The information contained in this presentation is taken from sources which we believe to be reliable, but is not guaranteed by us as to accuracy or completeness and is presented to you for information purposes only. There is a risk of loss when trading commodity futures and options. Country Hedging, Inc. bases its recommendations solely on the judgment of Country Hedging, Inc. personnel. Price Risk Developing a Marketing Plan and Marketing Tools Basics Country Hedging, Inc., Cenex Harvest States 5500 Cenex Drive Inver Grove Heights, MN or Instruction Guide

Sell Cash/Buy Call Sell Cash/Buy Futures Cash Sale Need Money Like Price Sell Cash (in bin) Delayed Price Basis Fixed Waiting for Better Price Store Grain Sell Futures Buy Put Option Hedge to Arrive Scale Up Strategy Like Price Sell Production Marketing Decisions 3 Major Decisions Old Crop - Sell Cash Store cash New Crop - Sell Production Why Sell? Why Store? Why sell Production? Marketing Tools to Use

Harvest 1999 Crop How much to sell? When to sell? Pre-HarvestStorage Does anyone have ‘97 crop? All at some point Spread risk - sell before harvest Corn or wheat

Market Plan Selling Seasons:Pre-Plant Growing Harvest Storage NewOld Pre-PlantStorage Growing Harvest New Crop Plan Old Crop Plan Football Analogy- Coach has a game plan. When does the coach want to score? How many coaches wait until the 4th quarter to implement their game plan? How many coaches wait until the game is over to score? carry crop for more than one year

Are you comfortable with loan rate?

Is it easy to sell in a weather market? When does a weather market give me pricing opportunities? Key to moving price around report dates Ask the group - Of the 3 major components that move price (weather, acres, demand) which moves price the most? All the answers are right. The question that needs to be answered is: When do I implement my plan when the 3 events listed above - give me an opportunity to price my grain and implement my Plan.

Most Important 50% 20% 30% 50% Forward Contract Min. Price Forward Contract Min. Price (Price Ins.)

CORN 30% 20% 10% % % 10% 30% 6-30

( Today’s Date) CornSoybeans Wheat -- Local cash bid -- --Local bid for new crop delivery -- Est. cost of production (use range) with low prices Use cash flow # What was the highest cash price you could have received for old crop grain - may occur in previous year What was the highest cash price for new crop grain What if we have a short crop? How high can prices go? Normal to large crop - price expectations What is your next sales objective? Selling zone Break up in groups - record and use for plan

99 Corn Dec. Corn / / / /4 53 1/2 x /2 x /2 x Dec Mar July Pre-PlantGrowing %2.60 Z futures 10% Z futures 10% 2.60 Z Put -.15 Premium 2.45 Min. Futures 10% 2.70 Z Futures Premium 2.55 Min. Futures

98 Corn March Corn /2 95 1/ / /2 March May July 95 1/2 x /2 95 1/2 x /2 95 1/2 x /2

Joe Farmer Corn 50,00020,00030,000 20,000 30,000 20,000 (.25) ,000

Corn Corn % 40% 30% Dec. cornZ calls 10% cents 10% cents 10%

Farmer Owned Reserve

Marketing Tools Basics

Short Long Lower prices Higher prices Buy back or make delivery Sell back or take delivery

Note: Explains concept of margin and how money in previous example goes into or out of account. Wheat 5,000 bushel $12.50 (5000 x.0025) 1/4 cent per bu. 20 cents/bu.$1000 (5000 x.20) $1000 $800 $4.00 $ $4.03 $4.05 $4.00 $ x 5000 = -$ x 5000 = -$ x 5000 = +$ x 5000 = +$500 $850 $750 +$250 = $1000 Margin Call $1250 $ $ x $1000 $2750

$ $4.40 $4.20 $4.00 $3.80 $3.60 $4.00 (at expiration) $.20 $.40 No value when you have the right to sell lower than futures. Right to sell futures above the current price-value here

$ $4.40 $4.20 $4.00 $3.80 $3.60 $4.00 call $.40 $.20 Right to buy lower than futures has value Right to buy higher than futures has no value at expiration

$4.00 $3.80$4.00$ $.20 $.10 $.20$.15 $.10$.20$.35

$4.00 $3.80$4.00$4.20 $.2000 $.15$.20$.10 $.35$.20 $.10

$4.00 $4.20$3.80 $4.00 $3.80$4.20 (Strike prices with intrinsic value are “in-the-money”)

Describes rights held by option buyers and obligations of option sellers.

SEPHRSW$ (best to use local basis estimate) $3.80

3.00 MAR HRSW3.00 $ $2.80

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