Agricultural Economy in September 2007 Steve Elmore Pioneer – A DuPont Business Sept 17, 2007 – ASFMRA – Washington DC

Agricultural Economy inSeptember 2007

Steve ElmorePioneer – A DuPont Business

Sept 17, 2007 – ASFMRA – Washington DC

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FUNDAMENTALS

© 2007,Pioneer Hi-Bred- 4 -

AH 07 1100.pptSeptember 2007Source: Pioneer Global Marketing

0

1

2

3

4

5

6

7

8

9

10

1950 1970 1990 2010 2030 2050

Billions

Less Developed Regions

More Developed Regions

Source: United Nations, World Population Prospects: The 2004 Revision (medium scenario), 2005www.prb.org.

Growth in More, Less Developed Countries



Real GDP [Annual % Change)

2005 2006 2007 2008

World 3.5 4.0 3.4 3.5

N America 3.2 3.3 2.2 2.9

W. Europe 1.7 2.8 2.5 2.1

C. & E. Europe 6.2 6.8 6.1 5.7

Asia 4.6 4.9 4.7 4.5

China 10.4 10.7 10.0 9.0

Japan 1.9 2.2 2.2 1.9

ex Japan 7.3 7.5 7.0 6.8

S. America 5.2 5.7 4.9 4.8



Population & Income Drives the Demand forCorn & Soybean in the Last Decade

+13%+13%The growth in world

populationpopulation over the last 10 years

+35%+35%The growth in global

income income over the last 10 years

+32%+32%The growth in meat meat

consumption (Beef +15%, Pork

+37%, Chicken +39%) over the last decade


corn corn consumption over the last decade


soybean soybean consumption over the last decade

+2%+2%The growth in world crop crop areaarea harvested over the

last decade

AREA in 2008



World Wheat Stocks & Stocks:Use Ratio

0

40

80

120

160

200

19

60

19

63

19

66

19

69

19

72

19

75

19

78

19

81

19

84

19

87

19

90

19

93

19

96

19

99

20

02

20

05

15%

20%

25%

30%

35%

40%

Stocks (Mil MT) Stocks:Use

Stocks:UseLowest Level

GlobalEnding Stocks

Lowest Since 1981



U.S. Wheat Farm Price

4.654.80

5.105.40

5.80

2.30

2.80

3.30

3.80

4.30

4.80

5.30

5.80

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

Ma

y

Jun

e

July

Au

g

Se

pt

$/Bu

Month ofUSDA Estimate

Made for the2007 Crop Year

FOOD USE



New record levels in red.

US Wheat



Drawdown in Soybean Stocks-to-Use (& Carryover in terms of Days*)

0%

5%

10%

15%

20%

25%

30%

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

0

20

40

60

80

100

120

* Days of additional carryover at constant usage rates.

Stocks-to-Use Days*

United States

Global




US Soybeans



Drawdown in Corn Stocks-to-Use (& Carryover in terms of Days*)

0%

5%

10%

15%

20%

25%

30%

35%

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

0

18

37

55

73

91

110

128


Stocks-to-Use Days*

United States

Global



2006/07 Crop: Difference Between WASDESept. 2006 Estimate to August 2007 Final

Source: Pioneer Market Economics USDA/NASS

-600 -500 -400 -300 -200 -100 0

Beginning Stocks

Production

Imports

Supply, total

Feed and residual

Food, seed & industrial

Ethanol for fuel

Domestic, total

Exports

Use, total

Ending Stocks

Sep-06 Aug-07

Mil Bu 06/07 est 06/07 FinalChange to

FinalBeginning Stocks 2,062 1,967 (95) Production 10,976 10,535 (441) Imports 10 10 - Supply, total 13,047 12,512 (535) Feed and residual 6,125 5,750 (375) Food, seed & industrial 3,540 3,525 (15) Ethanol for fuel 2,150 2,150 - Domestic, total 9,665 9,275 (390) Exports 2,150 2,100 (50) Use, total 11,815 11,375 (440) Ending Stocks 1,232 1,137 (95)

