AAggrriiccuullttuurree WWeeeekkllyy 29 Apr 11

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See end pages for important disclosures, including investment banking relationships. J.P. Morgan does and seeks to do business with companies covered in its research reports.As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as a single factor in making their investment decision.

Colin P. Fenton(212) [email protected]

Jonah D. Waxman, CFA

(212) 834-2203 [email protected]

Elizabeth M. Volynsky

(212) 834-4021

[email protected]

Global Commodities Research

JPMorgan Chase Bank, NA

April 29, 2011

Agriculture Weekly

Agriculture Weekly

Projected median temperature and precipitation changes for the western US

Temperature (left) in degrees Fahrenheit, precipitation (right) in percent

Forecast of median changes from 112 climate projections (2070-2099 relative to 1950-1979)

The “hidden” cost of water adds to food inflation

Meat and grain production will be key drivers of globaldemand for water over the next decade: We project the global water

footprint for poultry will rise to 389.5 billion liters/year by 2020 from 296.4

billion liters today (+31.4%) while water used to produce corn will require

844.9 billion liters by 2020 from 733.4 billion liters today (+15.2%).

Water resources are unevenly distributed: Only 2.5% of theworld’s water is freshwater and, of that, less than 31% is available for use

in agriculture, power generation, and other industrial uses, according to the

UN. The biggest imbalance is in Asia, which supports 60% of the world’s

population with only 36% of the world’s freshwater resources.

Weather volatility is increasing stress on water supplies:Deviations from normal precipitation and temperature have been impacting

the availability and predictability of hydropower, water resources for crop

irrigation, and natural gas pricing. These uncertainties raise transactioncosts in food production and distribution channels.

Source: US Department of the Interior Bureau of Reclamation





3

Global water consumption for agricultureBillions of liters

Global water consumption for agricultureBillions of liters

Structural constraints in water will increase food price volatility

Structural constraints in water will increase food price volatility

US water consumption for agricultureBillions of liters

US water consumption for agricultureBillions of liters

Liters of water required to produce oneliter of biofuel by source crop

Liters of water required to produce oneliter of biofuel by source crop

China water consumption for agricultureBillions of liters

China water consumption for agricultureBillions of liters

India water consumption for agricultureBillions of liters

India water consumption for agricultureBillions of liters

Global breakdown of freshwater use bysector, percent

Global breakdown of freshwater use bysector, percent

Source: USDA, FAO, UN, The World Bank, J.P. Morgan Commodities Research Source: USDA, FAO, UN, The World Bank, J.P. Morgan Commodities Research

Source: USDA, FAO, UN, The World Bank, J.P. Morgan Commodities Research Source: USDA, FAO, UN, The World Bank, J.P. Morgan Commodities Research Source: United Nations. *Can require an additional 500-1000 liters of irrigated water per liter of fuel

Source: World Bank

2,000 786 2,250 1,3602,360

3,330

10,000

0

2,0004,000

6,000

8,000

10,000

12,000

S u g a r c a n e *

S u g a r b e e t *

C a s s a v a

M a i z e *

P a l m

o i l

R a p e s e e d

S o y b e a n

Ethanol Biodiesel

0

1000

2000

3000

4000

5000

6000

7000

1 9 7 9

1 9 8 3

1 9 8 7

1 9 9 1

1 9 9 5

1 9 9 9

2 0 0 3

2 0 0 7

2 0 1 1

2 0 1 5

2 0 1 9

Corn Beef Pork

Soy bean Chick en R ic e

Sorghum Wheat

Forecast

0

100

200

300

400

500

600

1 9 7 9

1 9 8 3

1 9 8 7

1 9 9 1

1 9 9 5

1 9 9 9

2 0 0 3

2 0 0 7

2 0 1 1

2 0 1 5

2 0 1 9

Corn Soy bean Rice

Sorghum Wheat Chicken

Forecast

0

200

400

600800

1000

1200

1400

1 9 7 9

1 9 8 3

1 9 8 7

1 9 9 1

1 9 9 5

1 9 9 9

2 0 0 3

2 0 0 7

2 0 1 1

2 0 1 5

2 0 1 9

Corn Beef Pork Soy beanChicken RiceSorghum Wheat

Forecast

0

200

400

600

800

1000

1200

1 9 7 9

1 9 8 3

1 9 8 7

1 9 9 1

1 9 9 5

1 9 9 9

2 0 0 3

2 0 0 7

2 0 1 1

2 0 1 5

2 0 1 9

Corn Beef Pork Soy beanChic ken Ric eSorghum Whea t

Forecast

Power, 11%

Domestic and

other industrial,

19%

Agriculture,

67%

Evaporation,

3%

Power Domestic and other industrial Evaporation Agriculture



4

Shanghai port container throughputThousand TEUs

Shanghai port container throughputThousand TEUs

Rising shipping and transport costs will drive ag prices higherRising shipping and transport costs will drive ag prices higher

