2015 HRS and Durum Crops

OutlookErica Olson

Marketing Specialist, NDWC

Summary

The GOOD:

Early planting, quick harvest

Record to near-record yields

Improved quality

Fairly good demand

The BAD:

Declining price

The UNKOWN:

When will prices increase/decrease

2016 acreage

U.S. SPRING WHEAT PLANTINGS & PRODUCTION

05

06

07

08

09

10

11

12

13

14

15 0

4

8

12

16

20

0

130

260

390

520

650

Planted Harvested Production

Source: USDA October 2015Xldata/HRS/Acres

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

Million Acres

Million Bushels

Average U.S. Wheat Yields

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

30

32

34

36

38

40

42

44

46

48

50

2.00

2.14

2.27

2.41

2.54

2.68

2.82

2.95

3.09

3.22

3.36US Spring ND Spring

Bushels Per Acre Metric Tons Per Hectare

Source: USDA Sept 2015

HRS Quality Summary

Notable improvements in:

Protein – nearly two-thirds above 14%

Vitreousness

Falling Number

DON levels

High grading crop – overall #1 DNS, over 90% is a number one grade

Increased milling yields

Stable to slightly stronger dough properties

Higher loaf volumes

HRS Grading & Kernel Characteristics

2014 2015 5-Year Avg.

ND 2015

Test Weight(lbs/bu.)

61.4 61.6 61.4 61.9

1000 KWT (g) 32.4 31.3 31.0 31.3

Damage (%) 0.2 0.4 0.1 0.5

Total Defects 0.9 1.2 1.2 1.2

Vitreous Kernels (%)

53 83 69 81

Protein (12% moisture)

13.6 14.1 14.0 14.1

Falling Number (seconds)

339 372 383 372

DON 0.3 0.1 0.4 0.2

HRS: Protein Content (12% moisture basis

2015

2014

2013

2012

2011

2010

12.0%12.5%13.0%13.5%14.0%14.5%15.0%

- - - 5 yr avg is 14.0

HRS Protein Spreads

1/4/

2010

4/12

/201

0

7/19

/201

0

10/2

5/20

10

1/31

/201

1

5/9/

2011

8/15

/201

1

11/2

1/20

11

2/27

/201

2

6/4/

2012

9/10

/201

2

12/1

7/20

12

3/25

/201

3

7/1/

2013

10/7

/201

3

1/13

/201

4

4/21

/201

4

7/28

/201

4

11/3

/201

4

2/9/

2015

5/18

/201

5

8/24

/201

5-3.000

-2.000

-1.000

0.000

1.000

2.000

3.000

15% Premium 13% Discount$ per bushel

HRS: 2015 Protein Content by State (12% moisture basis)

14.4 14.1

14.0

13.8

15.0

HRS: Vitreous Kernel Content Distribution

0% 10% 20% 30% 40% 50% 60% 70% 80%

69%

12%

9%

10%

43%

18%

20%

19%

2014 2015Percent2014 Avg. = 532015 Avg. = 83

HRS: Falling Number Distribution

0% 10% 20% 30% 40% 50% 60% 70% 80%

64%

30%

40%

1%

0%

28%

45%

16%

8%

3%

2014 2015Seconds 2014 Avg. = 3392015 Avg. = 372

HRS: Flour Extraction

2015

2014

2013

2012

2011

2010

60% 63% 66% 69% 72%

- - - 5 yr avg is 68.5%

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.

U.S. Hard Red Spring: Dough QualityFarinograph Results

10 11 12 13 14 150

4

8

12

16

PEAK MIX TOL (minutes)

Minutes

10 11 12 13 14 15

Peak 6.2 7.5 7.4 6.2 6.0 6.7

Mix Tolerance

10.2

11.0 12.2 9.0 9.4 10.3

Factors affecting HRS market

Record world wheat production and supplies

Good HRS production and quality

Buyers not concerned about supplies

Weaker overall U.S. wheat exports – HRS and durum faring better than other classes

Buyers making hand to mouth purchases

Competition

Strong dollar

No major weather concerns….yet

Dry in Black Sea, up to 1/3 of crops in Russian and Ukraine considered poor condition

Australia – rains prior to harvest could cause quality issues

WORLD WHEAT PRODUCTION

04-0

5

05-0

6

06-0

7

07-0

8

08-0

9

09-1

0

10-1

1

11-1

2

12-1

3

13-1

4

14-1

5

Proj 1

5-16

300

400

500

600

700

11,022

14,696

18,370

22,044

25,718

Million Bushels

Source: USDA October 2015Xldata/world/all wheat/wheat/prod

Million Tons

WORLD WHEAT PRODUCTION – MAP(Million Bushels)

13-14 14-15 Proj 15-16

13781076 955

Canada

13-14 14-15 Proj 15-16

2135 2024 2050

U.S.

