Fundamental Factors Af

Agricultural and Other Commodities

Julie Winkler, Managing Director, CME Group Research & Product DevelopmentJuly 29, 2008
© 2008 CME Group Inc. All rights reserved

Outline

• Current events impacting corn prices• Impact of U.S. dollar depreciation on corn and • Components of key commodity indexes• Recent price trends and current events in othe

markets like rough rice, hot rolled coil, freight, 
© 2008 CME Group Inc. All rights reserved

Battle for acreage due 

to increase in renewable 

fuels mandates.

Prices stabilize due to 

largest planted crop 

since 1946. Over 93 

million acres planted.

Global supply concerns increase, as cons

rises faster than production. World stock

ratio at historical low in 2007 at 14

projected to decline further to 12.6% 

Events Impacting Corn Prices Since June 2006

Price

Fl

Mid

ov

star
© 2008 CME Group Inc. All rights reserved

Weak U.S. Dollar is a Key Driver of Increasing Commodity Prices

Cr

200300400500600700800

January 3, 2006 July 1, 2008

Cents per Bushel

20%

Corn Prices

Cents per Bushel

$40$60$80

$100$120$140$160

January 9, 2006 

Dollars per Barrel

Corn, wheat and soybean prices 

would be at least 20 percent lower

if the U.S. Dollar had maintained 

its value from January 2006; Crude Oil 

prices would be 23 percent lower

Nearby Corn FutuNearby Crude Oil Currency Adjustefor each respectiv
© 2008 CME Group Inc. All rights reserved

Current Commodity Weights in Key Commodity Indexes• GSCI and DJ-AIG Commodity Indexes have significant

weights. It is estimated that there is over $155 billion inindexes. Goldman Sachs Commodity Index*

* As of July 25, 2008.

Energy

77%

Industrial Metals

6%

Precious Metals

2%

Agriculture

12%

Livestock

3%

Agriculture

29%

Industrial Metals

20% 

Dow Jones A
© 2008 CME Group Inc. All rights reserved

Prices in Commodity Markets with Little or No Speculator Participation Also Have Increased

• Prices for commodities that do not have speculator par

seen significant price movements since January 2008 asupply

• In recent weeks, prices in many of these commodities h

declined as shown on the following slides

% Change Weight 

Commodity since Jan 2008 DJ AI

Hot Rolled Coil 100% 0.00% 

Hay 25% 0.00% 

Rough Rice 17% 0.00% 

BIFFEX Panamax Index Unchanged 0.00% 

Corn 25% 5.66% 

Soybeans 10% 7.63% 

Wheat 3% 4.70% 
© 2008 CME Group Inc. All rights reserved

Rough Rice Prices Increase as Consumption Outpaces Production

Prices steadily increasing due to production growing at a slower pace than consumption 

& the world stocks-to-use ratio being at its lowest level in over 20 years.

Adverse weather leading to short cro

major rice producing countries 

Expectation of expo

producing coun

Rough Rice prices have 

increased 137% since the 

first of 2005 and 17% since 

the beginning of 2008
© 2008 CME Group Inc. All rights reserved

Growing World Demand, Weak DollarPressure Prices of North American Hot Rolled Coil - Midwest Mill 

Standard Cyclical World Steel Price Cycle

Hot Rolled Coil (HRC) prices 

have increased 71% since the 

first of 2005 and 100% since 

the beginning of 2008

The price for Iron Ore, one of HRC’s 

been increasing significantly due 

demand. This new demand has co

China as their building and auto in

grow exponentially. In addition to th

curtailed foreign import of steel in

domestic prices to rise along with 
© 2008 CME Group Inc. All rights reserved

BIFFEX Panamax Index* Shows Rising Shipping Costs that Impact Commodities

*The BIFFEX (Baltic International Freight Futures Exchange) Panamax Index is a weighted average index of routes commonly navigated by Panamax vessels. A Panamax vessel is a major mode of international grain tran

BIFFEX Panamax Index has 

increased 83% since the first of 

2005 and has had significant 

price movements in 2008

Prices steadily increasing due mainly to higher crude oil

prices. The correlation between the Biffex Panamax Index 

and Crude Oil was 0.72 from January 2005 to June 2008.

Prices increased dramatically in mid 2007 due to

vessel shortages. Strong demand for iron ore 

and coal shipments caused this shortage.

Prices corrected 

eased and then r

increasing 
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Monthly Average Farm Prices for Alfalfa Hay Increase as More Acres Diverted to Corn, Soybeans

Hay prices have a consistent cyclical price pattern.

m

Hay prices have increase

2005 and 25% since th
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Summary

• Fundamental demand and supply factors influ

prices not the presence of certain market partiindex funds

• Impact of U.S. dollar depreciation cannot be u

on corn and crude oil prices

• Open, transparent markets providing price disco

commodities especially as commodity markets aglobal marketplaces