Marketing Strategies for 2015

Robert Anwender Grain Merchandiser

Marketing Tips for 2015… and Forward!

Build a Knowledge Base: • Stay in tune with market fundamentals • Understand how a volatile dollar affects basis levels • Look ahead for opportunities • Other factors that influence grain prices Individual Marketing Strategies: • Know your costs… Seriously, know your costs! • Know your quality/storage situation • Learn the different discount schedules • Look outside your traditional marketing avenues • Use pricing tools to your advantage during a volatile market Take Home Points: • The world is NOT running out of grain • Going forward, think Proactive not Reactive!

U.S. Soybean Supply and Demand

January 12, 2015

2013/14

estimate

2014/15

forecast

Change from

December 10

Change from

2013/14

Percent Percent

Planted area (million acres) 76.8 83.7 -0.6 8.9

Harvested area (million acres) 76.3 83.1 -0.4 8.9

Yield (bushels per acre) 44.0 47.8 0.7 8.5

Million bushels

Beginning stocks 141 92 0.0 -34.6

Production 3,358 3,969 0.3 18.2

Imports 72 15 0.0 -79.1

Total supply 3,570 4,076 0.3 14.2

Crush 1,734 1,780 0.0 2.7

Seed and residual 98 116 0.7 18.7

Domestic use 1,832 1,896 0.0 3.5

Exports 1,647 1,770 0.6 7.5

Total use 3,478 3,666 0.3 5.4

Ending stocks 92 410 0.0 345.7

Percent

Stocks to use ratio 2.6 11.2

Dollars per bushel

Average market price 13.00 9.45/10.95 2.0 -21.5

World Soybean Supply and Use 2013/14

estimate

2014/15

forecast

Change from

November 10

Change from

2013/14

Million Tons Percent Percent

Beginning stocks 56.3 66.6 -0.4 18.3

Production 285.3 312.8 0.2 9.6

Total Supply 341.6 379.4 0.1 11.1

Domestic crush 239.8 251.9 0.0 5.0

Total use 272.6 286.1 0.1 4.9

Trade 112.8 116.2 0.6 3.0

Ending Stocks 66.6 89.9 -0.5 35.0

Addendum:

China imports* 70.4 74.0 0.0 5.2

*From all sources.

December 10, 2014

5

USDA SUPPLY/DEMAND Hightower 2015/16 Estimates

US SOYBEANS Dec Dec Dec Changes in Planted Acres Est.

