Robert Bresnahan The 9 th China International Oils & Oilseeds Conference November 6,

Components of Price Macro Fundamental Technical Inputs

©2014Trilateral, Inc. 3 Macro Influences Fundamental Inputs Technical Inputs Highly Probable Price Projections Risk Management

1)Long-term Commodity Cycle 2)U.S. Dollar 3)Market Psychology Marco Influences

#1 Long-term Commodity Cycle John Dos Passos, the novelist and historian, once said: "Often things you think are just beginning are coming to an end."

#2 Dollar Bottom Strong Inverse Correlation If the dollar goes up, commodity go down

©2014Trilateral, Inc. 7 #3 Major Change in Market Psychology Proof of the End of Long-term Commodity Cycle

©2014Trilateral, Inc. 8 #3 Major Change in Market Psychology Proof of the End of Long-term Commodity Cycle

©2014Trilateral, Inc. 9 #3 Major Change in Market Psychology Proof of the End of Long-term Commodity Cycle

©2014Trilateral, Inc. 10 #3 Major Change in Market Psychology Proof of the End of Long-term Commodity Cycle

#3 Major Change in Market Psychology Proof of the End of Long-term Commodity Cycle Fundamentals dictate the trend, Market Psychology drives price velocity.

Fundamental Influences

FUNDAMENTAL INPUTS DICTATE THE MARKET TREND. The most important fundamental number is the monthly USDA S&D number. FUNDAMENTAL INPUTS DICTATE THE MARKET TREND. - Up - Down - Sideways The most important fundamental number is the monthly USDA S&D number. - Lower S&D numbers = Higher Prices - Higher S&D numbers = Lower Prices

©2014Trilateral, Inc. 14 Corn The absolute S&D number is important, as is the trend of the S&D numbers.

©2014Trilateral, Inc. 15 Corn Increasing yields elevates the S&D numbers. Final yields are unknown.

©2014Trilateral, Inc. 16 Corn High High Ending Stocks equates to High S&D numbers and lower prices. Low Low Ending Stocks equals Low S&D numbers and higher prices. The trend of the S&D numbers directly effects market psychology. Critical level is 1.0 billion bushels.

©2014Trilateral, Inc. 17 Soybeans The absolute S&D number is important, as is the trend of the S&D numbers. Prices: Steady to Higher Prices: Lower

©2014Trilateral, Inc. 18 Soybeans Increasing yields elevates the S&D numbers. Final yields are unknown.

©2014Trilateral, Inc. 19 Soybeans High High Ending Stocks equates to High S&D numbers and lower prices. Low Low Ending Stocks equals Low S&D numbers and higher prices. Critical level is 150 million bushel carryover.

Technical Influences Support & Resistance Technical Price Patterns

How Low Can Corn Prices Go? Prices could ultimately trade between 2.96 ¾ to $1.85 ¾.

Long-term Trends There is the possibility of one more new low to complete wave III.

How Low Can Soybean Prices Go? Prices could trade well below $7.76 1/2.

Long-term Trends One more new low will complete wave 3 (circled).

Head & Shoulders technical price pattern measures to roughly $5.25. How Low Can Soybean Prices Go?

How Low Can Soybean Meal Go? Price could ultimately trade below Flat to Lower

Long-term Trends Price have completed an initial decline (a). A corrective of that decline is unfolding. Flat to Lower

How Low Can Soybean Oil Go? Price could ultimately trade down to Flat to Lower

Long-term Trends One more low will complete wave 3 (circled).. Flat to Lower

Macro Outside Forces Deflation/Lack of Inflation?. Flat to Lower How Could Prices Trade So Low?

Long-term Commodity Cycle John Dos Passos, the novelist and historian, once said: "Often things you think are just beginning are coming to an end."

Flat to Lower Treasury Yields Falling yields reflect a lack of growth/inflation.

Flat to Lower Gold Falling gold prices reflect a lack of growth/inflation.

Flat to Lower Copper Hedge funds utilize copper as a barometer of world economy health.

Flat to Lower Dollar Dollar rally equates to lower commodity prices.

