1. Tomm Pfitzenmaier Summit Commodity Brokerage Service Stability Longevity Market Outlook & Risk Management Strategies Illinois Pork Producers Association February 16 th, 2011

2.  The market needs to see a minimum of a 3 to 4 million acre increase in planted acres.  Acreage battle fought last fall and corn won.  Adequate subsoil moisture in the U.S., but concern about dry weather moving in from the southeastern US.  Concerns about poor weather in Argentina.  Argentine crop critical – under 20 MMT is a problem  The quality issue 2010 vs. 2011

5.  Fall nearly perfect for fieldwork  La Nina  Adequate Subsoil

6.  Looking at the three primary sources of corn demand  Ethanol  Livestock  Exports

7.  Usage to be stable at around 5 billion bushels  Profit margins are decent  Ethanol and DDGs prices are strong  EPA approves blend rate to 15% on 2001 cars and newer positive.  Congressional extension of blender’s credit, tariffs and mandates huge positive for ethanol production.  Ethanol is the wild card subject to changes in government policy

8.  Hog and pig report shows that breeding herd smaller, but total tonnage of production up.  Poultry – numbers continue to grow slowly.  Cattle numbers appear to be stable  Overall feed demand is expected to stay strong.  Improvement in the overall economy should help support the meat demand  Strength in the livestock prices should help demand for corn for livestock feed.

9.  The US still the number one exporter in the world.  Argentina is number two with crop problems.  China – US or from Argentina?  If the Argentine crop is reduced, it could add additional US export demand.  Worldwide grain supplies are tight especially after problems in the Russian and Australian.

12.  The index funds are a major factor  Basis levels should tighten and stay that way through the summer.  Adapt strategies that give maximum flexibility for delivery.  Use options and minimum price strategies to keep your plan flexible when price are in an uptrend

13.  Cash will be king through the summer. Maximize the benefit of on-farm storage.  Use options if you think there is upside potential and to give you maximum delivery flexibility.  Implement a scale up strategy that keeps using higher strike priced puts and eventually roll up lower strike puts.  Try to sell option premium whenever you can to hold down the cost of option premium.

14.  Most farmers are sold out, so try to hold cash corn and defend price with put options.  Look for old crop prices to gain on new crop.

15.  We are recommending an option strategy that incorporates flexibility into your marketing plan.  We think that $5.25 to $5.50 cash corn is a good place to begin making sales.  We plan to accomplish this with the following strategy:  Buy the Dec $5.70 corn put for $0.70  Sell the Dec $7.00 corn call for $0.38  Sell the Jul $6.00 corn put for $0.33  This gives a net cost of $0.02.  It gives you a minimum price of approx. $5.70, with the ability to participate in rallies of up to $7.00.

16.  U.S. crop size pretty well set  Brazilian crop conditions are nearly ideal, although Feb-Mar time frame are critical for them.  Still concern about Argentina, but mostly in corn  2010 U.S. acreage likely to be unchanged to slightly higher.  The question whether or not beans can hold acres against wheat, corn and cott on.

17.  Strong export demand has been the driving force in bean demand.  Chinese buying has made up to 50-80% of our bean sales nearly every week through this past marketing year.  It looks like the Chinese are going to buy every extra bean that we produce.  South American beans will take some demand away in the next few months.

18.  Feed demand for meal has been hurt by the increased usage of DDGs in livestock rations.  While bean prices rallied last year, meal lagged  Some recovery in the U.S. economy may encourage livestock expansion and create some additional demand.  The biodiesel demand for bean oil was given a boost when Congress extended the blender’s credit.  Overall domestic demand should be steady at best.

23.  Very few left  Cash beans will be strong through the summer.  Use this strength to finish making 2009 sales.

24.  Scale up selling beginning at $13.00 basis to Nov futures contract.  Or the following option strategy:  Buy Nov $13.00 bean put for $1.10  Sell July $13.00 bean put for $0.42  Sell Nov $16.00 bean call for $0.54  Net cost of $0.14

25.  All Hogs and Pigs 99.1%  Kept For Breeding 98.8%  Kept For Marketing 99.2%  Under 50 97.3%  50 – 119 96.8%  120 – 179 99.3%  180+ 100%

26.  Shrinking Supplies  Pork in cold storage down 2.8%  Will problems with breeding herd last fall cause supply reductions in the 2 nd quarter?  More pigs saved per litter

27.  Recovering Economy  So. Korean imports up 30% - mass herd liquidation  Japan, Mexico, Russia, China all up too  Ultimately will we be able to sell meat at higher prices?

28.  Little producer selling to limit rallies  How are producers going to react to higher prices?  Will it prompt expansion?  Not likely if no one willing to take on additional risk  Will high corn prices ultimately more than offset high hog prices?

29.  Fund buying of hogs is huge  Packer margins are good ($10/cwt)  Cash index up last week for 9 th week in a row  Prices are approaching all time high levels  What will be the effect of better quality corn?

32.  Friday Futures close - $91.62  Buy $91 April put for $2.95  Sell $96 April call for $1.50  Net cost of about $1.45  Roll up the floor to protect gains as market rallies

33.  June Futures on Friday - $92.50  Buy June $94.00 puts for $2.25  Sell June $104 calls for $2.25  Roll floor up $2.00 for a cost of $.50  Roll ceiling up when goes 150% against you  Monitor your positions

34. If you would like more information please visit our website: www.summitcommoditybrokerage.com Or call: Local 515-276-4200 Nat’l 800-247-5869