DAILY SOY COMPLEX COMMENTARY 12/20/17

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1 Wednesday December 20, S. Wacker Dr., Suite 2350 Chicago, IL or DAILY SOY COMPLEX COMMENTARY Soybean sales announcements the last three days OVERNIGHT CHANGES THROUGH 6:05 AM (CT): SOY BEANS +2.4, BEAN OIL +0.1, SOYMEAL +0.0 OVERNIGHT DEVELOPMENTS: January soybeans are trading 2 1/2 cents higher this morning. China Dalian soybean futures were down 0.25%. Palm oil futures in Malaysia were down 0.87%. Outside market forces are mixed. NEAR-TERM MARKET FUNDAMENTALS: The soybean meal market continues to shed length which has been pulling the soybean market with it. On the week so far January soybeans are down near 8 cents while January soybean meal is down $5.00. We estimate the managed money length in soybean meal still near 45,000 contracts while in soybeans they are flat. The GFS forecasting model is still leaning wetter in Argentina over the next ten days. Other models are not nearly as wet and this could be reason for the complex to find some stability going into a three day weekend. January soybeans traded down to 953 1/4 overnight which is the lowest level since September 12th. Both soybeans and soybean meal feel like there has been long liquidation this week although Monday's soybean open interest was up 12,266 contracts and soybean meal was up 4,329 contracts suggesting fresh selling interest. Yesterday's open interest had soybeans up another 4,550 contracts while soybean meal was down 2,907 contracts. January soybean meal closed below the 200 day moving average and the 100 day moving average yesterday which could spark further selling. US exporters announced the sale of 145,000 soybeans to Unknown destinations this morning. The last three days have seen daily sales announcements to China/Unknown destinations for a total of 924,000 tonnes. Malaysia's palm oil exports for the December 1-20 period were seen at 874,022 tonnes down 2.0% from last month's 891,926 tonnes for the same period. Malaysian palm oil is down over 5.0% on the month so far. Soybean oil's premium over Malaysian palm oil is $117 per tonne versus the average $110 per tonne over the last year. Soybean harvesting in Mato Grosso may be as much as four weeks later than last year after dry weather delayed planting according to Soybean & Corn Advisor. They also look for soybean production estimates to rise after recent rains. The Soybean and Corn Advisor last Brazilian production estimate was million tonnes with Conab at million tonnes. Yesterday, Safras & Mercado consulting estimated the Brazilian soybean production at million tonnes, slightly lower than their previous estimate of million tonnes. January soybeans and January soybean meal have closed lower in nine of the last ten trading days. The managed money traders have shed their soybean length, but they remain long an estimated 45,000 contracts of soybean meal. As of December 12th, the managed money soybean meal length was 67,716 contracts and open interest is down only 14,419 contracts since then. Oil-share closed at 34.5% which was the highest close since November 28th. Look for continued strength in oil-share into the end of the year. The next downside target in January soybeans is at 948 3/4 with resistance at 967.