13-14 14-15 Proj 15-16

386 459 386

Argentina

13-14 14-15 Proj 15-16

5302 5750 5706

EU 27

13-14 14-15 Proj 15-16

3817 4141 4317FSU

13-14 14-15 Proj 15-16

4479 4637 4776

China

13-14 14-15 Proj 15-16

3435 3523 3266

India

13-14 14-15 Proj 15-16

930 871 992

Australia

USDA October 2015xldata/world/all/prod & use

WORLD WHEAT STOCKS

04-0

5

05-0

6

06-0

7

07-0

8

08-0

9

09-1

0

10-1

1

11-1

2

12-1

3

13-1

4

14-1

5

Proj 1

5-16

0

50

100

150

200

250

0

1,837

3,674

5,511

7,348

9,185

Million Bushels

Source: USDA October 2015Xldata/world/all wheat/wheat/prod

Million Tons

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

11-12 12-13 13-14 14-15 Proj15-16

Change

Beg Stocks 185 151 165 169 212 +25%

Production 398 505 491 556 564 +1%

Imports 35 43 77 66 45 -32%

Tot Supply 618 699 733 791 821 +4%

Dom Use 225 303 318 308 287 -7%

Exports 242 232 246 270 295 +9%

Tot Use 467 534 564 579 582 +1%

End Stocks 151 165 169 212 239 +13%

S/U Ratio 32% 31% 30% 37% 41%

Source: USDA October 2015Xldata/HRS/S&D

EXPORT PACE FOR U.S. WHEAT(Shipments and Sales as of October 29, 2015)

CLASS 14/15 PACE 15/16 PACE % CHANGE

Hard Red Winter

181 127 -30%

Soft Red Winter

105 82 -22%

Hard Red Spring

175 145 -17%

White 93 88 -5%

Durum 12 20 +67%

TOTAL 566 462 -18%

Million Bushels

EXPORT PACE – U.S. HRS WHEAT(Shipment and sales as of October 29, 2015)

Total Europe Asia Africa Latin America

0

1

2

3

4

5

-36.7

0.0

36.7

73.5

110.2

147.0

183.7

14-15 15-16Million Tons Million Bushels

11/5/15

U.S. Dollar Index

U. S. FUTURES TRENDSMinneapolis – Hard Red SpringKansas City – Hard Red WinterChicago – Soft Red Winter – World prices10

-Jun

Sept

Dec

Mar

11-J

unSe

ptD

ecM

ar12

-Jun

Sept

Dec

Mar

13-J

unSe

ptD

ecM

ar14

-Jun

Sept

Dec

Mar

15-J

unSe

pt

$3.00

$6.00

$9.00

$12.00

$110.22

$220.44

$330.66

$440.88MGE KCBOT CBOT

$ per Ton

$ per Bushel

11/4/15

U.S. WHEAT PRICE CHANGE AT THE PNW

DNS 14% HRW 12% SW 10.5% (MAX)

$100

$200

$300

$400

$500

$2.72

$5.44

$8.16

$10.88

$13.60

367

281 279250

227265

Nov 14 Nov 15

$ per Ton

$ per Bushel

11/4/15

Northern Durum Quality Summary Notable improvements in:

Vitreousness

Falling Number

DON levels

Protein

High grading crop – overall #1 HAD, majority is a #2 HAD or better

Improved milling and pasta processing qualities

Durum Grading & Kernel Characteristics

2014 2015 5-Year Avg.

ND 2015

Test Weight(lbs/bu.)

59.0 60.6 60.0 60.7

1000 KWT (g) 38.0 38.5 39.2 39.7

Damage (%) 0.8 0.3 0.6 0.4

Total Defects 1.6 1.3 1.7 1.3

Vitreous Kernels (%)

74 91 84 88

Protein (12% moisture)

13.2 13.9 13.5 13.6

Falling Number (seconds)

276 414 354 407

DON 2.1 0.8 1.3 1.2

U.S. Northern Durum: Grade Distribution

58%

23%

9%

7%

3%

31%

19%

11%

8%

31%2014 2015

U.S. Northern Durum: Falling Number Distribution

72%

26%

2%

0%

11%

24%

54%

11%

2014 2015Seconds

2014 Avg. = 2762015 Avg. = 414

U.S. Northern Durum: Vitreous Kernel Content Distribution

0% 10% 20% 30% 40% 50% 60% 70% 80%

67%

22%

10%

0%

1%

24%

41%

20%

4%

11%

2014 2015Percent

2014 Avg. = 74%2015 Avg. = 91%

U.S. Northern Durum: 2015 Vitreous Kernels by Crop Area (percent)

