The energy complex has endured a tre-mendous bear-market since the summer of 2014, with crude oil prices dropping nearly $70 as U.S. shale producers flooded the market and OPEC nations kept their spigots flowing to maintain market share. The market made a mockery of predictions of “peak oil” that were prevalent as recently as two years ago.

But no market is going to go down for-ever, and there are reasons to think the bear-market in crude oil is over. Let’s look at some of the fundamental and technical reasons this market should have support.

SHALE BOOM TO BUSTFor months, the biggest fundamental

factor we have been watching is U.S. pro-duction, for signs that weaker prices were starting to cause oil producers to turn off the spigot. This bear-market has been one driven by excess supply. But reversing the trend in production is typically a long pro-cess. As recently as a couple months ago we saw no signs that the cuts were taking effect – and no sign that the bear-market in the energy complex was over.

That has all changed over the past eight weeks. After soaring throughout 2014 and plateauing at all-time highs in early sum-mer, production is now 4.9% off the peak. While production did tick higher in the most recent week, the downward trend is unlikely to reverse and in fact should ac-celerate. New oil drilling rigs, as reported by Baker Hughes, are down 62% since Oc-tober and are at their lowest level in five years. This has been viewed as a leading indicator for energy production and while it has proven to be only a modestly useful tool, the steep reduction in rigs nonetheless indicates that actual crude oil production is

likely to continue decreasing. The underlying factor here driving the

decline in drilling rigs and ultimately pro-duction is financial stress on oil producers. Based on our contacts in the industry, many oil producers and the various businesses that support them are in dire straits. Loan officers are conducting their twice annual review of commodities in October and are considering whether to extend financing.

During the last review, in April, crude oil prices were in the midst of a rebound that would send prices to $60 per barrel, which may have given producers a reprieve. How-ever prices now are around $50, and spent some of the past six months around $40 or lower. This could make for some uncom-fortable meetings between banks and oil producers this month, and the end result could be an increase in bankruptcies.

OTHER SIGNSTechnically, the market also appears to

have set a bottom. Futures tumbled to a fresh six-and-a-half-year low at the end of August, and around that time there started to be some extremely bearish predictions of crude dropping to as low as $20. It is often at the time when bullish or bearish senti-ment seems overwhelming that the market starts to reverse course. Crude oil futures es-tablished an outside week higher off of that bear-market low, which is typically a strong indicator a bottom is in.

Another encouraging sign for bulls is the structure of the market. Just as with grain futures, a market in which deferred con-tracts are at a steep premium to nearby months is generally considered to be bearish. When that relationship changes, and nearby months start to gain, that is a sign market sentiment has shifted and supplies are start-

October 9, 2015

OIL PRICES HAVE BOTTOMED

“Not everything that counts can be counted, and not everything that can be counted counts” - William Bruce Cameron

USD

A R

OUN

DUP

Much of this week’s lead story is from our Brock Energy Report, our monthly newsletter on crude oil, crude products, along with natural gas. If you are interested in following these markets more closely, call 800-525-2903 for a free trial.

Energy News

Friday’s USDA report was largely anticlimactic, particularly for corn and soybeans. USDA cut its U.S. corn crop estimate slightly, as ex-pected, on lower acreage that offset a yield increase. USDA also cut its soybean crop estimate by 1.2% as a 1.1-million-acre cut in plantings was offset by a small yield increase to 47.2 bushels per acre. However projected ending stocks of 1.561 billion bushels for corn and 425 mil-lion for soybeans were both higher than the average trade guesses.

The market’s response to the re-port may have been more telling than the re-port itself, as soybeans rallied on what was at best just a mildly friendly report. Ultimately, this reinforces that while 425 million bushels is a big soybean carryout versus recent years, it is not a bearish amount at current price levels.

The report was not friendly for wheat, as USDA slashed projected wheat exports and estimated U.S. carryout at a higher-than-ex-pected 861 million bushels. World revisions were also bearish, as USDA hiked the global carryout by nearly 2 million metric tons thanks to increased production estimates for Canada, the EU and Australia. However the ongoing El Nino weather pattern is caus-ing increased concern and weather extremes around the world, which could hinder pro-duction going forward.

The markets will now turn their attention to U.S. harvest weather and planting condi-tions in South America, while waiting for the next USDA update a month from now.

2 800-558-3431

ing to tighten. That is what has happened in crude. The 12-month carry (see page 2) has shrunk from $7.50 in mid-August to about $4 currently. The trend has been similar in heating oil (diesel) futures.

What about natural gas? This market is not tied as closely to crude oil as are crude oil’s products, heating oil and gasoline. Technically a bottom here is not quite as clear, as futures fell to their lowest level in more than three years on Oct. 2 and posted a bearish outside week lower on the weekly chart. However, the market has responded well since then, and we expect declining production and the onset of winter’s and heating demand will underpin the market.

NOT SO FASTStill, there are some undeniably bearish

factors that persist in the market. As with our bullish case, the main bearish factor is supply. Crude oil inventories have dropped some seasonally during the summer but re-main at phenomenally high levels (see chart

below). Crude inventories are 28% above a year ago.

In other words, even as U.S. production declines, there is not going to be a panic over supply any time soon. Particularly since OPEC nations have been unwilling or unable to enact production cuts. Instead, various countries, including Saudi Arabia, have maintained production in an effort to maintain market share and ultimately thwart the shale boom as prices remain low.

Also look at the gasoline inventories chart below. While gas supplies are much closer to normal than crude oil, the trend here is bearish, as stockpiles have climbed counter-seasonally each of the past four weeks and are now above the five-year range.

The other potentially bearish factor to consider is the world economy. We’ve writ-ten in the past year about the deflationary environment for commodities. That has been driven in part by declining Chinese growth rates and a glut of supplies for a va-riety of resources. China’s situation appears

to be getting no better, and in recent weeks the turmoil there has threatened to spill into the U.S. The Fed’s decision last month to leave interest rates unchanged was largely based on concern about the global economy.

WHAT IT MEANSOn Aug. 10 we recommended buying

100% of fall diesel fuel needs in the cash market. Our last natural gas recommenda-tion was in March, when we recommend-ed buying 50% of needs through the third quarter.

Whether you followed those recom-mendations or not, the question to ask is this: Is there more upside or downside from these levels? In our view the down-side is limited. As monthly charts on pages 18 and 19 show, heating oil, natural gas and crude oil are all near support levels that should hold, as output continues to decline. Buyers should look at locking in their needs for the next several months in natural gas and diesel.

