Smart Money Focus Report-

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1 \ Growing Financial Success Contents Firming Cash Market Differential Ratios for Grains and Coffee Suggest That Higher Prices Are On The Way. On The Other Hand Weak Cash Market Differentials Suggest More limited Upside for Sugar With A Large Decline possible for Cocoa Smart Money Focus Report- Follow The Cash Commodity Currencies Turning up The 10% rise in commodity currencies to 6 month highs offers the possibility that a major low has been placed and that a bullish tail wind from this may be present for a good portion of Published By Hackett Financial Advisors, Inc. Shawn Hackett, President 9259 Equus Circle Boynton Beach, FL (888) Shawn@HackettAdvisors.com In order to have a true bull market move in agricultural commodities one must have commodities currencies in neutral mode or more productively in rally mode. The recent 10% spike in commodity currencies has presented the first currency bullish tail wind since early 2014 and could signal the beginning of a more bullish up-trending phase. While it is still too early to know if this is just a bear market rally, it is enough to suggest a likely more favorable currency environment for the first half of Subscription Rate is $300 a year. To subscribe, please contact us via or phone or register on our website. This kind of currency fundamental shift will allow bullish changes in supply/demand fundamentals into a more influential role to price discovery. Page 1 of 41

2 With that in mind the most important currency for agriculture is the Brazilian Real. Brazilian Real Spot Price Chart This expanding bullish technical fan structure supports an acceleration bullish move to the upside. Any break above.28 would offer a move to much higher levels and additional bullish forces to agricultural commodity pricing. The chart above of the Brazilian Real continues to show an accelerating fan bullish pattern that could enter a more impulsive spike move in the months to come. This would obviously place lighter fuel onto the current ambers of an embryonic bull market move in agricultural commodities. So with commodity currencies beginning to exert an upward tailwind bullish force, the next condition for a sustained bull move in overall commodities is to have a bullish tail wind with weather patterns. Remember, the last 2 years we have been under the bearish spell of El Nino that produces in aggregate above trend line global crop yields. Page 2 of 41

3 However with El Nino beginning to fade and transition to a La Nina which tends to produce well below trend line yield global crops, the stage has been set for weather to turn into a massive bullish tailwind for agricultural commodities. Like Newton s principal which states for every action there is an equal and opposite reaction given that the recent El Nino was a record setting SUPER EL NINO, we can expect the flip to La Nina to likely reach a similar record setting SUPER LA NINA. Models Continue to Support a Strong La Nina in Second half of 2016 The recent update of the well regarded Scripps weather model indicates a move to a SUPER LA NINA by the late fall to early winter of Even if they are half right about this forecast it would still be a strong La Nina with the resulting below trend line yiled implications of global Ag crops is going to severe. Page 3 of 41

4 Any end user who is aware of the history of La Nina weather patterns and the resulting negative affect to global crop yields and resulting positive impact to rising global crop prices should be scared to death. As bearish as I was back in 2012 in grains, where I put out an all out sell recommendation 2 days before the top in corn prices as high prices and a developing El Nino meant a massive bear in agricultural commodities, I am now putting an all out buy recommendation for the exact opposite to happen. Especially in grains, end users should be protecting upside price risk on a large portion of your needs going out 2 years by a combination of cash purchases, long futures hedges and call options. Failure to do so in my view makes you run the risk of insolvency over the next few years. Bottom line is that I am expecting a bull market in increased weather volatility which means much higher prices for agriculture and especially grain markets. Grains Synopsis: My long term forecast for grains is that prices in general should double from their respective bear market low points by the summer of The first wave of this move is likely to occur from now into late summer The second wave higher should comprise the period from early winter 2016 to the summer of To that end, I am expecting wheat and rice to be the ring leaders in the first part of the grain bull market move to then be followed by a corn/soybean centric outperformance move in The bullish buy signals have been piling up and they include: 1) Massive smart money buy signal 2) Contrarian bullish large and fully recongnized above ground global stocks 3) Bullish turn in commodity currencies 4) Major cash differential ratio buy signals in most grain markets 5) Bullish reversal technical price patterns Key flash points for summer growing season: U.S, Russia, India Please read below for charts and select commentary. Page 4 of 41

5 Massive Smart Money Buy Signal Points to Much Higher Grain Prices The correlation between strong smart money buy signals and big rallies in grains is undeniable My proprietary smart money signal indicator is giving off a very strong buy signal that has been spectacular in forewarning of large grain market upside price moves. The smart money sees what is coming and is taking full advantage of late trend following short speculators to load up on longs to protect against upside price risk. All end users should heed their warning and do the same. Failure to do so will put you in grave risk of insolvency. Page 5 of 41

