Introduction to Soft Futures SOFT COMMODITY FUTURES

FROM YOUR MORNING COFFEE AND DANISH TO YOUR HOT CHOCOLATE BY THE FIRE, SOFT COMMODITY PRODUCTS ARE A MAJOR COMPONENT OF EVERYDAY LIFE.

By understanding the fundamentals of the soft commodity product futures, traders and end-users can leverage better methods of discovery and risk management.

Coffee Futures Cocoa Futures Futures

An investment in futures contracts involves a high degree of risk and is suitable only for persons who can assume the risk of loss in excess of their margin deposits. You should carefully consider whether futures trading is appropriate for you in light of your investment experience, trading objectives, financial resources, and other relevant 01 Rosenthal Collins Group, LLC circumstances. Past performance is not necessarily indicative of future results. COFFEE FUTURES Coffee: An Overview

Millions of people all over the globe begin each and every day with coffee. This commodity is now cultivated in over 70 countries and is a major export commodity.

Types of Coffee:

• Arabica: This type of coffee was originally indigenous to Ethiopia. Arabica is sometimes referred to as mountain coffee and represents the bulk of global coffee production.

• Robusta: This type of coffee has its roots in sub-Saharan Africa and it is often used in espresso and instant coffee blends. Robusta contains greater quantities of caffeine as well as higher antioxidant levels compared to Arabica.

Coffee Use

Although when you think of coffee you likely think of drinking it, there are numerous other potential uses for coffee including:

• Coffee personal care products • Insect repellant • Fertilizer • Flavoring

Investing in Coffee

As a major global commodity, there are numerous ways to invest in coffee. For exposure to today’s coffee markets, you can use multiple vehicles including equities, ETFs and futures.

02 Rosenthal Collins Group, LLC COFFEE FUTURES

General Factors Influencing Price

Although the price of coffee may fluctuate with other soft , the market has its own unique set of supply and demand factors that can influence price movement. The coffee market can be affected by numerous factors both from a local standpoint as well as a global standpoint. Some of these key issues include:

• General economic conditions • Currency market fluctuations • Weather conditions • Global demand • Government and import/export regulations

SOURCE: https://en.wikipedia.org/wiki/Coffee

Other Factors Influencing Price

Looking at the coffee market as a whole, it is important to keep in mind that while there are numerous issues potentially impacting (like those listed above), there are also other costs that can affect prices for end-users. Some of these other possible costs include:

• Transportation costs • Insurance costs • Cropstorage and interest costs • Inventory levels

Coffee Jolt Expectations for a poor Brazilian harvest have sent coffee prices to two-year highs amid steadily rising demand.

Brazilian coffee production Arabica-futures prices Global demand

illion as $3.00 a pound 6 million metric tons illion as Monday: illion $2.202

Notes: One bag weighs 60 kilograms, futures prices as of midday Monday *Projections Sources: Conab (production); FactSet (continuous, most-active contracts); Euromonitor (demand) The Wall Street Journal

SOURCE: https://seekingalpha.com/article/3021666-why-coffee-could-be-the-best-commodity-performer-of-2015

03 Rosenthal Collins Group, LLC COFFEE FUTURES

The world’s biggest coffee drinkers

Coffee consumption per capita etherlands 2.414 cups per day inland . Sweden . enmark . ermany . Slovakia . Serbia . Cech epublic . Poland . orway . Slovenia . Canada . Belgium . Switerland . ew ealand . SA . Austria . Costa ica . reece . Algeria . acedonia . rance . ithuania . Bosnia-Heregovina . Philippines . stonia . eorgia . Spain . ussia . omania . Brail . Belarus . Colombia . ominican epublic . Israel .

SOURCE: http://www.forbes.com/sites/michaellingenheld/2015/02/03/coffees-weakness-masks-bullish-fundamentals/#511047c42e5c

04 Rosenthal Collins Group, LLC COFFEE FUTURES

CME GROUP Contract Specifications

Contract Unit 37,500 pounds

Price Quotation U.S. Dollars per pound

Trading Hours CME Globex: Sunday - Friday 6:00 p.m. - 5:00 p.m. (5:00 p.m. - 4:00 p.m. Chicago Time/CT) with a 60- minute break each day beginning at 5:00 p.m. (4:00 p.m. CT)

CME ClearPort: Sunday - Friday 6:00 p.m. - 5:00 p.m. (5:00 p.m. - 4:00 p.m. Chicago Time/CT) with a 60- minute break each day beginning at 5:00 p.m. (4:00 p.m. CT)

Minimum Price Fluctuation $0.0005 per pound

Product Code CME Globex: KT CME ClearPort: KT Clearing: KT

Listed Contracts Trading is conducted in the March, May, July, September, and December cycle for the next 23 months.