WASDE REPORT

Change from 06/07 Est. to 06/07 FinalMil Bu

Price:+$0.65




US Corn



Drawdown in Soybean Stocks-to-Use (& Carryover in terms of Days*)

0%

5%

10%

15%

20%

25%

30%

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

0

20

40

60

80

100

120


Stocks-to-Use Days*

United States

Global

BIOFUELS



Economic Growth Drives Oil Consumption

FUEL USE

0

10

20

30

40

50

60

70

80

90

2002 2003 2004 2005 2006 07q1

United States Other OECDChina Former USSROther Non-OECD

Million Barrels Per Day

1.00

1.05

1.10

1.15

1.20

1.25

1.30

1.35

1.40

1.45

2002 2003 2004 2005 2006 07q1

United States Other OECDChina Former USSROther Non-OECD World Demand

Growth Index (2002=1)



Oil & Natural Gas Prices

10

20

30

40

50

60

70

80

90

0

2

4

6

8

10

12

14

16

West Texas Henry Hub

Oil ($/bbl) Natural Gas ($/mmbtu)

2002200120001999 2003 2004 2005 2006 2007

FUEL USE



Ethanol Capacity

1.92 2.35 2.71 3.10 3.64 4.345.39

0.060.39 0.48

0.600.75

1.78

6.34

0.0

2.0

4.0

6.0

8.0

10.0

12.0

2001 2003 2005 2007 2009 2011

Jan. 1 capacity Under construction RFS Mandate

Calendar Year

Billion Gallons

As of July 20: • 6.1 bil. gal./yr. of ethanol

capacity (119 Plants)

• Additional 6.4 billion gallons under construction (78 plants) & expansion (8 plants).

As of July 20: • 6.1 bil. gal./yr. of ethanol

capacity (119 Plants)

• Additional 6.4 billion gallons under construction (78 plants) & expansion (8 plants).

Source: Renewable Fuel Association website http://www.ethanolrfa.org/industry/statistics

FUEL USE



U.S. Ethanol from corn policies:

Continued support from national and state public policies with a political environment trumpeting independence.• Federal $0.51 / gal tax benefit

• $0.54 / gal tariff on imported ethanol

• MTBE effectively eliminated .. no substitute emerges

• Increased bio-fuel use mandate (15 billion gallons?)

• Other state and federal incentives (from E-10 to E-20)



Ethanol: Dry Mill Net Operating Returns

0.20

0.60 0.56

0.85

0.41

1.56

$0.00

$0.20

$0.40

$0.60

$0.80

$1.00

$1.20

$1.40

$1.60

02/0

3

03/0

4

04/0

5

05/0

6

06/0

7

07/0

8

$/Gallon

FUEL USE



Dry Mill Net Return U.S. Industry Average: 2007/08

0.41

1.86

0.30

0.32

0.29

1.14

0.00

0.50

1.00

1.50

2.00

2.50

Ethanol DDG Corn Nat.Gas

OthCost

NetReturn

$/per Gallon

FUEL USE



Dry Mill Ethanol Plant Net Returns over Operating Costs, 2007/08

Corn Price (Dollars per Bushel)

