1. Fundamental Factors Affecting
Agricultural and Other Commodities
Research & Product Development
February 2011

2. Outline
• Review of key supply and demand factors affecting commodity
markets
• World stocks-to-use levels for corn, wheat and soybeans
• Current events impacting corn, wheat and soybean prices
• Impact of U.S. dollar depreciation on commodity prices
• Global growth of agricultural futures market
• Index fund positions as a percentage of open interest
• Non-commercial positions and their correlations to price changes
• Margin and speculative position limits
© 2011 CME Group. All rights reserved 2

3. Highlights
• Our Markets are Working
• Many Factors Affect Commodity Prices
• Basic Supply and Demand Principles
• Weather and disease limiting supply
• Growing demand from developing countries
• Higher input costs related to increasing energy prices
• Falling U.S. dollar
• Biofuel production increases
• Limited additional farmland in the short run
• Restrictive export policies from some major exporters
• No Evidence Index Funds or Non-Commercial Participation is
Adversely Affecting Grain and Oilseed Markets
• Index fund participation has decreased or remained steady
• Non-commercial participation in our markets has low correlations to recent changes in prices
© 2011 CME Group. All rights reserved 3

4. Agricultural Commodity Stocks Are Extremely Low
World
Current ratio versus the 10-year average ratio:
Stocks-to-Use Ratio
Corn at 13% vs. 17%
40% Wheat at 21% vs. 24%
Soybean at 19% vs. 22%
35%
Soybean
30%
Wheat
Corn
25%
21%
20%
19%
15%
13%
10%
5%
0%
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
*
© 2011 CME Group. All rights reserved 4

5. U.S. Planted Acres
Corn and Soybean planted acres are at record levels as the industry attempts to
keep pace with increasing world demand.
100
USDA January
Estimate
90 88
80
77
Millions of Acres
70
60
54
50
40
Corn Soybeans All Wheat
30
© 2011 CME Group. All rights reserved 5

6. Events Impacting Corn Prices Since January 2008
$8 Global supply concerns increased as consumption
rises faster than production. World stocks-to-use
ratio at historical low in 2008 at 12.6%.
Corn prices surged during harvest in 2010 as reports
filtered in from farmers that yields were far below trend
line estimates. Early estimates were looking for a yield
of 164.7, but the December 2010 USDA estimate was
ratcheted down to 154.3 bushels per acre.
$6
Dollars per Bushel
Corn prices remained range bound for most
of 2009 as a weak U.S. dollar, reduced feed
demand and a larger than expected U.S. crop
kept prices in check.
$4
Overall macro economic
weakness adversely affected
commodity prices during the
last half of 2008.
Corn Price 30 Day Avg
$2
© 2011 CME Group. All rights reserved 6

7. Events Impacting Wheat Prices Since January 2008
$13
Severe drought hit the FSU damaging a
Spring wheat supplies almost depleted prior to majority of the region’s crop. This led to
harvest leading to a record high for all wheat a wheat export ban from the world’s
classes. Prices then consolidated nearly 30% third largest wheat exporter. In addition
$11 as prospects for a successful harvest relieved to this, Australia’s crop was heavily
supply concerns. damaged again due to drought
conditions in some areas and major
flooding in other wheat growing
territories.
$9
Dollars per Bushel
Wheat prices remained primarily range bound for
most of 2009 as a weak U.S. dollar and increasing
world production kept prices from surging.
$7
Overall macro economic
$5 weakness adversely
affected commodity
prices during the last
half of 2008.
30 Day Avg Wheat
$3
© 2011 CME Group. All rights reserved 7

8. Events Impacting Soybean Prices Since January 2008
Battle for 2008 acres and a very thin U.S.
carry-out led prices to a historical high. Reports of dry conditions in South
$17 America which could lead to lower
Prices started inching higher following production in the region and
low production numbers out of South continued demand from China led
America and lower than expected prices higher in the last half of 2010.
$15 planting estimates for the U.S.
$13
Dollars per Bushel
$11
$9
Overall macro economic
weakness adversely affected Prices stabilized as better than
$7 commodity prices during the expected yields were reported in
last half of 2008. 2009 and demand stabilized.
Soybean Price 30 Day Avg
$5
© 2011 CME Group. All rights reserved 8

