Global Update

December 11, 2008

Do you find the information in Global Update useful? If so, be sure to pass it on to your friends and colleagues who might benefit from learning more about the U.S. Grains Council’s programs to build demand for U.S. grains and increase market access around the world. If they would like to receive Global Update directly, encourage them to contact Jodi Kiely at jkiely@grains.org with their name, company and email to subscribe.

Don’t miss an issue of Global Update! Make sure you continue to receive Global Update without interruption by adding the following email addresses to your email program’s safe senders list, also called a white list: mdeering@grains.org; jkiely@grains.org and mcarrow@grains.org.

=========================================================

U.S. DDGS to be Used in Dairy, Horse Feeding Trials in Australia - Page 1 USDA Forecast Gloomy, Brighter Days Ahead - Page 1 USGC Seminar Covers Various Grain Trade Issues - Page 2 Education Efforts Create Export Opportunities in Middle East - Page 3 USGC Optimistic About Biotechnology Rules in Korea - Page 3 USDA Approves Council’s 2009 FMD Allocation - Page 3 Give Back in Guatemala - Page 4 Farewell to Jodi Kiely - Page 4 Arkansas Corn and Grain Sorghum Board Holds First Annual Producer Conference - Page 4 FAS Audit Shows USGC Fully in Compliance with Federal Regulations - Page 4 Artho Reinforces the Need to Expand Demand - Page 4 USGC Gets Updated on the World’s Economic Situation - Page 4 Register for the Council’s Upcoming Guatemala Meeting - Page 5 Updated Barley, Corn and Sorghum Information - Page 5 Council Activity Calendar - Page 5

=========================================================

U.S. DDGS to be Used in Dairy, Horse Feeding Trials in Australia. A sample of 45.7 metric tons of U.S. distiller’s dried grains with solubles (DDGS) successfully passed quarantine inspections at Australia’s Port of Melbourne on Nov. 25, marking the first time U.S. DDGS has been exported to the country, according to the USDA. The U.S. Grains Council has been present in Australia as the shipment’s recipient begins the country’s first U.S. DDGS feeding trials in dairy and horse feed rations. According to Adel Yusupov, USGC regional director in Southeast Asia, the recipient, Australian feed supplier CopRice, plans to produce dairy trial pellet feeds in its plants in Tongala, Leeton and Cobden. “The company will contract with three-to-four farmers each, producing 200 cows per farm, totaling 600 to 800 cows,” he said. “The trial timeframe is estimated at 10 to 14 days with DDGS inclusion rates of 5 percent, 10 percent, 15 percent and 20 percent.” Upon completion of the trial, CopRice is planning to measure milk volume and output per cow, milk fat and milk protein content. The results would then be compared to the control diet. Not much is known about CopRice’s intentions to test DDGS in horse feed rations, Yusupov said, as the trials are still in the planning stage. “Horse feed is CopRrice’s second most important feed product and they are planning to mill DDGS at a 10 percent inclusion rate into horse pellet feed,” he said, adding that the trial is to run for three weeks. The DDGS sample was donated to CopRice from Council member Hawkeye Gold in Ames, Iowa. Council member The DeLong Co. Inc. of Clinton, Wis., donated trans-loading services for the shipment and the Council covered the freight costs. “We are very excited to begin feeding trials using the U.S. DDGS sample,” said Kirsty Cutter of CopRice. “The most important goal achieved so far is that U.S. DDGS can be successfully brought into the country and used in commercial pellet feed production in Australian conditions. We look forward to seeing the results of these trials and what they reveal.”

