The Agricultural Risk Consulting Group 4546 South 86th St Suite D Lincoln NE Toll Free

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1 Global View June It has been an interesting spring in the markets. Spot crude market has gone from just over $30 in January to $69 this week. The DJIA hit a low around 6,500 before rebounding back to over 8,600 recently. News of the H1N1 swine flu hit the markets April 27 th with several of the ag markets temporarily falling to limit or near limit down levels before quickly rebounding. The eastern corn belt got off to a very slow planting start adding strength to the market. In addition to our domestic planting concerns, Argentina confirmed that their soybean crop was severely damaged and leading to a dramatic tightening of world soybean stocks. The significant soybean price rally has introduced dramatic change in 09/10 carryouts in a matter of a few months. Doom & gloom prevailed at USDA s Ag Outlook Forum in late February which showed rather large estimated 09/10 carryouts for corn & soybeans at 1,720 & 380 million bushels (mb), respectively. The private analysts Informa estimated soybean carryouts north of 800 mb. Fast forward to the May WASDE report, carryouts changed dramatically to a relatively tight 1,145 mb corn & 230 mb soybean ending stocks, with some envisioning carryouts for corn at sub-1000 mb and soybeans at sub-100 mb! The current Administration has been printing money and racking up a deficit at an unprecedented rate. This will be inflationary to commodities (and unfortunately input costs) and deflationary to the US$ (see charts above). The Fed is trying to reflate the economy but doesn t want to overshoot and ignite hyper-inflation. In addition, recent decisions by the Administration to force Chrysler bond holders to convert their position to an equity stake has injected unprecedented uncertainty into the financial markets. Typically we re worried about nationalization of US assets in places like Venezuela. This leads to further weakness in the US$ as assets flee to safer havens. Trader Dennis Gartman has been speaking frequently about the long term impacts to the US$ and raw commodities in light of our recent Administration actions. China s authorities are gravely concerned that the US is heading down the path of fiscal ruin, and although we do not envision an environment wherein China will openly sell its holdings of US treasury securities, we can and we do envision and environment where China quietly refuses to rollover those investments and where those maturing dollars are used instead to buy the raw materials that China knows it shall need in the future. Simply put, China has been, is and will be swapping Treasury securities for copper; treasury securities for oil; treasury securities for wheat, corn and soybeans; treasury securities for cotton et al. The Agricultural Risk Consulting Group 4546 South 86th St Suite D Lincoln NE Toll Free

2 In conclusion, we are going through a very unusual time in history. Unusual times call for an even more important need to understand your operation and manage it to the best of your ability in the face of all outside factors. Currently corn is trading north of $4.50 and beans above $ Compared to historical returns, these should be very profitable levels for row crop production even in light of increased input costs for Also, keep in mind that most domestic industries that utilize our corn & soybeans (ethanol & livestock) are squeaking out small profits at best and more likely booking significant losses. This cannot take place long term. Long term, their inputs are going to have to go down, the end products go up, or demand will be reduced. In the short term, markets can be irrational and do very unfundamental things. Looking forward to 2010, anhydrous prices are below $400 and corn price is above $4.50. The potential net margins in this scenario appear to be among the highest in the past 20 years. If we are entering a period of re-flation it appears that buying anhydrous and selling a similar value of corn is good business decision. Drew Jensen Current Seasonal Crop Insurance Commodity Month Contract Futures Price Yearly Average Price Average Price Guar- antee KC Wheat Jul-09 KW N9 $6.79 $7.00 $6.03 $8.77 Soybeans Nov-09 S X9 $10.70 $9.71 $9.36 $8.80 Corn Dec-09 C Z9 $4.68 $4.47 $4.21 $4.04 Yearly Average to Date: 76% priced Seasonal Average to Date: 92% priced Seasonal Average: Feb 15 -Jun 15 average prices preceding harvest Yearly Average: 12 month price average preceding harvest See ACRE Program Our marketing theory is highly influenced by the research done at Iowa State University and the University of Illinois. Bob Wisner at ISU did extensive research on pre-harvest marketing and Illinois established the idea of benchmarking advisors and seeing if they outperformed a seasonal or yearly price average. When we talk about a seasonal price average, it would be achieved by selling futures daily from Feb 15th through June 15th, whereas a yearly price average would be achieved by selling futures daily from Sept 31 through Oct 1st. Most producers don t have enough bushels to replicate this, so we try to sell strength within the seasonal time frame (see chart at left). Historically, the seasonal average follows the bear pattern 74% of the time. We ve had many inquiries about the ACRE program and the following links are very helpful in determining if the program is appropriate for your farm. The first link is a presentation covering the program and takes about half an hour to view. The second link is a spreadsheet that helps you evaluate participation in the program. We selected this calculator because it lists all states, and seems pretty easy to use. You will have to input your yield history. Looking over simulations run by Ohio State and Iowa State, it appears that there will be payments from the ACRE program if prices fall substantially. The compromise is that you have to sign up for 5 years and forego 20% of your Direct Payments and forego 30% of the Loan Rate. Doug Simon