USDA USDA USDA 15 Yr. Trend Line Yield

08-09 09-10 10-11 11-12 12-13 13-14 14-15

Planted Area (M Acres) 75.7 77.5 77.4 75.0 77.2 76.8 84.2 86.2 87.2 88.2

Harvested Area (Acres) 74.7 76.4 76.6 73.8 76.1 76.3 83.4 85.3 86.3 87.3

Yield (Bu/Acre) 39.7 44.0 43.5 41.9 40.0 44.0 47.5 45.5 45.5 45.5

Beginning Stocks (M Bu) 205 138 151 215 169 141 92 410 410 410

Production 2,967 3,359 3,329 3,094 3,042 3,358 3,958 3,883 3,928 3,973

Imports 13 15 14 16 41 72 15 15 15 15

Supply,Total 3,185 3,512 3,494 3,325 3,252 3,570 4,065 4,308 4,353 4,398

Crushings 1,662 1,752 1,648 1,703 1,689 1,734 1,780 1,810 1,785 1,810

Exports 1,279 1,499 1,505 1,365 1,317 1,647 1,760 1,770 1,695 1,770

Seed 90 90 87 90 89 98 92 92 92 92

Residual 16 20 43 -2 16 0 23 22 22 22

Use, Total 3,047 3,361 3,279 3,155 3,111 3,478 3,655 3,694 3,694 3,694

Ending Stocks 138 151 215 169 141 92 410 614 659 704

Stocks/Use Ratio 4.5% 4.5% 6.6% 5.4% 4.5% 2.6% 11.2% 16.6% 17.8% 19.1%

U.S. Corn Supply and Demand

January 12, 2015

2013/14

estimate

2014/15

forecast

Change from

December 10

Change from

2013/14

Percent Percent

Planted area (million acres) 95.4 90.6 -0.3 -5.0

Harvested area (million acres) 87.5 83.1 0.0 -4.9

Yield (bushels per acre) 158.1 171.0 -1.4 8.2

Million bushels

Beginning stocks 821 1,232 -0.3 50.0

Production 13,829 14,216 -1.3 2.8

Imports 36 25 0.0 -30.1

Total supply 14,686 15,472 -1.2 5.4

Feed and residual 5,036 5,275 -1.9 4.8

Food, seed, and industrial 6,501 6,570 0.4 1.1

Ethanol 5,134 5,175 0.5 0.8

Domestic use 11,537 11,845 -0.6 2.7

Exports 1,917 1,750 0.0 -8.7

Total use 13,454 13,595 -0.5 1.0

Ending stocks 1,232 1,877 -6.0 52.4

Percent

Stocks to use ratio 9.2 13.8

Dollars per bushel

Average market price 4.46 3.35/3.95 4.3 -18.2

World Corn Production

Country or Region

2013/14

estimate

2014/15

forecast

Change from

November 10

Change from

2013/14

Million Tons Percent Percent

World 989.3 991.6 0.1 0.2

United States 353.7 366.0 0.0 3.5

Foreign 635.6 625.6 0.2 -1.6

Argentina 25.0 22.0 -4.3 -12.0

Brazil 79.3 75.0 0.0 -5.4

Mexico 23.0 23.0 0.0 0.2

Canada 14.2 11.5 0.0 -19.0

European Union 64.2 73.6 0.7 14.6

FSU-12 46.9 42.7 0.0 -9.0

Ukraine 30.9 27.0 0.0 -12.6

Russia 11.6 12.0 0.0 3.1

South Africa 14.8 13.5 0.0 -8.5

China 218.5 215.5 0.7 -1.4

India 24.2 21.0 0.0 -13.2

December 10, 2014

9

World Wheat Supply and Use 2013/14

estimate

2014/15

forecast

Change from

November 10

Change from

2013/14

Million Tons Percent Percent

Beginning stocks 174.5 185.3 -0.2 6.2

Production 714.8 722.2 0.3 1.0

Total Supply 889.2 907.5 0.2 2.1

Feed use 130.3 139.2 -0.5 6.9

Total use 703.9 712.6 0.0 1.2

Trade 165.8 158.0 2.0 -4.7

Ending Stocks 185.3 194.9 1.0 5.2

December 10, 2014

• 11 months of the year, wheat is being harvested somewhere in the world

World Wheat Production

December 10, 2014

Country or Region

2013/14

estimate

2014/15

forecast

Change from

November 10

Change from

2013/14

Million Tons Percent Percent

World 714.8 722.2 0.3 1.0

United States 58.1 55.1 0.0 -5.1

Foreign 656.7 667.1 0.3 1.6

Argentina 10.5 12.0 0.0 14.3

Canada 37.5 29.3 6.5 -21.9

Australia 27.0 24.0 0.0 -11.1

European Union 143.1 155.4 0.0 8.6

Russia 52.1 59.0 0.0 13.3

Ukraine 22.3 24.5 0.0 10.0

Kazakhstan 13.9 12.5 4.2 -10.3

China 121.9 126.0 0.0 3.3

India 93.5 95.9 0.0 2.6

How does a falling dollar affect you?

• Canadian Dollar has dropped 6% in 2015… so far

Canadian Dollar Influence on Basis

Scenario #1 SH5: $10.00/bu US Basis: $0.00/bu FX: .8500 CAD Basis: $1.76/bu CAD Flat: $11.76/bu

Scenario #2 SH5: $10.00/bu US Basis: $0.00/bu FX: .8250 CAD Basis: $2.12/bu CAD Flat: $12.12/bu

Scenario #3 SH5: $10.00/bu US Basis: $0.00/bu FX: .8000 CAD Basis: $2.50/bu CAD Flat: $12.50/bu

January FX High: .8603 (Jan 2) Low: .8022 (Jan 23)

Assume Futures hold at $10.00/bu and US Basis is $0.00/bu

For Comparison: Delivered Hamilton Flat Bid Jan 2: $10.22 + $1.80 = $12.02/bu Jan23: $9.77 + $2.33 = $12.10/bu Futures: -$0.45 Basis: +$0.53 Net: +$.08

Recent Headlines

“Bank Of Canada Cuts Its Key Interest To 0.75%”

-Reuters

“Hedge-Fund Bulls Retreat From Soy as Silos Fill Up: Commodities” – Bloomberg

“China Cancels 176,000 mt soy shipments for 2014/15” - USDA

“IGC Raises Corn Outlook, Sees Grains Stockpiles at 30-Year High” – Bloomberg

“Deeper cuts, more pain for companies riding out global oil price war” - BNN

Building a Marketing Plan

• Procrastination when supplies are tight has paid off in the past… today is a different story

• There is no definition of what a good marketing plan looks like, but having a plan is better than nothing

• Basics of a marketing plan: 1. Know your costs/Create a budget

2. Set pricing targets based on profitability/cash flow needs

3. Implement marking plan by setting targets and pricing orders with your market representatives.

4. If available or applicable to your situation, consider more complex marketing tools. Ex. Basis/Futures First contracts, Pricing Products

5. Stick to your plan!

Pricing Product Example - Accumulator Plus

0 5 10 15 20

4.15

4.00

Enhanced sell Level

CN5 Market Protection level

Duration

Pri

ce

• Example: CN5 is trading at 4.00, you would like to sell 5,000 bushels of CN5, 107 days to expiry, every day you sell 47 bushels at the following levels:

– For every day CN5 stays above 3.00, you sell at 4.15

– If 3.00 trades before expiry, remaining quantity is filled at 4.00

– If 3.00 never trades and upon expiry of CN5 (Jun.26.2015) CN5 closes above 4.15 you have an additional obligation to sell equal quantity of CN5 at 4.15

Fill Trigger 3.00

+0.15

1.00

2014 Corn Budget Example

2014 Soybean Budget Example

On Farm Storage Marketing for 2014

• Marketing lower grade corn takes more work!

• Know your costs… is your storage really free?

• Know your quality! • What is your average grade?

• Do you have higher/lower quality segregated?

• Keep a close eye on bin quality!

• Understand the discounts at different destinations • Feed Mills mostly flat rate discounts

• Ethanol uses ‘Cumulative’ discounts

• Look outside your traditional markets to compare pricing

Final Thoughts to Consider

• If there’s good money on the table, take some off

• Don’t always go for the Home Run… 2014 MLB Home Run leader hit 40 in 618 attempts (7% success)

Thanks for your time! Robert Anwender Grain Merchandiser BroadGrain Commodities Inc. 519-275-2020 x.206 robert.anwender@broadgrain.com