OIL PRICES HAVE BOTTOMED (continued)

300

325

350

375

400

425

450

475

500

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Source: EIA

Million barrels

2015

2014

5-yr average

5-yr. range

U.S. Crude Oil Inventory

190

200

210

220

230

240

250

260

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Source: EIA

Million barrels

2015

2014

5-yr average 5-yr. range

U.S. Gasoline Inventory

8.00

8.25

8.50

8.75

9.00

9.25

9.50

9.75

Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov

U.S. Crude Oil Production and Weekly Change million barrels/day

2014 І 2015

-4.9%from

peak

Source: EIA

Weekly U.S. Crude Oil Production

0

1

2

3

4

5

6

7

8

9

Jan Feb Mar Apr May Jun Jul Aug Sep Oct

Source: EIA

$/bbl

Crude Oil (WTI)12-month Calendar Spread

narrowing spreads are consistent with

a bullish price trend

3EMAIL BREPORT@BROCKREPORT.COM

Lead story . . . . . . . . . . . . .1Fundamentals . . . . . . . . .3News Analysis . . . . . . . . .4Corn . . . . . . . . . . . . . . . . .6Soybeans . . . . . . . . . . . . .8Management/Biofuels . .10Wheat . . . . . . . . . . . . . . .12

Rice . . . . . . . . . . . . . . . . .14Cotton . . . . . . . . . . . . . . .15Hogs . . . . . . . . . . . . . . . .16Cattle . . . . . . . . . . . . . . .17Feed/Inputs . . . . . . . . . .18Financials/Energy . . . . .19Positions . . . . . . . . . . . . .20 C

ON

TEN

TS

USDA on Friday adjusted its old-crop and new-crop soybean crush estimates upward by 5 million and 10 million bushels respectively, based on the lower-than-expected Sept. 1 soybean stocks and the the latest production data from soy processors. The 5-million bushel increase in the 2014-15 crush to 1.875 billion was modest, given the May-August crush numbers reported last Thursday by USDA’s National Agricultural Statistics Service (NASS) in its highly anticipat-ed new Fats and Oils report. This report provided the first monthly estimates of the full U.S. soy-bean crush since July, 2011.

The soybean trade had been relying on Nation-al Oilseed Processors Association member crush data and assuming the NOPA crush equaled about 95.5% of the full U.S. crush, based on his-torical data from 2011 and earlier. However, the NASS data showed the NOPA crush ranged from 95.0% of the full crush in May down to 92.6% in August, averaging 93.7% of the full May-August crush. This implies the total old-crop crush could have been as high as 1.899 billion. USDA is still carrying a soybean residual of 46 million bushels on its 2014/15 balance sheet and could make fur-ther revisions to the crush.

The NASS Grain Crushings and Co-Products production report put August corn-for-ethanol use at 455 million bushels, down slightly from July. The NASS data together with weekly En-ergy Information Administration ethanol pro-duction data implies an August conversion rate of 2.80 gallons of ethanol per bushel of corn, slightly below the 10-month average of 2.82 gal-lons per bushel.

FUNDAMENTALSCOMMENTARY

12/10/15 New Harmony, IN - First Bank Evansville1/13/16 Fort Worth, TX - Farm Credit Bank of Texas2/17/16 Memphis, TN - MidSouth Farm & Gin Show2/28/16 - 3/1/16 New Orleans, LA - Agricul-tural Economic SymposiumCall 800-558-3431 or visit www.brockreport.com

UPCOMING SPEECHES

110

120

130

140

150

160

170

May Jun Jul Aug

NOPA USDA

Sources: USDA NASS, National Oilseed Processors Association, Thomson Reuters

mil bu

92%

93%

94%

95%

96%

May Jun Jul Aug

NOPA Crush vs. USDA Soybean Crush

2.81

2.77

2.86

2.80

2.84

2.82

2.87

2.77

2.832.84

2.80

2.742.762.782.802.822.842.862.882.90

Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug

2014 2015

est.

gal./buCorn to Ethanol Conversion Rate

Monthly NOPA and USDA Soybean Crush

NOPA crush averaged 93.7% of USDA crush in the four months through August

2014 Oct Nov Dec

2015 Jan Feb Mar Apr May Jun Jul Aug

Beverage alcohol 4.2 3.0 2.4 2.1 2.7 2.5 3.3 3.2 2.5 2.6 3.1

Industrial alcohol 5.7 6.3 7.0 6.1 6.1 6.7 6.6 5.7 6.9 6.2 6.3

Other Purposes 39 42 45 43 38 44 45 48 43 44 43

Fuel alcohol 437 443 465 454 405 449 419 459 451 457 455

Total Corn Consumed 486 494 519 505 451 502 474 516 503 510 507

Monthly Dry and Wet Mill Corn Consumption (million bu)

4 800-558-3431

should help pressure China’s domestic corn prices and reduce demand for imports, along with the lower prices Beijing will pay farmers for their corn this year. However, the news appeared to be already factored into China’s Dalian corn futures.

EQUIPMENT MAKERS EYE CHINAWhile sales of agricultural equipment are generally suffering

due to low commodity prices and falling farm income, there is at least one bright spot in the world for equipment manufacturers – China – where consolidation in the agriculture sector is expected to boost demand for big farm machinery despite a slowing general economy. Migration of farm labor to the cities, land reforms and government subsidies are spurring a move toward larger farm sizes.

“People are just getting ready,” Alexious Lee, head of China industrial research at investment bank CLSA, told Reuters News Service, pointing to the move towards larger farms. “Whether from the dealers or the financing side, everyone is skewing towards this angle.” Several thousand state and co-op farms of about 3,500 hectares (8,650 acres) each will also need bigger tractors and combines.

WORLD NEWS ANALYSIS

BRAZIL CROP WATCH TO PICK UPMarket expectations for Brazil’s 2015-16 soybean crop are high

amid prospects for another rise in plantings and the presence of the El Nino weather event, which usually brings favorable growing weather there. USDA on Friday raised its crop forecast by 3 million metric tons (MMT) to 100 MMT, while Brazil’s CONAB forecast output in a range of 100.1-101.9 MMT. Other estimates circulating in the market range from 97.1 MMT to 102 MMT.

Normally El Nino years bring good soybean crops in Brazil. Out of the last six moderate or stronger El Nino years, five have seen record or near-record yields, with only the 1987-88 crop coming up short. However hot, dry weather in Brazil’s top soybean growing state of Mato Grosso, which continues to limit planting activity should be watched closely as market concerns about conditions there could start to escalate very soon.

UKRAINE CORN EXPORTS DOWNUkraine’s government has reportedly reached an agreement

with exporters to allow corn exports of 16 MMT in the 2015/16 marketing year, which began on Oct. 1. That figure is down more than 20% from last year’s exports of over 19 MMT. USDA on Friday cut its forecast for Ukraine’s exports to 17 MMT from 18.5 MMT. The decline in Ukrainian exports will force importing countries to rely more on supplies from the U.S. and South America. This should help boost U.S. export prospects for the second half of 2015/16 (September-October), along with smaller main season corn plantings in Brazil and reduced plantings in Argentina.

However, weaker Chinese demand for corn imports will likely divert some Ukrainian corn to other markets, limiting the decrease in competition there. A senior official in Ukraine’s government told Reuters News Service on Thursday that corn exports to China under a $1.5 billion loan-for-grains deal could be significantly below an expected 2 MMT this year, as Beijing seems to want less of the grain. Ukraine supplied about 2 MMT of corn to China in 2014 and had planned to ship the same amount this year.

PROVINCE TO STOCKPILE LESS CORNChina’s top corn province of Heilongjiang in the country’s

northeast production belt plans to buy 12.5%-23.0% less corn for state reserves this year than it did last year, according to a local newspaper. The Heilongjiang Daily said the province intends to buy 35-40 MMT of corn for state reserves, down from last year’s purchases of 45.7 MMT. The newspaper said corn reserves in Heilongjiang alone are still expected to hit 120 MMT by the end of next April, up from 81 MMT currently.

