Volatility of Agricultural 

Gerald A. Bange

Chairperson

World Agricultural Outlook Bo

Office of the Chief Economi

U.S. Department of Agricultu

Presented to

Commodity Futures Trading Com

Roundtable

Washington, D.C.

April 22, 2008
Price Volatility Fact

• Strong Demand Worldwide for Agricultural Co• Rising Petroleum Prices and Increased Produ

Renewable Fuels

• Tight Grain and Soybean Stocks• World Wheat Consumption has exceeded Pro

last 8 years

• Restrictions on World Exports of Grains• U.S. Cotton Area and Production Sharply Low• Rising Input Costs
Price Volatility Fact

(continued)

• Strong Demand Worldwide fo

Agricultural Commodities

– Income growth in developing count

China, etc.

– Japan and other Asian markets acti

despite high prices

• Rising Petroleum Prices and 

Production of Renewable Fu

– Corn for Ethanol in the United State– Oilseeds for biodiesel in the Europe
Price Volatility Fact

(continued)

• Tight Grain and Soybean Sto

– U.S wheat stocks at 60-year low– World wheat stocks at 30-year low– Corn stocks down sharply in 2007/0

decline further in 2008/09

– U.S. soybean acres down sharply in 

stocks reduced from record beginnuse exceeds production by 400+ mi

– South American soybean acres inc

modestly in 2007/08

– China imports of soybeans forecast 
Price Volatility Fact

(continued)

• World Wheat Consumption h

exceeded Production in 6 of years

– Yields below trend in major exportin

for the past 2 years

– Australia recorded 2 back-to-back c

lost more than one full year’s outpu

– E.U. crops below par – U.S. yields below trend– Canadian crops below average
Price Volatility Fact

(continued)

• Restrictions on World Expor

– Ukraine, Russia, and Kazakhstan cu

exports

– Argentina shut-off export registratio

and wheat and raised taxes on soyb

– Vietnam, India, Egypt, Cambodia, an

imposed various restraints on rice e

– Thai exporters are having difficulty 

supplies to meet contracts

– Australian rice exportable supplies 

due to drought
Price Volatility Fact

(continued)

• U.S. Cotton Area and Production 

Lower in 2007/08

– Cotton acres lost to competing crops, esp

and corn

– 2007/08 U.S. export forecast reduced as s

due to diminished China purchases and incompetition from India

– Area f

orecast to decline again -

projected n

expected to favor grains and oilseeds in 20

– Competitor production has been growing – 

– China producing excellent crops –

planting

2008/09

– Australian crop reduced by drought – Pakistan crop reduced by insect infestatio
Price Volatility Fact

(continued)

• Rising Input Costs

– Fuel prices up sharply– Fertilizer prices at record highs

• Strong global demand with highe

improved cultural practices and cultivated area amid rising prices agricultural commodities

• U.S. dependency on imports is g

domestic production accounts foof nitrogen needs

• Disproportionate impact on corn

intensive crop
U.S. Wheat Supply and De

2006/07 

estimate

2007/08 

foreca

st

2008/09 

foreca

st

Pla

nte

d area (

millio

n

acres) 5

7.3

6

0.4

6

4.0 

H

arveste

d a

rea (millio

n a

c

r

e

s) 46.

8 51.

0 54.

4 

Yiel

d (

b

us

h

els per acre)

3

8.7

4

0.5

4

2.8 

Millio

n b

u

s

h

els

B

egi

nning stoc

ks 571 456 272 

Production 1,812 2,067

2,330 

I

mp

o

rts 122 90 100 

Total s

up

ply

2,505 2,613

2,702 

Food, s

e

e

d, and i

ndu

strial u

s

e

1,015 1,036

1,039 

Fe

e

d and r

e

sidual 125 60 175 

D

o

me

stic us

e

1,140 1,096

1,214 

Ex

p

o

rts 909 1,275 950 

Total u

s

e

2,049 2,371

2,164 

E

nding stoc

ks 456 242 538 

Pe

rc

e

nt

Stoc

ks t

o u

s

e r

ati

o

22.

3

10.

2 24.

