2016

California Grain & Feed AssociationSan Diego, CAApril 28, 2016

Fundamental ShiftsImpacting U.S. Agriculture

Richard Brock

2016

Game Changers

3 fundamental shifts Long term Impact

2016

$2 cotton in 2011… industry will never be

the same.

2016

$8.00 corn in 2012Research yield and drought resistant

5

10

15

20

25

95/96 00/01 05/06 10/11 15/16

U.S.

non U.S.

billion bu

World Corn Production

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

95/96 00/01 05/06 10/11 15/16

U.S.

non U.S.

billion buWorld Corn Exports

2016

Oil price collapse• Fracking changed the world … low oil

prices for a long time period.

• OPEC Collapse

0

25

50

75

100

125

150

2000 2005 2010 2015

$/barrelWeekly Crude Oil Futures

2016

Other market impacts

2016

Technology Transfer to Asia

2016

Water Availability

2016

Consumer Demand Shift

2016

2016

General Economy & Outside Markets

2016

I personally would suggest government. They never go to jail

2016

U.S. Dollar Index

2016

U.S. Dollars per Brazilian Real

2016

-100

0

100

200

300

400

500

707580859095100105110115120125130135140

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

CRB Index

U.S. Dollar Index

CRB Index vs. U.S. Dollar Index

Commodity prices often move inversely the U.S. dollar.

2016

2016

2016

Water @ $1.39/20 oz. bottle = $8.90/gal

Water is 6.4 times more expensive than gasoline!

2016

Crude Oil, monthly continuous

2016

June 2016 Crude Oil

Shale oil regions

2016

275

300

325

350

375

400

425

450

475

500

525

550

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

As of April 15th,crude oil inventory was:

10% above last year, 34% above 5-year average

Source: EIA

Million barrels

2016

2011-2015average

2011-2015 range

U.S. Crude Oil Inventory

2015

2016

U.S. Crude Oil Production and Imports

3

4

5

6

7

8

9

10

11

12

1990 1995 2000 2005 2010 2015

Imports down 28%since 2006 peak

Domestic production up 127%since 2008 bottom

Mill

ion

barr

els/

day

Source: EIA through April 15, 2016; values based on 4-week moving averages

Productiondown 6.4% from

June peak

2016

2016

Farm Economy

2016

7 Stages of Ag Economic Cycles

Time

Copyright © by Richard Brock and Associates, Inc.

Now

1985 2010 2015

Emot

ions

7 Stages of Agricultural Economic Cycle

Caution

Confidence

Euphoria

Concern

Despair

Skepticism

Hope

2016

MAD

MAD

2016

0

100

200

300

400

500

600

1995 2000 2005 2010 2015F

$ Billion

Net Farm Income -27% in 2014, -37% in 2015;Projected to Decline Additional 3% in 2016

Total Gross Income

Net Farm Income

Net Cash Income

Total Expenses

Source: USDA ERS, February 20162016F

2016

$0.00

$1.00

$2.00

$3.00

$4.00

$5.00

$6.00

$7.00

$8.00

0

50

100

150

200

250

300

350

400USDA Nitrogen Price Index (1982=100)

Corn Price (Marketing Year)

Corn Prices and Nitrogen Prices are Highly Correlated N

itrog

en P

rice

Inde

x (1

982

= 10

0)Average C

orn Price (marketing year)