Settlement Method Financially Settled

Termination Of Trading Trading terminates on the day immediately preceding the first notice day of the corresponding trading month of Coffee “C” futures at ICE Futures U.S.

Settlement Procedures Nymex Coffee Settlement Procedures

Position Limits NYMEX Position Limits

Exchange Rulebook NYMEX 931

Block Minimum Block Minimum Thresholds

Price Limit or Circuit Price Limits

Vendor Codes Quote Vendor Symbols Listing

Source: CME Group: http://www.cmegroup.com/trading/agricultural/softs/coffee_contract_specifications.html as of 5/25/17

An investment in futures contracts involves a high degree of risk and is suitable only for persons who can assume the risk of loss in excess of their margin deposits. You should carefully consider whether futures trading is appropriate for you in light of your investment experience, trading objectives, financial resources, and other relevant 05 Rosenthal Collins Group, LLC circumstances. Past performance is not necessarily indicative of future results. COCOA FUTURES Cocoa: An Overview

Many of the world’s tastiest treats, holiday candies and desserts are derived from or contain cocoa.

Although cocoa can be enjoyed in many different forms, it also has an equally rich history. The cacao tree originated in Central America as well as in parts of Mexico. Cacao trees only grow in very specific geographic regions, and today almost 70 percent of the global cocoa crop comes from West Africa. Just as cocoa was an important commodity in the past, it is a vital component today in countless foods, beverages and other products.

Cocoa Use

Cocoa is widely used in the production of food and beverages, and is a major component of many types of candy and chocolate. The possible uses for cocoa don’t stop there, however. This commodity can also be used for:

• Production of cocoa butter • Animal feed • Potash • Jams and marmalades • Mulch

Investing in Cocoa

As a global commodity, the cocoa market may attract not only those needing to hedge but speculators as well. There are numerous ways to gain exposure to the cocoa market. Cocoa investments can potentially be made using cocoa producer stocks, cocoa-based ETFs or futures and options contracts.

06 Rosenthal Collins Group, LLC COCOA FUTURES

General Factors Influencing Price

The cocoa market can be driven by numerous factors, including but not limited to:

• General economic conditions • Seasonality • International politics • Weather • Supply and demand

Other Factors Influencing Price

• Harvesting costs • Transportation • Insurance • Storage • Emerging market demand

Summary of revised estimates

Cocoa year 2014/2015 2015/2016 Year-on-year change (Oct-Sep) Revised Previous Revised estimates estimates a/ estimates

(thousand tonnes) (per cent)

World production 4 248 3 988 4 031 - 217 - 5.1%

World grindings 4 154 4 160 4 141 - 13 - 0.3%

Surplus/deficitb/ 52 - 212 - 150

End-of-season stocks 1 597 1 376 1 447 - 150 - 9.4%

Stocks/Grindings ratio 38.4% 33.1% 34.9%

Notes: a/ Estimates published in Quarterly Bulletin of Cocoa Statistics, Vol. XLII - No. 3 - Cocoa year 2015/2016 b/ Surplus/deficit: net world crop (gross crop adjusted for loss in weight) minus grindings Totals may differ due to rounding.. SOURCE: https://www.icco.org/about-us/icco-news/333-quarterly-bulletin-of-cocoa-statistics-november-2016.html

07 Rosenthal Collins Group, LLC COCOA FUTURES

CME GROUP Contract Specifications

Contract Unit 10 metric tons

Price Quotation U.S. Dollars per ton

Trading Hours CME Globex: Sunday - Friday 6:00 p.m. - 5:00 p.m. (5:00 p.m. - 4:00 p.m. Chicago Time/CT) with a 60- minute break each day beginning at 5:00 p.m. (4:00 p.m. CT)

CME ClearPort: Sunday - Friday 6:00 p.m. - 5:00 p.m. (5:00 p.m. - 4:00 p.m. Chicago Time/CT) with a 60- minute break each day beginning at 5:00 p.m. (4:00 p.m. CT)

Minimum Price Fluctuation $1.00 per ton

Product Code CME Globex: CJ CME ClearPort: CJ Clearing: CJ

Listed Contracts Trading is conducted in the March, May, July, September, and December cycle for the next 23 months.

Settlement Method Financially Settled

Termination Of Trading Trading terminates on the day immediately preceding the first notice day of the corresponding trading month of Cocoa futures at ICE Futures U.S.