6 All Grains Price Index The recent break down failure reversal higher technical buy signal in the gains complex and the subsequent recent breaking above of 2 long term downtrend lines supports the notion that a bull market move may have already begun. Page 6 of 41

7 A double barreled smart money buy signal bodes well for much higher corn prices. Page 7 of 41

8 corn The cash differential ratio for corn is near a major buy signal. As you can see, these kinds of buy signals have been spectacular in picking major bullish turning point lows. Page 8 of 41

9 Soybean The cash differential ratio for soybeans has triggered a major buy signal. This bodes very well for much higher prices Page 9 of 41

10 Wheat First Weather Volatility Event of the Season The wheat market is experiencing the first weather volatility event of the El Nino to La Nina transition growing season. This is just the tip of the ice berg. Major flooding in the Deep South has caused irreversible yield damage to about 20% of the crop. The very warm temperatures in the month of March are also allowing winter wheat to come out of dormancy 4 weeks earlier than normal. This is very problematic as wheat will enter a critical yield determining stage of heading with frost threats still very climatically possible. Any frost threat would create a wild spike trade for wheat. Whether this happens or not remains to be seen but it does bring out the point that weather volatility is here to stay and with it lower yields. How much longer will record short speculators be comfortable with an escalation in weather volatility? I pray for their survival for they know not what they do. Page 10 of 41

11 The massive smart money buy signal in KC Wheat and all wheat markets and its high correlation to large upward price moves bodes well for much higher prices in the months to come. Page 11 of 41

12 wheat The cash differential ratio in wheat has triggered a major buy signal. This has been an incredible indicator for picking out major bullish turning point lows. Page 12 of 41

13 KC Wheat Price Chart KC wheat s break above the primary downtrend line just recently bodes well for a run short term to $5.40/bushel. Rice The 2 main data points to follow here for the U.S. rice market are the Thailand benchmark rice price and they Brazilian benchmark rice price. U.S. rice prices pivot off of both differentially based up the relative differences in supply/demand fundamentals. Brazil is going to have a below trend line yiled crop and will need to restrict exports of high quality rice. Brazil is a large exporter of high quality rice but is also a large importer of low quality rice. Page 13 of 41

14 Rice is in a perfect spot to complete a major secondary low. Look for a weekly close above $11/hwt for a major technical buy signal Rice-Key Signals To Watch Brazilian rice prices nearing a major break out and runaway advance Page 14 of 41

15 Brazilian net rice exports expected to go negative in 2016 for the first time since 2008 Brazil Exports to continue to fall Page 15 of 41

16 Weekly U.S. Rice Exports Surging Due to Discount to Brazil Secondary Bottom in Rice Near at Hand Look for a move above $400 to signal a major buy signal for Asian rice prices Page 16 of 41

17 Thailand Rice Prices Breaking Downtrend Break Above $400 a key buy signal Page 17 of 41

18 OATS An extraordinary cash differential buy signal has been triggered in oats. High probably spike trade in the months to come. Page 18 of 41

19 Loom for a weekly close over $2.00/bushel for a major technical buy signal The very fact that the oars futures market has lost its ability to offer adequate liquid hedging is exactly what has made the outlook for prices in 2016 so bullish. With an inability to hedge and poor economics Canadian oats planted acres are going o fall by as much as 25%. Even in a market like oats that has stagnant demand that kind of lost acreage is going to cause a major upward price spike. The cash differential ratio clearly indicates the concern from the cash buyer s perspective. For those willing to deal with a lower liquidity futures contract Oats could offer quite a move higher. Page 19 of 41

20 SOFTS Synopsis: Current smart money trends have triggered a solid buy signal suggesting strength in the group. The same bullish pillars that will drive grains will also drive much of the SOFTS complex although it is more of a mixed bag. Weather wise La Nina s tend to be good for Sugar production in Asia over the growing season as well as for West African cocoa production. Cotton, Coffee and Orange Juice tend to see very poor weather. Unlike grains we are not seeing any major cash differential buy signals in the SOFTS complex other than in the coffee market. This suggests the recent rallies in cocoa and sugar on short term weather issues are not being met by strong cash bids. This divergence offers a more limited upside trajectory for these 2 markets unless weather becomes much more severe. A great shorting opportunity approaches for the cocoa markets. In cotton, the recent decline in price against rising grain prices is a bulls perfect set up for a large move higher later in Once lost acres can be confirmed in the global cotton arena and especially in Texas this market could easily double in value. A great buying opportunity approaches. Orange Juice needs a weather problem to get going given the never ending loss of demand. With La Nina coming OJ may get a much needed boost. For now there is not much to do but wait and watch. The lumber market could offer a great shorting opportunity given the wild spike trade that has recently accrued. Please read that section for more details. Page 20 of 41