Baltic Dry IndexJanuary 4, 1985 = 1000

Baltic Dry IndexJanuary 4, 1985 = 1000

US grain transportation cost indicatorIndex base year 2000 = 100

US grain transportation cost indicatorIndex base year 2000 = 100

Singapore port container throughputThousand TEUs

Singapore port container throughputThousand TEUs

Hong Kong port container throughputThousand TEUs

Hong Kong port container throughputThousand TEUs

Bunker fuel prices by location (IFO 180)US$/metric tonne

Bunker fuel prices by location (IFO 180)US$/metric tonne

Source: Maritime and Port Authority of Singapore Source: Hong Kong Maritime Industry Council

Source: Bloomberg Source: Bloomberg Source: USDA

Source: Bloomberg

0

2000

4000

60008000

10000

12000

14000

2 0 0 0

2 0 0 2

2 0 0 4

2 0 0 6

2 0 0 8

2 0 1 0

0

200

400600

800

1000

1200

O c t - 0 9

D e c - 0

9

F e b - 1

0

A p r - 1 0

J u n - 1

0

A u g - 1

0

O c t - 1 0

D e c - 1

0

F e b - 1

1

Truck Rail Barge Ocean

1000

1500

2000

2500

3000

2006 2007 2008 2009 2010 2011

1000

1500

2000

2500

3000

2006 2007 2008 2009 2010 2011

1000

1200

1400

16001800

2000

2200

2400

2006 2007 2008 2009 2010 2011

$0

$200

$400

$600

$800

$1,000

2003 2004 2005 2006 2007 2008 2009 2010 2011

Hong Kong Ham burg N ew York



5

Tracking changes in the CBT cornforward curve through time, US cents/bu

Tracking changes in the CBT cornforward curve through time, US cents/bu

Stronger-than-expected price momentum lifts our corn forecastStronger-than-expected price momentum lifts our corn forecast

Level of ethanol blending in the USPercent

Level of ethanol blending in the USPercent

Rolling prompt CBT corn vs JPM’s2Q2011 price forecast, US cents/bu

Rolling prompt CBT corn vs JPM’s2Q2011 price forecast, US cents/bu

Corn plantings progress in the USPercent planted

Corn plantings progress in the USPercent planted

Ethanol blending profitability in the USUS$ per gallon

Ethanol blending profitability in the USUS$ per gallon

JPM monthly corn price forecastUS cents per bushel

JPM monthly corn price forecastUS cents per bushel

Source: USDA Source: DTN Energy, Bloomberg, J.P. Morgan Commodities Research

Source: CBT, J.P. Morgan Commodities Research Source: EIA, J.P. Morgan Commodities Research Source: CBT, J.P. Morgan Commodities Research

Source: USDA, DOE, NOAA, Federal Reserve, IEA, Bloomberg, J.P. Morgan Commodities Research