9. Weak U.S. Dollar is a Key Driver of Increasing
Commodity Prices
Cents per Bushel
Corn Prices
Cents per Bushel
1400
Wheat Prices
800
1200
700
17%
1000
600
17%
800
500
600
400
400
300
200
200
January-08 December-10
January-08 December-10
Cents per Bushel Soybean Prices
1800
Nearby Corn Futures
1600 Nearby Wheat Futures
17%
Nearby Soybean Futures
1400 Currency Adjusted (U.S. Dollar Index) Nearby Futures for
each respective product
1200
1000 Corn, wheat and soybean prices would be at
800 least 17 percent lower if the U.S. Dollar had
maintained its value from June 2006
600
400
January-08 December-10
© 2011 CME Group. All rights reserved Source: Bloomberg 9

10. Index Fund Net Long Positions Have Remained
Steady in Corn Futures Market
Index Net Long (Short) Positions Nearby Price
as % of OI Corn Cents per Bushel
70% 800
60% 700
600
Though index fund Index Net Long Positions 50%
positions as a percentage
500
of open interest remained 40%
Cents per Bushel
constant at around 20%
over the last three years, 20% 400
30%
20%
prices increased 25%.
300
20%
200
10% 100
0% 0
Jan-08 Index Net Long Positions as % of Open Dec-10
Interest
Nearby Corn Settlements
© 2011 CME Group. All rights reserved Source: www.cftc.gov 10

11. Index Fund Net Long Positions Have
Remained Steady in Wheat Futures Market
Index Net Long (Short) Positions as Nearby Price
% of OI
Wheat Cents per Bushel
100% 1400
90%
1200
80%
Though index fund
70% 1000
positions as a percentage
index Net Long Positions
of open interest remained 60%
Cents per Bushel
steady over the last three 800
years, prices have been 50% 35% 35%
consolidating for most of 600
40%
this time period.
30% 400
20%
200
10%
0% 0
Jan-08 Dec-10
Index Net Long Positions as % of Open Interest
Nearby Wheat Settlements
© 2011 CME Group. All rights reserved Source: www.cftc.gov 11

12. Index Fund Net Long Positions Have Declined in
Soybean Futures Market
Index Net Long (Short) Positions as Nearby Price
% of OI Soybeans Cents per Bushel
70% 1800
1600
60%
1400
50%
Index fund positions as a 1200
Index Net Long Positions
percentage of open interest
40%
Cents per Bushel
declined 3% over the last 1000
three years while prices 21%
increased 16%. 30% 24% 800
600
20%
400
10%
200
0% 0
Jan-08 Index Net Long Positions as % of Open Dec-10
Interest
Nearby Soybean Settlements
© 2011 CME Group. All rights reserved Source: www.cftc.gov 12

13. Changes in Non-Commercial Positions in Corn Have
Low Correlations to Price Changes
Nearby Price
Net Long (Short) Corn Cents per Bushel
40% 800
35%
700
30%
600
25% Non-commercial positions
500 varied over the last 3 years
20%
despite prices being fairly
15% 400 stable. The correlation
between changes in their
10%
300
positions and price
changes is 0.41.
5%
200
0%
100
-5%
-10% 0
Jan Dec
2008 Non-Commercial Net Long (Short) as a % of Open Interest 2010
Nearby Corn Settlements
© 2011 CME Group. All rights reserved Source: www.cftc.gov 13

14. Changes in Non-Commercial Positions in Wheat Have
Low Correlations to Price Changes
Nearby Price
Net Long (Short) Wheat Cents per Bushel
25% 1200
20%
1000
15%
800 Net positions for non-
10% commercial participants
Cents per Bushel
are primarily net short
Net Long (Short)
5% 600
despite the recent increase
in price. The correlation
between changes in their
0%
positions and price
400
changes is 0.69.
1/8/2008
-5%
200
-10%
-15%Jan Dec
0
2008 2010
Non-Commercial Net Long (Short) as a % of Open Interest
Nearby Wheat Settlements
© 2011 CME Group. All rights reserved Source: www.cftc.gov 14

15. Changes in Non-Commercial Positions in Soybeans
Have Low Correlations to Price Changes
Net Long (Short)
Soybeans Nearby Price
Cents per Bushel
40% 1800
35% 1600
30% 1400
Non-commercial
participants continue to
Net Long (Short)
25% 1200
hold net long positions in
Cents per Bushel
soybeans. The correlation
20% 1000 between changes in their
positions and price
15% 800 changes is 0.52.
10% 600
5% 400
0% 200
-5%Jan Non-Commercial Net Long (Short) as a % of Open Interest
Dec0
2008 Nearby Soybean Settlements 2010
© 2011 CME Group. All rights reserved Source: www.cftc.gov 15