USDA Forecast Gloomy, Brighter Days Ahead. U.S. Grains Council President and CEO Ken Hobbie said the USDA’s World Agricultural Supply and Demand Estimates released today showcases the challenges in the global economy but reinforce agriculture’s reputation of translating obstacles into opportunities. “The agricultural industry is undoubtedly feeling the heat of a troubled world economy, but now is the time to dust off our playbooks and go on the offensive. We must work together to expand demand for U.S. grains, which will sustain the future of U.S. agriculture and increase profitability for U.S. farmers in 2009. This is not the first time we have seen such a forecast and it won’t be the last,” said Hobbie. “The bottom line is a forecast is a forecast and nothing more. By developing markets, breaking down trade barriers, working with overseas end-users to implement effective risk managements practices and educating our customers on the economics of feeding distiller’s grains and other feed grain co-products, we have the opportunity to significantly improve the profitability for the U.S. agricultural sector.” The report, issued Dec. 11, 2008, projects corn exports 100 million bushels lower; sorghum exports down 10 million bushels; and barley exports down 5 million bushels from USDA’s Nov. 10 report. Total coarse grain exports are projected at 49.51 million metric tons compared to November’s forecast of 52.43 million metric tons. Jim Broten, USGC chairman and North Dakota barley grower said the Council is not able to change market dynamics but building demand can insulate the impact felt by America’s farmers. “It is true that agriculture is a volatile industry right now and the markets can change in a blink of an eye, but the actual marketplace has to have the final say,” said Broten. “Building demand domestically and outside our borders will help insulate U.S. growers from substantial impact in the current economy. Sitting on the sidelines and doing nothing is not the answer. Developing international markets is a winning solution.” Hobbie said the Council actively works with USDA’s Commodity Credit Corporation (CCC), which administers export credit guarantees for commercial financing of U.S. agricultural exports. The guarantees encourage U.S. exports to buyers in countries where credit is necessary to maintain or increase U.S. sales but where financing may not be available without CCC guarantees. Hobbie said one reason for U.S. exports projected lower is the increasing availability of feed wheat in international markets. In Korea, for example, the country is turning to cheaper feed wheat coming from the Black Sea region rather than opting to purchase high-quality feed grains by U.S. growers. “The credit program ensures that U.S. farmers and agribusinesses have markets for their barley, corn, sorghum and their co-products. We have the tools necessary to turn the tides and we will work vigorously to do just that,” Hobbie said. “Our most valuable tool is our barley, corn, sorghum, and agribusiness members working together with our global staff to develop relationships with our overseas customers. These relationships are valuable to sustaining the United States as a key supplier in the competitive global marketplace.”

USGC Seminar Covers Various Grain Trade Issues. As the current global financial situation continues to rattle the globe, international grain buyers wonder how it will affect world grain and shipping prices. Two of the United States’ most important customers, Korea and Taiwan, are especially concerned and in an effort to learn more, industry representatives in both countries attended a seminar last week led by the U.S. Grains Council. In Korea, USGC Consultant Jay O’Neil of the International Grains Program at Kansas State University, and Bill Olthoff of Illinois Farm Bureau, spoke to seminar participants about ocean freight issues and the U.S. corn supply and demand outlook, respectively. “In the case of Korea, buyers are operating under the difficulty of high priced contracts that were purchased last summer for shipment through the end of the calendar year,” O’Neil said. “They have not yet benefited from the dramatic drop in commodity prices over the last two-to-three months.” O’Neil noted that despite these difficulties, the United States’ Export Credit Guarantee Program, also known as GSM-102, is a great benefit to Korean customers. The GSM-102 program covers credit terms up to three years and underwrites credit extended by the private banking sector in the United States to approved foreign banks using letters of credit to pay for food and agricultural products sold to international buyers. “This program will help U.S. corn compete against Brazilian corn and Black Sea wheat which is being offered into the country at discounted prices,” O’Neil said. “Essentially, GSM-102 will help maintain a certain level of U.S. commodity exports to Korea.” While O’Neil discussed shipping issues, Olthoff’s presentation focused on the United States’ corn production and acreage outlook. “The participants were happy to hear that U.S. corn production has increased despite our late start in planting and the added obstacles faced with flooding,” Olthoff said. “I told the audience that regardless of these challenges, U.S. corn farmers have managed to produce 200 bushels per acre, which is pretty impressive considering the circumstances we were facing this spring.” Olthoff said participants were also interested in his break-even price as a corn producer. “I told him I was breaking even at $5 which included land prices and crop inputs. They were quite surprised to hear that,” he said. The situation in Taiwan is a bit different from what is happening in Korea. Following the USGC-led seminar in Seoul, O’Neil traveled to Taiwan where he delivered similar talks to industry representatives. “The Taiwanese are more hand-to-mouth in their purchasing strategies and are enjoying the benefits of the current low prices in the grain and freight markets,” O’Neil said. “Compared to Korea, Taiwan has not purchased as much pre-bought grain.” The big issues for Taiwan are the sharp changes in delivered commodity values and the altered price relationship between containerized grain and bulk shipments. “Over the past two-to-three years, the Taiwanese have taken advantage of relatively cheap container rates and have imported a large percentage of their corn, soybean and feed ingredients via container shipment,” O’Neil said. “However, during the last three months that trend has reversed as bulk is proving to be more economical.”

