Introduction toSoft 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.

Coffee Futures

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

Cocoa Futures

Sugar Futures

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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 circumstances. Past performance is not necessarily indicative of future results.

SOFTCOMMODITY FUTURES

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COFFEE FUTURESCoffee: 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.

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

Coffee Use

Coffee personal care productsInsect repellantFertilizerFlavoring

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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.

Investing in Coffee

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Although the price of coffee may fluctuate with other soft commodities, 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 FactorsInfluencing Price

Looking at the coffee market as a whole, it is important to keep in mind that while there are numerous issues potentially impacting prices (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

Other FactorsInfluencing Price

General economic conditionsCurrency market fluctuationsWeather conditionsGlobal demandGovernment and import/export regulations

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COFFEE FUTURES

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

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

2009 ‘10 ‘11 ‘12 ‘13 ‘140

10

20

30

40

50

60 million bags45.1 million bags

Brazilian coffee production

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

Coffee Jolt

2009 ‘10 ‘11 ‘12 ‘13 ‘14 ‘150

1

2

3

4

5

$3.00 a pound 6 million metric tons5.1 million

‘10 ‘11 ‘12 ‘13 ‘14‘090

0.50

1.00

1.50

2.00

2.50

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

Arabica-futures prices Global demand

Monday:$2.202

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COFFEE FUTURES

Netherlands

Finland

Sweden

Denmark

Germany

Slovakia

Serbia

Czech Republic

Poland

Norway

Slovenia

Canada

Belgium

2.414 cups per day1.848

1.357

1.237

1.231

1.201

1.188

1.17

1.152

1.128

1.076

1.009

0.981

Switzerland

New Zealand

Coffee consumption per capita

USA

0.971

0.939

0.931

Austria 0.803

Costa Rica 0.793

Greece 0.782

Algeria 0.765

Macedonia 0.755

France 0.694

Lithuania 0.691

Bosnia-Herzegovina 0.631

Philippines 0.608

Estonia 0.599

Georgia 0.588

Spain 0.559

Russia 0.552

Romania 0.506

Brazil 0.484

Belarus 0.482

Colombia 0.479

Dominican Republic 0.441

Israel 0.409

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

The world’s biggest coffee drinkers

05 Rosenthal Collins Group, LLC

COFFEE FUTURES

37,500 poundsContract Unit

U.S. Dollars per poundPrice Quotation

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)

Trading Hours

Contract SpecificationsCME GROUP

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)

$0.0005 per poundMinimum Price Fluctuation

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

Financially SettledSettlement Method

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.Termination Of Trading

Product Code CME Globex: KT

CME ClearPort: KT

Clearing: KT

Nymex Coffee Settlement ProceduresSettlement Procedures

NYMEX Position LimitsPosition Limits

NYMEX 931Exchange Rulebook

Block Minimum ThresholdsBlock Minimum

Price LimitsPrice Limit or Circuit

Quote Vendor Symbols ListingVendor Codes

Source: CME Group: http://www.cmegroup.com/trading/agricultural/softs/coffee_contract_specifications.htmlas 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 circumstances. Past performance is not necessarily indicative of future results.

06 Rosenthal Collins Group, LLC

COCOA FUTURESCocoa: An Overview

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

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:

Cocoa Use

Production of cocoa butterAnimal feedPotashJams and marmaladesMulch

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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.

Investing in 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.

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

General FactorsInfluencing Price

General economic conditionsSeasonalityInternational politicsWeatherSupply and demand

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COCOA FUTURES

Other FactorsInfluencing Price

Harvesting costsTransportationInsuranceStorageEmerging market demand

•••••

Cocoa year(Oct-Sep)

2014/2015 2015/2016 Year-on-year change

Revisedestimates

Previousestimates a/

Revisedestimates

(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/deficit b/ 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 grindingsTotals may differ due to rounding..

SOURCE: https://www.icco.org/about-us/icco-news/333-quarterly-bulletin-of-cocoa-statistics-november-2016.html

Summary of revised estimates

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COCOA FUTURES

10 metric tonsContract Unit

U.S. Dollars per tonPrice Quotation

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)

Trading Hours

Contract SpecificationsCME GROUP

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)

$1.00 per tonMinimum Price Fluctuation

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

Financially SettledSettlement Method

Trading terminates on the day immediately preceding the first notice day of the corresponding

trading month of Cocoa futures at ICE Futures U.S.Termination Of Trading

Product Code CME Globex: CJ

CME ClearPort: CJ

Clearing: CJ

Nymex Cocoa Settlement ProceduresSettlement Procedures

NYMEX Position LimitsPosition Limits

NYMEX 930Exchange Rulebook

Block Minimum ThresholdsBlock Minimum

Price LimitsPrice Limit or Circuit

Quote Vendor Symbols ListingVendor Codes

SOURCE: http://www.cmegroup.com/trading/agricultural/softs/cocoa_contract_specifications.htmlas 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 circumstances. Past performance is not necessarily indicative of future results.

09 Rosenthal Collins Group, LLC

SUGAR FUTURESSugar: 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:

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.

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

Sugar Use

Making SweetnersBeverage food processingAs a preservativeMaking of rumChewing gum productionDecorative table sugarsSugar cubesSyrups

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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.

Investing in 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:

Sugar Count

Maharashtra

Uttar Pradesh

Karnataka

Tamil Nadu

All-India

10.51

7.1

5

1.25

9.7

7.35

4.98

1.25

9

7.5

4.6

1.35

28.31 28 27

2014-15(Actual)

2015-16(July forecast)

2015-16(Sep forecast)

(Output in million tonne)

Source: Isma

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General FactorsInfluencing Price

General economic conditionsCurrency marketsWeather conditionsGeographic variationsSupply and demand

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SUGAR FUTURES

2010 2011 2010 2011 2014 2015 2016 2017 2018 2019 2020

211,5

201,5

191,5

181,5

171,5

161,5

20

10

0

EU sugar productionquotas : 13.3 mio tons

EU sugar export limit :1.37 mio tons

Other FactorsInfluencing Price

Transporation costsStorage and interest costsInsurance costsEmerging market demand

••••

SOURCE: http://www.financialexpress.com

Evolution of global demandfor sugar (mio tons)

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

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SUGAR FUTURES

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 Reed.Blauer@fas.usda.gov 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

USDA 2016/17 Sugar Overview

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SUGAR FUTURES

112,000 poundsContract Unit

U.S. Dollars per poundPrice Quotation

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)

Trading Hours

No. 11 Sugar Futures Contract SpecificationsCME GROUP

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)

$0.0001 per poundMinimum Price Fluctuation

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

Financially SettledSettlement Method

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.Termination Of Trading

Product Code CME Globex: YO

CME ClearPort: YO

Clearing: YO

Sugar 11 Future Settlement ProceduresSettlement Procedures

NYMEX Position LimitsPosition Limits

NYMEX 934Exchange Rulebook

Block Minimum ThresholdsBlock Minimum

Price LimitsPrice Limit or Circuit

Quote Vendor Symbols ListingVendor Codes

SOURCE: http://www.cmegroup.com/trading/agricultural/softs/sugar-no11_contract_specifications.htmlas 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 circumstances. Past performance is not necessarily indicative of future results.

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