Special One Grain

2010/11 Early Commitment Pool No.2

18th June 2010

A flexible contract tonnage wheat pool

The team at Special One Grain is pleased to announce the Special One Grain Early Commitment Pool No. 2.
This premium pool has been designed to take advantage of early season marketing, with the option to reduce
contracted tonnage by 1/3 in September. Washout costs will incur if all or part of, the physical commitment is
unable to be delivered.

Target Price - $210-220/mt APW Track

Features of the pool:
 an early commitment contract pool;
 minimum contract size of 100mt;
 growers commit to a contract which is a multiple of 100mt ;
 on entering the pool there is a commitment to physically deliver 2/3rds of the contract total;
 the additional 1/3rd can be committed at the end of September, up to the contract total;
 the grower is not obliged to increase their commitment to physical delivery in September 2010;
 if the pool participant increases their firm tonnage commitment in September, they will be required to
deliver the total committed tonnage.
 grade spreads will be set closer to harvest.

The Strategy:
The 2010/11 Early Commitment pool No. 2 objective is to utilise forward physical and futures pricing strategies
to take advantage of the historically higher prices for new crop wheat earlier in the season, to protect a portion
of the downside price risk. The Pool Manager's aim is to manage the price risk of the maximum tonnage
contracted by growers.
The strategy is to purchase longer dated options for maturity throughout the growing season. By purchasing
longer dated options, this provides the pool manager the flexibility to make physical cash sales when there are
rallies in the markets at any time leading up to delivery of the physical wheat. If targeted opportunities to make
physical sales occur or other price management mechanisms arise through the life of the pool, the Pool Manger
reserves the right to make these sales.

The Pool Manager has the complete discretion as to the timing of the new crop physical wheat “basis sale”,
option on futures purchased and the specified derivative product utilised post expiry of the initial “Put Option”
expiry. It is becoming increasingly apparent that “hedging” new season wheat on the domestic market may be
more prudent this year measured against “pre deregulation” because of domestic softening “basis” risk. More
specifically, the bottleneck in grain logistics, the consolidation of grain companies (lack of buyers), improving
seasonal conditions (potential La Nina) and credit risks are placing pressure on the basis.
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The principle of the strategy is to “lock in and protect a base value”. That is, a "base price" is determined if the
underlying physical price of grain trades lower leading up to and post sowing. If, on the other hand, prices rally
post sowing and leading up to harvest, then the Pool Manager is in the position to improve wheat price sales
through a dollar cost averaging process.

Exit/Washout Costs:

This pool is for the physical delivery of grain equal to the customer’s grain delivery commitment. If the grower
anticipates that they will not be able to physically deliver all or part of its grain delivery commitment the grower is
entitled to give written notice to the pool manager stating that it will not deliver the grain delivery commitment
(“washout notice clause 11 in Terms & Conditions).
The exit or washout cost will be determined by the "close out" value of physical and derivative positions on the
physical delivery committed that the grower chooses not to, or is unable to, deliver.

Exit or washout example: Washout - 100mt

The pool manager has sold the first quantity of grain at $220 per metric tonne;

The price per metric tonne of grain as at the washout date is $225 per metric tonne;

The option purchase price of grain at the pool opening date was $18 per metric tonne; and

The option selling price of grain as at the washout date in late September was $10 per metric tonne:

{[($220 - $225) x 66] + [(-18 + 10) x 33]} ÷ 100

= - $594/100

= $5.94/mt

Generic Strategy – Please note, this does not allow for your individual objectives, financial situations or
needs.
Please review the Terms &Conditions on our website www.specialonegrain.com.au or call
1300 28 12 28 for further details.
Authorization for general derivative advice [futures of FX] is held by:
Special One Grain Accumulator Pty Ltd [Trading as Special One Grain], Authorized Representative No:308521
Advance Trading Australia Pty Ltd is an AFSL holder No. 257679.
ABN 49 062 118 496

urts of that State.

Any advice given by ADVANCE staff & its Authorised Representatives [AR] is deemed to be GENERAL advice, as the information or advice given does not take into account your particular
objectives, financial situation or needs. Therefore at all times you should consider the appropriateness of the advice before you act further. Advance Trading Australia [ATA] does not give
any warranty, whether express or implied, as to the accuracy , reliability or otherwise of the information and opinions contained herein and to the maximum extent permissible by law,
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accepts no liability in contract, tort [including negligence] or otherwise for any loss or damages suffered as a result of reliance on such information or opinions.