3 Corn Commentary Dec09 corn has rallied from the late winter lows to $4.70, finally reaching the highs we established in January. Many are asking why the market is going up and will it keep going higher? The US dollar is sliding sharply lower as the Obama Administration tries it hand at economic policy. Fund managers are investing in commodities, betting on a re-flation trade, as the US government pushes expansionary monetary policy and fiscal spending. China and other foreign countries are buying commodities instead of investing in US treasuries. They are also using US dollars from maturing US treasuries to purchase hard assets before the US dollar devalues. These developments along with the slow planting start ignited a rally. Month Contract Price Basis Spread Carry Jul-09 C N9 $ Jul-Sep 0.10 Sep-09 C U9 $ Sep-Dec 0.13 Dec-09 C Z9 $ Dec-Mar 0.11 Mar-10 C H0 $ Mar-May 0.07 May-09 C K0 $ Dec-Dec Dec-10 C Z0 $ The question is why do we want to sell? First, the corn seasonal pattern says we work lower from June into harvest 74% of the time. It s the horse you want to bet on. Second, prices are above breakeven and it is a good business decision to lock in profitable levels and guarantee yourself a good year when many businesses in the country don t have that luxury. Third, the livestock and ethanol industries continue to struggle. Higher prices will 25% 20% 15% 10% 5% 0% * estimates 94/95 95/96 96/97 97/98 US Corn Carryout Ratio and Price 98/99 99/00 00/01 01/02 Carryout Ratio Ave Farm Price 1600 million bushels 02/03 03/04 04/05 05/06 06/07 07/08 08/09 09/10 $4.50 $4.00 $3.50 $3.00 $2.50 $2.00 $1.50 $1.00 ration demand, and sharply higher prices will sharply ration demand. A summer bull market will depend on the weather. Historically, planting delay rallies, as in last year and in 2004, are followed by summer selloffs. Nobody can accurately predict the weather but the U.S. farmer usually raises a good crop and that is why it usually pays to sell into these summer rallies. Even with planting delays the corn crop had a 70% good to excellent rating on Monday afternoon. The seasonal average corn price is at $4.21 and 90% sold. The yearly average is at $4.47 and 76% sold. With prices above these levels it is time to keep making additional sales and work toward getting your insured bushels priced. Basis levels for harvest are World Corn Ending Stocks weaker than levels we set the last year so we 750 Foreign Corn Carryout * Projections would continue to use HTA s or futures US Corn Carryout World Consumption 650 mmt World Production hedges to set the futures and then the basis at a later date. If yield is slightly lower than trendline our carryout will be right around a billion bushels which would also support tighter basis levels on your new crop corn later in the year Clint Hoffman

4 Soybean Commentary The new crop bean market started the year near $10.00 after recovering $2.00 from the harvest lows. The market hung around $10.00 for about a week before it fell directly back to $8.00. This caused many farmers to really look hard at crop US Soybean Carryout Ratio and Price 20% $10.50 rotations and input costs. From the 18% first of March the bean market has Carryout Ratio $ % Ave Farm Price had a steady climb and extended the 14% $ million bushels 12% $ % rally to a new annual high of $ Much of the rally can be $6.50 8% tied to the poor crop estimates in 6% 4% $5.50 South America, aggressive demand for old crop beans (which reached an annual high this week of $4.50 2% 130 million bushels versus the July), and the poor planting conditions in the 0% $3.50 Eastern corn belt. The recent fall in the value of the dollar has 100 World Soybean Ending Stocks had a huge impact on the value of all commodities, especially 240 beans. Our philosophy has been to sell our crops in a seasonal 90 * Projections World Soybean Carryout World Consumption manner in incremental sales. The seasonal average is $ mmt 200 and is 92% sold and the yearly average is $9.71 and 76% World Soybean Production sold. We try to make these sales with some flexibility in the Chicago price, but always try to maintain a position that will 120 allow for improvement in carry and basis, especially on farm 100 stored bushels. History has shown us that making sales consistent with the seasonal strategy outperforms advisors most years. No one knows where bean prices will trade. The funds have a net long position rivaling the position 94/95 95/96 96/97 97/98 98/99 99/00 00/01 01/02 02/03 03/04 they held last summer during the biggest commodity bull run in history. The boat is tipped to their side. The shortage of old crop beans is no secret. The market is trying to find the price level that rations demand. Bottom line: We had several discussions the first of the year about how $7-8 beans did not work very well! Now would be a good time to eliminate that 04/05 05/06 06/07 07/08 08/09 09/10* Month Contract Price Basis Spread Carry Jul-09 S N9 $ Jul-Aug Aug-09 S Q9 $ Aug-Nov Nov-09 S X9 $ Nov-Jan 0.06 Jan-10 S F0 $ Jan-Mar Mar-09 S H0 $ Mar-May May-09 S K0 $ Nov-10 S X0 $9.91 Nov-Nov ($2.34) problem if you don t have enough sold! We would recommend that you strongly consider selling your insured bushels. An option fence with $2 of upside potential and $2 of downside price protection can established for about cents. This would be a good way to get caught up with the seasonal average if you are not excited about selling futures or contracting with a Hedge to Arrive. The carryovers for old crop beans and new crop beans have tightened dramatically in the last two months. We strongly advise leaving your basis open on new crop sales. Old crop bids will roll from AUG09 to NOV09 futures and processors will carry the positive basis over to the first new crop beans delivered. In 2004, basis traded $1.00 over NOV04 for the first beans delivered,. It dropped aggressively the first two weeks of harvest; however, those bids were still better than the pre-harvest bids. Shane Lechtenberg.

