Here is the monthly softs commodities summary that discussing the major markets of coffee, sugar, cocoa and cotton. Please feel free to visit my website www.alpine-trading.net for details on daily market wire:

Recent USDA world coffee market and trade report advised that Brazil finally broke its biennial cycle for arabic coffee production in more than 2 decades. This is critical as it finally places 2 down production years in Brazil, a key production country to only 33.1 mln bags. Total world coffee production is forecasted to be 148.7 mln bags down 1.5 mln bags from 2013/14. What is illustrative is the stocks to use ratio recently forecasted:

2010/11 2011/12 2012/13 2013/14 2014/15

Wolrd production (mln bags) 134.087 143.897 155.140 150.145 148.670

Stocks to Use Ratio 21.5 % 18.3 % 25.4 % 24.7% 21.7 %

So the projected S/U for 2014/15 looks very similar to 2010/11 but not as bad as 2011/12. If you look at the price performance back 3-4 years ago:

2008012014.png /%

when the markets rallied passed the $ 3.00 per lb level. I believe that this will happen as well in the next few months to the coffee market in other to ration demand that is clear cutting into the small Brazilian production.

The world sugar markets and trade report was released recently with the forecast essentially that world production is flat at 176 mln mt for 2014/15. So although Brazilian production was down 1.0 mln mt, two other major producers like Thailand and India increased to help with production concerns overall. In general, world human consumption is expected to increase by 3 mln mt vs. last year, which will shrink that stocks to use ratio by 1.0 %

2010/11 2011/12 2012/13 2013/14 2014/15

World production (1kmt) 161,940 172,166 177,486 175,703 175,589

Stocks to Use ratio 18.78 % 21.95 % 26.73 % 27.10 % 26.00 %

Based on this simple analysis, I believe that we can see sugar prices break even further down towards the 14.00 cent level in the next few months. Not only have we seen the futures prices slip lower but also have seen futures spreads collapse in several weeks.

20chart%2008012014.png /% 20spread%2008012014.png /%

Since these spreads do not look like they are stopping to the downside, I believe that the complex is still susceptible to another bigger sell-off barring any changes to production forecasts.

Reports from the U.S. and Western Europe are that retail sales continue to increase from year to year on the chocolate market. More impressive is the continued double digit increase in Asia Pacific and Latin American emerging markets. As there are no circumstances right now for supply shock in the major producing countries like Ivory Coast and Ghana, I dont believe that this market will climb or spike higher very abruptly. I would rather expect it to steadily climb towards the $ 3500 levels going into the holiday season. I believe that we will have underlying support for Cocoa markets at 3000 — 3200 levels and could possibly see a test of $ 3600 and higher in the next 4-6 months.

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The cotton market at this point is not threatened by any supply shocks around the world as weather in the U.S. has been very cooperative and stock situation looks plentiful. Lets compare world production to S/U ratios as well as U.S. numbers to same.

2010/11 2011/12 2012/13 2013/14 2014/15

World production (mln mt) 25.472 27.562 26.770 25.674 25.348

S/U ratio 43.9 % 71.3 % 84.3 % 92.7 % 94.9 %

U.S. production (mln bales) 18.1 15.57 17.32 12.91 16.50

S/U ratio 14.2 % 22.0 % 23.6 % 19.1 % 37.1 %

We actually have not seen S/U ratio levels on a U.S. basis since 2008/09 at 37.4 % when prices ended up much lower than current prices (nearly 40 cents/ lb). On a global scale, 94.9 % stocks to use ratio is ridiculous high levels and without a supply threat, I dont believe that anything will keep prices from tumbling lower.

20chart%2008012014.png /%

If indeed we see 40 cent levels in the cotton market during the next 3-4 months, this will in my opinion set up as a good support level. From this point, I believe we will see fewer and fewer acres go into cotton in South America and then eventually in North America, will might create supply issues next summer 2015.

If you have any questions or comments, please do not hesitate to contact me.

Best Regards

Edgard Cabanillas

Alpine Trading LLC

Website: www.alpine-trading.net