A97%

B95%

A87%

B89%

C96%

D89%

U.S. Northern Durum: 2015 DON by Crop Area (ppm)

A<0.2

5

B<0.2

5

A1.2

B2.9

C1.1

D0.3

U.S. Northern Durum: Pasta Color Score

2015

2014

2013

2012

2011

2010

8.0 8.5 9.0 9.5 10.0

- - - 5 yr avg is 8.9

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

U.S. Northern Durum: Pasta Cooked Firmness

2015

2014

2013

2012

2011

2010

3.0 3.8 4.5 5.3 6.0

- - - 5 yr avg is 4.6

Grams CM

Factors affecting Durum market World production up 10% after reaching 13-year low

in 2014

Canadian crop lower than average, but better than expected

EU crop is larger

World stocks continue to tighten

Durum susceptible to wide price swings

Recovery in production and quality in U.S. crop

Strong demand for U.S. durum

However, overall world durum trade expected to be down this year, especially in EU and North Africa

Higher domestic production, no major quality shortfalls

Prices holding a premium to bread wheat, but for how long?

WORLD DURUM PRODUCTION – MAP(Million Bushels)

13 14 Proj 15

239191 173

Canada

13 14 Proj 15

59 5182

U.S.

13 14 Proj 15

85 85 85

MEXICO

13 14 Proj 15

290 261 293

EUROPEAN UNION

13 14 Proj 15

239184 217

TURKEY/SYRIA/KZ

13 14 Proj 15

257 257 257

OTHER

13 14 Proj 15

195151

228

NORTH AFRICA

13 14 Proj 15

18 18 18

AUSTRALIA

Source: Stats Canada and Int’l Grains CouncilXldata/world/durum/prod October 2015

World Import Durum Demand

EU Algeria Morocco Venezuela Tunisia Others0

0.5

1

1.5

2

2.5

3

0

20

40

60

80

100

2012 2013 2014 2015Million Tons Million Bushels

Durum Stocks in Major Exporting Countries – U.S., Canada, European Union

04-05

05-06

06-07

07-08

08-09

09-10

10-11

11-12

12-13

13-14

14-15

Proj 15-16

0

2

4

6

8

0

73

146

219

292

U.S. Canada EU

Source: Stats Canada and Int’l Grains CouncilXldata/world/durum/sdmajor1 October 2015

Million Tons Million Bushels

U.S. DURUM WHEAT PLANTINGS BY STATE

North Dakota

Montana AZ & CA0.0

0.5

1.0

1.5

2.0

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8Million Acres

11 12 13 14

Million Hectares

Source: USDA October 2015

U.S. DURUM SUPPLY & DEMAND Million Bushels

10-11

11-12

12-13

13-14

14-15

Proj 15-16

Change

Beg Stocks

35 35 25 23 22 26 +18%

Production

107 50 82 58 54 82 +52%

Imports 34 37 36 44 50 40 -20%Tot Supply

176 122 143 125 126 148 +17%

Dom Use 98 70 91 73 63 78 +24%Exports 43 27 29 31 37 40 +8%Tot Use 141 97 120 103 100 118 +18%End Stocks

35 26 23 22 26 30 +15%

S/U Ratio

25% 27% 19% 21% 26% 25%

Source: USDA October 2015Xldata/durum/S&D

EXPORT PACE – U.S. DURUM WHEAT2015-16 as of October 29, 2015

Total Europe Africa Latin America

Unknown0.0

0.1

0.2

0.3

0.4

0.5

0.6

0.0

3.7

7.3

11.0

14.7

18.4

22.0

14-15 15-16Million Tons Million Bushels

11/5/15

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

6/4/

10

11/2

1/10

5/10

/11

10/2

7/11

4/14

/12

10/1

/12

3/20

/13

9/6/

13

2/23

/14

8/12

/14

1/29

/15

7/18

/15

$3.00

$6.00

$9.00

$12.00

$15.00

$18.00

$110

$220

$331

$441

$551

$661 MPLS 14% HRS DURUM

$ per Ton

$ per Bushel

10/9/15

Average N.D. Durum Wheat Prices

1/3

1/2

01

43

/3/2

01

44

/3/2

01

45

/3/2

01

46

/3/2

01

47

/3/2

01

48

/3/2

01

49

/3/2

01

41

0/3

/20

14

11

/3/2

01

41

2/3

/20

14

1/3

/20

15

2/3

/20

15

3/3

/20

15

4/3

/20

15

5/3

/20

15

6/3

/20

15

7/3

/20

15

8/3

/20

15

9/3

/20

15

10

/3/2

01

5

$3.00

$6.00

$9.00

$12.00

$15.00

$18.00

$110

$220

$331

$441

$551

$661 MPLS Durum Index ND Durum

$ per Ton

$ per Bushel

10/31/15

QUESTIONS??