Agricultural Marketing

Agricultural Marketing
ECON 337: Agricultural Marketing Chad Hart Associate Professor 1

CME Group http://www.cmegroup.com/ Products Agricultural commodities
Corn, soy, cattle, hogs, etc. Energy Currency Metals Weather Others

Futures Contracts A legally binding contract to make or take delivery of the commodity Trading the promise to do something in the future You can “offset” your promise Standardized contract Form (weight, grade, specifications) Time (delivery date) Place (delivery location)

Soybean Futures Form Time 5,000 bushels
No. 2 Yellow Soybeans (at price), No. 1 Yellow soybeans (at 6 cents over price), and No. 3 Yellow Soybeans (at 6 cents under price) Time Contract months: Sept, Nov, Jan, Mar, May, July, and August Source: CME Group

Delivery Points Corn Soybeans Wheat
Source: Irwin, Garcia, Good, and Kunda, 2009 Marketing and Outlook Research Report

Futures Contracts No physical exchange takes place when the contract is traded (no actual commodity moves) Payment is based on the price established when the contract was initially traded (prices can and will change before delivery is taken) Deliveries can be made when the contract expires or the offsetting futures position must be taken to settle up Deliveries occur on less than 5 percent of the traded contracts

Market Positions You can either buy or sell initially to open a position in the futures market “Make” a promise to make or take delivery Do the opposite to close the position at a later date “Offset” the promise (and no commodity changes hands) Trader may also hold the position until expiration and make or take physical delivery of the commodity

Trading Futures Contracts
All trades through a licensed broker Brokerage house has a “seat” at the exchange and is allowed to trade Represented “on the floor” to exercise trade Local broker to initiate transaction and manage account with client Full service and discount brokers

CME Group http://www.cmegroup.com/ Open, High, Low, Last Price
Settlement Price Volume Open Interest Daily Limits

Cash vs. Futures Prices Iowa Corn in 2016
The gap between the lines is the basis.

Market Participants Hedgers are willing to make or take physical delivery because they are producers or users of the commodity Use futures to protect against a price movement Cash and futures prices are highly correlated Hold counterbalancing positions in the two markets to manage the risk of price movement

Hedgers Farmers, livestock producers Merchandisers, elevators
Food processors, feed manufacturers Exporters Importers What happens if the futures market is restricted to only hedgers?

Market Participants Speculators have no use for the physical commodity
They buy or sell in an attempt to profit from price movements Add liquidity to the market May be part of the general public, professional traders or investment managers Short-term – “day traders” Long-term – buy or sell and hold

Market Participants Brokers exercise trade for traders and are paid a flat fee called a commission Futures are a “zero sum game” Losers pay winners Brokers always get paid commission

Hedging Holding equal and opposite positions in the cash and futures markets The substitution of a futures contract for a later cash-market transaction Who can hedge? Farmers, merchandisers, elevators, processors, exporter/importers

Cash vs. Futures Prices Iowa Corn in 2016

Short Hedgers Producers with a commodity to sell at some point in the future Are hurt by a price decline Sell the futures contract initially Buy the futures contract (offset) when they sell the physical commodity

Short Hedge Example A soybean producer will have 25,000 bushels to sell in November The short hedge is to protect the producer from falling prices between now and November Since the farmer is producing the soybeans, they are considered long in soybeans

Short Hedge Example To create an equal and opposite position, the producer would sell 5 November soybean futures contracts Each contract is for 5,000 bushels The farmer would short the futures, opposite their long from production As prices increase (decline), the futures position loses (gains) value

Short Hedge Expected Price
Futures prices when I place the hedge + Expected basis at delivery – Broker commission

Short Hedge Example As of Jan. 20,
($ per bushel) Nov soybean futures $10.29 Historical basis for Nov. $-0.30 Rough commission on trade $-0.01 Expected price $ 9.98 Come November, the producer is ready to sell soybeans Prices could be higher or lower Basis could be narrower or wider than the historical average

