From: "Barrett, Paul S" <ta To: "Epstein, Jeffrey [email protected] <[email protected]> CC: "Giuffrida, David J" Subject: Corn Idea Date: Fri, 16 Mar 2012 15:49:23 +0000 Embedded: unnamed Inline-Images: image001.jpg; image003.jpg Jeffrey Our IB guys have come out bullish on Dec 2012 corn. Corn idea: Buy Corn calls Contract: December 2012 (expires 23Nov2012) Reference rate: 572.25 (cents/bu) Strike: 600 Premium: 44.45 (cents/bu) Strike: 625 Premium: 36.25 (cents/bu) • IB outlook o Corn: We have bullish take on Corn leading into 3q12 and 4q12. While we see the increase in acreage in the US from 91.9 million acres to 93.8million acres in 2012, there are many risks to the upside. Those upside risks including: possible disappointing US production due to wet spring or dry/hot summer as well as China being in the midst of its growing season in 3q12 and increasing its imports should droughts lead to a shortfall in their production. Additionally, higher gasoline prices during the summer will likely increase ethanol demand in the US. While the highest risk price occurs in 3q12 the Sep12 contract tends to be much less liquid than the Dec12 - so we would be long Dec12 futures over Sep12. Additionally, we like being long calls here to express a bullish view in corn as we think heading into US planting window vol should naturally be bid up and therefore you can be long the vol and the delta. Vol looks like a decent buy here in corn. o Soybean: The Soybean complex is similar to corn especially in q3 and q4. The whole curve could shift higher to encourage the marginal planting of soybeans as opposed to corn in the US which we are beginning to see. We shifted our planting forecast from 93.5mil acres of corn and 75.2 million acres of soybeans - a .3 million acre shift from corn to soybean area due to higher prices of soybeans relative to corn. Upside risk comes from potential higher biodiesel blending mandates in Brazil and Argentina. In Bra