Settlement Procedures Nymex Cocoa Settlement Procedures

Position Limits NYMEX Position Limits

Exchange Rulebook NYMEX 930

Block Minimum Block Minimum Thresholds

Price Limit or Circuit Price Limits

Vendor Codes Quote Vendor Symbols Listing

SOURCE: http://www.cmegroup.com/trading/agricultural/softs/cocoa_contract_specifications.html as of 5/25/17

An investment in futures contracts involves a high degree of risk and is suitable only for persons who can assume the risk of loss in excess of their margin deposits. You should carefully consider whether futures trading is appropriate for you in light of your investment experience, trading objectives, financial resources, and other relevant 08 Rosenthal Collins Group, LLC circumstances. Past performance is not necessarily indicative of future results. SUGAR FUTURES Sugar: An Overview

Sugar is a generalized term referring to carbohydrates composed of hydrogen, oxygen and carbon. Sugar is found in the tissue of many types of plants, but only sugarcane and sugar beet contain a high enough concentration for extraction.

Types of Sugar:

Sugar comes in various forms including monosaccharides, disaccharides and oligosaccharides. According to the sugar association, some types of sugar are used strictly by professional bakers and the food industry, and may not be available to retail consumers in the grocery store. Some of the common type of sugar include:

• Regular or white sugar: This sugar is the type found in sugar bowls and commonly used in food preparation.

• Fruit sugar: This type of sugar is finer than regular sugar and has a smaller crystal size. It is regularly used in dry mixes.

• Baker’s special sugar: With an even finer crystal, this type of sugar was developed specifically for baking.

Sugar Use

Sugar is regularly used in cooking and baking. Some specific uses include:

• Making Sweetners • Beverage food processing • As a preservative • Making of rum • Chewing gum production • Decorative table • Sugar cubes • Syrups

Investing in Sugar

The sugar trade has been around for quite some time. As a major component of modern baking and food production, there are numerous vehicles that can potentially be used to invest in sugar. Some of these vehicles include producer stocks, sugar-based ETFs and sugar futures.

09 Rosenthal Collins Group, LLC SUGAR FUTURES

General Factors Sugar Count Influencing Price (utput in million tonne) • General economic conditions • Currency markets (Actual) (uly forecast) (Sep forecast) • Weather conditions • Geographic variations aharashtra . . • Supply and demand ttar Pradesh . . .

Other Factors arnataka . . Influencing Price Tamil adu . . . • Transporation costs • Storage and interest costs llInia • Insurance costs • Emerging market demand Source Isma

SOURCE: http://www.financialexpress.com

Evolution of global demand for sugar (mio tons)

E , . mio tons

, E . mio tons ,

,

,

,

SOURCE: OECD/FAO Agricultural Outlook 2011-2020, page 122. In addition to strong demand, the stock-to-use ratio of sugar will decline by 28% over the 2007-2020 period, from 46% to 33%.

10 Rosenthal Collins Group, LLC SUGAR FUTURES

USDA 2016/17 Sugar Overview

United States production is forecast up 300,000 tons from last year to a record 8.5 million on higher yields. Imports are expected to decline 600,000 tons to 2.4 million with consumption relatively unchanged. Stocks are projected to dip 8.0 percent to 1.7 million tons. Brazil’s production is forecast to rise 3.1 million tons to 37.8 million on favorable weather and a higher percentage of sugarcane (forecast at 45 percent compared to 43 percent the year before) being diverted toward sugar production instead of ethanol. Exports are projected up 2.8 million tons to 27.1 million on greater exportable supplies and higher demand from markets such as India and Indonesia.

Consumption is down slightly on lower consumer purchases of processed foods. India’s production is forecast to drop 3.6 million tons to 23.9 million due to lower area and yield. India is the world’s largest consumer with consumption forecast to rise marginally to a record 27.2 million tons. Production is forecast up in Uttar Pradesh, while that from Maharashtra and Karnataka is lower than expected. Exports and stocks are forecast down sharply. Thailand’s production is forecast down 470,000 tons to 9.3 million as severe drought conditions during the growing stage are expected to lower yields. However, exports are up slightly as stocks are drawn down to meet demand. Consumption is up slightly on growing household and industrial uses.

Production in the European Union is forecast to rebound 1.9 million tons to 16.2 million on higher sugar beet area. Consumption is projected flat at 18.8 million and imports are down. Exports are unchanged at 1.5 million tons, limited by the World Trade Organization sugar export ceiling. China’s production is forecast up 700,000 tons to 9.5 million on higher area and yields. Consumption is forecast flat. Imports are flat year over year but have been trending higher. Stocks are forecast down sharply to the lowest level since 2010/11.