2.00 2.25 2.50 2.75 3.00 3.25 3.50 3.75 4.00 4.25 4.50 4.75 5.00

Ethanol Price (Dollars per Gallon)1.25 0.07 0.01 -0.06 -0.12 -0.19 -0.25 -0.31 -0.38 -0.44 -0.51 -0.57 -0.64 -0.701.30 0.12 0.06 -0.01 -0.07 -0.14 -0.20 -0.26 -0.33 -0.39 -0.46 -0.52 -0.59 -0.651.35 0.17 0.11 0.04 -0.02 -0.09 -0.15 -0.21 -0.28 -0.34 -0.41 -0.47 -0.54 -0.601.40 0.22 0.16 0.09 0.03 -0.04 -0.10 -0.16 -0.23 -0.29 -0.36 -0.42 -0.49 -0.551.45 0.27 0.21 0.14 0.08 0.01 -0.05 -0.11 -0.18 -0.24 -0.31 -0.37 -0.44 -0.501.50 0.32 0.26 0.19 0.13 0.06 0.00 -0.06 -0.13 -0.19 -0.26 -0.32 -0.39 -0.451.55 0.37 0.31 0.24 0.18 0.11 0.05 -0.01 -0.08 -0.14 -0.21 -0.27 -0.34 -0.401.60 0.42 0.36 0.29 0.23 0.16 0.10 0.04 -0.03 -0.09 -0.16 -0.22 -0.29 -0.351.65 0.47 0.41 0.34 0.28 0.21 0.15 0.09 0.02 -0.04 -0.11 -0.17 -0.24 -0.301.70 0.52 0.46 0.39 0.33 0.26 0.20 0.14 0.07 0.01 -0.06 -0.12 -0.19 -0.251.75 0.57 0.51 0.44 0.38 0.31 0.25 0.19 0.12 0.06 -0.01 -0.07 -0.14 -0.201.80 0.62 0.56 0.49 0.43 0.36 0.30 0.24 0.17 0.11 0.04 -0.02 -0.09 -0.151.85 0.67 0.61 0.54 0.48 0.41 0.35 0.29 0.22 0.16 0.09 0.03 -0.04 -0.101.90 0.72 0.66 0.59 0.53 0.46 0.40 0.34 0.27 0.21 0.14 0.08 0.01 -0.051.95 0.77 0.71 0.64 0.58 0.51 0.45 0.39 0.32 0.26 0.19 0.13 0.06 0.002.00 0.82 0.76 0.69 0.63 0.56 0.50 0.44 0.37 0.31 0.24 0.18 0.11 0.052.05 0.87 0.81 0.74 0.68 0.61 0.55 0.49 0.42 0.36 0.29 0.23 0.16 0.102.10 0.92 0.86 0.79 0.73 0.66 0.60 0.54 0.47 0.41 0.34 0.28 0.21 0.152.15 0.97 0.91 0.84 0.78 0.71 0.65 0.59 0.52 0.46 0.39 0.33 0.26 0.202.20 1.02 0.96 0.89 0.83 0.76 0.70 0.64 0.57 0.51 0.44 0.38 0.31 0.252.25 1.07 1.01 0.94 0.88 0.81 0.75 0.69 0.62 0.56 0.49 0.43 0.36 0.302.30 1.12 1.06 0.99 0.93 0.86 0.80 0.74 0.67 0.61 0.54 0.48 0.41 0.352.35 1.17 1.11 1.04 0.98 0.91 0.85 0.79 0.72 0.66 0.59 0.53 0.46 0.402.40 1.22 1.16 1.09 1.03 0.96 0.90 0.84 0.77 0.71 0.64 0.58 0.51 0.452.45 1.27 1.21 1.14 1.08 1.01 0.95 0.89 0.82 0.76 0.69 0.63 0.56 0.502.50 1.32 1.26 1.19 1.13 1.06 1.00 0.94 0.87 0.81 0.74 0.68 0.61 0.55

Notes: The matrix shows net returns over variable operating costs for various combinations of ethanol and corn prices. To calculate plant profits, capital and other fixed costs would also need to be subtracted from these figures.

In the yellow zone, net returns over operating costs are less than $0.20 per gallon, which may be less than required to cover fixed costs. The matrix assumes DDG prices change with corn prices. For example, a $3.25/bu. corn price is associated with a $98/ton DDG price. Other operating costs (fuel, electricity, labor, etc.) are assumed to average $0.62 per gallon. The matrix assumes one bushel of corn yields 2.746 gallons of ethanol and 17 pounds of DDGs.