Prices Went Up, Hist. Basis
In November, buy back futures at $11.50 per bushel ($ per bushel) Nov soybean futures $11.50 Actual basis for Nov. $-0.30 Local cash price $11.20 Net value from futures $-1.22 ($ $ $0.01) Net price $ 9.98

Prices Went Down, Hist. Basis
In November, buy back futures at $7.00 per bushel ($ per bushel) Nov soybean futures $ 7.00 Actual basis for Nov. $-0.30 Local cash price $ 6.70 Net value from futures $ 3.28 ($ $ $0.01) Net price $ 9.98

Short Hedge Graph Hedging Nov $10.29

Prices Went Down, Basis Change
In November, buy back futures at $7.00 per bushel ($ per bushel) Nov soybean futures $ 7.00 Actual basis for Nov. $-0.10 Local cash price $ 6.90 Net value from futures $ 3.28 ($ $ $0.01) Net price $10.18 Basis narrowed, net price improved

Hedging Results In a hedge the net price will differ from expected price only by the amount that the actual basis differs from the expected basis. So basis estimation is critical to successful hedging. Narrowing basis, good for short hedgers, bad for long hedgers Widening basis, bad for short hedgers, good for long hedgers

Basis Basis = Cash – Futures Futures reflect global supply and demand
Basis reflects local supply and demand Cash = Futures + Basis

Basis Basics Specific to time and place Typically use nearby futures
Convergence Less variable than cash prices Relatively predictable

Basis Factors Relative storage capacity
Transportation availability and cost Time to expiration Quality issues

Average Iowa Corn Basis, 2010-14
Source:

Basis Information ISU Extension and Outreach, Ag Decision Maker
Corn Soy Cattle Hogs USDA-Ag. Marketing Service Local elevators, ethanol plants, processing plants, etc.

Cash Contracts When we talk about a cash contract, it is an agreement between a seller and a buyer covering a quantity and quality of a product to be delivered at a specified location and time for a specific price If the time is now, we call it a “cash” contract If the time is sometime in the future, then it’s a “forward cash” contract

The Highest Cash Price Is …
… Not always the highest return Need to think about transportation and storage costs Compare the cash prices we’ve seen today: If storage is costing me 3 cents/bushel/month, do the May bids look better than the current cash price? If transportation is costing me 0.5 cents/bushel/mile, which is the better price? Boone (16 miles) Gilbert (8 miles) Nevada (10 miles) Alleman (16 miles) Eddyville (100 miles)

Cash vs. Futures Hedge Cash Sales Futures Hedge
Locks in full price and delivery terms No margin requirements Futures Hedge Locks in futures price, but leaves basis open Could see price improvement/loss Can be easily offset if problems arise

Options What are options?
An option is the right, but not the obligation, to buy or sell an item at a predetermined price within a specific time period. Options on futures are the right to buy or sell a specific futures contract. Option buyers pay a price (premium) for the rights contained in the option.

Option Types Two types of options: Puts and Calls
A put option contains the right to sell a futures contract. A call option contains the right to buy a futures contract. Puts and calls are not opposite positions in the same market. They do not offset each other. They are different markets.

Put Option The Buyer pays the premium and has the right, but not the obligation, to sell a futures contract at the strike price. The Seller receives the premium and is obligated to buy a futures contract at the strike price if the Buyer uses their right.

Call Option The Buyer pays a premium and has the right, but not the obligation, to buy a futures contract at the strike price. The Seller receives the premium but is obligated to sell a futures contract at the strike price if the Buyer uses their right.

Options as Price Insurance
The person wanting price protection (the buyer) pays the option premium. If damage occurs (price moves in the wrong direction), the buyer is reimbursed for damages. The seller keeps the premium, but must pay for damages.

Options as Price Insurance
The option buyer has unlimited upside and limited downside risk. If prices moves in their favor, the option buyer can take full advantage. If prices moves against them, the option seller compensates them. The option seller has limited upside and unlimited downside risk. The seller gets the option premium.

Option Issues and Choices
The option may or may not have value at the end The right to buy corn futures at $6.00 per bushel has no value if the market is below $6.00. The buyer can choose to offset, exercise, or let the option expire. The seller can only offset the option or wait for the buyer to choose.