0

200

400

600

800

1000

S e p - 1

0

O c t - 1 0

N o v - 1

0

D e c - 1

0

J a n - 1

1

F e b - 1

1

M a r - 1 1

A p r - 1 1

Prompt CBT corn JPM 2Q2011 Forecast

400

450500

550

600

650

700

750

D e c - 1

0

A p r - 1 1

A u g - 1

1

D e c - 1

1

A p r - 1 2

A u g - 1

2

D e c - 1

2

A p r - 1 3

A u g - 1

3

D e c - 1

3

A p r - 1 4

30-Sep-10 31-Dec -10 31-M ar-11 28-Apr-11

9

46

23

0

10

20

30

40

50

25-Apr-11 24-Apr-10 Fiv e-y ear av erage

$0.00

$0.05

$0.10

$0.15

$0.20

A p r - 1 0

J u n - 1

0

A u g - 1

0

O c t - 1 0

D e c - 1

0

F e b - 1

1

28-Apr-11

$0.16

8.0%

8.2%

8.4%

8.6%

8.8%

9.0%

9.2%

9.4%

J u n - 1

0

J u l - 1 0

A u g - 1

0

S e p - 1

0

O c t - 1 0

N o v - 1

0

D e c - 1

0

J a n - 1

1

F e b - 1

1

M a r - 1 1

A p r - 1 1

22-Apr-11

8.9%

200

300

400

500

600

700

800

2008 2009 2010 2011 2012



6

Forecasts and trading recommendationsForecasts and trading recommendations

Source: Exchanges, J.P. Morgan Commodities Research. *Unit cost is the official close on the day before the date of publication.

J.P. Morgan Agricultural Commodity Price Forecasts

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q

Wheat (US$/bu) 4.96 4.67 6.53 7.07 5.82 7.93 8.70 8.85 9.20 8.65 9.40 9.85 10.20 10.30 9.95

Corn (US$/bu) 3.70 3.55 4.22 5.62 4.28 6.70 7.30 7.10 6.90 7.00 7.25 7.60 7.15 6.45 7.10

Soybeans (US$/bu) 9.55 9.57 10.35 12.45 10.49 13.83 14.95 14.85 15.45 14.80 15.45 14.75 14.50 14.90 14.90

Soybean Oil (US cents/lb) 38.59 38.12 40.25 50.96 42.03 56.98 57.05 62.40 63.95 60.10 65.50 61.30 59.00 59.35 61.30

Soybean Meal (US$/short ton) 278.0 280.8 304.9 338.1 300.8 367.2 365.4 373.8 368.7 368.8 379.9 382.0 378.6 343.2 370.9

S&P GSCI Agriculture Spot Price Index 326.7 299.6 365.2 458.7 363.0 531.2 558.9 586.4 567.6 561.0 567.5 586.9 591.3 583.6 582.3

20102012F

2011E 2012F2010 2011E

Active Trading Recommendations

Marked as of: 28-Apr-11 Date of recommendation Cost* Last closing price

Change since

recommendation

Long May-11 CBT Corn 8-Feb-2011 608.50 723.00 18.8%Roll into Jul-11 CBT Corn 29-Apr-2011 729.25

Long Nov-11 CBT Soybean 8-Feb-2011 1366.00 1337.75 -2.1%

Long May-11 CBT Wheat 8-Feb-2011 890.50 743.00 -16.6%

Long Dec-11 CMX Gold 25-Feb-2011 1421.10 1534.70 8.0%

Long Jul-11 LME Copper 14-Jan-2011 9585.00 9321.00 -2.8%

Set stop at $8915/mt

Short Jul-11 LME Zinc 14-Jan-2011 2481.00 2245.50 10.5%

Long May-11 ICE Gasoil 11-Apr-2011 1048.25 1038.25 -1.0%

Long CY2013 Brent call options ($125) 23-Feb-2011 7.30 12.47 70.8%

Long S&P GSCI Total Return 30-Sep-2010 4303.80 5700.70 32.5%

Long S&P GSCI Enhanced TR 30-Sep-2010 621.52 832.99 34.0%

Long JPM Commodity Curve TR 30-Sep-2010 443.75 574.85 29.5%



7

Colin P. Fenton, Head of Global Commodities Research and [email protected]

(1-212) 834-5648

OilOil MetalsMetals

PowerPower

Agriculture and StrategyAgriculture and Strategy

Natural GasNatural Gas

Lawrence E. Eagles(1-212) 834-8107

[email protected]

David G. Martin(44-20) [email protected]

Jeff G. Brown(65) 6882-2215

[email protected]

Ryan F. Sullivan

(1-212) [email protected]

Scott C. Speaker

(1-212) [email protected]

Shikha Chaturvedi(1-212) [email protected]

Michael J. Jansen(44-20) 7325-5882

[email protected]

Peter K. Nance(1-713) [email protected]

Jonah D. Waxman, CFA(1-212) 834-2203

[email protected]

Elizabeth M. Volynsky(1-212) [email protected]





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AAggrriiccuullttuurree WWeeeekkllyy 29 Apr 11