1. January 2015 London ON © DePutter Marketing Seminar Part 2: Marketing your crops

2. Previous key theme: shift from shortage to surplus. Sub US$4 corn predicted. It happened. Now what? Ample supply set to linger. Bottoming action needs more time. Next major up-cycle may not be for 2-3 years & don’t expect a repeat of 2012. Corn – the world’s largest feedgrain Highlights 2

3. 3 USDA Jan’15 forecast: 171 bu/acre – down from Dec 2014 forecast of 173.4 –but still a record by far. (Lots of growers got 200-250 bu/acre.) New all-time high for yield! (2012 drought was an outlier in an uptrend.)

4. Farmers answered the call for more grain – in both 2013 and 2014. Americans love to grow corn 2014 crop of 14.2 billion bu - new record high 4

5. 5 Excess inventories building in U.S. A century of data: higher, ever higher!

6. Even with lower yields Even with lower yields, US will have lots in 2015-16

7. Corn, 1975-2015 ? 5.6 year cycle low due Window is wide; could be 2016 Window for cycle low is open. 7

8. 8 Both futures and cash markets are turning down. Seasonal rally is over. February slump ahead? Prices here better than expected… But turning down… March 2015 future

9. Old-crop % sold? Basis contracts? Average price to date? Sales dates? Future sales price targets? Expectations? Time targets? Hedges? Options? New-crop (2015-crop) % sold – estimate? Basis contracts? Average price to date? Sales dates? Targets, expectations, budgets? Time targets? Hedges? Options? Insurance? 9 Where are you with your corn marketing?

10. Ample world stocks will keep a lid on the rallies in the coming year US acreage down, helping build base, for major cycle low 10 Wheat Slowly building major cycle low. 10

11. Chicago SRW Wheat, 1980-2015 Average of 4.5 years from low to low Lows usually take several months to fully form Like most commodities, wheat prices are cyclical. One prominent cycle for wheat is a 4.5 year pattern from low to low. A window for a cycle low is open at this time. 11 Cycle low due

12. 2014-15 supply-demand sheet looks well balanced. Tentative forecast for 2015-16 looking similar 12 A look at the US Supply-demand well balanced in US

13. Sell rallies, avoid dips April is often a good time to sell wheat Winterkill worries, etc. tend to pop up at that time. Farmers with storage have an edge with their wheat marketing. 13

14. 14 Sell into the “carry” to get paid for storing CBTKCMinn Mar '15 532-6573-0581-0 May '15 535-6576-0588-2 July '15 540-0580-4596-4 Dec '15 559-2605-4614-0 Mar '16 565-4615-0623-6 Dec '16 568-4620-6 N/A Updated to January 15, 2015

15. Soybeans: Corn/coarse grain flipped from shortage to surplus. Oilseeds next in line… 15

16. Average yield 47.8 bu, up from 44 in 2013. Largest U.S. crop ever Got a little bigger in January…

17. But can China single-handedly keep lifting demand side? Demand is growing too...

18. Even with recent weather problems, total production will swell to new record There’s more ahead in South America

19. Huge potential

20. 20 Mato Grosso & other Cerrado areas Argentina Older areas of S Brazil

21. Even the bullish scenario is not bullish! Even with fewer acres, low yield, US stocks could build in 2015-16

22. This rally was sparked by slow refilling of an empty pipeline for meal and soybeans Main trend is down, barring severe weather problems in South America and/or new Chinese demand Interim rally within long-term downtrend? Mar 2015 soybeans Nov 2015 soybeans

23. Soybean prices in Ontario are a function of (a) futures, (b) basis – which involves mainly the Cdn $. Sales should be well advanced…

24. 24

25. Your Marketing Process Follow a process… And know that following the process will work, in the end. Sell incrementally, basing the specific timing on certain signals that work for you. It’s like running a marathon…

26. Your Marketing Process Mild price gains are often seen from mid to late December, sometimes into January Caused by lack of farmer selling; weather concerns in South America Prices frequently break by mid-February, so do some selling before the seasonal weakness – old-crop and possibly some new-crop too Sell in increments into seasonal rallies 1. Time window to sell? Dec 15 to Jan 20

27. Your Marketing Process Time to sell more old-crop, and possibly some new-crop If February prices are below most farmers’ cost of production higher probability of strong spring rally – so wait if prices are poor! Prices often fall hard in June and July if the weather is good, so if prices are profitable, sell before then The Spring Rally 2. Time window to sell is: April 15 to June 15

28. Your Marketing Process A good time finish old-crop sales (if not done yet) Important to sell some new-crop if a weather scare lifts prices Can be a brief rally, but sometimes in the past the seasonal strength has lasted several weeks - based on US drought Very difficult to predict length or height as the market is emotionally charged at this time – best to just make a 20% sale and relax. If there isn’t a rally, skip the sale and if it’s a full blown bull market make an extra sale or two The Summer Rally 3. Time window to sell is: July 15 to August 15

29. Your Marketing Process Most years, there’s a small price bulge in September; minor and not as exciting as the summer rally Sometimes due to low supplies of old-crop soybeans before new-crop comes in Time window for frost fear Look for this pre-harvest bulge in years when there was no summer weather rally! Pre-Harvest Strength 4. Time window to sell is: September 15-30

30. Your Marketing Process The seasonal tendencies repeat themselves Back to the Dec-Jan rally… 5. Time window to sell is: Dec 15 to Jan 20 6. Time window to sell is: April 15 to June 15 7. Time window to sell is: July 15 to Aug 15

31. Your Marketing Process Sale #1 Sale #2 Sale #3 Sale #4 Sale #5 Sale #6 High side of the trading range to date Rallying into a seasonal time window for a high Charts show an increase in volatility followed by a bearish reversal, ideally during widely-publicized bullish news Soybean Seasonal Tendencies – Sales Chart 31 If applicable

32. Your Marketing Process Record the weekly price at your local elevator and note the dates and prices where you made your sales (all numbers for illustrative purposes only) Incremental Selling – Tracking Your Sales & Building your track record 32 DateNew Crop Weekly Avg. Price at Local Elevator Price of My Sales Sale Increment January 111.25 January 711.35 January 1411.4511.5020% … April 1510.1010.2020% … July 2711.35 … September 159.75 20% … December 158.108.0020% … April 1510.20 … July 1511.4011.5020% Total (Average)10.5510.19

33. Definition Difference between futures price and cash price Example Jan future is $12. Cash price at local elevator is $11. What is the basis? $1 “under.” What’s a good basis? Buyer is offering “specials” or prices above the competition Local prices are comparable to US crops drawn in (at import ceiling) Buyer is having trouble finding supplies for domestic use or export order Your Marketing Process The Basis – Understand the nuts & bolts

34. Your Marketing Process Sell in increments Resolve to keep track of the prices you sell for, and compare them with averages. Build a track record. It’s not about being right. It’s about profitability over the course of a career. Understand futures & basis. Understand hedging but consider it optional. Take-home points 34 Always many unknowns. Know what you don’t know. That’s why a “process” is important.

35. ©2015 DePutter Publishing Ltd. Thank-you!