This report offers some confirmation of market expectations for a drop in Chinese stockpiling. Smaller purchases for state reserves

WORLD WEATHER HOTSPOTSBrazil’s top soy state of Mato Grosso and neighboring Goias

continued to see hot, dry weather much of this week, leading to further planting delays. World Weather Inc. predicts southern and western areas of Mato Grosso will see late-week rainfall, which should boost planting activity, but a pattern of limited rainfall is set to return next week and soils will quickly dry down again.

Brazilian forecaster Somar Meteorologia said on its website on Thursday that rains will remain uneven across Brazil’s center-west region leading to more planting delays. “Still, the trend is that this month is better than in October 2014, which was extremely hot and dry in much of Brazil”, said agricultural meteorologist Marco Antonio dos Santos.

Dryness across Ukraine, southern Russia and western Kazakhstan continues to hurt winter crop establishment there. World Weather Inc. says some rains may evolve in western Ukraine late this weekend into early next week. Computer forecast models suggest drier areas in Ukraine and southern Russia will see moderate rainfall in the Oct. 15-21 period.

Australia’s wheat regions dried out further this week, likely hurting yields. The crop is now largely done reproducing in inland areas, so potential for further damage there is limited. Timely showers in southeastern Australia the next few days will offer a short-term boost to reproducing wheat there.

5EMAIL BREPORT@BROCKREPORT.COM

TRADE AGREEMENT CHEERED BY LIVESTOCK, WHEAT INDUSTRIES

The week started with some good news on the trade front, as negotiators announced they had reached a deal on the Trans-Pacific Partnership trade agreement. The deal, considered hugely important and a main priority for the Obama Administration, involves the U.S. and 11 other Pacific Rim nations, including Japan, Canada, Chile, Australia, Malaysia and Vietnam. It will apply to roughly 40% of the global economy and result in the phasing out of thousands of import tariffs.

The details of the deal are still trickling out and will continue to do so, as the full text is not available for another month. Plus the deal faces opposition on both sides of the aisle in Congress. Here is a rundown of the potential impact on various industries in agriculture.

PORK: The National Pork Producers Council said it had played an active role in the five-year negotiation, and is confident the deal will “provide enormous new market opportunities” for pork products. It cited an Iowa State economist who said the deal could increase U.S. exports over time “exponentially.” The industry shipped $4.5 billion of pork products to the other TPP nations (a list that notably does not include China).

BEEF: The National Cattlemen’s Beef Association said the deal will immediately reduce tariffs on beef products. It estimated that beef exports currently add more than $350 to each head of cattle sold in the U.S.

WHEAT: The agreement could boost demand from countries where the U.S. already has duty-free access, United Wheat Associates said after the deal was announced. It noted that competitors such as Australia are moving forward with their own bilateral agreements that eliminate tariffs on wheat imports in countries such as Vietnam. The trade group noted “high standards” in the TPP agreement that should help U.S. wheat be more competitive.

MONSANTO LOSSES INCREASE, COMPANY TO CUT JOBS

Earnings season is starting up, and given the darkening mood in the farm economy and disappointing results last quarter, the inclination is to brace for more bad news. First up this week was Monsanto, which has endured a tumultuous period, including its failed pursuit of Syngenta and weaker commodity prices.

The company reported a larger-than-expected fourth-quarter loss of $495 million, or $1.06 per share. The year-ago loss was $156 million, or 31 cents per share. Excluding one-time items, the

company’s loss amounted to 19 cents per share, whereas analysts were on average expecting a per share loss of one cent according to Reuters.

The company’s corn seed and traits business saw sales fall by 5%, while its chemical segment, which includes Roundup, saw a decline of 12%. The company said it sees a modest rebound in corn prices, but not until the 2016-17 marketing year.

Monsanto also announced it would cut 2,600 jobs as part of a reorganization that would reduce the workforce by

12% over the next two years and result in savings of $275 to $300 million. The company told analysts that it expects more consolidation in the ag sector.

Privately held Cargill, which reports quarterly earnings without going into much detail, reported first-quarter earnings were up 20% to $512

million. The company said its grain origination segment was its top performing business during the

quarter. That could be good news for competitors Archer Daniels Midland and Bunge, although their results do not always mirror each other.

Meanwhile DuPont, a main competitor of Monsanto in the seed business, abruptly announced the departure of CEO Ellen Kullman. Analysts said the timing of the move indicated she was forced out, and her resignation has sparked renewed talk of a possible breakup of the company, driven by an activist shareholder. DuPont, and Kullman, successfully fended off the attempt of an activist shareholder to force a breakup of the company earlier this year.

JOAQUIN LANDS KNOCKOUT BLOW WITHOUT MAKING CONTACT

While Hurricane Joaquin did not make landfall in the U.S., the heavier-than-expected historic rains it brought to the Carolinas and Virginia caused severe flooding and crop damage, primarily to cotton, soybeans, peanuts and sweet potatoes. Even as the storm stayed well off the coast, it created a “fire hose” effect that led to phenomenal amounts of rain, particularly in South Carolina, where a few areas received as much as 20 inches of rain. Several inches of rain was common across the Carolinas and into Virginia.

Some forecasts ahead of the storm had predicted a U.S. landfall along with heavy rains in the eastern Corn Belt that would have delayed harvest. However that forecast did not come to pass, and the storm had little market impact except on cotton. The head of USDA’s Farm Service Agency in South Carolina anticipates “huge” losses in peanuts and cotton. The head of the FSA in North Carolina has estimated that up to 30% of that state’s soy-bean crop could be lost.

NATIONAL NEWS ANALYSIS

25

30

35

40

45

50

55

2009 2010 2011 2012 2013 2014 2015

Billion dollars, four quarter moving average

Q2

Source: Federal Reserve Bank of Kansas City, Agricultural Finance Database

Current Operating Loan Volume

6 800-558-3431

300325350375400425

Apr May Jun Jul Aug Sep Oct

WEEKLY CONTINUOUS

CENTRAL ILLINOIS CASH CORN

CORN

14 DAY RSI

Support

Contract Size: 5,000 buDaily Limit: 25 cents/bu

DECEMBER 2015 Key reversal down

High: 6.00 9/19/12

Low: 3.57 1/28/12/15

Support

7EMAIL BREPORT@BROCKREPORT.COM

Year begins Sept 1 13/14 Est. 14/15 Proj 15/16 Proj 14/15 15/16ACREAGE (million)

Planted Area 95.4 90.6 88.4 90.6 88.4Harvested Area 87.5 83.1 80.7 83.1 80.7Yield 158.1 171.0 168.0 171.0 168.2

SUPPLY (mil bu) Beg. Stocks 821 1,232 1,731 1,232 1,731Production 13,829 14,216 13,555 14,216 13,574Imports 36 32 30 30 30

Total Supply 14,686 15,479 15,316 15,477 15,335USAGE (mil bu)

Feed & Residual 5,030 5,317 5,275 5,300 5,300Food/Seed/Ind 6,503 6,566 6,630 6,571 6,600