2 1) Long March Soybean Oil from with an objective of Risk the trade to a close under ) Long March oil/short July soybean oil from -40 with an objective of -10. Risk a total of 10 points from entry. SOYBEAN COMPLEX TECHNICAL OUTLOOK: SOYBEANS (JAN) 12/20/2017: Momentum studies are declining, but have fallen to oversold levels. The market's close below the 9-day moving average is an indication the short-term trend remains negative. The market's close below the pivot swing number is a mildly negative setup. The next downside objective is 948 3/4. The market is approaching oversold levels on an reading under 30. The next area of resistance is around 960 1/2 and 966 3/4, while 1st support hits today at 951 1/2 and below there at 948 3/4. SOYBEAN OIL (JAN) 12/20/2017: Daily stochastics are trending lower but have declined into oversold territory. The market's close below the 9-day moving average is an indication the short-term trend remains negative. The close over the pivot swing is a somewhat positive setup. The next downside objective is now at The next area of resistance is around and 33.46, while 1st support hits today at and below there at SOYMEAL (JAN) 12/20/2017: Momentum studies are declining, but have fallen to oversold levels. The market's close below the 9-day moving average is an indication the short-term trend remains negative. The close below the 1st swing support could weigh on the market. The next downside target is now at The next area of resistance is around and 320.4, while 1st support hits today at and below there at DAILY CORN COMMENTARY Open interest up 25K in last three days OVERNIGHT CHANGES THROUGH 6:05 AM (CT): CORN +0.4 OVERNIGHT DEVELOPMENTS: March corn is trading 1/2 cent higher this morning. China Dalian futures were unchanged this morning. Outside market forces are slightly positive with crude oil and metals higher. The US dollar is near unchanged. NEAR-TERM MARKET FUNDAMENTALS: The volume remains light in holiday fashion with the same 2 1/4 cent range the last two sessions. Snow in parts of Russia's central grain regions will delay the tail end of corn harvest with nearly 15% of the crop to be gathered according to Agritel. The arrival of snowy weather will also cause quality concerns for the corn. China's Dalian futures are unchanged this morning but up 1.9% on the week and are up over 20% on the year so far. Tight supplies of good quality local corn continues to support the futures market as indicated by officials at Continental Rice in Tokyo. Chinese mills have purchased 1.2 million tonnes of US corn since the start of November as the widening gap between Dalian and US corn prices make imports attractive. Chinese corn futures are about $139/tonne more expensive than CME corn futures prices which is the most since February The Xinhua news agency reported yesterday that China's largest corn producing region of Heilongjiang is cutting corn acreage by almost 1.0 million hectares (2.471 million acres) in 2017 with smaller reductions in Jilin province as the country continues to try and reduce massive-dated government stocks. Soybean harvest in Mato Grosso may be as much as four weeks later than last year after dry weather delayed planting according to Soybean & Corn Advisor. Farmers may plant more sorghum, sunflowers and cotton after soybeans because low corn prices reduce farmer interest in planting a second-season crop. Brazil's corn crop may fall to 83.0 million tonnes because of smaller area planted after the soybean harvest in January and February. The open interest in corn went up 11,503 contracts on Tuesday. The average estimate for today's ethanol production report is million barrels per day in a range of to million. Stockpiles are estimated at 22.4 million barrels in a range of 22.0 to million barrels.

3 The open interest in corn is up nearly 25,000 contracts over the last three days which seems to be increased selling interest. Yet, March corn continues to hold the 346 1/2 level as the rate of descent is softening. A strong close above the first level of resistance at 351 3/4 could get the trade talking about a triple bottom. Holiday markets sometimes surprise with limited participation from traders and wild swings. The swing low objective remains at 341 1/4. Resistance is seen at 351 3/4 followed by 353 1/2. Long May Corn 380 call, short May Corn 430 call, and short May Corn 350 put from a net premium paid of +2 cents. Use an objective of +28 cents on the spread, and risk a total of 8 cents from entry. CORN TECHNICAL OUTLOOK: CORN (MAR) 12/20/2017: Daily stochastics declining into oversold territory suggest the selling may be drying up soon. The market's close below the 9-day moving average is an indication the short-term trend remains negative. With the close higher than the pivot swing number, the market is in a slightly bullish posture. The next downside objective is now at 345 1/2. The next area of resistance is around 348 1/2 and 349 3/4, while 1st support hits today at 346 1/2 and below there at 345 1/2. DAILY WHEAT COMMENTARY Reversal action yesterday following through OVERNIGHT CHANGES THROUGH 6:05 AM (CT): WHEAT -1.2 OVERNIGHT DEVELOPMENTS: Chicago March wheat is trading 1 1/4 cent lower this morning. Kansas City March is down 1 1/2 cent. Outside market forces are mixed. Matif milling wheat futures are down 0.46%. NEAR-TERM MARKET FUNDAMENTALS: France's largest export union, InVivo, commented that wheat prices should remain under pressure as global output keeps expanding. French wheat remains too expensive to compete with Russian wheat and Argentina's crop is soon to be competing as well. Paris wheat futures are heading for the fifth consecutive year in decline the longest losing streak since Russia's Deputy Ag Minister informed Saudi officials the Russian companies are ready to start wheat sales to Saudi Arabia. This news comes just days after Saudi Arabia and Russia agreed to a trade agreement that will guarantee Saudi food security after a decision to halt wheat plantings in the country. The Saudi-Russian Business Council seeks to boost bilateral trade to $10 billion per year within five years from the current $1 billion per year with agriculture trade expecting a significant increase. Iraq is seeking 50,000 tonnes of wheat with the lowest offer coming from the US at $284 per tonne compared to Australian offers at $288 per tonne and Canadian offers at $295 per tonne. The National Weather Service latest 8-14 day outlook has increased precipitation in the winter wheat belt for the December 27th-January 2nd period, but temperatures remain below normal for the same period. Snow cover in many areas of Kansas, Oklahoma and Texas is minimal. With the end of year just seven days away traders have been calculating the index fund re-balancing for While the Chicago wheat figures are nominal, the Kansas City market could see 12,000 contracts of buying which is almost 4.0% of the total open interest. This re-balancing will be over five days from January The open interest in Chicago went down 891 contracts on Monday with Kansas City up 1,262 contracts. March wheat put in an outside day lower close yesterday after trading to a recent high at 424. We can't put much