9

Dollars pe

r bus

h

el

Avera

g

e market p

ric

e

4.2

6

6.6

5

7.0

0 

*The estimates for 2006/07 and the forecasts for 2007/08 are from the WorDemand Estimates report of April 9, 2008, and the 2008/09 forecasts were rOutlook Forum of F

ebruary 21-22, 2008.
Monthly Farmer Wheat Marketin5-year Average

05

10152025

Jun

Jul

A

u

g

Sep

O

ct Nov Dec

Jan Feb

Per

cent

81 % markete
U.S. Corn Supply and D

2006/07 

esti

mate

2007/

08 

forecast

2008/

09 

forecast

Pla

nted area (millio

n acres) 7

8.3

9

3.6

9

0.0 

H

arveste

d area (millio

n a

c

r

es 7

0.6

8

6.5

8

2.7 

Yield (bushels pe

r a

c

r

e) 1

4

9.1

1

5

1.1

1

5

4.9 

Millio

n b

u

s

h

els

B

egi

nnin

g stoc

ks 1,967

1,304 1,283 

Production 10,

535 13,

074 12,

810 

Total suppl

y

1

2,5

1

4

1

4,3

9

3

1

4,2

6

3 

Fe

e

d and r

esidual 5,598 6,150

5,400 

F

ood, se

e

d, and i

ndust

rial 3,488

4,460 5,470 

Ethanol 2,1

1

7

3,1

0

0

4,1

0

0 

D

o

mestic use

9,086 10,

610 10,

870 

E

x

p

o

rts 2,125 2,500

2,150 

Total use

11,210

13,110

13,020 

E

ndin

g stoc

ks 1,304

1,283 1,243 

Pe

rcent

St

o

cks/use

1

1.6

9.8

9.5

Dollars per bush

el

A

vera

g

e market p

ric

e

3.0

4

4.3

0

4.6

0 

*The estimates for 2006/07 and the forecasts for 2007/08 are from the WorDemand Estimates report of April 9, 2008, and the 2008/09 forecasts were rOutlook Forum of F

ebruary 21-22, 2008.
Monthly Farmer Corn Marketings5-year Average

05

10152025

Sep

Oct

N

o

v

Dec Jan

Feb

M

ar Apr

M

a

y

Per

cent

56 % markete
789

1011121314

1995/96 1997/98 1999/00 2001/02 2003/04 

Bil. bushels

Production Total use

Note: 2007/08 production and use are projected based on the World Agricultural Supply and Demand Estim

U.S. Corn Production and T1995/96 through 2007/08F
U.S. Soybean Supply and 

2006/07 

esti

mate

2007/08 

forecast

2008/09 

forecast

Plante

d ar

e

a (

million ac

r

es) 75.

5 63.

6

71.

0 

H

a

r

veste

d ar

e

a (

millio

n ac

r

es) 74.

6 62.

8

70.

1 

Yield (

b

ush

els p

e

r ac

r

e) 42.

7 41.

2

42.

1 

Millio

n b

u

s

h

els

B

egi

nning stoc

ks 449 574 160 

P

rodu

ction 3,188 2,585 2,950 

Imp

o

rts 9.0

1

0.0

6.0 

Total S

up

ply

3,647 3,169 3,116 

C

r

ush

1,806 1,840 1,860 

S

e

e

d and Residual 148 94 177 

D

o

mestic use

1,955 1,934 2,037 

Ex

p

o

rts 1,118 1,075 910 

Total Use

3,073 3,009 2,947 

E

nding stoc

ks 574 160 169 

Pe

rcent

Stoc

ks/use r

atio 18.

7

5.3 5.

7

Dollars p

er b

ush

el

Ave

rage ma

r

ket p

ric

e

6.4

3 10.25 11.50 

*The estimates for 2006/07 and the forecasts for 2007/08 are from the WorDemand Estimates report of April 9, 2008, and the 2008/09 forecasts were rOutlook Forum of F

ebruary 21-22, 2008.
Monthly Farmer Soybean Market5-year Average

05

10152025

Sep

Oct

N

o

v

Dec Jan

Feb

M

ar Apr

M

a

y

Per

cent

60 % markete
U.S. Soybean Oil Supply and D

2006/07 

e

sti

mate

2007/08 

foreca

s

t

2

fo

Million p

ounds 

B

eginning stoc

ks 3,010

2,904 

P

roduction 20,487 21,250

Impo

rts

3

7

3

7

Total s

upply 23,535 24,192

D

o

me

stic 18,743 18,700

Methyl e

ste

r

2,796 2,950

E

xpo

rts

1,888 2,700

Total us

e 20,630 21,400

E

nding stoc

ks 2,904

2,792 

Cents p

er p

ound

A

v

e

rage ma

rket pric

e

31.02 52.