Source: USDA NASS

Corn Price

NitrogenFertilizer

PriceIndex

2016

$0

$2,000

$4,000

$6,000

$8,000

$10,000

1980 1985 1990 1995 2000 2005 2010 2015

California

Iowa

Illinois

Nebraska

United States

Idaho

Source: USDA Land Values, August 2015 Summary

Cropland Value per Acre10,690 +5.4%

5,070 -2.1%

7,650 -0.6%

8,200 -6.3%

4,130 +0.7%

3,200 +5.3%

2016

5

10

15

20

25

30

1970 1975 1980 1985 1990 1995 2000 2005 2010 2015F

Percent

Debt/Equity

Debt/Assets

Farm Sector Debt Ratios Increasing

Debt-to-equity increasing:from: 12.8% in 2013

13.3% in 201414.7% in 201515.2% in 2016

Debt-to-assets increasing:from: 11.3% in 2013

11.7% in 201412.8% in 201513.2% in 2016

Source: USDA ERS , U.S. Farm Income and Wealth Statistics, February 20162016F

2016

-40%-30%-20%-10%0%10%20%30%40%50%60%70%80%90%100%110%120%130%140%150%160%170%180%190%200%

-

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

Actual Land Value

Land value per regression formula

U.S. Gross Farm Income Correlation to Cropland Value

Based upon USDA projected 2016 gross farm income as of February 2016, land values should be closer to $3,298 vs. $4,130 per USDA survey in August.Cropland is 25% "overvalued" by historical valuation measures.

$3,298

$4,130 in 2015

% undervalued

% overvalued

2016

5.600.98

0.450.06

0.00-0.03

-0.21-0.34-0.41-0.42

-1.24-1.90

-3.25-5.09

-6.00 -4.00 -2.00 0.00 2.00 4.00 6.00 8.00

cornCotton

RiceDurum Wheat

Sugar BeetsCanola

Dry Edible BeansOats

SoybeansBarley

sorghumOther Spring

Winter WheatAll Wheat

USDA Changes in Planted Acres (in millions)2016 compared with 2015*

* 2016 Prospective Plantings

2016

Corn Supply & Demand

2016

Marketing year begins Sept 1 14/15 15/16 Proj 16/17 15/16 16/17ACREAGE (million)

Planted Area 90.6 88.0 90.0 88.0 91.5Harvested Area 83.1 80.7 82.3 80.7 83.7Yield 171.0 168.4 168.0 168.4 169.0

SUPPLY (mil bu) Beg. Stocks 1,232 1,731 1,837 1,731 1,837Production 14,216 13,601 13,825 13,601 14,145Imports 32 50 40 50 30

Total Supply 15,479 15,382 15,702 15,382 16,012USAGE (mil bu)

Feed & Residual 5,324 5,250 5,425 5,300 5,400Food/Seed/Ind 6,560 6,621 6,600 6,595 6,600

Ethanol & By-Products 5,200 5,250 5,225 5,225 5,225Domestic Use 11,883 11,871 12,025 11,895 12,000Exports 1,864 1,650 1,700 1,650 1,800

Total Use 13,748 13,521 13,725 13,545 13,800Ending Stocks (mil bu, Aug 31) 1,731 1,862 1,977 1,837 2,212

CCC 0 0 0 0 0Privately-Owned 1,731 1,862 1,977 1,837 2,212Stocks/Use 12.6% 13.8% 14.4% 13.6% 16.0%Farm Price ($/bu) $3.70 $3.40-3.70 $3.60 $3.20-3.80 $3.15-3.75

Brock

U.S. CORN SUPPLY AND DEMANDOutlook ForumUSDA

93.6*

* Prospective Plantings report

2016

Top 10 States (million acres)

State 2013 2014 2015

March 1 2016

intentionsChange

from 2015

Iowa 13.60 13.70 13.50 13.90 0.40Illinois 12.00 11.90 11.70 12.10 0.40Nebraska 9.95 9.30 9.40 9.70 0.30Minnesota 8.60 8.20 8.10 8.20 0.10Indiana 6.00 5.90 5.65 5.80 0.15South Dakota 6.20 5.80 5.40 5.70 0.30Kansas 4.30 4.05 4.15 4.80 0.65Wisconsin 4.10 4.00 4.00 4.00 0.00Ohio 3.90 3.70 3.55 3.55 0.00Missouri 3.35 3.50 3.25 3.60 0.35Top 10 Total 72.00 70.05 68.70 71.35 2.65