Ethanol & By-Products 5,134 5,207 5,250 5,205 5,250Domestic Use 11,534 11,883 11,905 11,871 11,900Exports 1,920 1,864 1,850 1,875 1,850

Total Use 13,454 13,748 13,755 13,746 13,750

Ending Stocks (mil bu, Aug 31) 1,232 1,731 1,561 1,731 1,585CCC 0 0 0 0 0Privately-Owned 1,232 1,731 1,561 1,731 1,585Stocks/Use 9.2% 12.6% 11.3% 12.6% 11.5%Farm Price ($/bu) $4.46 $3.70 $3.50-4.10 $3.68 $3.50-4.00

BrockUSDA

3.25

3.50

3.75

4.00

4.25

-600,000

-500,000

-400,000

-300,000

-200,000

-100,000

0

100,000

200,000

300,000

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Commitments of TradersFutures and Options Combined, as of September 29, 2015

Commercials

PriceContracts

LargeSpecs

Source:CFTC

Price (dotted line,left scale)

VOLUME

OPEN INTEREST

CORN

U.S. SUPPLY & DEMAND

JULY 2016 High: 5.82 3/4

1/30/13Low: 3.80 1/2

8/12/15

COMMENTARYPrices edged higher throughout the

week in anticipation of Friday morn-ing’s WASDE report, which lowered output and carryout slightly. Yields are coming in fairly strong in the up-per part of the Midwest, as expected. Movement has been moderate with the majority of the crop going into storage.

Technically, the trend has been up, but Friday’s poor close established a bearish outside week lower and is cause for concern. Major support in March futures is at $3.90. We expect just choppy trading action over the next several weeks. Cash-Only Marketers’ Strategy: 50% of this year’s crop is forward con-tracted a long time ago. Sit tight. Hedgers’ Strategy: Cash sales are at 30%. We have taken profits on all short hedges and long puts with our only remaining positions being short March $5.20 calls and short Decem-ber ‘16 $5.00 calls. Odds are they will expire at zero and if not we would be selling corn over $5.00.

Support

MARCH 2016 High: 5.12

4/28/14Low: 3.68 3/4

8/12/15

DECEMBER 2016 High: 5.60

12/18/12Low: 3.778/12/15

Key reversal down

Key reversal down

Support

Support

Resistance

Resistance

8 800-558-3431

14-DAY RSI

SOYBEANS

80085090095010001050

Apr May Jun Jul Aug Sep Oct

CENTRAL ILLINOIS CASH SOYBEANS

Source: USDA AMS

WEEKLY CONTINUOUS

Contract Size: 5,000 buDaily Limit: 70 cents/bu

NOVEMBER 2015High: 13.00 10/11/12

Low: 8.53 1/49/11/15

Resistance

Broken support

9EMAIL BREPORT@BROCKREPORT.COM

COMMENTARY

8.00

8.50

9.00

9.50

10.00

10.50

-250,000

-200,000

-150,000

-100,000

-50,000

0

50,000

100,000

150,000

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Commitments of TradersFutures and Options Combined, as of September 29, 2015Price Contracts

Large Specs

Commercials

Source:CFTC

Price(dotted line,left scale)

VOLUME

OPEN INTEREST

MARCH 2016High: 12.11 3/4

5/21/14Low: 8.58 1/2

8/24/15

SOYBEANS

Year Begins Sept 1 13/14 Est. 14/15 Proj 15/16 Proj 14/15 15/16

ACREAGE (million)Planted Acres 76.8 82.3 83.2 83.3 83.2Harvested Acres 76.3 82.6 82.4 82.6 82.4Yield 44.0 47.5 47.2 47.5 47.8SUPPLY ( mil bu) Beg. Stocks 141 92 191 92 191Production 3,358 3,927 3,888 3,927 3,939Imports 72 33 30 33 30 Total Supply 3,570 4,052 4,109 4,052 4,160USAGE (mil bu) Crush 1,734 1,875 1,880 1,885 1,890Exports 1,647 1,843 1,675 1,835 1,675Seed 97 97 92 100 94Residual 0 46 38 41 30 Total Use 3,478 3,861 3,685 3,861 3,689

Ending Stocks (mil bu, Aug 31) 92 191 425 191 471 CCC 0 0 0 0 0 Privately-Owned 92 191 425 191 471Stocks/Use 2.6% 4.9% 11.5% 4.9% 12.8%Farm Price ($/Bu) $13.00 $10.10 $8.40-9.90 $10.10 $8.00-9.50

BrockUSDA

U.S. SUPPLY & DEMAND

Resistance

Yields for the most part are coming in higher than expected. Many pro-ducers are reporting yields 20 bushels or more above average and expecta-tions. This is not going to play out well for the longer term price direc-tion of soybeans.

Nevertheless, technically this mar-ket is in a sideways trading range. Movement of cash soybeans to the market right now has been light. Basis levels have been stronger than normal for a harvest season also indicating that commercials are having difficulty buying soybeans. Support in January soybeans is at $8.75. Cash-only Marketers’ Strategy: 50% was contracted long ago. Sit tight. Nothing has been done on the ‘16 crop. Hedgers’ Strategy: All hedges have been lifted with a net profit on the ‘15 crop of $1.35 per bushel on the entire crop. Going into this week only 10% had been sold in the cash market and on Wednesday we pushed that to 30%. For the ‘16 crop, just stay on the sidelines.

NOVEMBER 2016High: 12.56 1/2

12/6/12Low: 8.509/11/15

JANUARY 2016High: 12.09 1/4

5/19/14Low: 8.57 9/11/15

Brokenresistance

Brokenresistance

10 800-558-3431

WEATHER

MANAGEMENT INSIDE BROCK

ON TOPIC

TIME TO SHIFT GEARS

David BehrelVice President of

Brock Investor Services

While futures and options are not for everyone, as a broker with Brock Investor Services, they are the tools we use when helping clients develop marketing strategies. With a new trend comes a new approach to marketing. Here’s an example of a possible strategy to consider in corn as we shift gears in our market outlook.

As harvest is coming to a close, let’s consider where we’ve been and where we think we are headed:

1. Hedging has paid off in big dividends since the fall of 2012. Clients have netted just slightly less than one dollar per bushel hedge profits on 100% of the crop for both the 2013 and 2014 crops.

2. As I write this, we have 28 cents per bushel in the bank on 100% of the 2015 crop.

3. We have recommended only 30% of this year’s crop be forward contracted by hedgers, and that was done at an average price of $4.30. So if you add 28 cents on top of that price, 30% of the crop is sold at $4.58.

4. The three-year bear market in corn is likely over. That means that the strategies that worked in the last three years are not likely ones we will want to use this coming year.

5. The fundamentals are not necessarily bullish but they’re also not bearish from current price levels. As the balance sheet on page 7 indicates, we expect the average price of corn at the farm this year to be between $3.40 and $4.00 per bushel. Central Illinois is currently at $3.70, right in the middle of the range. The downside risk in the cash market below $3.50 is limited.

DEVELOPING THE PLANLet’s keep in mind that our goal and objective is a net selling

price that gets us in the top 1/3 of the expected annual price range and certainly above the average price of the year. So assuming a client is 30% sold as outlined above, and also assuming that client has enough on-farm storage to keep his crop, what is the next step?

