million Acres Million Bushels

U.S. SPRING WHEAT PRODUCTION BY STATE

North Dakota

Montana South Dakota

Minnesota0

1.5

3

4.5

6

7.5

9

0

55.11

110.22

165.33

220.44

275.55

330.66

Million Tons

050607081011

Million Bushels

Source: USDA Small Grains Summary

Montana had largest production gains in 2010

U.S. Hard Red Spring Wheat 2010 Harvest Progress

As of August 29

31% 74% 97%

95%

Nationally – 69% versus 75% normalMN and SD completedND near normal, MT well behind

U.S. Hard Red Spring Wheat 2010 Harvest Progress

As of September 12

56% 85% 100%

100%

U.S. HARD RED SPRING DEMAND

00-0

1

01-0

2

02-0

3

03-0

4

04-0

5

05-0

6

06-0

7

07-0

8

08-

09

09-

10

10-1

1

0

50

100

150

200

250

300

350

400Exports Domestic Use

Million Bushels

Source: USDA

COMPARATIVE U.S. WHEAT PROTEIN LEVELS

12% Moisture Basis

80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 1010

11

12

13

14

15

16

17

HRS Wheat5 Yr AvgHRW WheatFive Yr Avg

Protein Content

10/26/10

COMPARATIVE U.S. HRS & CWRS PROTEIN LEVELS

12% Moisture Basis

90 92 94 96 98 00 02 04 06 08 1012.0

12.5

13.0

13.5

14.0

14.5

15.0

15.5

U.S. HRS5 Yr AvgCWRSFive Yr Avg

Protein Content

10/26/10

Grade shortfalls and low protein dual challenge with Canadian crop in 2010

EXPORT PACE – U.S. HRS WHEAT2010-11 as of November 25, 2010

Total Europe Asia Africa W Hemisphere0

1.5

3

4.5

6

7.5

0

55

110

165

220

276

09/10 10/11Million Tons Million Bushels

U.S. HARD RED SPRING SUPPLY & DEMAND Million Bushels

05/06 06/07 07/08 08-09 09-10 Proj10-11

Change

Beg Stocks 159 132 117 68 142 234 65%Production 467 432 450 512 548 570 4%Imports 12 50 48 45 41 35 -15%Tot Supply 638 614 615 625 731 839 15%Dom Use 225 247 242 273 282 268 -5%Exports 282 250 305 210 214 360 70%Tot Use 506 497 547 483 496 628 25%End Stocks 132 117 68 142 234 211 -10

S/U Ratio 26% 24% 12% 29% 47% 34%

Source: USDA

U.S. HARD RED SPRING2010 Quality

Summary:Average grade - #1 Northern Spring with above average test weights

Improved protein levels over record low 2009 crop, but still below traditional level

Little to no damaged kernels, but lower vitreousness (color) and some pockets of lower falling numbers

Performance – Increased flour yields, lower absorption, some improvement in dough strength and similar loaf volumes (both still below traditional levels)

Data is based on collection of 713 producer samples -- represents entire harvest with the exception of parts of Montana. Analysis by North Dakota State University, Plant Sciences Department, Hard Red Spring Wheat Quality Lab

HRS: Grade Distribution

#1 DNS #1 NS #2 DNS OTHER0

10

20

30

40

50

6054

34

1

11

56

28

3

13

2009 2010

Percent

HRS: Test Weight

05 06 07 08 09 1057.0

58.0

59.0

60.0

61.0

62.0

63.0

60.2

60.6 61.1 61

61.8 61.6

Annual Avg5-yr Avg

Pounds/bushel

HRS: Total Defects

05 06 07 08 09 100

1

2

3

4

Foreign MaterialDamagedShrunken & Broken

Percent

HRS: Protein Content(12% Moisture Basis)

05 06 07 08 09 1012.0

12.5

13.0

13.5

14.0

14.5

15.0

15.5

16.0

14.615.0

14.2 14.3

13.1

13.7Annual Avg5-yr Avg

Percent

HRS: Protein Content Distribution

-11.9 12.0-12.9 13.0-13.9 14.0-14.9 15.0+0

25

50

2009 2010Percent

HRS: Protein by Area(12% moisture basis – percent)