United States 95.37 90.60 88.00 93.60 5.60

USDA Corn Acreage

2016

-

10

20

30

40

50

60

70

80

90

100

110

Apr 03 Apr 10 Apr 17 Apr 24 May 01 May 08 May 15 May 22 May 29 Jun 05 Jun 12 Jun 19

U.S. Corn Planting Progress

5-yr average

Source: USDA NASS

shaded area is5-year range

Percent

2016

2015

As of April 24th:30% planted vs.16% last year16% 5-year average

% Planted 5‐year average +/‐

Missouri 81 31 50Minnesota 45 11 34Iowa 40 9 31Kentucky 50 28 22Tennessee 65 43 22Illinois 42 25 17Kansas 43 27 16Wisconsin 10 3 7Nebraska 16 11 5Michigan 3 4 ‐1Ohio 8 9 ‐1Indiana 11 13 ‐2U.S. 30 16 14

2016

0708

09 14

1.001.502.002.503.003.504.004.505.005.506.006.507.007.508.00

0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% 55%

Aver

age

Farm

Pric

e ($

/ B

ushe

l)

Corn Ending Free Stocks to Use Ratio (10 = 2010/11 marketing year)

U.S. Corn Free Stocks/Use Ratio vs. Average Price (1975/76 - 2016/17)

Source: USDA, Brock Associates

10

06

05

2015/16 13.6% stocks/use; $3.20-3.80/bu

12

11

13

2016/17 16.0% stocks/use; $3.15-3.75/bu

85

2016

2012 2013 2014 2015 2016*change

from 2015Iowa 1,877 2,140 2,367 2,505 2,449 -2.2%Illinois 1,286 2,100 2,350 2,013 2,101 4.4%Nebraska 1,292 1,614 1,602 1,693 1,649 -2.6%Minnesota 1,374 1,294 1,178 1,429 1,348 -5.7%Indiana 597 1,032 1,085 822 933 13.5%South Dakota 535 803 787 800 734 -8.2%Missouri 248 435 629 437 483 10.5%Ohio 438 649 611 499 549 10.0%Kansas 375 504 566 580 552 -4.8%Wisconsin 396 439 485 492 481 -2.3%Michigan 314 346 356 335 351 4.8%North Dakota 422 396 314 328 365 11.1%Rest of States 1,600 2,076 1,886 1,668 1,956 17.3%US TOTAL 10,755 13,829 14,216 13,601 13,950 2.6%

U.S. Corn Production (million bu)

   * assumes Prospective Plantings acreage, 20‐year trend yield by state, and 20‐year average percent harvested by state

2016

12% below last year

Corn Export Commitments

0

250

500

750

1,000

1,250

1,500

1,750

2,000

Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug

 2015/16

 2014/15

 5‐year average

USDA Target

2015/16

Source: USDA

million bu1,7001,650

1,7501,850

2016

0%

10%

20%

30%

40%

50%

60%

70%

U.S. Argentina Brazil Ukraine R.O.W.

World Corn Export Share, 2007/08 to 2015/16

2007/08 2015/16

2012 Drought

Source: USDA, April 2016

World Corn Export Volume:2013/14: 131.12014/15: 141.7

est. 2015/16: 122.3

2016

10%

20%

30%

40%

50%

60%

-

50

100

150

200

250

75/76 80/81 85/86 90/91 95/96 00/01 05/06 10/11

Ending Stocks (left scale) Ending Stocks/Use (right scale)