FAPRI average of 500 outcomes for 2007/08 December 2007 futures, Mar. 23, 2007

Corn price $3.23 per bushel Corn price $3.90 per bushel ($4.10 minus $0.20 assumed basis)Ethanol price $1.78 per gallon Ethanol price $1.89 per gallonDry mill net return $0.28 per gallon Dry mill net return $0.22 per gallon

Distribution of Dry Mill Ethanol Plant Net Returns over Operating Costs

Crop Year 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14 14/15 15/16 16/17

Proportion of Stochastic Outcomes (Percent)Negative Net Returns 0.0 0.0 0.0 1.4 2.0 1.4 1.2 2.6 3.0 1.8 1.2$0.00-$0.20 per Gallon 0.0 30.6 54.4 60.6 60.4 60.8 62.0 62.4 62.0 62.2 61.4Over $0.20 per Gallon 100.0 69.4 45.6 38.0 37.6 37.8 36.8 35.0 35.0 36.0 37.4

U.S. Dry Mill Net Returns over Variable Costs

FUEL USE



Biodiesel Growth Economically Biodiesel Growth Economically LimitedLimitedwith the High Soybean Oil Priceswith the High Soybean Oil Prices

10

15

20

25

30

35

40

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

USDA FAPRI CBOT Futures

Cents/Pound



Biodiesel Plant Net ReturnsBiodiesel Plant Net Returnsover Variable Costsover Variable CostsBiodiesel Plant Net Returns over Operating Costs, 2007/08

Soybean Oil Price (Dollars per Pound)

0.20 0.22 0.24 0.26 0.28 0.30 0.32 0.34 0.36 0.38 0.40 0.42 0.44

Biodiesel Price (Dollars per Gallon)2.50 0.47 0.32 0.16 0.01 -0.15 -0.30 -0.45 -0.61 -0.76 -0.92 -1.07 -1.22 -1.382.55 0.52 0.37 0.21 0.06 -0.10 -0.25 -0.40 -0.56 -0.71 -0.87 -1.02 -1.17 -1.332.60 0.57 0.42 0.26 0.11 -0.05 -0.20 -0.35 -0.51 -0.66 -0.82 -0.97 -1.12 -1.282.65 0.62 0.47 0.31 0.16 0.00 -0.15 -0.30 -0.46 -0.61 -0.77 -0.92 -1.07 -1.232.70 0.67 0.52 0.36 0.21 0.05 -0.10 -0.25 -0.41 -0.56 -0.72 -0.87 -1.02 -1.182.75 0.72 0.57 0.41 0.26 0.10 -0.05 -0.20 -0.36 -0.51 -0.67 -0.82 -0.97 -1.132.80 0.77 0.62 0.46 0.31 0.15 0.00 -0.15 -0.31 -0.46 -0.62 -0.77 -0.92 -1.082.85 0.82 0.67 0.51 0.36 0.20 0.05 -0.10 -0.26 -0.41 -0.57 -0.72 -0.87 -1.032.90 0.87 0.72 0.56 0.41 0.25 0.10 -0.05 -0.21 -0.36 -0.52 -0.67 -0.82 -0.982.95 0.92 0.77 0.61 0.46 0.30 0.15 0.00 -0.16 -0.31 -0.47 -0.62 -0.77 -0.933.00 0.97 0.82 0.66 0.51 0.35 0.20 0.05 -0.11 -0.26 -0.42 -0.57 -0.72 -0.883.05 1.02 0.87 0.71 0.56 0.40 0.25 0.10 -0.06 -0.21 -0.37 -0.52 -0.67 -0.833.10 1.07 0.92 0.76 0.61 0.45 0.30 0.15 -0.01 -0.16 -0.32 -0.47 -0.62 -0.783.15 1.12 0.97 0.81 0.66 0.50 0.35 0.20 0.04 -0.11 -0.27 -0.42 -0.57 -0.733.20 1.17 1.02 0.86 0.71 0.55 0.40 0.25 0.09 -0.06 -0.22 -0.37 -0.52 -0.683.25 1.22 1.07 0.91 0.76 0.60 0.45 0.30 0.14 -0.01 -0.17 -0.32 -0.47 -0.633.30 1.27 1.12 0.96 0.81 0.65 0.50 0.35 0.19 0.04 -0.12 -0.27 -0.42 -0.583.35 1.32 1.17 1.01 0.86 0.70 0.55 0.40 0.24 0.09 -0.07 -0.22 -0.37 -0.533.40 1.37 1.22 1.06 0.91 0.75 0.60 0.45 0.29 0.14 -0.02 -0.17 -0.32 -0.483.45 1.42 1.27 1.11 0.96 0.80 0.65 0.50 0.34 0.19 0.03 -0.12 -0.27 -0.433.50 1.47 1.32 1.16 1.01 0.85 0.70 0.55 0.39 0.24 0.08 -0.07 -0.22 -0.383.55 1.52 1.37 1.21 1.06 0.90 0.75 0.60 0.44 0.29 0.13 -0.02 -0.17 -0.333.60 1.57 1.42 1.26 1.11 0.95 0.80 0.65 0.49 0.34 0.18 0.03 -0.12 -0.283.65 1.62 1.47 1.31 1.16 1.00 0.85 0.70 0.54 0.39 0.23 0.08 -0.07 -0.233.70 1.67 1.52 1.36 1.21 1.05 0.90 0.75 0.59 0.44 0.28 0.13 -0.02 -0.183.75 1.72 1.57 1.41 1.26 1.10 0.95 0.80 0.64 0.49 0.33 0.18 0.03 -0.13