Foreign Agricultural Service/USDA November 2016 Office of Global Analysis Page 3 Mexico’s production is forecast slightly higher at 6.7 million tons while exports are expected up 8.9 percent to 1.4 million tons due to exports to non-U.S. markets. The U.S.-Mexico Suspension Agreement establishes minimum, or floor, prices to guard against undercutting or suppression of U.S. prices. These minimum prices are $0.26 per pound for refined sugar and $0.2225 per pound for all other sugar. Stocks are expected up amid flat consumption. Australia’s sugar production is projected up 200,000 tons to 5.1 million. Exports, up nearly 30 percent in 4 years, are forecast higher at 4.0 million tons on high demand from markets such as Japan and South Korea and on higher exportable supplies. Russia’s production is expected to climb 400,000 tons to 5.6 million on both higher area and yield.

Consumption is expected to continue to rise due to expansion in production of home-made alcohol. Imports are forecast down slightly. Pakistan’s production is forecast up 460,000 tons to a record 5.7 million reflecting growth in area. Sugar is favored by farmers who value the government-established procurement price for sugarcane in the face of lower prices for other crops. Consumption is forecast up slightly, but stocks are expected to soar. Selected 2015/16 Revisions from May 2016 Forecast: - World production revised 900,000 tons higher to 165.8 million. o China is up 400,000 tons to 8.8 million on increased area. o EU is increased 280,000 tons. ‐ World imports are revised 1.2 million tons lower to 53.3 million. o China down 700,000 tons to 6.0 million on higher production and trade data update. o Iran is lowered 600,000 tons to 790,000 on higher production and trade data update. - World Exports are lowered 1.3 million tons to 53.6 million tons. o Thailand drops 1.0 million tons on a revised forecast.

For further information, please contact Reed Blauer at (202) 720-0898 or [email protected] The Sugar: World Markets and Trade circular is based on post reports submitted since September 2016 and on available secondary information. The individual country reports can be obtained on FAS Online at: http://gain.fas.usda.gov/Pages/Default.asp

11 Rosenthal Collins Group, LLC SUGAR FUTURES

CME GROUP No. 11 Sugar Specifications

Contract Unit 112,000 pounds

Price Quotation U.S. Dollars per pound

Trading Hours CME Globex: Sunday - Friday 6:00 p.m. - 5:00 p.m. (5:00 p.m. - 4:00 p.m. Chicago Time/CT) with a 60- minute break each day beginning at 5:00 p.m. (4:00 p.m. CT)

CME ClearPort: Sunday - Friday 6:00 p.m. - 5:00 p.m. (5:00 p.m. - 4:00 p.m. Chicago Time/CT) with a 60- minute break each day beginning at 5:00 p.m. (4:00 p.m. CT)

Minimum Price Fluctuation $0.0001 per pound

Product Code CME Globex: YO CME ClearPort: YO Clearing: YO

Listed Contracts Trading is conducted in the March, May, July, and October cycle for the next 24 months.

Settlement Method Financially Settled

Termination Of Trading Trading terminates on the day immediately preceding the first notice day of the corresponding trading month of Sugar No. 11 futures at ICE Futures U.S.

Settlement Procedures Sugar 11 Future Settlement Procedures

Position Limits NYMEX Position Limits

Exchange Rulebook NYMEX 934

Block Minimum Block Minimum Thresholds

Price Limit or Circuit Price Limits

Vendor Codes Quote Vendor Symbols Listing

SOURCE: http://www.cmegroup.com/trading/agricultural/softs/sugar-no11_contract_specifications.html as of 5/25/17

An investment in futures contracts involves a high degree of risk and is suitable only for persons who can assume the risk of loss in excess of their margin deposits. You should carefully consider whether futures trading is appropriate for you in light of your investment experience, trading objectives, financial resources, and other relevant 12 Rosenthal Collins Group, LLC circumstances. Past performance is not necessarily indicative of future results. An introduction to Soft Commodity Futures

Searching for more market information? Contact an RCG broker for further insight into this sector.

Additional Trading Resources: RCG clients receive access to daily premium research from multiple • Delayed Trading • Margin Requirements analysts: Quotes & Charts • Futures Calendar • Technicals • Quotes • Contract Specs • Daily Commentary • Charts • Trading Symbols

Have questions? CONNECT WITH US Speak with an RCG broker toll free twitter.com/RCG_Futures 888-222-1250 youtube.com/user/RCGFuturesTrading linkedin.com/company/rosenthal-collins-group WWW.RCGDIRECT.COM plus.google.com/+Rcgdirect