Strike Prices The predetermined prices for the trade of the futures in the options They set the level of price insurance Range of strike prices determined by the futures exchange

Options Premiums Determined by trading in the marketplace
Different premiums For puts and calls For each contract month For each strike price Depends on five variables Strike price Price of underlying futures contract Volatility of underlying futures Time to maturity Interest rate

Option References In-the-money At-the-money Out-of-the-money
If the option expired today, it would have value Put: futures price below strike price Call: futures price above strike price At-the-money Options with strike prices nearest the futures price Out-of-the-money If the option expired today, it would have no value Put: futures price above strike price Call: futures price below strike price

Options Premiums Dec. 2017 Corn Futures $3.93 per bu. In-the-money
Out-of-the-money Out-of-the-money In-the-money

Setting a Floor Price Short hedger Buy put option
Floor Price = Strike Price + Basis – Premium – Commission At maturity If futures < strike, then Net Price = Floor Price If futures > strike, then Net Price = Cash – Premium – Commission

Put Option Graph Dec. 2017 Corn Futures @ $3.9325 Strike Price @ $4.00
Put Option Return = Max(0, Strike Price – Futures Price) – Premium – Commission Premium = $0.3425 Commission = $0.01

Put Option Graph Dec. 2017 Corn Futures @ $3.9325 Strike Price @ $4.00
Premium = $0.3425 Net = Cash Price + Put Option Return

Short Hedge Graph Sold Dec. 2017 Corn Futures @ $3.9325
Net = Cash Price + Futures Return

Comparison

Out-of-the-Money Put Dec Corn $ Strike $3.00 Premium = $0.0175

In-the-Money Put Dec. 2017 Corn Futures @ $3.9325 Strike Price @ $5.00
Premium = $

Comparison

Call Option Graph Dec. 2017 Corn Futures @ $3.9325
Strike $4.00 Call Option Return = Max(0, Futures Price – Strike Price) – Premium – Commission Premium = $0.2875 Commission = $0.01

Summary on Options Buyer Seller Buying puts Buying calls
Pays premium, has limited risk and unlimited potential Seller Receives premium, has limited potential and unlimited risk Buying puts Establish minimum prices Buying calls Establish maximum prices

Option Premiums Can be divided into two sections:
Intrinsic value What is the option worth today? Time value How much time is left on the option? Intrinsic value depends on the futures price and the strike price of the option. Time value depends on the length of time in the option and the price volatility in the market.

Option Premiums Intrinsic value will not be less than zero. Remember, you have the right to exercise an option, not the obligation. So if the option is losing money, you can just let it expire. Time value will gradually approach zero as the expiration date approaches. Option premium = Intrinsic value + Time value

Example Start with an December 2017 corn put option @ $3.90 per bushel
Day Futures Price Option Premium Intrinsic Value Time Value 1 $3.855 $ $0.045 $ 2 $3.8725 $ $0.0275 $ 3 $3.9625 $ $0.00 4 $3.945 5 $3.9325 $

Combination Strategies
Option fence Buy put and sell call Put spread Buy In-the-money or At-the-money put and sell Out-of-the-money put

Option Returns in a Fence
Buy Put Option Dec $3.50 Premium = $ Sell Call Option Dec $4.50 Premium = $

Fence for Hedger Buy Put Option Dec. 2017 Corn @ $3.50
Premium = $ Sell Call Option Dec $4.50 Premium = $

Option Returns in Spread
Buy Put Option Dec $4.50 Premium = $0.6975 Sell Put Option Dec $3.50 Premium = $

Spread for Hedger Sell Put Option Dec. 2017 Corn @ $3.50
Premium = $ Buy Put Option Dec $4.50 Premium = $0.6975

Combination Strategies
Butterfly Straddle Condor Strangle These positions can be flipped

Condor Sell Put @ $3.00 Premium = $0.0175 Sell Call @ $6.00
Buy $4.00 Premium = $0.3425 Buy $5.00 Premium = $