A12.8

E13.6

C13.5

B13.4

D13.5

A14.1

B13.6

A13.1C

13.3

A13.5

B14.2 C

14.7

E14.4

D14.5

B13.8

F13.8

HRS: Falling Number

05 06 07 08 09 10250

300

350

400

450

414 416428

379 375387

Annual Avg5-yr Avg

Seconds

HRS: Vitreous Kernel Count

05 06 07 08 09 1050

60

70

80

90

100

68

8279

71 71 70

Annual Avg5-yr Avg

Seconds

HRS: 2010 Vitreous Kernelsby State (percent)

74

77

70

58

HRS: Flour Extraction

05 06 07 08 09 1060.0

62.0

64.0

66.0

68.0

70.0

72.0

70.0 68.6 68.8 69.869.1

70.0

Annual Avg.5-Yr. Avg.

Test milling was conducted on a Buhler laboratory mill. Results are suitable for comparison between crop years, however yields are lower than those obtained in commercial mills.

Percent

HRS: Flour Protein (14% moisture)

05 06 07 08 09 1011.5

12.0

12.5

13.0

13.5

14.0

14.5

13.4

13.9

13.4 13.3

12.312.6

Annual Avg.5-Yr. Avg.

Percent

HRS: Farinogram Absorption

05 06 07 08 09 1050.0

55.0

60.0

65.0

70.0

65.6 66.4 65.766.9 66.2

64.5

Annual Avg.5-Yr. Avg.

Percent

U.S. Hard Red Spring: Dough Mixing Strength

05 06 07 08 09 100

2

4

6

8

Annual Avg 5-yr Avg

Mixogram ScoreScale 1- 8

Reference Farinograms

U.S. Hard Red Spring WheatDough Quality : Farinograph Times

05 06 07 08 09 100

10

20

30

40

0

2

4

6

8

PEAK MIX TOL (minutes) CLASS (Scale: 1-8)

Minutes Classification

05 06 07 08 09 10Peak 5.7 10.8 9.6 7.1 6.3 6.2

Mix Tolerance

9.9 22.4 22.1 11.0 9.9 10.2

Class 5.1 7.5 6.9 5.0 4.8 4.8

HRS: Stability by Area(minutes)

A9.0

B6.5

C7.5

A10.5 B

10.0

D11.5

C11.0

E8.5

A11.5

D11.0

E14.0

B9.5 A

9.0

B9.5

C12.0

F10.0

HRS: Loaf Volume

05 06 07 08 09 10850

900

950

1000

1050

1100

1015

1042

975 977

925 927

Annual Avg.5-Yr. Avg.

Cubic Centimeters

HRS: 2010 Loaf Volumeby State (cubic cm)

894 923943

917

WORLD DURUM PRODUCTIONMillion Bushels

00 01 02 03 04 05 06 07 08 09 Proj 10

0

400

800

1200

1600

1,2311,165

1,2681,354

1,4881,378

1,313 1,286

1,4291,506

1,264

OtherTunisiaMoroccoAlgeriaTurkeyUSCanadaEU

Source: Stats Canada and Int’l Grains Council

WORLD DURUM PRODUCTION – MAP(Million Bushels)

08 09 Pro 10

202 198110

Canada

08 09 Proj 10

85110 107

U.S.

08 09 Proj 10

7381 81

MEXICO

08 09 Proj 10

367 323 320

EUROPEAN UNION

08 09 Proj 10

246276

235

TURKEY/SYRIA/KZ

08 09 Proj 10

312 272 242

OTHER

08 09 Proj 10

125

228165

NORTH AFRICA

08 09 Proj 10

18 18 18

AUSTRALIA

Source: Stats Canada and Int’l Grains Council

Durum Stocks in Major Exporters U.S., Canada, European Union (As of June 1)

00-

01

01-

02

02-

03

03-

04

04-

05

05-0

6

06-0

7

07-0

8

08-0

9

09-1

0

10-1

1

0

2

4

6

8

0

73

146

219

292U.S. Canada EU

Source: Stats Canada and Int’l Grains Council

Million Tons Million Bushels

WORLD DURUM EXPORTS

Canada United States

EU *Others0

50

100

150

200

0

10

20

30

40

50

60Million Bushels

05060708Proj 1011

Million Tons

Others includes Turkey, Syria, Mexico and Australia Source: Int’l Grains Council

U.S. DURUM2010 Overview

Record yields and production in MT. Smaller Desert Durum Crop in AZ and CA (reduced acres). Larger durum crop in ND (higher acres). Quality of Northern crop compromised by September rains/frost.