0

0 

*The estimates for 2006/07 and the forecasts for 2007/08 are from the WorDemand Estimates report of April 9, 2008, and the 2008/09 forecasts were rOutlook Forum of F

ebruary 21-22, 2008.
U.S. Soybean Meal Supply and D

2006/07 

esti

mate

2007/

08 

foreca

s

t

2

f

Th

o

usa

n

d sh

ort to

n

s

B

eginning s

toc

ks 314

351 

P

roduc

tion 43,

027 43,

934 

Impo

rt

s

156 165

 Total supply

4

3,4

9

7

4

4,4

5

0

D

o

me

s

tic 34,

360 35,

300 

Expo

rt

s

8,786 8,850

 To

t

al us

e

43,146

44,150

E

nding s

t

o

cks

3

5

1

3

0

0

Dollars per s

h

ort to

n

A

v

e

ra

g

e ma

rke

t p

ric

e

2

0

5.4

4

3

2

5.0

0

*The estimates for 2006/07 and the forecasts for 2007/08 are from the WorDemand Estimates report of April 9, 2008, and the 2008/09 forecasts were rOutlook Forum of F

ebruary 21-22, 2008.
2007 Energy Act

 Mandates very ambitious renewabl

(RFS), starting at 9.0 billion gals in increasing to 36 billion gals by 202

 15 billion gallons of the RFS will be 

ethanol starting in 2015.

 By 2016, all of the RFS increase mu

cellulosic ethanol or other non-corn biofuels.

1 In comparison, the 2005 Energy Act had an RFS sta

gals by 2008, rising to 7.5 billion by 2012.
U.S. Ethanol Production CaAnnual Capacity by Month

6.

8

5.

0

02468

101214

S

ep-06

M

a

r-07

S

ep-07

M

a

Bil. G

allo

n

s
U.S. Corn Used for Eth

1995/96 through 2015/16*

4.1

3.1

31 %

0.

0

1.

0

2.

0

3.

0

4.

0

5.

0

6.

0

1995/96 1999/0

0

2003/0

4

2007/08F 

Bil. bus

h

els

Ethanol c

orn us

e

Ethanol s

hare of c

orn us

e

N

ote: 2007/08 is

projected based on the

World Agricultural Supply and Demand Estimates, April 9, 2008

USDA’s Grains & Oilseeds Outlook, Agricultural Outlook Forum, Washington, D.C., February 22, 2008. 

mandates for corn starch b

ased ethan

ol under the Energ

y Independence and Security Act of 2007.
U.S. Corn Exports1995/96 through 2007/08F

1.001.251.501.752.002.252.502.75

1995/96 1997/98 1999/00 2001/02 2003/04 

Bil. b

ushel

s

N

ote: 2007/08 e

xports are projected based on the World Agricultural Supply and Demand Estimates, April 9
Daily Cash Market Corn Prices2004/05 through 2007/08 to date

1.502.002.503.003.504.004.505.005.506.00

4-

S

e

p

4-Oct 4-

N

o

v

4-Dec 4-Jan

4-Feb 4-

M

ar 4-A

pr 4-

M

a

$/bu.

N

ote: Central Illinois cash bids. 
U.S. Biodiesel Mandate 

(2007 Energy Act)

0

200400600800

1,0001,200

2000/01 2003/04 2006/07 2009/10 201

Bio

die

s

el C

onsum

p

tion M

andat

e

S

h

a

re of S

o

ybea

n Oil P

rod.

Millio

n g

allo

n

s

14%
EU Industrial Use of Vegetabl

02468

10

2001 2002 2003 2004 2005 

Ot

h

e

r Oi

l

Palm Oi

l

S

oybe

an Oi

l

Rap

ese

e

d Oi

l

Million Tons 6% of global veg

production
Soybean Oil Futures P

December 2008 Contract

2530354045505560657075

1-

A

u

g06 1-

O

ct06 1-

Dec06 1-

F

e

b07 1-

A

pr07 1-Ju

n07 1-

A

u

g07 1-

O

ct07 

Ce

nts/lb.

N

ote: Chicag

o Board of Trade daily settle

ment prices. 
Biodiesel Margi

-100

-5

0

0

50

100150

J

u

n

-

0

6

O

ct-0

6

F

e

b-0

7

J

u

n-0

7

O

cents/lb

SBO costs 

exceed $4/gal
Daily Cash Market Soybean Pr2004/05 through 2007/08 to date

4.505.506.507.508.509.50

10.5011.5012.5013.5014.5015.50

S

e

p

Oct

N

o

v

Dec Jan

Feb

M

ar A

pr M

a

$/bu.

N

ote: Central Illinois cash bids. 
U.S. Cotton Supply and De

2006/07 

esti

mate

2007/08 

foreca

st

2008/0

foreca

Plante

d ar

e

a (

millio

n ac

r

e

s) 15.

3 10.

8 9.

5 

H

a

r

ve

ste

d a

r

e

a (

millio

n a

c

r

e

s) 1

2.7

1

0.5

8.6 

Yield (

pound

s p

e

r ac

r

e) 814.

