CONVERGENCE 

POTENTIAL SOLUTIONS 

ADD DELIVERY POINTS .. at par value .. 

Mid-South River Stations 

Ohio River Stations 

Ohio Rail Facilities 

ADD DELIVERY POINTS .. safety value .. 

At a discount to the primary 

Delivery Point 

CHANGE STORAGE RATES 

PROs 

Likely improves local basis levels 

Reduces basis volatility in the region 

Same as above 

Modest Increase in all Storage Rates Better reflects current value of storage 

Large Increase in all Storage Rates Allows more volatility in spreads and less in basis 

(e.g.,doubling of storage rates) Enhances convergence in surplus years 

Implement Seasonal Storage Rates Better reflects value of storage during peak periods 

CONs 

Does not resolve the problem with convergence 

The market is not suffering from a lack of deliveries 

Would represent a disadvantage for the stopper 

Same as above, but no disadvantage to the stopper 

Does not resolve the problem with convergence 

Makes the market less responsive to bullish fundamentals 

Creates potential for an opposite imbalance in tight stock yea rs 

Creates incentive for 11production11 for CME rather than consumer 

Increases burden on long hedgers 

Does not resolve the problem with convergence 
POTENTIAL SOLUTIONS PROs 

COMPELLED LOAD-OUT 

No Qualifications or Limits Would force convergence in cash/futures 

With Limits to Maintain Market Balance Would force convergence in cash/futures 

Restores confidence/dependable of short-hedges 

CASH SETTLED INDEX 

SERIAL FUTURES CONTRACTS 

(e.g.monthly ctr) 

Potential solution to convergence 

Creates enhanced hedging opportunities 

Reduces time-frame/risk of market imbalances 

CONs 

Creates an unmanageable risk for the long-hedger 

Creates an imbalance in favor of the short-hedger 

Could dramatically reduce liquidity as long-hedgers see other alternative 

Could force current 110n-exchangell volume to OTC 

Represents a material change that could destablize the market 

All of the comments in compelled loadout section apply 

unless structure & limits are designed properly to assure market 

balance 

Represents a radical change with unknown consequenses 

Creates new basis exposure for elevator operators 

Eli mates delivery system as the ultimate market and source for physical 

Could create advantage for large networks over smaller operators 

No guarantee that it will create convergence 

Not a solution for convergence 
I - COT REPORT Non-Commercial Commercial Index Traders Non-Reportable Total Total Spreads I Total --- long Short Spreads long Short long Short long Short longs Shorts -

WHEAT I I I I I I I _ long 0 1 as of 7/22/08 43249 72076 ...lli28Z 34121 156490 209408 33347 27170 52035 313948 313948 J 242&l 438235 

CIT lonq share ofTotal 01 48% - CIT Net share ofT o:al 01 40% -

_ CIT Net share 01 excl Spreads 56% 

Net Long as % of Production > 145% ---

BEANS 

932 ...19~ 102319

1 

_ Long 0 1 as of 7/22/08 945_§_9 284185 163630 13521 52888 83761 413396 413399 ~ 93653 607052 

CIT Lonq share ofTotal 01 27% - CIT Net share ofT o:al 01 25% -

_ CIT Net share 01 excl Spreads 36% 

Net Long as % of Production > 29% ---

- CORN 

547952_1 ----- -- _ Long 01 as of 7/22/08 183689 92628 737306 904339 ,......i32662 46104 15711§ 278349 1321419 1321420 737306 2058726 

CIT Long share ofTotal 01 21% - CIT Net share ofT o:al 01 19% --

_ CIT Net share 01 excl Spreads 29% 

Net Long as % of Production > 15% -

-