Overall production Similar to 2009

Demand Still seeing strong domestic use Export sales started strong but have since fallen behind last

year due to political issues in Algeria, weaker Euro and compromised quality

Prices Wide quality price spreads in the market ($3.50 to $7.25) Top-end durum is nearly a $1 below 14% protein HRS

U.S. DURUM WHEAT PLANTINGS & PRODUCTION

98-9

9

99-

00

00-

01

01-

02

02-

03

03-

04

04-

05

05-0

6

06-0

7

07-0

8

08-

09

09-

10

10-

11

0

1

2

3

4

5

6

0

25

50

75

100

125

150

Planted Harvested Production

Source: USDA Small Grains SummaryXldata/durum/acres

Million BushelsMillion Acres

U.S. DURUM WHEAT PRODUCTION BY STATE

North Dakota Montana AZ & CA0.0

0.6

1.2

1.8

2.4

3.0

0

22

44

66

88

110Million Tons

0506070809Column2

Million Bushels

Source: USDA Small Grains Summary

Desert Durum accounted for smaller share of 2010 crop

DURUM SUPPLIES IN THE U.S.

00-0

1

01-0

2

02-0

3

03-0

4

04-0

5

05-0

6

06-0

7

07-0

8

08-0

9

Est 0

9-10

Proj

10-

11

020406080

100120140160180200

0.0

1.4

2.7

4.1

5.4

6.8

50 45 33 28 26 38 40 22 8 25 35

11084

80 97 90101

53 72 84

109 107

25

3430 20 29

32

42 40 38

3540

Beg Stocks Production Imports

Source: USDA

Million Bushels Million Tons

U.S. DURUM DEMAND

00-0

1

01-0

2

02-0

3

03-0

4

04-0

5

05-0

6

06-0

7

07-0

8

08-

09

09-

10

10/1

1

0.0

0.5

1.0

1.5

2.0

2.5

0

18

37

55

73

92Million Tons Exports Food Use Million Bushels

Source: USDA

EXPORT PACE – U.S. DURUM WHEAT2010-11 as of November 25, 2010

Total Europe Africa W Hemisphere0.0

0.2

0.4

0.6

0.8

1.0

0.0

7.3

14.7

22.0

29.4

36.7

09/10 10/11Million Tons Million Bushels

U.S. DURUM SUPPLY & DEMAND Million Bushels

05/06 06/07 07/08 08-09 09-10 Proj10-11

Change

Beg Stocks 38 40 22 8 25 35 40%Production 101 53 72 84 109 107 -1%Imports 32 42 40 38 35 40 15%Tot Supply 171 135 134 130 169 182 7%Dom Use 84 79 84 81 90 89 -1%Exports 47 35 42 24 44 50 14%Tot Use 131 114 126 105 134 139 2%End Stocks 40 21 8 25 35 43 23%

S/U Ratio 31% 18% 6% 24% 26% 31%

Source: USDA

U.S. NORTHERN DURUM2010 Quality

Source: North Dakota State UniversityDurum Wheat Quality LabPlant Sciences Department

Summary: Crop averages a #1 HAD but first 60% of the crop is of much higher quality than last portion Near average test weights but below average protein, vitreous kernels and falling numbersMilling extractions higher than 09 and 5-yr averageSemolina mixing strength near averagePasta color scores and cooked firmness below average due to September rains

2009 Carryover stocks remain high and the crop was of excellent quality…will help mitigate some quality issues in 2010

Data based on 204 producer samples collected during harvest. Last 20% of MT crop not sampled due to late harvest