Consider the fundamentals of the corn market. With a 1.6 billion bushel carryover, recognize that it would take a minor miracle for a major bull market next year. The structure of the

futures market reflects that same situation in that there is a stair step market through July (the more distant contracts are higher than the nearby contracts). September corn, however, is currently trading at 7 cents discount to the July, as many people are anticipating an increase in planted corn acres this year due to the price ratio between corn and soybeans. So then the question is how do we take advantage of a stair step market and lock in carrying costs for corn in storage?

While we have not recommended implementing the following strategy as of yet, there’s a good chance we will (or something similar to it) within the next couple of weeks. As this is written, July corn futures are trading at $4.18. July $4.50 calls are at 22 cents. So the recommendation would be to sell the July $4.50 calls at 22 cents, collecting the premium. You are essentially agreeing to give up your corn at $4.50, and receiving 22 cents for doing so. This is what’s known in stock trading as “writing a covered call.” Why do this?

1. The July futures strike price of $4.50 is likely going to be significantly higher than corn prices are going to average.

2. If July futures expire at $4.50 or less, you have collected the 22 cents to add to the selling price of your cash corn.

3. If corn prices continue to rally, you have a ceiling on that market of $4.72. ($4.50 + $.22)That is nearly a dollar over the current market! So what would be wrong with selling 20% of your crop at a dollar over the current market?

The Bottom Line: Selling option premium (calls) is a strategy that can add to your net selling price. This strategy also allows you to “back in to a hedge,” locking in a higher price if the market reaches your strike price objective. In this case you would actually hope that the market goes through the strike price and the premium price but if it doesn’t, at least you’ve added 22 cents per bushel to your average selling price. Don’t do it on 100% of your production. But just starting on 20% to 30% with this method could help increase your average selling price.

Email David at dbehrel@brockreport.com

11EMAIL BREPORT@BROCKREPORT.COM

BIOFUELS

Association. Net exports fell to just 18.5 million gallons, down from 73.7 million in July and the lowest total since May 2014. Much of the shift is attributable to Brazil, where the relentlessly dropping real currency has made imports less attractive and exports more at-tractive.

Brazil’s imports of 1.7 million gallons were down sharply from 25.1 million just five months earlier. Meanwhile the U.S. imported 15.7 million gallons of ethanol in August, up sharply from recent months, with Brazil the primary supplier.

At its current rate, the U.S. is on pace to export about 850 million gallons of ethanol, which would be at the low end of what industry executives have been fore-casting the past two years.

DDG EXPORTS SLIPExports of distiller’s dried grains with

solubles were down 6% in August from the prior month’s record high, as exports to China were down 30%. China has been a dominant buyer of DDGs, but as recent months have demonstrated it is typically at the expense of other would-be buyers. When China backs off those other buyers

step up, and buying from countries other than China was up 44% in August versus the prior month.

RFS SURVIVES ATTACK.. The latest attempt to kill the Renewable

Fuel Standard failed in the Senate last week, although it is unclear

to what extent the vote was actually to support ethanol. The amendment, from Sen. Pat Toomey, R-Pa. and Dianne Feinstein, D-Calif.,

would have been attached to a Senate bill authorizing crude

oil exports. The Senate Banking Committee rejected

the amendment by a 15-7 vote. The head of the National Corn Growers Association said the vote was a “strong message” in support of the RFS. However a group called RFS Off the Menu, which includes the North American Meat Institute as well as restaurant and retail groups, said the amendment was rejected because of the controversial nature of the crude oil bill.

...BUT UNCERTAINTY STILL A PROBLEM

A report from the National Corn Growers Association and National Farmers Union this week argues that the uncertainty surrounding the Renewable Fuel Standard is hurting U.S. farm income. The report focuses not on the types of legislative attacks mentioned above, but on the Obama Administration and EPA’s waffling on mandated blending levels. The report notes that USDA projects farm income to be down $35 billion, or 26%, from 2013 peaks. Of course there are many reasons for that, but the slowing growth in the ethanol industry certainly hasn’t helped. The two groups held a conference call with reporters and noted that the uncertainty has caused some plants to close down. As we have noted recently, these closures have mainly occurred outside the Corn Belt.

OUTPUT TRENDING UP Weekly ethanol production inched

higher for the second week in a row, increasing to 950,000 barrels per day, up 7,000 from the prior week according to EIA. This is 75,000 barrels per day, or 8.6%, above a year ago.

Using a conversion rate of 2.8 gallons of ethanol per bushel, this implies weekly use of 99.75 million bushels, which is slightly below the average weekly pace of 100.7 million bushels needed to reach USDA’s corn use for ethanol forecast of 5.250 bil-lion. Although production should con-tinue to pick up as the harvest makes corn supplies plentiful, ethanol’s contin-ued price premium to gasoline remains a negative factor that could cap seasonal increases in ethanol output. Also, as we noted last week, ethanol production mar-gins are weak currently.

EIA reported stockpiles were up 30,000 barrels, to 18.81 million barrels, compared to 18.65 million a year earlier.

ETHANOL EXPORTS DROP

Ethanol exports fell substantially in August, to their lowest monthly total in more than two years according to gov-ernment data and the Renewable Fuels

-125-100

-75-50-25

0255075

100125150175200

Exports Imports Net exports

Million gallons

Source: USDA FAS (through August; September data to be released in November)

0

Net Ethanol Exports Down 48% Since March

2011 2012 2013 2014 2015

August

73.7

18.5

net exports

Net Ethanol Exports Sink to 15-month Low

12 800-558-3431

CHICAGO WEEKLY

CHI #1

CHI #2

CHI #3

WHEATCHICAGO DECEMBER 2015

High: 7.72 5/9/14

Low: 4.63 9/4/15

High: 7.69 5/7/14

Low: 4.729/4/15

MARCH 2016

JULY 2016

Contract Size: 5,000 buDaily Limit: 35 cents/bu

High: 7.32 5/6/14

Low: 4.82 1/29/4/15

Resistance

Brokenresistance

Brokenresistance

Brokenresistance

Support

Support

Support

13EMAIL BREPORT@BROCKREPORT.COM

400

450

500

550

600

650

Apr May Jun Jul Aug Sep Oct

550

600

650

700

750

800

850

Apr May Jun Jul Aug Sep Oct

The most significant observation in this market is the discount of Kan-sas City wheat to Chicago. This price relationship is a very rare occurrence. With the higher protein quality of Kansas City wheat versus Chicago, that relationship will not last long. That is why we recommended a speculative move this week of buying Kansas City March and selling Chi-cago March.

Fundamentally the world supplies are burdensome but discounted at current price levels. Dryness concerns in the Black Sea region and southern U.S. Plains remain potentially sup-portive factors. Technically, the mar-ket is in a short-term upward trend. We see no reason to fight the trend.Cash-only Marketers’ Strategy: 70% of the old-crop was sold long ago. Nothing has been priced on the ‘16-17 crop. Hedgers’ Strategy: 70% was sold months ago. We are on the sidelines for the new crop.