Flat to Lower Euro Euro decline is consistent with dollar rally.

Equity prices “Black Swan”. Possible “Black Swan”. Down

Fundamentals. Flat to Lower How Could Prices Trade So Low?

How Could Prices Trade to the Much Lower Levels S&D, while lower is still relatively high with a carryout close to 2.0 billion bushels.. Flat to Lower

How Could Prices Trade to the Much Lower Levels S&D continue to build. Higher S&D equals lower prices.. Flat to Lower

How Could Soybean Prices Trade to the Lower Levels? World S&Ds at record levels.. Flat to Lower

November 2015 Soybeans Divided by December Corn Current ratio favor planting soybeans. Brazil is planting soybeans now.

Near-term Price Direction Corrections in a long-term downtrend.

Flat to Lower Shot-term Outlook Correction (wave (4)) could be completing now.

Flat to Lower Seasonal Pattern Grains tends to bottom in early October.

Flat to Lower Shot-term Outlook Correction (wave (4)) could be completing now.

Flat to Lower Seasonal Pattern Grains tends to bottom in early October.

Flat to Lower Shot-term Outlook Transportation issues are supporting soybean meal.

Flat to Lower Seasonal Pattern Grains tends to bottom in early October.

Flat to Lower Shot-term Outlook Soybean oil could be completing a correction now.

Flat to Lower Seasonal Pattern Grains tends to bottom in early October.

Flat to Lower Components Best time to Lock in basis?

Flat to Lower Gulf Soybean Basis History Declining from historically high levels.

Flat to Lower Gulf Soybean Declining from historically high levels.

Flat to Lower Gulf Soybean Meal Basis History

Flat to Lower Midwest Soybean Meal Basis History Significant difference between Midwest and Eastern soybean meal basis.

©2014Trilateral, Inc. 57 Transportation Issues

©2014Trilateral, Inc. 58 Transportation Issues

Commodity Funds Influence Near-term Price Direction

“Money Flow” Large long position is troubling.

“Money Flow” Covering shorts and returning to a long position.

“Money Flow” Funds remained long through the entire price decline.

“Money Flow” Funds covered shorts and are now long.

Triggers for Action When will traditional commodity funds liquidate their grain holdings? Which one chart should we focus on? What could drive prices even lower?

Intra-Market Spreads An easing of the backwardation would be a signal the rally is over. Bearish Bullish

Quantifying Risk

Possible Path Lower. What are the risks? 8.30 Upside risk is to between ¼ and ¼.

What are the risks? Risk is to

Closing /Recommendations Autumn 2014 transportation issues are exerting an oversized impact on agriculture price discovery. - Higher end user meal basis. - Lower on farm basis (lack of farmer selling.) - Supercharged cash crush margins. - Increased willingness of meal end users to extend forward coverage to insure timely delivery. Collectively these are supportive to soybeans, soybean meal and grains. - Corn & wheat are underpriced relative to soybeans. Easing of transportation strain by February/March will reduce support from this usual factor allowing market to focus on 2015 Brazilian row crop prospects and sizeable gain in 2015 U.S. soybean acreage. Until then, future shorts are vulnerable.Until then, future shorts are vulnerable.

Closing /Recommendations November soybean’s $1.40 rally thus far from the early October lows compares: - $2.00 November soybean fall 2013 rally. - Record $$2.90 November soybean autumn rally in Most November soybean autumn rallies are under $1.50 although current autumn meal transportation glitch (record bean and meal exports layered over deteriorating rail efficiency) is unprecedented. BOTTOM LINE: While we remain confident that new row crop lows are likely in the first quarter of 2015, we do not recommend short side of market until pipeline shortages are resolved. - Focus on post-harvest soybean basis appreciation, soy meal basis, pace of soybean export sales and any sign of bin spill-over soybean sales next week in eastern Midwest. Long term, we are unable to fundamentally justify November 2015 soybeans over $10.00 given the record 2015 U.S. soybean acreage and the potential for a large gain in September 2016 U.S. soybean stocks.

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