REPORT

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COMMODITY OIL

SOY AND CANOLA OIL

Seasonal indicators continue to point to solid underlying support over the next few

months, but some caution is warranted as the Soybean and Soybean Meal markets look to

be carrying excessive risk premiums at this time. The Soybean complex was able to close

higher this week despite a lack of any fresh bullish fundamental inputs and continued

poor meal demand. Technical indicators continue to point higher for the Soybeans and

Soybean Meal and sideways for the Soybean Oil.

SOY:

• The $1 per gallon biodiesel blender’s tax credit expired at the end of 2016,

effectively taking margins below the break-even level for smaller, stand-alone

operators. Traders remain concerned about a potential overhaul of the RFS.

• The USDA raised its 2016/2017 Soybean Oil ending stocks estimate by 25 million

pounds on their February report

• Current price ratios continue to favor planting Soybeans instead of Xorn in

the U.S. next spring. As much as 4 to 5 million additional Soybean acres are

expected.

• The combined Soybean production of Brazil and Argentina is likely to be at a

record level again this year. The early Brazilian harvest is progressing nicely.

PALM OIL:

• A noted Palm Oil industry analyst is projecting that global Palm Oil production

will increase by as much as 20% in 2017. The Malaysian Palm Oil Board

estimated end of January Palm Oil stocks at 1.54 million metric tons. Although

the number represented a 7.6% drop from February and was at a five-month

low, it was still considered price negative as traders had been expecting an even

bigger month over month decline.

EXPORTS:

• U.S. Soybean Oil exports continue to outpace the levels needed to meet current

USDA projections for the 2016/2017 crop year.

SEASONALS:

• Seasonal pattern considerations are still in play as the Soybean Oil futures have

rallied between 2/12 and 4/10 for 13 of the last 15 years.

DAIRY

BUTTER

Butter pricing continues to trend down this week to the lowest level we have seen since

mid-December. Plentiful Cream supplies have increased Butter churning across all regions.

Cold storage numbers are building, and we are likely adjusting to a new normal where peak

cold storage inventories still result in prices over the $2.00/lb mark.

CHEESE

Production levels vary across the country. Block inventories are steady to growing, while

barrel inventories remain long. Some manufacturers are operating full production schedules

to keep up with the available Milk supply. While others are curtailing production to keep

inventory levels in check. Overall demand is down, and many in the industry expect to see

orders pick up in March when spring holiday orders begin. Interest from international buyers

is increasing, but export orders are not expected to increase until the U.S. price becomes

more attractive. The market pricing undertone is uncertain as production varies.

SHELL EGGS

Retail demand patterns are reported as fair this week. Shell Egg inventories are flat from the

week prior and are up 22% compared with the five-year average for the period. Supplies are

readily available and the market is weak. Pricing is down this week due to excess supply.

MILK AND CREAM

Fluid Milk production is seasonally active for this time of year throughout the majority of the

country. Class I sales are steady and supplies have filled most of the school pipelines. For

February, FMO Class I Skim markets were down, while Butterfat was up. All Class II markets

were up. California markets were mixed but Butterfat was up for both Class I and II. Pricing

will be higher for Heavy Cream across the country in February.

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