CHS Pro Advantage Update- February Corn

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1 CHS Pro Advantage Update- February 2018 Corn Recap and Outlook- The most important thing that happened in corn since our last update is the breakout of the 2 ½ month trading range that had existed prior to about January 24 th. On that date, our markets traded up to some of the highest levels we have seen since late November/early December (depending on the contract month) and have gradually worked their way a little higher since that time. Improving exports are one reason, and on the February 8 th USDA supply and demand report, the USDA raised their export estimate to billion bushels, up 125 million bushels from the January report. In addition, production estimates out of South America are falling, and the Drought Monitor here in the US is concerning. We expect to see a little more volatility in our markets, but we also understand that the American Farmer has a lot of corn that he wants to sell. Corn marketing to date: Pro Advantage 2018 (2 year)- We stood pat on our short futures position which is at 49.9% of the bushels under management. We remain with a short call position on 11.7% of next year s crop. On the close of trade on February 8th, the 2 year 2018 Pro Advantage corn program is currently valued at $ Pro Advantage 2018 (1 year)- The small rally allowed us to make our 1 st 10% sale in this program at approximately $3.95. We still are short some short-dated call options on 9.3% of the bushels under management. On the close of trade on February 8th, the 1 year 2018 Pro Advantage corn program is currently valued at $ Pro Advantage 2019 (2 year)- The new 2 year program for 2019 is a program in which we will sell bushels against strong weather rallies. The rally this month is partially due to South American weather and we extended our sales to 20% with another 10% sale at $ We are now 20% sold. On the close of trade on February 8th, the 2 year 2019 Pro Advantage corn program is currently valued at $ Pro Advantage July 2018 (2017 old crop bushels)- We made another 4.8% sale in the futures on the recent rally at $ and we made a 4.8% sale of $3.80 call options. We are still short 4.8% of July corn straddles. On the close of trade on February 8th, the 2018 July Pro Advantage corn program is currently valued at $

2 Soybeans Recap and outlook- Weather markets tend to bring volatility and the situation in Argentina this year is a classic example. We have now had two strong rallies due to weather concerns but when the market sees wetter forecasts, we quickly retreat. Yet as we write, the soybean meal market has posted its highest weekly close this season, and as we are further along in the South American growing season, it seems as if the market is more certain that there are losses in in Argentina. The offset is that the US ending stocks estimate has grown to 530 million bushels due to a slower than anticipated export program. While it is still possible that there will be a pick-up in exports, it doesn t appear that that we will shrink the carryout to the same extent has we have in year s past. So it is tough to rally too far due to the carryout, but it is also tough to break the market too far with meal prices as strong as they are. Board crush margins are now touching $1.25 per bushel so lower bean prices only mean higher crush margins. There is a lot of incentive for the processor to buy and crush beans. We look for more choppy trade ahead. Soybean marketing to date: Pro Advantage 2018 (2 yr.)- This month, due to the back and forth nature of the market and the mixed signals given, our position in this program is unchanged. Our short futures position is 33%. We still have a 22% long short dated put position for additional protection. We still have a short $9.80 call option position on 5.5% of the crop and we still have our short $10.00 straddles (calls and puts) on 16.5% of the crop. We have a 5.5% short call position with November $10.00 calls. On the close of trade on February 8th, the value of the CHS year Pro Advantage soybean contract was $ Pro Advantage 2018 (1yr.)- Same story with this program, our positions are mostly unchanged but we did take a profit on one position. We are short 22.9% in the futures. We still have inexpensive short dated puts on 28.6% of our bushels, while we are short November calls against those on the same 28.6%. Finally, we were short a short-dated straddle on 8.6% but we used the rally to cover the put at a profit. On the close of trade on February 8th, the value of the CHS year Pro Advantage soybean contract was $ Pro Advantage 2019 (2yr.)- In our 2 year 2019 contract, we have not made a sale as of yet. We prefer to make sales in 2 year contracts either on significant weather rallies, or when the contract is at a level that has represented a good price in recent history. There is an inverse in the Nov 18- Nov 19 bean spread, and as a result we haven t yet made a sale. On the close of trade on February 8th, the value of the CHS year Pro Advantage program is $9.9475, the value of the Nov 19 futures on the close that day. Pro Advantage July 2018 (old crop 2017 bushels)- In our July old crop contract, we were short 49.9% of calls against the bushels we have to manage and we sold another 24.9% this month. We will convert to futures should futures rally more substantially. On the close of trade on February 8th, the value of the CHS 2018 July Pro Advantage soybean contract was $ Wheat Recap and outlook- Crop conditions for the HRW crop deteriorated again this month as the drought worsens and as we have had to endure additional bouts of extreme cold. However, after previously lifting hedges, we have re-established some hedges on this rally. World stocks are still relatively large and we need to be nimble with this marketplace. We will continue to be aggressive buying breaks due to the poor crop conditions, but once again selling rallies because of the large world stocks.