21 Strong smart money buy signal suggest more upside for this group Page 21 of 41

22 All SOFTS Price Index A breakdown failure reversal higher buy signal has been triggered But more work needs to be done by closing above the downtrend line. Page 22 of 41

23 The recent smart money buy signal picked the low perfectly. It is doubtful that $.16.pound resistance can be exceeded, Page 23 of 41

24 Thus far we have not seen a major cash differential ratio buy signal in sugar that has been so spectacular in forewarning of major bullish low turning points. This suggests upside might be limited for now to $.16/pound Page 24 of 41

25 Cotton After a well timed smart money sell signal, the recent buy signal supports a low approaching. This is the year the TOO many acres globally will be lost. So, event though demand will remain stagnant cotton prices will likely see a large move to this upside against unfavorable La Nina weather. Page 25 of 41

26 A smart money sell signal was triggered last week setting up for a great shorting opportunity. A wild spike trade has occurred in lumber as it appears the industry got caught overweighed to the short side on a very visible event that has taken longer to play than originally thought. That event was the end of the U.S. tariff trade deal with Canada that placed higher costs to imported lumber as U.S. prices fell. This loss of protection made the U.S industry believe that a wall of lumber was waiting to hit the U.S once expired. That has proved to probably be right in concept but has been proven wrong on when/timing. The industry drew down buffer lumber stocks in the hope of buying the onslaught of Canadian lumber against a very warm and more productive building season this winter than normal and got caught with insufficient supplies to meet demand. Page 26 of 41

27 Of course the higher prices and loss of tariffs will create a huge surge in Canadian imports just as the industry gets better covered. A recipe for disaster I am not very optimistic on new home construction over the next 12 months and see the inevitable flood of Canadian imports as an increasing glut as the year progresses. Hence this artificial move higher in lumber offers a great shorting opportunity once technical sell signals are triggered. Look for a reversal from overhead resistance near $320 as a place to get short lumber Page 27 of 41

28 Cocoa A strong smart money buy signal timed the recent low quite well. A great shorting opportunity approaches in the $3000 to $3200 area. Vegetative health when compared to last year showing severe stress to cocoa trees El Nino driven dry weather has caused severe deterioration in western Africa mid-crop production potential. While this could cause more upside over the near term, it does not change the overall bearish picture. This should be the last hurrah for cocoa upside as favorable La Nina weather begins to inflict increasing crop size pressure later this year. Page 28 of 41

29 Despite all the talk about increasing deficits, bad weather and historically tight global stocks to usage ratio, the cash differential ratio is not responding or showing any tightness that has created some great buy signals in the past. This suggests very poor demand for cocoa is getting the upper hand to lower supply. Page 29 of 41

30 COFFEE Cash differential ratio has triggered an initial buy signal even as prices rise. This is suggesting that Brazil may have reached the bottom of excess reserves. Bullish. London and U.S coffee certified stocks are both in crash mode. Such drawdowns suggest global excess supplies have been exhausted. Bullish. Page 30 of 41

31 coffee Colombian cash coffee differential ratio to US futures have been rising and have triggered an initial buy signal. This suggests that the Colombia production miracle may be over. Bullish. Page 31 of 41

32 Smart money selling continues and projects a spring high for the complex Class III Milk The biggest issue short term is the notion that Class III Milk U.S. prices remain at a premium to NZ GDT prices. This condition has caused the U.S. import too much milk and build up inventories beyond normal seasonal levels. This condition must change in order to rebalance the situation. So either NZ GDT prices need to rise which could be enhanced by the NZ Dollar continuing to rally or U.S. prices will need to fall further to put the break on imports. The GDT auction on Tuesday will be important to try and put a reversal in what has been a continuing declining NZ GDT cheese market. Stay tuned. Page 32 of 41

33 This gap must return to parity to equalize US supply/demand for cheese. GDT All Milk Price We are nearing the end of the wedge. A break above the downtrend line would be quite bullish in Tuesday s GDT auction. Page 33 of 41

