September 15, 2014 Judith Ganes

President J. Ganes Consulting, LLC

Soft Commodity Markets - Upcoming Milestones, and How the Market Could Be Affected

2

Current Weather Expectations

El Nino Yes or No?

Development of Atlantic Hurricane Season

Potential Impact of Russian Sanctions

Weather & Politics

3

Current Weather Expectations

Coffee: Brazil and C America Too Dry

FCOJ: Slim Chance of Hurricane Hit

Sugar: Post Drought Assessment Ongoing

Cotton: Harvest Weather Critical, Some Rain

Cocoa: All Great in West Africa

4

NOAA Predicting 65% Chance of Fall / Winter El Niño but Downgraded

5

Strong El Nino Conditions Reduces Global Cocoa Output

• Primary climate changes during El Nino events:

• Dryness in West Africa and South-East Asia to weigh on top three largest cocoa producers

• Ivory Coast: - 4.7% • Ghana: - 6.6%

• Increased precipitation in parts of Brazil • Southern Brazil (cocoa producing states): + 1.99%

• Globally cocoa output is reduced by 5% in El Nino years

compared to the 6 year average

6

No Clear Correlation Between El Nino and Global Sugar Production

• El Nino events tend to cause off-setting gains and losses across the global sugar market

• Primary climate changes during El Nino events: • Increased precipitation in Brazil

• 4.5% higher rainfall in principal growing state of Sao Paulo • Correlation with production only seen for medium and severe El Nino Events

• Production decreased by 1.48% compared to 3 year average

• Rains in Southern India, Dryness in Northern India • Indian production located in Northern and Southern states • No clear correlation due to wide-geographic area and different

harvesting times for each state

• Increased precipitation in China • Production highly correlated with El Nino Episodes

• 1.25% above 3 year average

7

August NOAA Hurricane Outlook Favorable for Orange Crop

• Currently a 70% chance of a below-normal Atlantic hurricane season

• Conditions, including potential El Nino, serve to suppress storm development

• Below-normal Atlantic hurricane season would include:

• 7 – 12 Named storms (39 mph winds or higher) • 12 = 30 year average

• 3 – 6 Hurricanes (74 mph winds or higher) • 6 = 30 year average

• 0 – 2 Major Hurricanes (111 mph winds or higher) • 1 – 2 = 30 year average

• Though storm activities will be less frequent, they could have a

greater than normal impact on already stressed trees

8

Impact of Russian Sanctions May Weigh on Chocolate Companies

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

Jan-04 Aug-06 Mar-09 Oct-11 May-14

ButterImports

Price Ratio to Beans

• Reduced Russian chocolate imports may reduce ability of chocolate manufacturers to pass on prices to consumers

• With butter priced over $8,500 per ton, chocolate makers may need to seek out alternative fats or risk margin erosion

9

Russian Sugar Imports To Dip Though a Rise in Production Responsible

Million Tons

0

1

2

3

4

5

6

94/95 98/99 02/03 06/07 10/11 14/15

Output

Imports

Source: ISO, F.O. Licht,, J. Ganes Consulting

10

Impact of Seasonal Tendencies

Post-monsoon Indian Sugar Prospects

Brazilian Coffee Export Potential

Seasonal Swings and Spreads

11

Million 60-kg Bags

1.0

1.5

2.0

2.5

3.0

3.5

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

08/09 09/1010/11 11/1212/13 13/14

Source: ICO, J. Ganes Consulting

Coffee: After Strong Exports, What Will Brazil Have Left When Exports Typically Ramp up Post Harvest and Ahead of N American Winter?