Condor for Hedger

The 4 Basic Graphs for Options
Buy a put Sell a put Buy a call Sell a call

Seasonal Patterns A price pattern that repeats itself with some degree of accuracy year after year. Supply and demand Often sound reasons Widely known Linked to storage cost or basis patterns in grains Linked to conception and gestation in livestock

Seasonal Pricing Patterns
Source: USDA, NASS, Monthly Price Data

Corn Pricing Patterns Source: USDA, NASS, Monthly Price Data

Soybean Pricing Patterns

Charting Channel lines

Sell Signal A sell signal is one close below the charting lines

Buy Signal Some chartists need only one close above the charting line to create a buy signal, others use two closes above. Buy signal

Resistance and Support
Resistance level: A price level where the market seems to hit and bounce down Support level: A price level where the market seems to hit and bounce up

Key Reversal A key reversal is when the daily high and low price range exceed the price range for the previous two days.

Gaps Gaps often occur when a major new piece of information hits the market. They are often filled in by later price movements.

Double Tops & Bottoms Double tops and bottoms show prices with major technical resistance. These can be several days apart.

Head & Shoulders Source: Figure 7, Charting Commodity Futures
Ag Decision Maker, File A2-20

Moving Averages 9 day average 18 day average 40 day average
Sell signal Buy signals

Does Technical Analysis Work?
Arguments for it: Real world markets are not perfectly rational Markets may be slow to respond to new information Technical analysis works with the psychological biases It works because so many people use it Self-fulfilling Arguments against: Efficient market hypothesis The current price holds all of the relevant information

Carry (or Spread) The price difference between futures contracts
Compare the carry offered by the market to the costs of storing grain from one delivery month to the next.

Inverse Carry When further out futures are priced at a discount to nearby futures Usually occurs when demand is strong and the need for the crop is immediate Can also occur during short crop situations or when there is a large crop coming in after a tight stock situation Basis is usually stronger in an inverse market

Cost of Ownership Carry shows the additional revenue that can be obtained from holding on to the crop But there are costs to holding on: storage interest/opportunity costs These are known as the cost of ownership If the carry more than covers the cost of ownership, then it’s referred to as “full carry”

Storage Typically, storage costs can be broken down into two categories An in-out charge: sort of like a flat upfront fee Periodic charge: the additional cost for each time period - Could be monthly, weekly, or daily Charges vary by location (on-farm vs. off-farm)

Interest/Opportunity Costs
Costs associated with the lost opportunities you could have had if you sold the grain at harvest and reinvested the proceeds Figured as: Cash price at harvest * Short term interest rate * Months in storage / 12 Or the opportunity cost for each month in storage is: (1/12)* Cash price at harvest * Interest rate

Corn Cost of Ownership Assumption: Corn is Valued at $3.05/bu 5% APR

Soybean Cost of Ownership
Assumption: Soybeans are Valued at $9.06/bu 5% APR

Other Factors Moisture levels and drying costs Shrink factor
Transportation costs Quality issues Helpful tool to evaluate costs:

Seasonal Pricing Patterns

Corn Prices vs. Marketings
Sources: USDA, NASS & ERS Monthly Price Data

Soy Prices vs. Marketings
Sources: USDA, NASS & ERS Monthly Price Data

Iowa Storage Capacity Source: USDA-NASS 93 93

U.S. Storage Capacity Source: USDA-NASS 94 94

Storage Issues Source: Hurburgh and Elmore, ICM News, 10/15/09 95 95

Why Should you have a Marketing Plan?
Detached from the decision Proper perspective Introduces discipline and consistency Check your logic What if…

Fear, Greed, and Ego Fear of making a bad decision
-- Watching prices slip away as you wait -- Watching prices rise after you’ve sold Greed of expecting even higher prices -- Not taking advantage of good price opportunities Ego of wanting to claim you caught the market high -- “Lake Wobegon” marketing

Ego Greed Fear

What is a Marketing Plan?
A marketing plan is an outline of price, date, and quantity objectives used to generate a reasonable return given the existing market conditions.