34 A near smart money buy signal in late February 2016 bodes well that a short term bottom has been reached. Page 34 of 41

35 Class III milk My long term forecast has been calling for a final low to be achieved by the end of February. So far that appears to have occurred. A break above the downtrend line and $13.80/hwt would be a major technical buy signal Current U.S. stocks to usage ratio for cheese when compared to the peak month seen over the last 16 years remains well contained and likely heading lower over the next few years. Page 35 of 41

36 Smart money selling accelerating suggesting a spring high near $142 to $145 a likely ideal shorting opportunity. Page 36 of 41

37 Strong smart money selling suggests spring highs in the $75 to $80 area likely for a great shorting opportunity. ^back to top^ Page 37 of 41

38 Hackett Financial Advisors Inc. specializes in the agricultural space where there is far less coverage by the commodity analyst community and where some of the greatest opportunities should remain in the years ahead. While everyone on the planet has an opinion on Crude Oil or Gold there are very few who study agriculture in the manner that we do. We would be happy to see if opening an account with us would fit your needs whether as a commercial operator and/or a professional investor/firm. We also put God first in our dealings with you and our approach to the markets. Our heart is in the right place and through is honor and grace great things are possible. We take the view that the more successful you are the more you can give back to those in need. It hardly makes any sense to do it for any other reason. If you have any questions about any of the content in this report, please call me at (888) or me at Shawn@HackettAdvisors.com. Thank you for reading and I hope your future investment decisions turn out to be prosperous ones. All The Best Shawn Hackett *I want to thank my dear friend and colleague Daniel Herr for his input and meaningful contributions to this report that have helped give greater scope, gravity and pertinence to my subscriber base.* ^back to top^ Page 38 of 41

39 Also remember that you can also open an account with us at Hackett Financial Advisors Inc. We clear all our operations through R.J. O'Brien & Associates whcih is the oldest and largest independent futures brokerage and clearing firm in the United States. A futures commission merchant (FCM), RJO is a full clearing member of: the CME Group (founding member of the Chicago Mercantile Exchange) and all its markets; IntercontinentalExchange (ICE); NYSE Liffe U.S.; and the CBOE Futures Exchange (CFE). RJO offers the latest in order entry technology coupled with 24-hour execution and clearing on every futures exchange worldwide. Clearing more than 100,000 client accounts, the firm provides a full range of services to the industry s largest global network of introducing brokers (IBs) and to commercial, institutional, international and individuals clients. These include more than 400 IBs and many of the world's largest financial, industrial and agricultural institutions. We do not engage in proprietary trading; all of our business focuses on our valued clients. Our Place in the Industry Founded in 1914, RJO is one of the last 'boutique' futures firms in the industry. It is a privately held business majority owned by the O'Brien family of Chicago. The O'Briens have been instrumental in the development of the futures industry and remain committed to the continued growth of the company and our leadership within the industry. With client assets of approximately $3.6 billion, RJO is a well-diversified, fully integrated FCM. The firm regularly captures top-tier market share in both agricultural and financial futures products at both the CME and CBOT ^back to top^ Page 39 of 41

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41 This material has been prepared by a sales or trading employee or agent of Hackett Financial Advisors Inc. and is, or is in the nature of, a solicitation. This material is not a research report prepared by R.J. O Brien s Research Department. By accepting this communication, you agree that you are an experienced user of the futures markets, capable of making independent trading decisions, and agree that you are not, and will not, rely solely on this communication in making trading decisions. DISTRIBUTION IN SOME JURISDICTIONS MAY BE PROHIBITED OR RESTRICTED BY LAW. PERSONS IN POSSESSION OF THIS COMMUNICATION INDIRECTLY SHOULD INFORM THEMSELVES ABOUT AND OBSERVE ANY SUCH PROHIBITION OR RESTRICTIONS. TO THE EXTENT THAT YOU HAVE RECEIVED THIS COMMUNICATION INDIRECTLY AND SOLICITATIONS ARE PROHIBITED IN YOUR JURISDICTION WITHOUT REGISTRATION, THE MARKET COMMENTARY IN THIS COMMUNICATION SHOULD NOT BE CONSIDERED A SOLICITATION. The risk of loss in trading futures and/or options is substantial and each investor and/or trader must consider whether this is a suitable investment. Past performance, whether actual or indicated by simulated historical tests of strategies, is not indicative of future results. Trading advice is based on information taken from trades and statistical services and other sources that Hackett Financial Advisors Inc. believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades. ^back to top^ Page 41 of 41