4 merit into the failure considering the light volume and tight ranges but still, the action felt toppy. The next upside target in March wheat remains at 426 3/4. Close-in support at 415. WHEAT TECHNICAL OUTLOOK: WHEAT (MAR) 12/20/2017: Daily stochastics are showing positive momentum from oversold levels, which should reinforce a move higher if near term resistance is taken out. The market's short-term trend is positive on the close above the 9-day moving average. The market could take on a defensive posture with the daily closing price reversal down. The market's close below the pivot swing number is a mildly negative setup. The near-term upside target is at 425 1/2. The next area of resistance is around 422 and 425 1/2, while 1st support hits today at 417 and below there at 415 1/2. KC WHEAT (MAR) 12/20/2017: Daily stochastics are showing positive momentum from oversold levels, which should reinforce a move higher if near term resistance is taken out. A positive signal for trend short-term was given on a close over the 9-bar moving average. It is a mildly bullish indicator that the market closed over the pivot swing number. The next upside target is 425 3/4. The next area of resistance is around 422 1/2 and 425 3/4, while 1st support hits today at 417 1/2 and below there at 415 1/2. MINN WHEAT (MAR) 12/20/2017: Stochastics are at mid-range but trending higher, which should reinforce a move higher if resistance levels are taken out. The market's short-term trend is positive on the close above the 9- day moving average. It is a slightly negative indicator that the close was under the swing pivot. The near-term upside target is at 626 1/2. The next area of resistance is around 621 3/4 and 626 1/2, while 1st support hits today at 614 3/4 and below there at 612 1/4. RICE (JAN) 12/20/2017: Momentum studies are still bearish but are now at oversold levels and will tend to support reversal action if it occurs. A negative signal for trend short-term was given on a close under the 9-bar moving average. The market has a slightly positive tilt with the close over the swing pivot. The next downside objective is now at The next area of resistance is around and , while 1st support hits today at and below there at DAILY TECHNICAL STATISTICS 9 DAY STOCH D STOCH K 4 DAY 9 DAY 18 DAY 45 DAY 60 DAY CLOSE GRAIN COMPLEX CNAH / CNAK / SSAF SSAH / SMAF BOAF WHAH / WHAK / RCAF KWAH MWAH / OTAH /

5 DAILY SWING STATISTICS Contract Support 2 Support 1 Pivot Resist 1 Resist 2 GRAIN COMPLEX CNAH8 Corn 345 1/ / / / /4 CNAK8 Corn / /4 358 SSAF8 Soybeans 948 3/ / / / /4 SSAH8 Soybeans 959 1/ / / /4 SMAF8 Soymeal BOAF8 Soybean Oil WHAH8 Wheat 415 1/ / /2 WHAK8 Wheat / / /2 RCAF8 Rice KWAH8 KC Wheat 415 1/ / / / /4 MWAH8 MINN Wheat 612 1/ / / /4 OTAH8 Oats 237 3/ / / / /4 DAILY CATTLE COMMENTARY Expect more consolidation ahead of On-Feed report. Despite higher cash cattle trade last week, the trade does not appear to be too anxious to bid them higher this week. Yet, there are mixed viewpoints on where cattle could be headed this week. Feedlots don't appear to be too anxious to sell, but packer demand could be limited by lower the slaughter levels expected over the next couple of weeks. Cash beef prices have been directionless since late last week, gaining on Friday and Monday and declining yesterday. USDA boxed beef cutout values were up 58 cents at mid-session yesterday, but they closed $1.39 lower at $ This was down from $ the previous week. The USDA estimated cattle slaughter came in at 118,000 head yesterday. This brings the total for the week so far to 237,000 head, up from 236,000 last week at this time and up from 228,000 a year ago. The trade may be reluctant to push the market too far in either direction with the Cattle on Feed report looming on Friday. For the report, the trade on average is looking for November placements to come in about 6% higher than last year, November marketings about 3% higher, and on-feed as of December 1st about 7% higher. Look for resistance in February live cattle at Additional upside targets include and Look for support at and then CATTLE COMPLEX TECHNICAL OUTLOOK: LIVE CATTLE (FEB) 12/20/2017: Daily stochastics are showing positive momentum from oversold levels, which should reinforce a move higher if near term resistance is taken out. The market's short-term trend is positive on