Education Efforts Create Export Opportunities in Middle East. The U.S. Grains Council conducts educational seminars across the globe to effectively educate end-users on ways to become more efficient. The purpose of these efforts, according to Chris Corry, USGC senior director of international operations for Rest of the World, is to increase the production of meat, milk and eggs, which in turn creates a need for feed grains. “For nearly 50 years, the Council has worked with livestock industries across the globe to assist them increasing their production capabilities using the most cost efficient formula. As a result, we see a greater supply of food products available for consumers and a more prosperous middle class,” he said. “All the while, opportunities are created for U.S. farmers to expand demand for their commodities.” Corry said there is a need to focus Council education efforts in the Middle East to benefit U.S. producers. Specifically, the absence of an up-to-date commercial feed industry in Iraq has limited the growth of its poultry sectors. Previous Council programs in the Middle East sparked the interest of end-users to learn more about the reconstruction of its commercial feed mill facilities and its comprehension of the newest feed manufacturing technologies and management techniques. USGC Consultant Dr. Carl Reed of Kansas State University’s International Grains Program, traveled to Amman, Jordan last week to conduct on site consultations and a virtual seminar from the Council’s office in Amman to the Information Center for Poultry Excellence in Erbil, Iraq. The seminar was intended to encourage end-users to invest in sure-fire ways to maximize productivity and profitability. “Plant visits in Jordan showed an industry where feed millers have developed their handling practices based on hearsay and intuition. Lack of basic information relative to temperature monitoring, fumigation, and other issues led to the use of inefficient practices. Although such practices can be observed most anywhere in the world, increased efficiency may be more critical in the emerging economies than in the mature ones,” Reed said. “The Council has had a great deal of successes in strengthening efficiency in other developing countries such as Morocco, and we hope to have a success story in the region very soon.”

USGC Optimistic About Biotechnology Rules in Korea. The U.S. Grains Council participated in the 7th Biosafety Seminar organized by the Korea Biosafety Clearing-House Dec. 5, in Seoul, South Korea. USGC Director of Biotechnology Programs Rebecca Fecitt said the invitation was accepted with U.S. farmers in mind. “We were made aware that Korea was in fact moving to put in place very restrictive regulations on grains derived from genetically enhanced seeds that would establish an inappropriate precedence in the global marketplace. These regulations would put our U.S. farmers at a distinct disadvantage,” said Fecitt. “Our mission was to provide information about U.S. regulations pertaining to the safety of biotechnology which provides a timely yet effective and scientific review regarding impact to human health. We encouraged regulators to implement a safety assessment program that does not act to inhibit ingredients derived from modern biotechnology from entering Korea’s market.” Fecitt said the conference was positive and she maintains optimism about the growing confidence in the safety of biotechnology around the globe.