16. Over Regulating US Commodity Markets Will Encourage Flow
to the Already Active OTC Markets and Overseas Exchanges
• The amount of outstanding OTC “Other” declined by almost 68% for the second half of 2008.
• This sharp decline was tied to the overall weakness in commodity prices since the middle of
2008
• Over 68% of exchange traded commodity derivatives are now traded in oversea markets.
Amounts Outstanding of OTC “Other” Commodity Annual Volume Turnover
Forwards, Swaps, and Options (including energy) for Exchange Traded Commodity Derivatives
14,000
12,580 1,800
Amounts Outstaning in $ Billions
Number of Contracts in Millions
12,000 1,600
1,400
10,000
1,200
7,861 1,000
8,000
800
6,000
600
4,032
4,000 3,194 400
2,521 2,434 200
2,000
0
2006 2007 2008 2009 2010*
0 Overseas Markets US Markets
Dec.07 Jun.08 Dec.08 Jun.09 Dec.09 Jun.10
Source: BIS *Through September 2010
© 2011 CME Group. All rights reserved Source: BIS 16

17. Margin Levels Have Increased As Volatility Has Increased
$2,500 Corn 70%
Margins are highly correlated with price
60%
$2,000 volatility, which has been at record highs
Volatility
50% given low stocks-to-use ratios and growing
Margin
$1,500 40% global demand.
$1,000 30%
20% Corn Volatility
$500 Wheat Volatility
10%
Soybean Volatility
$0 0%
Margin
$7,000 80%
Wheat
Soybeans $6,000 70%
$5,000 80%
$4,500 60%
70% $5,000
$4,000 50%
60%
Margin
$4,000
Volatility
Margin
$3,500
Volatility
50% 40%
$3,000 $3,000
$2,500 40% 30%
$2,000 $2,000
30% 20%
$1,500 $1,000
20% 10%
$1,000
$500 10% $0 0%
$0 0%
17
© 2011 CME Group. All rights reserved 17

18. Margin Levels Have Already Been Increased
Margin as a % of Contract Value
$2,500
Corn 12% • Margins as a % of contract value increased
Margin
23% in corn, 46% in wheat and 34% in
$2,000 10%
soybeans since January ‘08.
8% • Currently, margins as a % of contract value
$1,500
6%
are 6.44% in corn, 8.50% in wheat and 6.30%
$1,000 in soybeans.
4%
Corn Margins
$500 2% Wheat Margins
$0 0% Soybean Margins
Margin as a % of Contract Value
$7,000 18%
Wheat
Margin as a % of Contract Value
Margin as a % of Contract Value
Soybeans $6,000
16%
$5,000 12%
14%
$4,500 $5,000
Margin
Margin
10% 12%
$4,000
$4,000 10%
$3,500
8%
$3,000 8%
$3,000
$2,500 6% 6%
$2,000
$2,000 4%
4% $1,000
$1,500 2%
$1,000 $0 0%
2%
$500
$0 0%
© 2011 CME Group. All rights reserved 18

19. Speculative Position Limits for Ag Markets Have Not
Increased Since December 2005
• Speculative position limits are federally mandated in CFTC Reg 150.2. They
are determined by a formula and have not been increased since Dec 20051.
• Spot Month speculative limits have not changed during this time. They are
600 contracts for Corn, Soybeans, Wheat, and Oats; 540 contracts for
Soybean Oil; and 720 contracts for Soybean Meal.
1 Single month and all month combined speculative position limits must be no greater than 10% of the average combined futures and
delta adjusted month end open interest for the most recent calendar year up to 25,000 contracts with a marginal increase of 2.5% of the
remaining open interest thereafter.
© 2011 CME Group. All rights reserved 19

20. Summary
• When basic supply and demand principles are studied, it is clear that
many factors affect commodity prices
• There is no evidence that the participation of non-commercials is
adversely affecting grain and oilseed markets
– Speculators help form efficient, liquid markets
– Speculators have continued to hold relatively constant percentages of open positions in most
markets
• CME Group’s commodity products serve as the benchmark for the world
and these markets are working
• Over regulating US markets will encourage additional flow to growing OTC
commodity markets and overseas exchange traded commodity products
• Speculative position limits for ag products are federally mandated and
have been unchanged since December 2005
• CME Group’s commodity products serve as the benchmark for the world
and these markets are working
© 2011 CME Group. All rights reserved 20