Last 20% of MT

crop not analyzed

N.D. Durum Harvest Progress

8-Aug 15-Aug 22-Aug 29-Aug 5-Sep 12-Sep 19-Sep 26-Sep 3-Oct0

20

40

60

80

100

2009 2010 5-yr. avg.Percent

U.S. Northern DurumGrade Distribution

#1 HAD#2 HAD

#1-#2 AD#3 HAD

OTHER0

10

20

30

40

50

60

70

8069

10 10

0

11

54

15

6 6

19

2009 2010

Percent

DURUM: Test Weight

05 06 07 08 09 1057.0

58.0

59.0

60.0

61.0

62.0

60.8

59.9 59.960.2

61.4

60Annual Avg5-yr Avg

Pounds/bushel

DURUM: Falling Number

05 06 07 08 09 10200

250

300

350

400

450

378 385367

322

398

335Annual Avg5-yr Avg

Seconds

DURM: Falling Numbers by Crop Area

A432

B414

A264

B323

C372

D443

U.S. Northern Durum: Vitreous Kernel Content

05 06 07 08 09 1070

75

80

85

90

95

100

91 90

95

83 83 82Annual Avg5-yr Avg

Percent

DURUM: Vitreous Kernel Content Distribution

-50 50-59 60-74 75-89 90+0

10

20

30

40

50

60

2009 2010

DURUM: 2010 Vitreous Kernelsby Crop Area (percent)

A87

B86

A79

B82

C88

D84

DURUM: Total Defects

04 05 06 07 08 09 100

1

2

3

4

Foreign MaterialDamageShrunken & Broken

Percent

DURUM: 2010 Total Defectsby Crop Area (percent)

A0.8

B1.0

A3.2

B1.3

C1.2

D0.9

DURUM: Protein Content(12% moisture basis)

05 06 07 08 09 1012.0

13.0

14.0

15.0

16.0

17.0

13.4

15.1 15.114.8

13.5 13.4

Annual Avg5-yr Avg

Percent

DURUM: 2010 Protein Contentby Crop Area (12% moisture)

A13.1

B13.1

A13.5

B13.4

C13.9

D13.6

DURUM: Semolina Extraction

05 06 07 08 09 1050

55

60

65

70

75

80

Total Extrac-tion5-Yr Avg.Semolina Extrac-tion

Percent

DURUM: Semolina Mixing Strength

05 06 07 08 09 100

2

4

6

8

Annual Avg.5-Yr. Avg.

Mixogram ScoreScale 1- 8

Reference Mixograms

DURUM: 2010 Semolina Mixing Strength (mixogram score by crop area)

A7.0

B5.0

A5.0

B6.0

C6.0

D6.0

DURUM: Pasta Color Score

05 06 07 08 09 100

3

6

9

12

9.4 9 9.1 8.79.5

8.3

Annual Avg5-yr Avg

Scale of 1-12

A pasta sample with a score of 8.0 or higher is considered to have good quality.

DURUM: 2010 Pasta Color Score scale of 1 -12

A8.5

B9.0

A8.0

B8.0

C8.5

D8.5

DURUM: Pasta Cooked Firmness

05 06 07 08 09 104.0

5.0

6.0

7.0

5.65.9

5.6 5.7

5

4.5

Annual Avg5-yr Avg

Grams cm

DURUM: 2010 Pasta Cooked Firmness grams cm

A4.2

B4.8

A4.4

B4.2

C4.4

D4.8

Average N.D. Hard Red Spring & Durum Wheat Producer Bids

Per TonPer Bushel

Source: Basket of average 9 ND elevator bids posted in AgWeek

$3.00

$4.00

$5.00

$6.00

$7.00

$8.00

$110.22

$146.96

$183.70

$220.44

$257.18

$293.92

What does recent price gains in HRS mean for 2011 acres in U.S?

THANK YOU!

QUESTIONS?

U.S. SPRING WHEAT PLANTINGS BY STATE

North Dakota Montana South Dakota Minnesota0

1

2

3

4

0.0

2.5

4.9

7.4

9.9Million Hectares

050607080910

Million Acres

Source: USDA Small Grains Summary9/30/10