Notes: The matrix shows net returns over variable operating costs for various combinations of biodiesel and soybean oil prices. To calculate plant profits, capital and other fixed costs would also need to be subtracted from these figures.

In the yellow zone, net returns over operating costs are less than $0.20 per gallon, which may be less than required to cover fixed costs. The matrix assumes glycerin is valued at $0.05 per gallon of biodiesel. Other operating costs (fuel, electricity, labor, etc.) are assumed to average $0.54 per gallon. The matrix assumes 7.7 pounds of crude soybean oil are required to produce one gallon of biodiesel.

FAPRI average of 500 outcomes for 2007/08

Soybean oil price $0.307 per poundBiodiesel price $3.17 per gallonPlant net return $0.32 per gallon

Distribution of Biodiesel Plant Net Returns over Operating Costs

Crop Year 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14 14/15 15/16 16/17

Proportion of Stochastic Outcomes (Percent)Negative Net Returns 0.0 0.4 19.2 47.6 57.2 61.2 65.0 71.0 76.6 79.8 81.4$0.00-$0.20 per Gallon 0.0 12.8 69.2 51.0 40.4 36.2 33.4 27.0 22.4 18.0 17.0Over $0.20 per Gallon 100.0 86.8 11.6 1.4 2.4 2.6 1.6 2.0 1.0 2.2 1.6

Source: FAPRI – University of Missouri.

LIVESTOCK



U.S. LivestockU.S. LivestockU.S. LivestockU.S. Livestock




Feed & Fuel: Aggregate values for the U.S. Livestock Sector (Beef,

Pork & Chicken)

19.4 24.4 83.8 160.6 169.889.20

20

40

60

80

100

120

140

160

180

20

06

20

07

20

06

20

07

20

06

20

07

Billion Dollars

Feed Costs Retail Revenue

Livestock Cash Receipts

up $5.0 billion, +25.5%

up $5.4 billion, +6.4%

up $9.2 billion, +5.7%



U.S. All Milk Prices & Variable U.S. All Milk Prices & Variable Production Costs Production Costs

1.92

1.78

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

8.00

2002 2003 2004 2005 2006 2007

11.68

12.68

13.68

14.68

15.68

16.68

17.68

18.68

19.68

Feed Non-feed Variable Costs All Milk Price

Change in Costs vs. 2002 ($/Cwt) Milk Costs & Price ($/Cwt)

2007 or 0? U.S. Farm Bill



What would happen if a 2007 farm bill is not enacted by September 30, 2007? If Congress takes no action on commodity support before the beginning of the 2008 harvest, then the non-expiring provisions of primarily the Agriculture Adjustment Act of 1938 and the Agriculture Act of 1949 take effect.

We will have a FARM BILL (or extension) because major distortions would occur if lawmakers do not get their work completed and major budget issues.