0 888.

0 835.

0 

Millio

n b

ale

s

B

egi

nning stoc

ks 6.

1

9.5 8.

2 

Imp

ort

s

0.0

0.0

0.0 

P

rodu

ction 21.

6 19.

4 15.

0 

Total s

up

ply

2

7.7

2

8.9

2

3.2 

Mill us

e

4.9

4.7

4.5 

Ex

p

o

rts

13.

0

14.

5

15.

0 

Total us

e

18.

0

19.

2

19.

5 

Unacco

unted

0.2

0.0

0.0

E

nding sto

cks

9.5

9.7

3.7 

Pe

rc

e

nt

Stoc

ks t

o u

s

e r

atio

52.

8

50.

5

19.

1

Cents p

e

r p

ound

Avera

ge market p

ric

e

4

6.5

0

5

6.2

0

*

*The estimates for 2006/07 and the forecasts for 2007/08 are from the WorDemand Estimates report of April 9, 2008, and the 2008/09 forecasts were rOutlook Forum of F

ebruary 21-22, 2008.
Monthly Farmer Cotton Marketin5-year Average

05

10152025

A

u

g

Sep

O

ct Nov

D

e

c

Jan Feb

Mar

A

pr 

Per

cent

62 % markete
Daily Cash Market Cotton Pric2004/05 through 2007/08 to date

4045505560657075808590

A

u

g

Sep

O

ct N

o

v

D

e

c Jan

F

e

b

Mar

A

pr 

cent

s/lb.

N

ote: Memphis 1 1/16. 
July 2008 Cotton Futures – Daily ChaVolatility Increasing

Cents per pound

-4-3-2-1

01234

10/31/2006 11/30/2006 12/29/2006 1/30/2007 2/28/2007 3/28/2007 4/26/2007 5/24/2007 6/22/2007 7/23/2007 8/20/2007 9/18/2007 10/16/2007 11/13/2007 12/
Area Planted, 5 major 

USDA forecasts for 2008/0

2007/08

actual

I

nitial 

2008/09 

fo

r

e

c

a

s

t 1

/

Marc

h

2008/09 

fo

r

e

c

a

s

t 2/

Millio

n a

c

r

e

s

C

o

rn 93.6 90.0 86.0

Soyb

e

a

n

s 63.6 71.0 74.8

W

he

a

t 60.4 64.0 63.8

All C

o

tt

o

n 10.8 9.5 9.4

Rice 2.8 2.7 2.85-

c

rop t

o

t

al 231.2 237.2 236.8

1/ February 22, 2008, A

gric

ultur

al O

utlook Forum.

2/ M

ar

c

h 31, 2008, 

P

rospec

tive Plantings, from the N

a

tional 

S

tatis

tics S

e

rvice.

3/ J

une 30, 2008, 

A

c

reage , from the N

a

tional A

gricultur

al Stati
Net Returns Outlook for the Major Fiel

Spring 2006, 2007, and 2008

0

50

100150200250300350400450500

Corn Soybeans Wheat Rice 

$ per acre

2006 2007 2008
New-crop Soybean/Corn Price 2007-crop and 2008-crop through April 1

1.801.902.002.102.202.302.402.502.602.70

1-

S

e

p 1-Oct 1-

N

o

v 1-Dec 1-Jan 1-

F

e

b 1-Mar 1-

A

pr 1-May 

S

oybean/

c

o

r

n

N

ov 2007 S

oybeans/

Dec 2007 C

orn Fu

N

ov 2008 S

oybeans/

Dec 2008 C

orn Fu

N

ote: Chicag

o Board of Trade daily settle

ment prices. 
Area Planted, 5 major 

USDA forecasts and actual for 2

I

nitial

 2007/08 

fo

recas

t 1/

Ma

r

c

h

2007/08 

fo

recas

t 2

/

June

 2007/08 

fo

recas

t 3/

Millio

n a

c

r

e

s

C

o

rn 87.0 90.5

92.9

S

o

ybean

s

70.5 67.1

64.1

Wheat 60.0 60.3

60.5

All C

o

tt

o

n

13.0 12.1

11.1

Ric

e 2.9

2.6 2.7

5-crop to

t

al 233.4 232.6 231.3 

1/ M

a

r

c

h 2, 2007, A

gricultural O

utlook F

o

rum.

2/ M

a

r

c

h 30, 2007, 

P

rospective Plan

tin

g

s, fr

o

m the N

a

tio

nal 

S

tatis

tics S

e

rvice.

3/ J

une 29, 2007, Ac

re

a

g

e , fr

o

m the N

a

tio

nal A

gricultural S

tati