Brian Grossman (312) ZANER Ag. Corn Exports and US Dollar Collision

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1 Brian Grossman (312) Ag Corn Exports and US Dollar Collision Thursday s come along with a of a more important tone as the USDA routinely releases exports sales data. Now that the USDA is back on schedule, this Thursday s sales covered the time period Feb Given the time period I had high hopes that the USDA would post 1.5+ MMT in sales and shipments of equal or higher volume. My hopes were stomped on as sales missed at MMT and shipments greatly missing at MMT and more in line with reality and the average trade estimates. Poor expectations this time of year is not a good sign for a lofty export outlook. This raises red flags of concern for a market that is already struggling with falling ethanol demand. Now, if exports falter, the corn balance sheet could quickly begin to rise on a year that soybeans remain impressively high for their current supply/demand situation. The US remains the king of the corn export world followed by Brazil and Argentina. With Brazil s corn exports down from last year s Safrinha drought, the US export market started off the market year (Sept-Aug) started of at a stellar pace with MMT in outstanding sales; well above the 11.4 MMT 3-year average. This fact helped build a very bullish undertone to the market and corn was quickly championed as the most bullish market. If that s the case, should we still be waiting? The USDA has remained steadfast on their export estimates. Wheat, soybeans, its no surprise they have remained steady in corn as well. Currently forecasted to export billion bushels (16.4% of total supply) is much smaller then Feed/Residual and Ethanol but it has more then enough ability to shift the market bias as I think it has begun to do. Ag Hedge Newsletter Get Daily Fundamental and Technical Updates for Free. Sent by Each Morning! Sign Up! ma

2 Brian Grossman (312) Ag There is a long list of reasons I think the corn market should be finding support that range from current US weather to fertilizer prices, but the market sees it otherwise for a reason. One of the major red flags in the export market is a rapidly falling Brazilian cash corn price. Falling from a recent high of near 190 US dollars per metric ton in January, prices have since fallen to near 160 USD/mt at a time that their export cycle is winding down just months away from their Safrinha corn harvest. Very different from last year s Safrinha corn crop, Brazil is on track and estimated by Conab to produce MMT in total and of which 65.2 MMT will come from the Safrinha crop. This crop is also the more heavily exported crop and with early harvest starting in June and in the early back half of when the US ships the bulk of its corn exports. Further adding to the potential problem is the stellar sales we had early on. Large volumes of corn were picked up early by key importers like Mexico, Japan, South Korea, and others. Will their early, strong pace keep up, or will we soon face the wrath of a strong US dollar?

3 Brian Grossman (312) Ag As global players like Brazil, Argentina, Ukraine, Russia and more begin to crank up their domestic production, the US s dominance in the world food exports has been quickly reduced by their ability not only in production terms but also in price competitiveness. More recently, the era of , the US enjoyed a relatively low US dollar and was able to compete. (US Dollar Index Monthly Continuous Chart 2000-current) (US Dollar Index overlay USD vs Brazil Real {blue} USD vs Russian Ruble {red} Monthly Continuous Chart 2000-current) During the time period, we have also seen the dollar not only strengthen, but even more so against key competitor currencies like Brazil and Russia. Without a major weather event as we saw in Brazil s Safrinha crop, the world has little reason to move to what is generally the higher priced market simply from the currency exchange. With the era of Quantitative Easing from the Fed and a strong demand for US dollars across the world, this problem may be here to stay for much longer then we would like. This unfortunately is completely out of our control. However, the other problem, potentially the greater of the problems, is the fact that the US EPA, through blender hardship waivers, continue to destroy the American

4 Brian Grossman (312) Ag Ethanol industry to the favor of Big Oil. While that too is completely out of our control, what we can do is put pressure on our elected officials to stop these waivers. They are hurting US ethanol and US producers. Either way, this week has not been very pleasant in the market place. So far corn is posting an outside weekly reversal lower and posted the lowest monthly close of the contract life. From a technical point of view, I wouldn t want to be a buyer of corn if I was managed money and so far, they were busy hate selling corn this week; selling an estimated 75,000 contracts and estimated net short just over 100,000 contracts Interested in my work at Ag? I am accepting new clients and would enjoy a conversation about my marketing services. Reach out to me directly at (312) Often, producers lack the time or understanding to properly plan and execute a marketing plan. My job is to wear that hat for you, so you can focus on the task at hand. But this is not to leave you left hanging. Ag takes pride in being a teaching firm as we want ALL of Or, our clients to feel comfortable with and understand the reason behind each trade. Ready to manage risk with Ag? Follow the link to get started! Contact me directly for a consult or even just a general chat about the markets and where I think they may be heading. Find me on Facebook and Twitter under the Thanks! Brian

5 Brian Grossman (312) Ag Financial Services Brian Grossman Market Strategist -- Agricultural Hedging (312) Direct Line (312) Fax Risk Disclaimer Trading Commodity Futures and Options Involves Substantial Risk of Loss and May Not Be Suitable for All Investors. You Should Carefully Consider Whether Trading Is Suitable for You in Light of Your Circumstances, Knowledge and Financial Resources. Abbreviations & Conversions: MT = Metric Ton TMT = Thousand Metric Ton MMT = Million Metric Ton 1 MT of Wheat/Soybean = bushels 1 MT of Corn = bushels Jan F Feb G Mar H April J May K June M July N Aug Q Sept U Oct V Nov X Dec Z Financial Services covers a broad range of commodities with individual divisions such as Ag Hedge, Precious Metals, and technical speculative based brokers. To learn more, sign up and contact us!