REPORT

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COMMODITY OIL

SOY AND CANOLA OIL

In a strong counter-seasonal move, the soybean oil futures and basis markets have posted

significant gains since late July. The primary drivers behind this rally are: strength in the

global palm oil market on lower stocks and stronger Chinese demand; continued solid

pace of the U.S. soybean oil exports - U.S. dollar still headed lower; record use of soybean

oil for biodiesel production in the U.S. ahead of elections; large drop from June to July

on NOPA domestic bean oil stocks despite high yields; and commodity fund (speculative)

traders have flipped from net short to net long positions. We’ll be looking for a pullback

late August/September to push pricing closer to $0.31. Current market at $0.34

SOY:

• The U.S. soybean crop is currently rated at 72% good to excellent. That is the

fourth highest level of the past 30 years for this point in the growing season.

Record yields are expected at this point.

• The USDA’s August supply/demand report raised the soybean ending stocks

estimate by 40 million bushels for the 2016/2017 crop year. However, the

USDA lowered its soybean oil ending stock estimates significantly in August,

recognizing a record pace of soybean oil used for U.S. biodiesel production ahead

of elections and increased export business – U.S. dollar still headed lower.

• Soybean oil’s share of product value has rallied over 4% since early July at the

behest of a sharp drop in soybean meal values. Current fundamentals suggest a

move to 36% in the spot position is likely.

PALM OIL:

• Palm oil prices made two-month highs this week on lower than expected July

stocks in Malaysia and stepped up buying from China. Seasonal production

increases have started out at a lower than expected pace.

CRUDE:

• Crude oil has been able to stay above the $40 per barrel level (profitable bio

margins), contributing to posted gains.

EXPORTS:

• The USDA lowered its soybean oil ending stock estimates significantly in August,

recognizing increasing export business and a record pace of soybean oil used for

biodiesel production.

SEASONALS:

• Soybean oil prices have a strong seasonal tendency to move lower in the months

of August and September.

DAIRY

BUTTER

Butter production is mixed across the country as cream supplies are uneven. We are nearing

the time frame when prices skyrocketed the past two years. The market fundamentals are

not supporting another $3.00/lb high as stocks are higher than year ago levels, production is

up and retail holiday bookings were active earlier this year. There is still some risk with the

skyrocketing prices, but we could also see a significant decrease as sellers look to unload

heavy supplies.

MILK AND CREAM

Bottle milk sales are up, as is demand. Production remains steady across the country except

in the West where high temperatures have been disrupting the cows. With back to school

upon us we will continue to see a rise in demand and pricing. FMO commodities for August

were all up except for class II butterfat. California commodities were all up.

CHEESE

Cheese prices have continued to climb each week since May. It seems as though lower than

expected production and higher than forecasted demand continue to be the drivers of the

higher markets. Markets were not expected to be trading this high and until demand lets off

we will continue to see the higher market. Expect markets to continue to trade within the

current range with upside expected in Q4.

SHELL EGGS

Retail demand patterns are good with more promotional activity and schools coming back in

session. Wholesale buying interest has been active this week, with bids to buy now exceeding

current offerings. Prices have increased due to the increased demand and tightening supply.

This trend should continue for the near term.

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