12

Million 60-kg Bags (Oct – Jun)

0

5

10

15

20

25

93/94 97/98 01/02 05/06 09/10 13/14

Arabica

Robusta

Source: ICO, J. Ganes Consulting

Brazilian Arabica Exports Reflecting Past Crops; Robusta Volumes Double on Bigger Crop

13

Late June / July Rains Removed Monsoon Indian Sugar Crop Fears, Northern India May See Flooding

Million Tons

10

15

20

25

30

35

94/95 98/99 02/03 06/07 10/11 14/15

Source: ISO, F.O. Licht,, J. Ganes Consulting

Cents per Pound

15.0

15.5

16.0

16.5

17.0

17.5

18.0

18.5

19.0

19.5

Aug-13 Dec-13 Apr-14 Aug-14

14

Concentrated Production Increases Weather Event Risk

Share of Global Output

36%

70%

20%

30%

40%

50%

60%

70%

80%

90/91 94/95 98/99 02/03 06/07 10/11 14/15

Sugar: Brazil, India, China

Cocoa: Ivory Coast, Ghana,Indonesia

Source: ISO, F.O. Licht,, J. Ganes Consulting

15

Evolving view on US Cotton

Impact of US Cotton crop on Global Market

Outlook for Sugar Demand

Market Sentiment

16

US Cotton Crop Estimates Yet to Decline

Million 480 lb. Bales and Cents per Pound

50

55

60

65

70

75

80

85

90

95

100

12

13

14

15

16

17

18

4/1/14 5/1/14 5/31/14 6/30/14 7/30/14 8/29/14 9/28/14

Cotton Futures Price

USA 2014/2015 Crop Estimates

Source: USDA, Futuresource

17

Strong Yields and Jump in Acreage Responsible for Bumper US Cotton Crop

Million Hectares and Pounds per Hectare

1,250

1,350

1,450

1,550

1,650

1,750

1,850

1,950

2,050

2,150

2,250

3

4

5

6

7

8

94/95 98/99 02/03 06/07 10/11 14/15

HarvestedAreaYield

Source: USDA, J. Ganes Consulting

18

US Responsible For Much of Global Cotton Stock Expansion

Change in Ending Stocks - Million 480 lb. Bales

-15

-10

-5

0

5

10

15

20

94/95 98/99 02/03 06/07 10/11 14/15

USAForeign Excl. China

Source: USDA, J. Ganes Consulting

19

Increased US Cotton Production May End Up in China

Million 480 lb. Bales

Source: USDA, J. Ganes Consulting

0

5

10

15

20

25

30

94/95 98/99 02/03 06/07 10/11 14/15

JGC RevisedCurrent USDA Imports

20

Fourth Consecutive Sugar Surplus?

Brazilian Coffee Downturn in Perspective

FCOJ Market Safe from Short Specs

Fundamental Favorites

21

Sugar Market Theoretically in 4th Straight Year of Surplus

Million Tons

100

110

120

130

140

150

160

170

180

190

94/95 98/99 02/03 06/07 10/11 14/15

Output

Use

Source: ISO, F.O. Licht,, J. Ganes Consulting

22

Statistical Loss Has The Global Sugar Market Tightening

Million Tons

-15

-10

-5

0

5

10

15

94/95 98/99 02/03 06/07 10/11 14/15

Change in Stocks

Source: ISO, F.O. Licht,, J. Ganes Consulting

23

2011 Coffee Rally Based On a 5 Million Bag Reduction in Colombia

Million 60-kg Bags

12.5

7.6

0

2

4

6

8

10

12

14

16

18

07/08 08/09 09/10 10/11 11/12

Colombian OutputProducer Stocks

Source: USDA, J. Ganes Consulting

24

Drop in Brazilian Production Could Be as Much as 3x as Large as in Colombia

Million 60-kg Bags

57.6

40 - 45

48 – 50

25

30

35

40

45

50

55

60

11/12 12/13 13/14 14/15 15/16 16/17

Potential ProductionRobustaArabica

Source: USDA, J. Ganes Consulting

25

Producer Coffee Stocks Not Enough To Cover Multi-Year Brazilian Losses, Exports to Slow in 16/17

Million 60-kg Bags

0

5

10

15

20

25

30

35

96/97 00/01 04/05 08/09 12/13 16/17

Source: USDA, J. Ganes Consulting

26

OJ Downside Limited by Disease, Upside Limited by Sharp Weather Related Price Movements

Thousand Contracts and Cents per Pound Solids

50

70

90

110

130

150

170

190

210

230

0

5

10

15

20

25

Jan-00 Nov-02 Oct-05 Aug-08 Jul-11 May-14

Speculator Long Interest

Price

Source: Futuresource, CFTC

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