COUNCIL NEWS

USDA Approves Council’s 2009 FMD Allocation. USDA informed the Council that its 2008/09 budget ceiling for the Foreign Market Development (FMD) program is $5,168,634. The FMD program provides funding for the Council’s overseas offices and other long-term market development programs. “This is $40,000 below our FMD ceiling for 2007/08 but since the total FMD funds are almost 5 percent lower this year than they were last year, it is a real vote of confidence by USDA,” said Erick Erickson, USGC special assistant for planning, evaluation and projects. The 2008/09 FMD program began Oct. 1, 2008 and ends Sept. 30, 2009. The other major USDA export development program is the Market Access Program (MAP), which runs on a calendar year. The Council expects to receive its 2009 MAP budget ceiling within the next two weeks. The Council’s combined FMD and MAP ceilings in 2007/08 totaled $14.7 million.

Give Back in Guatemala. The GRAINS Foundation is seeking help from U.S. Grains Council members to enhance the wellbeing of school children in Guatemala. The Foundation seeks cash donations that will be presented to an Indian school in Guatemala during the Council’s 6th International Marketing Conference & 49th Annual Membership Meeting Feb. 7-11, 2009, in Guatemala City, Guatemala. The money raised will be used to provide elementary school children with meat, milk and eggs for their school lunches. Now is your chance to give back! Other tangible donations will also be accepted. Please contact Hillary Bennett, USGC executive assistant, at 202-789-0798 for more information.

Farewell to Jodi Kiely. Jodi Kiely, U.S. Grains Council manager of communications, is moving to Orlando, Fla. to pursue other ambitions. She has been a great asset to U.S. Grains Council members by effectively communicating the importance of trade to U.S. farmers. Please join Council staff in wishing Jodi the very best of luck in her new endeavor. Her last day will be Monday, Jan. 5, 2009.

Arkansas Corn and Grain Sorghum Board Holds First Annual Producer Conference. The Arkansas Corn and Grain Sorghum Board held its first annual producer conference on Dec. 10, in Brinkley, Ark. Approximately 75 producers, consultants and dealers heard reports from extension staff on plant populations, fertilizer efficiency, weed control and efficient storage practices. Producers were also exposed to promotional efforts the board funds as representatives from the U.S. Grains Council and National Corn Growers Association (NCGA) provided overviews of their programs. Chris Corry, USGC senior director of international operations for Rest of the World, and Martin Barbre, board member of the NCGA, represented their organizations and presented at the conference.

FAS Audit Shows USGC Fully in Compliance with Federal Regulations. The most recent audit and review by the Foreign Agricultural Service’s (FAS) Compliance, Security and Emergency Planning (CSEP) of the U.S. Grains Council’s Market Access Programs and Foreign Market Development activities has shown once again the Council’s exceptional record keeping and compliance with all existing federal regulations. Of the more than $21 million in activities that were examined covering the two-year period from May 2006 through June 2008, only one claim for $102.43 was found to be questionable and disallowable by the FAS’s CSEP. The latest government compliance report, dated Nov. 26, 2008, demonstrates the high quality of work generated by the Council’s finance and accounting staff and its program areas both in Washington, D.C. and its offices overseas.

Artho Reinforces the Need to Expand Demand. Dale Artho, U.S. Grains Council past chairman and Texas sorghum producer, participated on a producer speaker panel at the DTN-Progressive Farmer 2008 Ag Summit Dec. 7-9 in Chicago, Ill. Artho said participants expressed a great deal of uncertainty given the current economic situation. “There was almost a mood of disenfranchisement among agriculturalists. When the market swings it creates uncertainty,” he said. “I reinforced the reality that this volatility heightens the importance of expanding demand for U.S. commodities outside U.S. borders.” Artho said there are market opportunities out there and the Council is working 24 hours a day to generate market access for U.S. feed grains. He said producers can do their part by implementing risk management practices. “I told them to do what we do as farmers and pay attention.” he said.