3 Wheat marketing to date: Pro Advantage HRS 2018 (2 yr) We have pushed our sales up to 79.7% sold. On the close of trade on February 8th, the value of the CHS year Pro Advantage HRS contract was $ Pro Advantage HRS 2018 (1 yr) We used this last rally to establish our first sale in this program. We are now 31.9% sold in futures. On the close of trade on February 8th, the value of the CHS year Pro Advantage HRS contract was $6.34. Pro Advantage HRS 2019 (2 yr) The September 2019 contract still has not yet traded in Minneapolis. As a result, we do not have any positions at this time. On the close of trade on February 8th, the value of the CHS year Pro Advantage HRS contract cannot be determined until September 2019 begins to trade. Pro Advantage HRW 2018 (2 yr July) We re-established a large number of hedges and we are now short 69% with futures. The price of the CHS Pro Advantage 2018 HRW wheat contract on February 8th, was $ Pro Advantage HRW 2018 (1 yr July) We made a 41% short futures hedge on this most recent rally. The price of the CHS Pro Advantage 2018 HRW wheat contract on February 8th, was $ Pro Advantage HRW 2019 (2 yr July)- We made our first sales in the 2 year July program and we are now 37% hedged in futures. The price of the CHS Pro Advantage 2018 HRW wheat contract on February 8th, was $ Pro Advantage SRW 2018 (2 yr July) We again established short futures positions and we are now hedged 57% with futures contracts. We are still short 16% of puts that are in the money, but much less than they were last month. On the close of trade on February 8th, the value of the CHS yr Pro Advantage SRW contract was $ Pro Advantage SRW 2018 (1 yr July) - With prices remaining low and few good marketing opportunities as of yet, we have not made any sales in this program. The price of the CHS Pro Advantage 2018 HRW wheat contract on February 8th, was $ Pro Advantage SRW 2019 (2 yr July) - We have a long time to be patent for opportunities and we still have not sold anything in this contract as of yet. The price of the CHS Pro Advantage 2019 HRW wheat contract on February 8 th, was $5.295.

4 Weekly Market Valuations As of February 8th, 2018 Contract Pricing Period Futures Month Current Market Valuation Pro Advantage-2018 Corn (2 yr) Dec $ Pro Advantage-2018 Corn (1 yr) Dec $ Pro Advantage Corn (2 yr) Dec $ Pro Advantage July Corn July 2018 $ Pro Advantage-2018 Soybeans (2 yr) Nov 2018 $ Pro Advantage Soybeans (1 yr) Nov 2018 $ Pro Advantage Soybeans (2 yr) Nov 2019 $ Pro Advantage July Soybeans July 2018 $ Pro Advantage-2018 Spring Wheat (2 yr) Sep 2018 $ Pro Advantage Spring Wheat (1 yr) Sep 2018 $ Pro Advantage Spring Wheat (2 yr) Sep 2019 N/A Pro Advantage HRW Wheat (2 yr) July 2018 $ Pro Advantage-2018 HRW Wheat (1 yr) July 2018 $ Pro Advantage-2019 HRW Wheat (2 yr) July 2019 $5.5306

5 Pro Advantage SRW Wheat (2 yr) July 2018 $ Pro Advantage SRW Wheat (1 yr) July 2018 $ Pro Advantage-2019 SRW Wheat (2 yr) July 2019 $5.0700