8-Step Marketing Plan Describe your current operation Specify goals
Know your costs of production and break-even Utilize sound market information Set target prices Evaluate pricing alternatives and actions Cash, futures/options, forward contract Execute when target prices are hit Review and evaluate results

1.Describe your current operation…
Annual marketing's: number, weight, timing of sales Input purchases: feeders, feed needs, crop inputs Cost of production: cash and total costs Alternative market outlets: distance, transportation costs Marketing philosophy: sell on tight schedule, shop for best price, standing order Attitude toward price risk and knowledge of risk management tools Where are you going?

2.Specify goals… Manage risk and protect profit potential
Goals should be achievable and measurable If and when consistently met – revise upward Examples: Selling price 5% higher than the auction or plant average Sell in top 1/3 of price range Cover total costs plus growth requirements Cover cash requirements

3.Know your costs of production and break-even…
Production history and expectations Incorporate input quantities and prices Project costs on per unit sold Variable $/unit Total $/unit Budgeting tools available

3.Know your costs of production and break-even…
Project a break-even level Price to cover variable costs Price to cover fixed costs Price to cover profit and growth Sensitivity analysis for key variables Back calculate from revenue to what you can afford to pay for feeder animals

4.Utilize sound market information…
Factors that impact price Supply Demand Demand and supply balance Systematic price variations Trends Cyclical movements (cattle cycle, hog cycle, etc.) Seasonal price patterns

4.Utilize sound market information…
Market information and projections USDA reports (weekly, monthly, annual) Extension forecast/outlook reports Commodity organizations Newsletters Private marketing firms

5.Set target prices… Set target prices based on actual or accurately estimated production costs Know what the market is paying (or expected to pay) The level and timing of target prices based on: Market outlook information Cost of production figures Cash flow needs Advantageous to set several target prices Allows for changing market trends

6.Evaluate pricing alternatives and actions…

6.Evaluate pricing alternatives and actions…
Method Advantages Disadvantages Cash sales Easy to transact Immediate payment No set quantity Minimize risk No price protection Less flexible Forward contract Easy to understand Flexible quantity Locked-in price Must deliver in full Opportunity loss if prices rise Futures contract Easy to enter/exit Often better prices than forward contracts Commission cost Performance bond calls Set quantities Options contract Price protection Benefit if prices rise Premium cost

7.Execute when target prices are hit…
Price Target Futures Price 1 50.72 2 76.24 3 79.19 4 82.14 5 86.19 6 90.25 7 94.30

8.Review and evaluate results…
Check performance relative to marketing goals Biggest reason for failure to repeatedly use marketing plans is that performance is compared to what might have been Typically the highest price alternative Probably an unrealistic goal No one strategy is best all the time Are conditions changing?

What Makes a Marketing Plan Work?
Know your market positions Track all positions – where do you stand on % sold and average price? Make the plan manageable Don’t expect to achieve your highest targets Focus on only tools you feel comfortable using Set price targets that are realistic Use multiple sources of analysis

A Little Marketing Philosophy
Bad outcomes still happen… Never compare to the market high… Remember it’s your plan for your operation…

Dec. Corn Futures Source: CBOT, Futures Price for 2nd Friday of the month

Dec. Corn Futures Nov Dec Jan Feb Mar Apr May June July Aug Sept Oct
2000 2.34 2.28 2.49 2.52 2.53 2.64 2.40 1.94 1.87 1.96 2.08 2001 2.54 2.45 2.47 2.16 2.37 2.24 2.09 2002 2.46 2.39 2.31 2.30 2.19 2.22 2.26 2.33 2.62 2.76 2003 2.41 2.38 2.50 2.42 2.11 2.14 2004 2.48 2.81 2.95 3.11 2.85 2.80 2.07 2005 2.29 2.04 2006 2.43 2.57 2.63 2.71 2.82 2.68 2.77 3.15 2007 3.45 3.50 3.95 3.99 4.08 3.75 3.92 3.69 3.51 3.49 2008 4.32 4.51 5.13 5.30 5.75 6.04 6.50 7.65 6.29 5.18 5.63 4.03 2009 4.43 4.20 4.54 4.06 4.18 4.07 4.40 4.48 3.32 3.28 3.20 3.72 2010 4.37 4.38 3.97 3.94 3.80 3.71 4.27 4.78 2011 5.09 5.29 5.71 6.18 5.78 6.53 6.27 7.13 6.37 7.15 7.37 6.40 2012 5.74 5.52 5.55 5.60 5.37 5.05 5.44 7.40 8.09 7.82 7.51 2013 6.30 6.28 5.77 5.47 5.50 5.33 4.53 4.59 4.33 2014 4.69 4.58 4.60 4.87 4.99 3.79 3.64 3.39 3.34 2015 4.24 4.22 4.05 3.78 3.70 4.31 3.76 3.87 3.83 2016 3.88 3.96 3.85 3.82 3.98 3.63 3.33 3.41 3.54 Source: CBOT, Futures Price for 2nd Friday of the month