World Corn Ending Stocks and Stocks/Use

Source: USDA FAS, April 2016

mil. metric tons Ending stocks/use +1.9 mmt

from last month;+1.3 vs. last year

2016

-10

-5

0

5

10

15

20

ImportsExports

Millionmetrictons

Exports

China Corn Imports & Exports

Source: USDA, April 2016Imports

2.5

2016

-

50

100

150

200

250

ProductionConsumptionEnding StocksImports

Millionmetrictons

Ending Stocks

Recordconsumption

Record production

China Corn Fundamentals

Source: USDA, April, 2016

Imports

50% stocks/use ratio

2016

Ethanol

2016

EPA Releases Final Renewable Fuel Obligations (RVO’s) for 2014 - 2016

- 1 2 3 4 5 6 7 8 9

10 11 12 13 14 15 16

RFS Statutory Mandate

Billion gallons

Sources: RFA, EPA

EPA Final RVO: 13.61 14.05 14.50

Actual fuel ethanol production

Final Renewable Volume Obligations

RFS Statutory Mandate: 14.40 15.00 15.00

June 2015EPA Proposal

2016

(0.50)

-

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

Ethanol Costs, Revenues, and Profitability/Gallon

ProfitabilityRevenues

Costs

2011 2012 2013 2014 2015

$/gallon

Source: Iowa State University through March 2016

Brockest. forApril

+$0.01

2016

-125-100

-75-50-25

0255075

100125150175200

   Exports   Imports Net exports

Million gallons

Source: USDA FAS (through February; March data to be released in May)

0

2011 2012 2013 2014 2015 2016

U.S. Ethanol Imports and Exports

2016

$0.00

$1.00

$2.00

$3.00

$4.00

$5.00

$6.00

$7.00

$8.00

$9.00

$10.00Central Illinois Cash Corn (1905‐2016*)

1917 1948 1974 1996

$2.21

15 Years

$2.84

31 Years+29%

14 Years

$3.97

26 Years+40%

22 Years+32%

$5.25

13 Years 9 Years

16 yrs +63%

2008

* Updated April 26, 2016

1917 1948 1974 1996 2012

$8.54

2016

$/bu

2016

December 2016 Corn

2016

Soybean Supply & Demand

2016

Marketing year begins Sep 1 14/15 15/16 Proj. 16/17 15/16 16/17

ACREAGE (million)Planted Acres 83.3 82.7 82.5 82.7 83.5Harvested Acres 82.6 81.8 81.6 81.8 82.7Yield 47.5 48.0 46.7 48.0 47.5SUPPLY ( mil bu) Beg. Stocks 92 191 450 191 439Production 3,927 3,929 3,810 3,930 3,928Imports 33 30 30 30 30 Total Supply 4,052 4,150 4,289 4,150 4,397USAGE (mil bu) Crush 1,873 1,870 1,900 1,870 1,900Exports 1,843 1,705 1,825 1,710 1,850Seed 96 65 92 92 97Residual 49 34 32 39 48 Total Use 3,862 3,705 3,850 3,711 3,895

Ending Stocks (mil bu, Aug 31) 191 445 440 439 502 CCC 0 0 0 0 0 Privately-Owned 191 445 440 439 502Stocks/Use 4.9% 12.0% 11.4% 11.8% 12.9%Farm Price ($/Bu) $10.10 $8.50-9.00 $8.50 $8.05-9.20 $8.25-9.50

Brock

U.S. SOYBEAN SUPPLY AND DEMANDOutlook ForumUSDA

82.2*

* Prospective Plantings report

2016

Top 12 States (million acres)