USGC Gets Updated on the World’s Economic Situation. The Council held its monthly Wednesday lunch with officials from the USDA’s Foreign Agricultural Service and economists from Informa Economics and LMC International. The focus of conversation was the economic situation’s impact on U.S. agriculture and trade.

NEW ON THE WEB

Register for the Council’s Upcoming Guatemala Meeting. Registration for the 6th International Marketing Conference & 49th Annual Membership Meeting in Guatemala City, Guatemala is now available on the U.S. Grains Council’s Web site, www.grains.org. A brochure to register for the conference, make hotel reservations and arrange airport transportation can be printed out and faxed to Marri Carrow, membership and communications coordinator, at 202-326-0670 or e-mailed to mcarrow@grains.org. You can also fill out a registration form online by clicking on the “News and Events” tab followed by clicking on the “Upcoming Meetings” tab on the left hand side of the page. Registration for the conference is ends Dec. 30. Contact the Council’s membership staff at 202-789-0789 with any questions.

Updated Barley, Corn and Sorghum Information. The U.S. Grains Council’s Web site, www.grains.org, has recently updated its barley, corn and sorghum utilization information for the 2008 season. You can find this information by clicking on the “Barley, Corn and Sorghum” tab on the Council’s homepage. There you can learn where the U.S. stands in barley, corn and sorghum world production and trade; who the leading importers of U.S. corn, sorghum and barley are; and the primary production areas of U.S. corn, sorghum and barley. You will also find a conversion factor chart in this section. Contact the Council’s communications department at 202-789-0789 with any questions.

COUNCIL ACTIVITY CALENDAR

December 13-20: Charles Ring of Council member Texas Corn Producers Board and USGC Asia Advisory Team leader; Mike Callahan, USGC senior director of international operations for Asia; Erick Erickson, USGC special assistant for planning, evaluation & projects; and Kim Karst, USGC manager of international operations for Asia, will travel to Ho Chi Minh City, Vietnam to meet individually with Asia country directors and begin strategic planning for the 2010 Unified Export Strategy. For more information contact Kim Karst, manager of international operations for Asia, at kkarst@grains.org.

December 15-23: The U.S. Grains Council will host staff members from Egypt’s Regional Center for Food and Feed (RCFF), an internationally accredited grain inspection lab, for a six day Federal Grain Inspection Service (FGIS) training program on recent advances in grain inspection, handling, storage and bio-safety issues. RCFF staff members will visit FGIS facilities in Kansas City, Mo. and Destrehan, La. During their travel the team will also tour a grain elevator, observe inbound barges and ship loading, and tour the LifeLine Foods corn processing plant. For more information contact Gina Tumbarello, manager of international operations for Rest of the World, at gtumbarello@grains.org.

January 7-8: The U.S. Grains Council’s Board of Directors (BOD) meeting will be held in St. Louis, Mo. to review and update the FY 2009 budget and financial report. The Board will review the 2009 calendar for upcoming BOD meetings and other Board activities. The Board will approve new members since the last meeting and review recent successes of the Council’s efforts. The Board will also tour Council member Monsanto’s research and crop analytics facilities. For more information, contact Hillary Bennett, executive assistant, at hbennett@grains.org.

January 7-9: The U.S. Grains Council will participate in Council member Minnesota Corn Growers Association’s MN Ag EXPO in Redwood Falls, Minn. The MN Ag EXPO provides participants the opportunity to learn more about the happenings in agriculture today with quality speakers and break-out sessions. The EXPO also serves as the Minnesota Corn Growers Association and the Minnesota Corn Research and Promotion Council’s joint annual meeting. USGC Senior Director of International Operations for Asia Mike Callahan will present during the annual meeting to provide interested parties a chance to learn more about the Council and to discuss the opportunities for involvement in Council avtivities.

The U.S. Grains Council does not discriminate on the basis of race, color, national origin, sex, religion, age, disability, political beliefs, sexual orientation or marital/family status. Persons with disabilities, who require alternative means for communication of program information should contact the U.S. Grains Council.