Permanent law does not authorize counter-cyclical payments or decoupled direct payments. Rice and Soybeans would not be mandatory. Non-recourse loans would be based off of Parity -- a formula that gives a unit of the

commodity the same purchasing power it had in the 1910-1914 time period.

Unit Average Farm Price

(July 2007)

Calculated

Parity Price(July 2007)

Parity Support %

Loan Rate

Based on Parity

Cotton $/Lb 0.468 2.06 65% 1.34

Peanuts $/Lb 0.183 0.653 75% to 90% 0.49 to 0.59

Wheat $/Bu 5.37 10.90 50% 5.45

Corn $/Bu 3.23 8.09 50% 4.05

Milk $/Cwt 21.70 40.50 75% to 90% 30.38 to 36.45



Cash Receipts are Very Strong

$80

$90

$100

$110

$120

$130

$140

$150

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

Crops Livestock

Billion Dollars



Portion of U.S. Crop Receipts

22%

7%

16%7%

48%

24%

7%

15%

6%

48%

29%

8%

15% 5%

43%

20052005

20062006

20072007

Non-Row CropNon-Row Crop

CottonCotton& Sugar& Sugar

FeedFeedGrainsGrains

FoodFoodGrainsGrains

OilseedsOilseeds



Market Returns Lead 2007 Income Rebound

$0

$10

$20

$30

$40

$50

$60

$70

$80

$90

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

Direct Govt pymts Emergency pymtsNet cash farm income Net cash income less govt pymts

Billion Dollars

Net Farm Cash Income

Net Cash Income lessGov’t Payments



U.S. Average Farm Real Estate Value

5% 6% 7% 5% 5% 7% 21% 15% 14%

$1,020 $1,080 $1,150 $1,210 $1,270$1,360

$1,650

$1,900

$2,160

$0

$500

$1,000

$1,500

$2,000

$2,50019

99

2000

2001

2002

2003

2004

2005

2006

2007

0%

5%

10%

15%

20%

25%

% Change Farm Value

Dollars/Acre Percent Change



CRP: Global Carryover in terms of Days*

40

50

60

70

80

90

100

110

120

130

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

Corn Soybeans Wheat


Days*



Observations

• Economic fundamentals will continue to put pressure on the agricultural sector to produce.

• 2007 volatility is the new norm? 2008 battle for area will be intense as the days of carry are at historic low levels on corn & wheat.

• Ethanol needs policies to remain and strong oil prices that develop the infrastructure. Margins, however, are decreasing at the plant level.

• Economics are a great way to analyze the sector’s health. But in Washington DC, the politics, the budget, and ELECTIONS will determine what the final bill looks like!



U.S. Budget Will Shape the Debate

-500

-400

-300

-200

-100

0

100

200

300

1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2103 2015

Billion dollars

2002 Farm Bill+$73 billion

(for 10 years)

2002 Farm Bill+$73 billion

(for 10 years)

2007 Farm Bill-/+ ???

2007 Farm Bill-/+ ???

1996 Farm Bill-$12.8 billion

(for 10 years)


(for 10 years)


(for 10 years)


(for 10 years)

Current LawBudget Surplus

Budget Deficit

THANKTHANKYOU!YOU!

APPENDIX –APPENDIX –The House and Senate IssuesThe House and Senate Issues

in 2007 in 2007



Political compromise that protect the status quoLowered payment limits

• AGI of less than $1 million per year

• 2/3 income from agriculture for AGI of $0.5-1.0 millionIncreased programs for fruits and vegetables

Extra $6.5 billion in funding• $4.0 billion in new taxes on investors

• $2.5 billion in taxes from oil companies

Safety net similar to 2002 farm bill• Revenue Counter-cyclical Program (RCCP) option