Basis Basis 2000 -0.42 2001 -0.40 2002 -0.25 2003 -0.26 2004 -0.34 2005 -0.56 2006 -0.46 2007 -0.49 2008 2009 2010 -0.59 2011 -0.30 2012 -0.09 2013 -0.03 2014 -0.38 2015 -0.37 2016 -0.44 Harvest basis from December corn futures for average cash prices for Iowa corn on the 2nd Friday of October, in $/bushel.

Marketing Types Harvest Averaging Price Target Time and Price
Extended Time and Price

Marketing Types Harvest
Takes the harvest price for 100% of their grain

Average Price Captured
Harvest 2000 1.66 2001 1.69 2002 2.29 2003 1.88 2004 1.73 2005 1.48 2006 2.69 2007 3.02 2008 3.69 2009 3.47 2010 5.04 2011 6.10 2012 7.42 2013 4.30 2014 2.96 2015 3.46 2016 3.10 Average 3.29 Min Max

Marketing Types Averaging
Sells 10% of their grain via futures each month January-July Sells the remaining 30% at harvest Sets basis at harvest

Harvest Averaging 2000 1.66 1.91 2001 1.69 1.87 2002 2.29 2.11 2003 1.88 2.05 2004 1.73 2.24 2005 1.48 2006 2.69 2.35 2007 3.02 3.27 2008 3.69 5.13 2009 3.47 3.77 2010 5.04 3.84 2011 6.10 6.02 2012 7.42 6.17 2013 4.30 5.08 2014 2.96 3.85 2015 3.46 3.61 2016 3.10 3.34 Average 3.29 3.43 Min Max

Marketing Types Price Target
Sells 25% of grain via futures when futures price > production cost Sells 25% when futures > costs + $0.25 Sells 25% when futures > costs + $0.50 Sells remaining 25% at harvest Sets basis at harvest Defaults to harvest sales when price objectives are not reached Will start selling in the November before planting

Costs of Production Cost Cost + 0.25 Cost + 0.50 2000 2.43 2.68 2.93
2001 2.56 2.81 3.06 2002 2.55 2.80 3.05 2003 2.42 2.67 2.92 2004 2.58 2.83 3.08 2005 2.79 3.04 3.29 2006 2.86 3.11 3.36 2007 3.54 2008 3.63 3.88 4.13 2009 4.43 4.68 4.93 2010 3.48 3.73 3.98 2011 3.99 4.24 4.49 2012 4.40 4.65 4.90 2013 4.46 4.71 4.96 2014 2015 4.37 4.62 4.87 2016 4.11 4.36 4.61 Source: Iowa State University Extension

Harvest Averaging Price Target 2000 1.66 1.91 1.76 2001 1.69 1.87 2002 2.29 2.11 2.31 2003 1.88 2.05 1.96 2004 1.73 2.24 2.40 2005 1.48 2006 2.69 2.35 2007 3.02 3.27 3.11 2008 3.69 5.13 4.16 2009 3.47 3.77 3.68 2010 5.04 3.84 3.87 2011 6.10 6.02 5.25 2012 7.42 6.17 5.97 2013 4.30 5.08 5.63 2014 2.96 3.85 4.00 2015 3.46 3.61 2016 3.10 3.34 3.29 Average 3.43 Min Max