6 the close above the 9-day moving average. It is a slightly negative indicator that the close was lower than the pivot swing number. The near-term upside objective is at The next area of resistance is around and , while 1st support hits today at and below there at FEEDER CATTLE (JAN) 12/20/2017: The daily stochastics have crossed over down which is a bearish indication. Momentum studies are still bearish but are now at oversold levels and will tend to support reversal action if it occurs. The close below the 9-day moving average is a negative short-term indicator for trend. The close below the 2nd swing support number puts the market on the defensive. The next downside target is The next area of resistance is around and , while 1st support hits today at and below there at DAILY HOGS COMMENTARY Cash hogs and pork under pressure ahead of holiday slowdown The trade is looking at slower holiday demand ahead, but there may some resistance to pushing too hogs much to the downside prior to the Quarterly Hogs and Pigs report on Friday. For the report, the trade is looking for all hogs and pigs as of December 1st to come in at 102% of last year, with the September-November pig crop expected to come in at 102% as well. USDA pork cutout values, released after the close yesterday, came in at $75.73, up 78 cents from Monday but down from $80.32 the previous week. Pork prices have been choppy this week. Cash hog prices in Iowa/Southern Minnesota were 70 cents lower yesterday. The USDA estimated hog slaughter came in at 468,000 head yesterday. This brings the total for the week so far to 935,000 head, up from 932,000 last week at this time and up from 882,000 a year ago. The CME Lean Hog Index as of December 15th came in at 63.18, down 93 cents from the previous session and down from the previous week. Feb hogs were only 52 points above the double bottom from December 15th and November 15th at their lowest point yesterday, and this could be a key support area today. And while we could see some consolidation as we move into the end of the week with Hogs and Pigs and Cold Storage reports both due out on Friday, the bears appear seem to be in control. Look for support at in February hogs, and then Resistance is up at PORK COMPLEX TECHNICAL OUTLOOK: LEAN HOGS (FEB) 12/20/2017: Momentum studies are declining, but have fallen to oversold levels. The market's close below the 9-day moving average is an indication the short-term trend remains negative. It is a slightly negative indicator that the close was under the swing pivot. The next downside target is now at The next area of resistance is around and , while 1st support hits today at and below there at DAILY TECHNICAL STATISTICS

7 9 DAY STOCH D STOCH K 4 DAY 9 DAY 18 DAY 45 DAY 60 DAY CLOSE MEAT COMPLEX LCG FCF LHG DAILY SWING STATISTICS Contract Support 2 Support 1 Pivot Resist 1 Resist 2 MEAT COMPLEX LCG8 Live Cattle FCF8 Feeder Cattle LHG8 Lean Hogs ***This report includes information from sources believed to be reliable and accurate as of the date of this publication, but no independent verification has been made and we do not guarantee its accuracy or completeness. Opinions expressed are subject to change without notice. Any information or recommendation contained herein: (i) is not based on, or tailored to, the commodity interest or cash market positions or other circumstances or characterizations of particular investors or traders; (ii) is not customized or personalized for any such investor or trader; and (iii) does not take into consideration, among other things, risk tolerance, net worth, or available risk capital. Any use or reliance upon the information or recommendations is at the sole discretion and election of the subscriber. The risk of loss in trading futures contracts or commodity options can be substantial, and traders should carefully consider the inherent risks of such trading in light of their financial condition. Any reproduction or retransmission of this report without the express written consent of Zaner Group, LLC. is strictly prohibited.