COMMENTARY

Year Begins June 1 13/14 14/15 Proj 15/16 Proj 14/15 15/16

ACREAGE (million)Planted Area 56.2 56.8 54.6 56.8 54.6Harvested Area 45.3 46.4 47.1 46.4 47.1Yield 47.1 43.7 43.6 43.7 43.6SUPPLY (mil bu) Beg. Stocks 718 590 753 590 753Production 2,135 2,026 2,052 2,026 2,054Imports 169 149 125 150 130 Total Supply 3,021 2,766 2,930 2,766 2,936USAGE (mil bu) Food/Seed 1,029 1,039 1,039 1,037 1,037Feed & Residual 226 120 180 136 195

Domestic Use 1,255 1,159 1,219 1,173 1,232Exports 1,176 854 850 840 850 Total Use 2,431 2,013 2,069 2,013 2,082

Ending Stocks (mil bu, May 31) 590 753 861 753 854 CCC 0 0 0 0 0 Privately-Owned 590 753 861 753 854Stocks/Use 24.3% 37.4% 41.6% 37.4% 41.0%Farm Price ($/Bu) $6.87 $5.99 $4.75-5.25 $6.00 $4.80-5.50

BrockUSDA

U.S. SUPPLY & DEMAND

400425450475500525550575600625650

Apr May Jun Jul Aug Sep Oct

MINNEAPOLIS CASH (U.S. #1, 14% PROTEIN)

High: 7.99 5/9/14

Low: 4.98 3/4 9/3/15

WHEATKANSAS CITY

December 2015High: 8.24 1/4

5/9/14 Low: 4.65 3/4

9/4/15

Source: USDA AMS

KANSAS CITY CASH

ST. LOUIS CASH

Source: USDA AMS

Source: USDA AMS

MINNEAPOLISDecember 2015

Daily Limit: 60 centsContract size: 5,000 bu

Daily Limit: 40 cents/buContract size: 5,000 bu

Support

Support

14 800-558-3431

Year begins Aug 1 13/14 14/15 Proj. 15/16 Proj. 14/15 15/16ACREAGE (Mil. Acres)

Planted Area 2.49 2.94 2.61 2.94 2.61Harvested Area 2.47 2.92 2.57 2.92 2.57Yield (Pounds) 7,694 7,572 7,307 7,572 7,296

SUPPLY (Mil. cwt)Beg. Stocks 36.4 31.8 48.5 31.8 48.5Production 190.0 221.0 187.8 221.0 187.5Imports 23.1 24.7 25.5 24.7 26.9

Total Supply 249.5 277.5 261.8 277.5 262.9USAGE (Mil cwt) Domestic & Residual 124.9 128.7 125.0 128.7 126.2Exports 92.7 100.3 97.0 100.3 99.0 Rough 28.6 34.0 33.0 34.0 33.8 Milled (Rough Eq.) 64.1 66.3 64.0 66.3 65.2Total Use 217.6 229.0 222.0 229.0 225.2Ending Stocks 31.8 48.5 39.8 48.5 37.7 Farm Price ($/cwt) 16.30 13.20 14.20-15.20 13.20 14.35-15.15

BrockUSDA

After a strong run dating back to early summer, futures have started to look toppy. The market set new contract highs and a fresh 14-month high on a continuation basis on Monday but was weak after that and tumbled on Thursday. Futures posted a bearish weekly reversal lower.

USDA cut its production estimate Friday, which was expected given re-ports coming out of the fields in re-cent weeks. USDA cut the yield to 7,307 pounds per acre, from 7,374 last month. Long-grain carryout was reduced to 21.8 million hundred-weight, from 23.0 million last month and 26.5 million in 2014-15. World carryout was lowered to 88.29 MMT, from 90.16 MMT last month.

These reductions have been priced into the market already, and while we are not ready to say the bull market is over, given the strong gains in futures and recent weakness, it is a good time to make another cash sale.

Strategy: We made another 10% cash sale on the 2015 crop on Friday and are now 40% sold.

COMMENTARYNEARBY CONTRACT

DEFERRED CONTRACT

RSI

WEEKLY CONTINUOUS

14-DAY RSI

RICE

U.S. SUPPLY & DEMAND

Contract Size: 2,000 cwtDaily Limit: $1.10/cwt

Brokenresistance

Support

NOVEMBER 2015

JANUARY 2016High: 13.705

10/5/15 Low: 10.27

5/26/15

High: 13.44 10/5/15

Low: 9.785/13/15

Year Beginning Stocks Production Consumption Ending

StocksStocks/Use

Ratio

2008/09 80.99 449.30 437.7 92.64 21.2%

2009/10 92.64 440.61 438.4 94.88 21.6%

2010/11 94.88 450.61 445.3 100.15 22.5%

2011/12 100.15 467.67 461.0 106.86 23.2%

2012/13 106.86 472.79 468.9 110.77 23.6%

2013/14 110.77 478.39 481.6 107.60 22.3%

2014/15 107.60 478.81 484.62 101.79 21.0%Change from September 0.23 0.24 0.50 -0.03 0.0%

2015/16 101.79 474.02 487.52 88.29 18.1%Change from September -0.03 -1.74 0.10 -1.87 -0.4%

* Values in million metric tons; bold numbers are USDA projections.

WORLD SUPPLY & DEMAND

Support

Support

15EMAIL BREPORT@BROCKREPORT.COM

WEEKLY CONTINUOUS

COMMENTARY

14-DAY RSI

DECEMBER 2015High: 82.95

5/5/14 Low: 59.70

9/24/15

COTTON

Marketing year begins August 1 13/14 Est. 14/15 Proj 15/16 Proj 14/15 15/16

ACREAGE (million acres)Planted Area 10.41 11.04 8.56 11.04 8.75Harvested Area 7.54 9.35 8.17 9.35 8.05Yield 821 838 784 838 800

SUPPLY (million 480-lb. bales) Beginning Stocks (August 1) 3.80 2.35 3.70 2.35 3.70Production 12.91 16.32 13.34 16.32 13.42Imports 0.01 0.01 0.01 0.01 0.00

Total Supply 16.72 18.68 17.05 18.68 17.12USAGE (million 480-lb. bales)

Mill Use 3.55 3.58 3.70 3.55 3.80Exports 10.53 11.25 10.20 11.20 10.20

Total Use 14.08 14.82 13.90 14.75 14.00Unaccounted 0.29 0.16 0.05 0.23 0.00

STOCKS (million 480-lb. bales) Ending Stocks (July 31) 2.35 3.70 3.10 3.70 3.12

Farm Price (¢/lb) 77.90 60.50 54-64 60.5 56-65

Brock USDA

U.S. SUPPLY & DEMAND

MARCH 2016High: 70.61 8/25/14

Low: 59.459/24/15

Daily Limit: 4¢/lb.Contract Size: 50,000 lbs.

Broken support

Cotton soared on Monday and ended higher on the week, but ended weakly. Friday’s USDA report was mainly a nonevent. It cut the projected 2015-16 U.S. cotton carryout slightly to 3.10 million bales, down from 3.2 million last month, due to a modest yield reduction. Acres were left un-changed. Global carryout was raised slightly, to 106.97 MMT from 106.26 MMT last month, as lower production was offset by a cut in expected demand.