State 2013 2014 2015

March 1 2016

intentionsChange

from 2015

Iowa 9.30 9.85 9.85 9.70 -0.15

Illinois 9.50 9.80 9.80 10.00 0.20

Minnesota 6.70 7.35 7.60 7.40 -0.20

Missouri 5.65 5.65 4.55 5.50 0.95

Indiana 5.20 5.45 5.55 5.55 0.00

Nebraska 4.80 5.40 5.30 5.30 0.00

Ohio 4.50 4.70 4.75 4.65 -0.10

South Dakota 4.60 5.15 5.15 5.00 -0.15

North Dakota 4.65 5.90 5.75 5.90 0.15

Kansas 3.60 4.00 3.90 3.85 -0.05

Arkansas 3.27 3.23 3.20 3.05 -0.15

Mississippi 2.01 2.21 2.30 2.00 -0.30

Top 12 Total 63.78 68.69 67.70 67.90 0.20

United States 76.84 83.28 82.65 82.24 -0.41

USDA Soybean Acreage

2016

 ‐

 10

 20

 30

 40

 50

 60

 70

 80

 90

 100

 110

Apr 24 May 01 May 08 May 15 May 22 May 29 Jun 05 Jun 12 Jun 19 Jun 26 Jul 03

U.S. Soybean Planting Progress

5-yr average

Source: USDA NASS

shaded area is5-year range

Percent

2015

As of April 24th:3% planted vs.2% last year2% 5-year average

2016

2016World Soybean Production

2012/13 2013/14 2014/15 2015/16

2015/16 Change from Feb

Brazil 82.0 86.7 97.2 100.0 0.0

United States 82.8 91.4 106.9 106.9 0.0

Argentina 49.3 53.4 61.4 59.0 0.5

World Total 268.6 282.6 319.5 320.2 -0.1

Source: USDA, April 2016

USDA World Soybean Production (million metric tons)

2016

2016

8.00

8.50

9.00

9.50

10.00

10.50

-300,000

-250,000

-200,000

-150,000

-100,000

-50,000

0

50,000

100,000

150,000

200,000

Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul

Soybean Commitments of TradersFutures and Options Combined, as of April 19, 2016Price

ContractsLarge Specs

CommercialsSource:CFTC

Price (dotted line, left scale)

2016

0.00

2.00

4.00

6.00

8.00

10.00

12.00

14.00

16.00

18.00

20.00

1980 1985 1990 1995 2000 2005 2010 2015

$/bu

9/86 6/91

9/127/08

5/04

7/93

6/88

7/99

4/00

5/979/83

5 yrs 5 yrs 4 yrs 2.5 yrs 4 yrs

4 yrs 4 yrs

Approximate time from peak to peak

3 yrs 3 yrs 2 yrs

Approximate time from peak to trough

BrokenSupport-51%

-53%

-56%

-53%

-53%

2/05

Continuous Monthly Soybean Futures

2015 16

2016

November 2016 Soybeans

2016

July 2016 Soybean Meal

2016

Cotton

2016

Marketing year begins Aug 1 14/15 15/16 Proj 16/17 15/16 16/17

ACREAGE (million acres)Planted Area 11.04 8.58 9.40 8.58 9.60Harvested Area 9.35 8.06 8.45 8.06 8.93Yield 838 767 812 771 795

SUPPLY (million 480-lb. bales) Beginning Stocks (August 1) 2.35 3.70 3.60 3.70 3.63Production 16.32 12.87 14.30 12.94 14.79Imports 0.01 0.04 0.01 0.00 0.00

Total Supply 18.68 16.61 17.91 16.64 18.42USAGE (million 480-lb. bales)

Mill Use 3.58 3.60 3.60 3.60 3.70Exports 11.25 9.50 10.70 9.40 10.90

Total Use 14.82 13.10 14.30 13.00 14.60Unaccounted 0.16 0.01 0.01 0.00

STOCKS (million 480-lb. bales) Ending Stocks (July 31) 3.70 3.50 3.60 3.63 3.82

Farm Price (¢/lb) 61.30 58-59 58.0 60-62 55-65

USDA

U.S. COTTON SUPPLY AND DEMANDBrock

Outlook Forum

9.56*

* Prospective Plantings report

2016

6

7

8

9

10

11

12

13

14

15

16

17

18

Mill

ion

Acre

s

U.S. Cotton Planted Area

9.56

2016

0

10

20

30

40

50

60

70

80

90

100

U.S. Cotton Planting Progress

5-yraverage

Source: USDA

shaded area is5 year range

Percent

2015

2016

As of April 24 th:10% planted vs.9% last year

13% 5-year average

U.S. Cotton Planting Progress

2016

- 1 2 3 4 5 6 7 8 9 10 11 12 13 14

Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul

All Cotton Export Commitments (million bales)