Marketing Types Time and Price Sell 25% in March Sell 25% in April
Sell 25% in May Sell 25% at harvest Sets basis at harvest Only make March-May sales if futures prices > production costs Defaults to harvest sales if price objectives are not reached

Harvest Averaging Price Target Time and Price 2000 1.66 1.91 1.76 2.02 2001 1.69 1.87 2002 2.29 2.11 2.31 2003 1.88 2.05 1.96 2004 1.73 2.24 2.40 2.41 2005 1.48 2006 2.69 2.35 2007 3.02 3.27 3.11 3.28 2008 3.69 5.13 4.16 5.24 2009 3.47 3.77 3.68 2010 5.04 3.84 3.87 3.74 2011 6.10 6.02 5.25 5.94 2012 7.42 6.17 5.97 5.80 2013 4.30 5.08 5.63 5.12 2014 2.96 3.85 4.00 4.17 2015 3.46 3.61 2016 3.10 3.34 3.29 Average 3.43 3.40 Min Max

Marketing Types Extended Time and Price
Sell 25% in March or when futures prices > production costs Sell 25% in April or when futures prices > costs + $0.25 Sell 25% in May or when futures prices > costs + $0.50 Only make March-May sales if futures prices > costs Sell remaining crop at harvest Sets basis at harvest Defaults to harvest sales if price objectives are not reached

Harvest Averaging Price Target Time and Price Extended Time and Price 2000 1.66 1.91 1.76 2.02 2001 1.69 1.87 2002 2.29 2.11 2.31 2.35 2003 1.88 2.05 1.96 2004 1.73 2.24 2.40 2.41 2.33 2005 1.48 2006 2.69 2007 3.02 3.27 3.11 3.28 2008 3.69 5.13 4.16 5.24 2009 3.47 3.77 3.68 2010 5.04 3.84 3.87 3.74 2011 6.10 6.02 5.25 5.94 2012 7.42 6.17 5.97 5.80 2013 4.30 5.08 5.63 5.12 2014 2.96 3.85 4.00 4.17 2015 3.46 3.61 2016 3.10 3.34 3.29 Average 3.43 3.40 3.33 Min Max

Extended Time and Price
Lowest Average Harvest Averaging Price Target Time and Price Extended Time and Price 2000 1.66 1.91 1.76 2.02 2001 1.69 1.87 2002 2.29 2.11 2.31 2.35 2003 1.88 2.05 1.96 2004 1.73 2.24 2.40 2.41 2.33 2005 1.48 2006 2.69 2007 3.02 3.27 3.11 3.28 2008 3.69 5.13 4.16 5.24 2009 3.47 3.77 3.68 2010 5.04 3.84 3.87 3.74 2011 6.10 6.02 5.25 5.94 2012 7.42 6.17 5.97 5.80 2013 4.30 5.08 5.63 5.12 2014 2.96 3.85 4.00 4.17 2015 3.46 3.61 2016 3.10 3.34 3.29 Lowest out of 17 years 12 2 4 8 6

Highest Average Harvest Averaging Price Target Time and Price Extended Time and Price 2000 1.66 1.91 1.76 2.02 2001 1.69 1.87 2002 2.29 2.11 2.31 2.35 2003 1.88 2.05 1.96 2004 1.73 2.24 2.40 2.41 2.33 2005 1.48 2006 2.69 2007 3.02 3.27 3.11 3.28 2008 3.69 5.13 4.16 5.24 2009 3.47 3.77 3.68 2010 5.04 3.84 3.87 3.74 2011 6.10 6.02 5.25 5.94 2012 7.42 6.17 5.97 5.80 2013 4.30 5.08 5.63 5.12 2014 2.96 3.85 4.00 4.17 2015 3.46 3.61 2016 3.10 3.34 3.29 Highest out of 17 years 4 6 2

Longer History Harvest Averaging Price Target Time and Price Extended Time and Price Average 2.63 2.74 2.69 2.73 Min 1.14 1.41 Max 7.42 6.17 5.97 5.94 Low Price 27 8 5 13 11 High Price 10 4 16 Out of 41 years ( )

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