Managing the RiskPresented by:

Mark GoldPresident

Top Third Ag Marketing, LLC

The last few months have brought new risk…

1. European debt crisis/Greece, Italy, Spain, etc.

2. MF Global

3. January 12th report

1. 2011 corn, wheat, and soybean carryouts are ample

2. Will China imports continue to grow?

3. Growing world carryouts◦ Corn may be the only exception until the fall

4. Farmers are storing grain

Current Fundamentals in Agriculture

1. Corn production is significantly lower than current U.S.D.A. estimates. The real numbers may not be known for months

2. Chinese demand is expected to keep growing. Since 2000, demand has risen 50% while production only gained 38%

3. China needs to re-build stocks that were sold to keep domestic prices in check

The Bull Market Scenario

1. World grain production and carryouts are ample

Current estimates put U.S. 2012 corn acres at 94-97 million

The Bear Market Scenario

2. Economic meltdown in Europe

3. MF Global crisis will curtail speculative buying

4. Decreased domestic livestock feed usage“Ain’t too many beef critters out there”

5. Reduction in Ethanol mandates

6. Any other Black Swan

Production x Price = Revenue

If your farm is a business, do you run it like one?

Rent/land cost Seed Chemicals Equipment Fertilizer Fuel

$500/Acre for corn or wheat

What are the expenses of production?

Would you spend 20-30 cents/Bushel if it could bring you 80 cents-$1.20/Bushel in

revenue??

Risk 20-30 cents to make 80 cents - $1.20

4:1 Risk Reward ratio

1. Spend more time on marketing by developing a marketing plan

2. Combine effective crop insurance (RA, CRC, Grip) with your marketing plan

3. Use options to manage risk1. We buy put options to protect unsold bushels2. We buy call options to replace the grain we have

sold4. Don’t become a speculator

How can you become a better marketer?

This year the American farmer’s concept of marketing is

“I’m just gonna stick it in the bin.”

Farmers are storing grain hoping for higher prices in the spring

If farmers usually sell their crops in the bottom third of prices, obviously we haven’t reached the bottom third yet, because they haven’t sold it

The Million Dollar Marketing Mistake

This quote comes from a Midwest grain elevator.

“farmers were in ‘not going to sell anything mode’… basis was very strong and I remember getting a call from a producer saying ‘the country must be out of corn because XYZ elevator’s bins are almost empty… and I said, ‘yes, that is because the commercial elevator will make the “economic decision”… ie; if the carry goes out of the market they will move the inventory… that doesn’t mean there isn’t a supply of corn, just that it’s being held by folks who are unwilling sellers at these cash prices…”

www.newagtalk.com

2011 Corn◦ Sell 70% of harvested bushels now◦ Buy $6.40 May puts for 15 cents to protect unsold

bushels◦ IF THE FARMER IS STORING CORN THESE PUT OPTIONS

ARE IMPERATIVE

2012 Corn◦ Sell 40% of GUARANTEED bushels now◦ Buy December $5.20 puts for 31 cents◦ Hold off buying call options until Top Third makes the

recommendation

Current Marketing Recommendations

2011 Wheat◦ Sell 100% of harvested bushels now◦ Buy call options to replace these sales upon Top

Third’s recommendation

2012 Wheat◦ Sell 25% of GUARANTEED bushels now ◦ Buy July $6.40 put options for 35 cents◦ Buy call options upon Top Third’s

recommendations

2011 Soybeans◦ Sell 70% of harvested bushels now◦ Buy May $13.20 put options for 25 cents◦ Buy call options upon Top Third’s recommendation

2012 Soybeans◦ Sell 40% of GUARANTEED bushels now◦ Buy November 2012 $12.20 put options for 45

cents◦ Buy call options upon Top Third’s recommendation

Buy Cattle put options, look to spend $2.75-$3.25 / cwt.

Buy Hog put options, look to spend $2.50-$3.00 / cwt.

Recommendations for Cattle and Hogs

Any statements of fact herein contained are derived from sources believed reliable, but are not guaranteed as to accuracy, nor do they purport to be complete. There is a risk of loss in trading commodity futures and options on futures. You may lose more than your original investment. Commodity trading is not suitable for all investors.

We offer:◦ Personal advice from an experienced risk

management specialist◦ Full service Hedge accounts◦ Custom Hedge programs◦ Cash management advice◦ Commission $75 R/T◦ Clearing through R.J. O’Brien◦ Web site grain comments 2 times a day at

www.topthird.com

We want to earn your trust

877-884-3343877-TT-HEDGE

Questions