Fundamentally, demand remains the main limiting factor. Weekly export sales looked bullish based on the headline totals, but the fine print was bearish. USDA reported net sales of 206,900 bales for 2015-16 and 358,300 bales for 2016-17. The problem is that China remains almost completely absent from the sales totals. Most of the 2015-16 sales and all of the 2016-17 sales were to Mexico. Shipments were also solid at 121,000 bales, up 35% from the four-week average, but again China was absent.

Strategy: The 2014 crop is 100% sold for cash-only marketers and hedgers. For 2015, all producers should have 20% sold in the cash market. We currently have no hedge positions in new crop futures.

Year Beginning Stocks Production Consumption Ending

StocksStocks/Use

Ratio

2008/09 62.77 108.30 108.3 62.72 57.9%

2009/10 62.72 103.36 118.3 47.78 40.4%

2010/11 47.78 117.63 114.1 51.34 45.0%

2011/12 51.34 127.42 104.4 74.39 71.3%

2012/13 74.39 123.88 106.5 91.81 86.2%

2013/14 91.81 120.40 109.2 102.98 94.3%

2014/15 102.98 118.92 110.11 111.79 101.5%Change from September -0.02 -0.01 -0.92 0.89 1.6%

2015/16 111.79 107.38 112.21 106.97 95.3%Change from September 0.89 -1.36 -1.18 0.71 1.6%

* Values in million 480-pound bales; bold numbers are USDA projections.

WORLD SUPPLY & DEMAND

Resistance

Resistance

Brokensupport

Brokensupport

16 800-558-3431

9-DAY RSI

Front-end lean hog futures held firm this week in choppy trade amid continued strength in cash hog and wholesale pork prices. The CME lean hog index rose $2.10 on the week as strong packer margins continued to spur good demand for hogs. But the February and more distant futures contracts reversed down off new long-term highs on Wednesday, suggesting they may have topped out again.

Good pork demand is underpinning hog prices in the face of large supplies. The composite pork cutout value rose $2.41 during the week ended Thurs-day to its highest level since mid-Au-gust. However, the cutout value is still down 27.7% from a year ago and beef has become more competitive with pork after recent price declines, which could keep a lid on the pork market.

Hog slaughter is running close to expected levels based on USDA’s quarterly inventory report. This week’s slaughter should near 2.3 million head, up about 30,000 from last week and about 7.2% from a year earlier. USDA on Friday raised its Q4 pork produc-tion forecast by 0.6% based on the inventory numbers. Q4 output is now seen running 6.8% above last year.

Technically, front-end lean hog futures are looking good, with most-active Dec. futures set to post their highest weekly close since early June. Dec. hogs may continue to find sup-port from their discount to cash in the near term with the Oct. contract set to expire next week. However, we don’t see much upside potential past $70.00-$71.00.Hedgers’ Strategy: Hedgers are long 1 Dec. $60 put option/short 2 Dec. $68 calls on 25% of Q4 marketings. We are short Feb. futures on 25% of Q1 marketings; June futures on 25% of Q2 and Aug. futures on 25% of Q3.

COMMENTARY

HOGS

JUNE 2016High: 83.90 1/08/15

Low: 74.003/16/15

APRIL 2016High: 78.00

11/25/14 Low: 66.08

3/19/15

Daily Limit: 3¢/lb.Contract Size: 40,000 lbs.

High: 79.00 6/25/14

Low: 57.057/13/15

DECEMBER 2015

FEBRUARY 2016High: 77.10 11/25/14

Low: 62.757/13/15

1.71.81.92.02.12.22.32.42.5

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Source: USDA AMS

5-year average

2014

2015

mil head Weekly Hog Slaughter (4-week average)

Brokenresistance

Resistance

Resistance

Key reversals down

Support

Support

Key reversal down

17EMAIL BREPORT@BROCKREPORT.COM

9-DAY RSI

What a difference a week has made in the cattle and feeder cattle mar-kets. Both markets vaulted sharply higher Tuesday through Thursday of this week on speculative short cover-ing, before being hit with some profit taking on long positions on Friday. Fundamental support for the live cattle rally came from indications of a bottom in the wholesale beef mar-ket and expectations for seasonal de-clines in fed cattle supplies. Feeder cattle futures’ extreme discounts to cash spurred bargain hunting in that market.

This week’s action has confirmed major V-bottoms on the cattle price charts. Live cattle futures have gone premium to cash, though, so it will take confirmation of a turnaround in the cash market to maintain the rally. Most-active Dec. live cattle futures have important chart gap support below $133.80 and we wouldn’t want to see a close below that. Dec. futures will have resistance near $138.00, but could potentially rally back to $140.00-$142.00, given some cash market support.

The cash fundamentals are still un-certain. There has been little Plains cash trade this week as of Friday morning. There was some light live cattle trade in Nebraska on Thursday at $120 per cwt. That was about 50 cents above last week’s Nebraska aver-age live cattle selling price. Wholesale beef prices have shown signs of bot-toming, but the choice cutout value fell another $3.94 during the week ended Thursday to a 22-month low. Thursday’s choice cutout value was 17.6% below last year. USDA raised is forcast for Q4 beef production by 2.5% on larger than expected slaugh-ter and higher slaughter weights. Hedgers’ Strategy: Both live cattle and feeder cattle sellers remain aside futures. Feeder cattle buyers are long January futures against 25% of Q4 purchase needs.

COMMENTARY

WEEKLY CONTINUOUS

CATTLE

APRIL 2015

High: 160.15 11/21/14

Low: 128.1010/1/15

High: 159.40 12/2/14

Low: 131.0810/1/15

High: 159.5012/2/14

Low: 130.8010/2/15

Daily Limit: 4.5¢/lb Contract Size: 50,000 lbs.

JANUARY 2016

High: 233.00 12/82/14

Low: 169.1010/1/15

High: 235.00 12/2/14

Low: 174.6510/1/15

Daily Limit: 3¢/lb Contract Size: 40,000 lbs.

Resistance

Brokensupport

Brokensupport

Resistance

Resistance

Brokensupport

FEEDER CATTLE NOVEMBER 2015

Resistance

Resistance

LIVE CATTLEDECEMBER 2016

FEBRUARY 2016

18 800-558-3431

FEED/INPUTS

Feeds: After falling to a four-month low the prior week, soybean meal futures were firm this week and then took off to the upside on Friday along with soybeans. Nearby months posted bullish outside days higher on Friday. Basis levels have been soft however this week in many areas due to the soybean harvest.

Distiller Dried Grain prices were mostly lower in the last week, with ample supplies and weaker export demand pressuring the market. Cash prices were down $4 to $15 across the Midwest.

Fuels: We covered the energy markets extensively in this week’s lead story, but a couple other fac-tors are worth noting. One is that recent weather forecasts are increas-ingly confident that the winter will be warmer than normal across both the northeast and the Midwest. This is bearish for natural gas demand.

Also, note that along with the crude oil supply declines detailed on page 1, gasoline demand is strong. The lat-est government Short-Term Energy Outlook notes that Americans drove a record 1.82 trillion miles in the first seven months of the year, topping highs seen before the financial crisis of 2007.

Fertilizers: The trend remains low-er for all main categories of fertilizer, as weak crop prices hang over the de-mand outlook. Dryness in the central and southern Plains is also helping to limit urea demand. The undercurrent in the world market is weaker as well as supplies are more than adequate to meet soft demand.