5 Wheat Commentary KC Wheat had a $1.65 run from the April lows, reversing off the $7.27 high on Monday. The seasonal average price for KC wheat is $6.03, and the yearly average price, going back to July 1, 2008 is $7.00. The wheat rally has been tied to dry conditions in Canada, Australia, China and the Ukraine, and to the wet conditions in the US spring wheat areas, and to the re-flation trade. Fundamentally, wheat has the least compelling bullish story given adequate US and world carryouts. The following chart by US Wheat Associates tells the whole story. The rally in wheat two years ago was ignited by a drop in stocks by the top 5 major exporters of wheat (US, World Wheat Ending Stocks and Canada, Australia, Argentina and EU-27). World stocks also dropped to the lowest absolute stock levels, and when viewed relative to consumption, the stocks-to-use ratio was historically tight. Once the exportable surplus dropped to historical lows, and coupled with the oil boom, prices raced to historical highs near $14 bu. The exportable surplus has rebounded with better crops in each country with sizeable increases in EU-27, Australia and the Black Sea region. The seasonal patterns on 15 and 30-yr patterns are negative going forward. The 5- yr pattern is much more bullish, consistent with the recent bull market. If we believe markets tend to revert to the mean, and we are nearly $1 above the seasonal average, and on the verge of harvest, we should be an aggressive seller. Basis levels for 12% protein wheat at ConAgra in Fremont/Omaha are trading +10 to +20 over KWN9, a substantial premium to local cooperatives. Doug Simon Month Contract Price Basis Spread Carry Jul-09 KW N9 $ Jul-Sep 0.11 Sep-09 KW U9 $ Sep-Dec 0.16 Dec-09 KW Z9 $ Dec-Mar 0.14 Mar-10 KW H0 $ Mar-May 0.08 May-09 KW K0 $ Jul-Jul 0.69 Jul-10 KW Z0 $

6 Weather & Crop Comments On Thursday, the National Oceanic and Atmospheric Administration's (NOAA) Climate Prediction Center said conditions were favorable for the return of El Nino sometime between June and August.. Where La Nina tends to keep the western corn belt warmer and drier than normal, the mid-west summer weather has less correlation with El Nino. El Nino is more positively correlated with drier conditions in eastern Australia and improved crop conditions in Brazil and Argentina. The NOAA 3-month forecasts show equal chances for above or below temperatures in the corn belt, except for the Dakotas and Minnesota where they are below normal. The NOAA 3-month moisture forecasts show equal chances across all the cornbelt. Sunspot activity remains low suggesting cooler than normal temperatures. The sunspot watchers are poking fun at Al Gore and his global warming hypothesis. Iowa State Climatologist Elwynn Taylor argues that you want excess growing degree days until tasseling, and then you want cooler than normal temperatures. The slow planting pace in the eastern corn belt has some worrying about an early frost, much similar to last year. Early frost is more of an issue in the plains, where we don t have the Great Lakes to moderate our climate. Doug Simon We have 2 classes of forecasters: Those who don t know and those who don t know they don t know. John Kenneth Galbraith Trading commodity futures and options involves substantial risk of loss and may not be suitable for all investors. Past performance is not indicative of future results. Opinions are subject to change at any time, and are not a solicitation or recommendation to buy or sell commodity futures or commodity options. The information contained herein has been obtained from sources believed to be reliable.