House Farm Bill 2007



House – Payment Targets

Crop Target PricesDirect

PaymentLoan Rates

Counter-cyclical Trigger

Old NewNo

ChangeOld New

Corn 2.63 2.63 0.28 1.95 1.95 2.35

Sorghum 2.57 2.57 0.35 1.95 1.95 2.22

Soybeans 5.80 6.10 0.44 5.00 5.00 5.66

Wheat 3.92 4.15 0.52 2.75 2.94 3.63

Cotton 0.724 0.70 0.067 0.52 0.52 0.633

Rice 10.50 10.50 2.35 6.50 6.50 8.15



USDA Estimates of Dollars per AcreAverage Total Cost of Production Crop 2002

2008 Forecast

$ Increase % Increase

Corn 330 462 132 40

Sorghum 203 321 118 58

Soybeans 232 302 70 30

Wheat 176 232 56 32

Cotton 529 611 82 16

Rice 586 797 211 36



House – RCCP Revenue Targets and USDA Operating Cost Estimates for 2008

Crop Revenue Target Operating Costs

Corn 344 225

Sorghum 131 138

Soybeans 232 104

Wheat 150 91

Cotton 497 391

Rice 548 427



1. Direct attribution to a single ID number for commodity and conservation payments

2. The three-entity rule eliminated

3. Payments limits under bill:

A. Counter-cyclical payments: retain current limit of $65,000

B. Direct payments: limit increases to $60,000 from current $40,000

C. Generic Certificates: eliminated, but no cap on MLGs or LDPs

D. Conservation programs: cap of $60,000 for participation in one

program; $125,000 if a producer in more than one program

4. Husbands and wives have separate limits if both are farming

House – Payment Limits



CRP reauthorized with 39.2 million acres. New enrollments in 2009

WRP maximum enrollment decreased from 3,775,000 to 3,605,000 acres. Wetlands maintenance funds could be provided on up to 1.5 million acres.

CSP payments increased slightly for contracts after Oct. 1, 2012. Three tiered system is replaced with an annual stewardship enhancement payment.

EQIP increased by $2 billion through 2012. Conservation Innovation Grants are to increase to $75 million per year by fiscal year 2012 for air quality improvement. Livestock production continues allocation of 60% of EQIP funds.

Regional Water Enhancement Program (RWEP) funded at $60 million per year.

Farm and Ranchland Protection Program (FRPP) funding increased by $300 million by 2012.

The Small Watershed Rehabilitation Program (SWRP) extended through 2012 and provides $200 million in baseline funding.

The Wildlife Habitat Incentives Program (WHIP) extended and costs shares increased from 15 percent to 25 percent for long-term agreements and activities that assist producers in meeting a regulatory requirements.

The Grasslands Reserve Program (GRP) is extended and requires an additional 1,000,000 acres enrollment during fiscal years 2008-2012.

House – Conservation



1. Up to $2 billion in loan guarantees for biorefineries (Half going to loans less than $100 million, Other half for loans up to $250 million)

2. Biodiesel Fuel Education Program - $10 million to continue 3. Rural Energy for America Program - $500 million, including

feasibility studies4. The Bioenergy Program - $1.5 billion5. Biomass Energy Reserve Program - encourage production

of cellulosic feedstocks and provide 5 year contracts to grow dedicated energy crops and provide incentives to harvest, store, and transport biomass

6. Forest Bioenergy Research Program - $75 million for the use of woody biomass for bioenergy production, including feedstock issues such as yield and new varieties.

7. The Biomass Research and Development Program (Section 9008) - funded for $500 million through fiscal year 2012.

8. $1 million to study the potential for an ethanol pipeline

House – Renewable Fuels



1. Agriculture Committee schedule for October2. Chairman Harkin more focused on conservation (CSP)

and renewable energy3. Harkin, Grassley and upper plains tougher on

payment limits4. Durbin & Brown amendment on revenue-based safety

net5. Tax increases probably won’t fly

Political process pulling the Senate?

Senate – Process



1. Senate must agree to a bill.2. Conference – Where the bill will be written.3. Bush must sign it.

TIMING?

2002 for ’08 (& ’09)

Can We See the Finish?

Documents

Agricultural Economy in September 2007 Steve Elmore Pioneer – A DuPont Business Sept 17, 2007 – ASFMRA – Washington DC