COMMENTARY

100

125

150

175

200

Mar Apr May Jun Jul Aug Sep Oct

$/ton

Source: USDA AMS

DRY DISTILLERS GRAINS NEBRASKA

SOYBEAN OIL DECEMBER 2015High: 48.75 5/6/13

Low: 25.70 8/24/15

SOYBEAN MEALDECEMBER 2015

High: 388.80 5/23/14

Low: 286.006/1/15

Contract Size: 100 tonsDaily Limit: $30/ton

Contract Size: 60,000 lbs. Daily Limit: 3.5 cents/lb

0.000.501.001.502.002.503.003.504.004.50

1995 2000 2005 2010 2015

$/gal

MONTHLY HEATING OIL

Resistance

Resistance

Broken Support

Resistance

19EMAIL BREPORT@BROCKREPORT.COM

FINANCIALS/ENERGYCOMMENTARY

One of the perplexities of financial markets is that sometimes “bad news” drives prices of equities and commodities lower, and at other times the same bad news is interpreted by the market as “good news” and drives these same asset classes higher (due to expecta-tions for a continuation of accommodative monetary policies). This week, economic news headlines were mostly “bad,” but global stock markets traded 2-5% higher, energy commodities were 4-9% higher (natu-ral gas was the exception, up “only” 2.5%), metals were 2-8% higher, and “softs” including cotton, orange juice and coffee were 3-10% higher. As stocks rallied to test last month’s highs, defensive asset classes such as the U.S. Dollar and Treasury bonds traded lower.

Weak economic news included an increasing U.S. trade deficit which surged to $48.3 billion. in August, 25% worse than early 2015. Imports in August were down 2% year-over-year (thanks to cheaper oil im-ports), but the strong dollar and weak overseas econo-mies have hurt U.S. exporters even more; U.S. exports of goods and services peaked in the last quarter of 2014 and are down 6% year-over-year. Weak over-seas economies prompted the International Monetary Fund to cut its forecast for global growth for the sec-ond time this year. The IMF cut its forecast for 2015 by 0.2% to 3.1%, and by 0.2% to 3.6% for 2016. The cut was prompted by a slowdown in China from 7.4% last year to 6.8% this year, with knock-on effects to countries that export raw material to China.

The current rally in stocks and commodities appears rooted in the idea of no rate increase and a weaker dollar, rather than a strengthening economy.

Support

E-MINI S&P 500DECEMBER 2015

15

24

3

Five wave

sell signal

Current Positions Open P/L Closed P/L

Corn None $0 $188

Soybeans None $0 $6,544

Live Cattle None $0 ($1,160)

Wheat L2KWH6 and S2WH6 $25 $0

Lean Hogs None $0 $3,390

Cotton None $0 ($430)

E-Mini S&P 500 None $0 $675

Crude Oil None $0 ($1,130)

2015 Total Profit (Loss) as of 10/8/15 $25 $8,0762014 Total Profit: $17,316Recommendations since last Brock Report through 10/8/1510/5/15: Bought 1 Dec 2015 e-mini S&P 500 @ 1974.25 to exit.10/8/15: Bought 2 March ‘16 Kansas City wheat and sold 2 March ‘16 Chicago wheat @ 1.5¢/bu credit for each spread.There is a risk of losses as well as profits when trading futures and options. Position size is based on account size of $60,000. Profit/(loss) does not include brokerage commissions.

SPECULATIVE POSITIONS

GOLDDECEMBER 2015

BrokenResistance

This page updated at 1 p.m., before the market close.

0

20

40

60

80

100

120

140

160

1995 2000 2005 2010 2015

$/bblCRUDE OIL (WTI)MONTHLY

0

2

4

6

8

10

12

14

16

1995 2000 2005 2010 2015

$/mmBtu

Support

NATURAL GASMONTHLY

Support

Support

20 800-558-3431

Monday is Columbus Day, and while the markets will trade a normal schedule, federal government offices will be closed. This means weekly reports such as Crop Progress and Export Sales will be pushed back a day, to Tuesday and Friday respectively. Reports that will get attention from investors include the Producer Price Index and Retail Sales for September on Wednesday, and CPI on Thursday. On Friday the government will release Industrial Production and Capacity Utilization for September.

THE WEEK AHEAD

14/15 15/16 16/17Strictly Cash 100% 50% 10%

Hedgers Cash 100% 30% 0%Hedgers F&O 0% 0% 0%

14/15 15/16 16/17Strictly Cash 100% 50% 0%

Hedgers Cash 100% 30% 0%Hedgers F&O 0% 0% 0%

14/15 15/16 16/17Strictly Cash 100% 70% 0%

Hedgers Cash 100% 70% 0%Hedgers F&O 0% 0% 0%

14/15 15/16 16/17Strictly Cash 100% 20% 0%

Hedgers Cash 100% 20% 0%Hedgers F&O 0% 0% 0%

HOGS 15-IV 16-I 16-II 16-IIIFutures 25% 25% 25% 25%

Options 0% 0% 0% 0%

CATTLE 15-IV 16-I 16-II 16-IIIFutures 0% 0% 0% 0%

Options 0% 0% 0% 0%

FEEDERS 15-IV 16-I 16-II 16-IIIFutures L25% 0% 0% 0%

Options 0% 0% 0% 0%

MILK Oct Nov Dec JanCash 0% 0% 0% 0%

Futures 0% 0% 0% 0%

14/15 15/16 16/17Strictly Cash 100% 40% 0%

Hedgers Cash 100% 40% 0%Hedgers F&O 0% 0% 0%

CORN 15-IV 16-I 16-IICash 75% 0% 0%

Futures/Options 0% 0% 0%

MEAL 15-IV 16-I 16-IICash 75% 0% 0%

Futures/Options 0% 0% 0%

CONTACT USFor more information or customer service:

Brock Associates2050 W. Good Hope Rd., Milwaukee, WI 53209

Call 414-351-5500 or toll-free 800-558-3431 Email: breport@brockreport.com

PUBLICATIONSTHE BROCK REPORTPublished 48 times per year; © 2015 by Richard A Brock & Assoc., Inc.Subscription price: 1 year $525; 6 mo. $290; 3 mo. $160.

DAILY MARKET COMMENTSComments include all new advice, cash strategies, current positions. Issued three times daily; via email/Internet, for $425/year. Also available to subscribers of The Brock Report for $150/year.

MARKET EDGEThese online presentations provide in-depth analysis of USDA’s key reports, as well as occasional other topics of importance to the markets. Issued monthly via email for $249/year for non-subscribers to The Brock Report or Daily Comments; $175/year for subscribers.

COMMODITY NETWORK SYSTEMUse your phone to monitor recommendations even when you’re away from your desk. Buy a pre-paid block of minutes.

CONSULTING SERVICESBrock Associates offers different levels of personal marketing assistance. Call 800-558-3431.

BROKERAGE SERVICESBrock Investor Services offers complete brokerage services. Call 800-426-0923; in Indiana, 866-260-9819; in Louisiana, 800-525-2903.

WORLD NEWS & WEATHERBROCK REPORT POSITION MONITOR

CORN

WHEAT

COTTON

LIVESTOCK

FEED PURCHASES

SOYBEANS

RICE