Source: USDA

Last Year

USDAtarget:

10.0

5-yr average

2015/16

9.5

Commitments are: 25% below last year 33% below 5-year average

2016

0%

20%

40%

60%

80%

100%

120%

0

20

40

60

80

100

120

Wor

ld E

ndin

g St

ocks

to U

se R

atio

Wor

ld C

otto

n St

ocks

(Mill

ion

480-

Poun

d Ba

les)

World Cotton Ending Stocks and Stocks to Use

Ending Stocks

Ending Stocks to Use Ratio

Source: USDA FAS, April 2016

-1.1 from last month;-9.7 from 2014/15

2016

32%

34%

36%

38%

40%

42%

44%

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Cotton's Share of Fiber Consumption, U.S.

Source: USDA ERS, Cotton and Wool Yearbook, November 2015

2016

2016

0

20

40

60

80

100

120

Wor

ld C

otto

n St

ocks

(Mill

ion

480-

Poun

d B

ales

)World Cotton Ending Stocks

Source: USDA FAS, April 2016

China63%

of total

R.O.W.

U.S.

2016

Cotton, Monthly Continuous

2016

December 2016 Cotton Futures

2016

Livestock Update

2016

15

20

25

30

35

40

45

50

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 proj.2016

Source: USDA ERS, April 2016

Billion lbs.U.S. Meat Production and Forecast(and percent change 2015 vs. 2014, 2016 vs. 2015)

+3.1%

Beef

+7.2% +1.9%

All red meat and poultry combined: +2.6%, +3.2%

+4.8%-2.3%

Pork

Poultry

+3.1%

USDA Outlook Forum: "red meat and poultryproduction will be record large in 2016"

2016

30

40

50

60

70

80

90

100

110

120

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 proj.2016

Poultry +5.7% +2.4%

Beef -0.4%

Pork +7.3% +0.8%

lbs. per capita

U.S. Per Capita Meat Consumption(and annual percent change 2015 vs. 2014, 2016 vs. 2015)

All red meat and poultry combined: +4.4%, +2.1%

+2.0%

Source: USDA ERS, April 2016

2016

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

2,200

1980 1985 1990 1995 2000 2005 2010 2015

$/head

10.6 years peak to peak

11.0 years peak to peak

1,250 lb. Live Cattle Value less 50 bu Corn Cost

Apr'16

2016

Continuous Monthly Live Cattle Futures

2016

Dairy

2016

100

120

140

160

180

200

220

240

10,000

12,000

14,000

16,000

18,000

20,000

22,000

24,000

1975 1980 1985 1990 1995 2000 2005 2010 2015

Source: USDA NASS, April, 2016

Production per cow(left scale)

U.S. Production(right scale)

U.S. Milk Production > U.S. per cow production estimated at 22,755 lbs; up 1.6%> 2016 production estimated at 211.8 bil lbs; up 1.5%lbs/cow billion lbs.

2016

2016

19

20

21

22

23

24

25

26

27

28

29

30

2010 2011 2012 2013 2014 2015 2016Source: USDA ERS

National Milk Total Cost-of-Production $/cwt

2016

1.50

2.00

2.50

3.00

3.50

4.00

1985 1990 1995 2000 2005 2010 2015

National Milk/Feed Price Ratio

2016

Pounds of 16-percent-protein mixed dairy feed equal in value to 1 pound of whole milk.

Higher Feed-Pice Ratios Favor Higher Profitability

Source: USDA

2016

For More Information on the Brock Report, write, email or call

BROCK ASSOCIATES2050 W. Good Hope Rd.

Milwaukee, WI 53209(800) 558-3431

www.brockreport.com rabrock@brockreport.com

2016

DisclaimerThere is a risk of losses as well as profits when

trading futures and options.

This market analysis is not a solicitation or recommendation to buy or sell any futures

contract or other security.