2
2019 Commodity Market Headlines
Continued large global supplies of grains & oilseeds
Huge/record South American production
U.S. spring flooding, planting delays
U.S. and China Trade War
African Swine Fever
Global economic concern
Currency Volatility
Speculative fund positioning
3
The Spring of 2019 was Historically Wet
Chart: NOAA
Total Precipitation Percentiles Mar – May 2019(1895 – 2019)
4
89.189.8
91.7 91.7 90.089.2
84.6
80.0 80.076.7
65.0
70.0
75.0
80.0
85.0
90.0
95.0
2018/19 Final March Intentions June WASDE July WASDE August WASDE
USDA U.S. Planted Acreage Estimates (million acres)
Corn Soybeans
Historically slow planting pace
Trade dismisses USDA, awaits re-survey results
The Great Acreage Debate of 2019
Record bearish production surprise
Trade War deters soybean acres
5
New Crop (19/20) Commitments
U.S. Corn sales of 5.5 MMT vs. 10.4 MMT last year, -47% (USDA -2%)
U.S. Wheat sales of 11.1 MMT vs. 9.0 MMT last year, +23% (USDA +4%)
U.S. Soybean sales of 5.6 MMT vs. 13.2 MMT last year, -58% (USDA +4%)
U.S. Corn, Wheat and Soybean Demand
Demand Headwinds into 2020 Flatlined ethanol demand Trade War deal before 2020 unlikely ASF continues to spread Big wheat crops in the EU and FSU High 19/20 SAM corn/bean crop potential $USD strength
6
CORN MARKET
7
0
500
1000
1500
2000
2500
Million Bu
shels
U.S. Corn Ending StocksUSDA WASDE Report
Data Source: USDA
U.S. Corn Supply: projected ending stocks above 2 billion are below last year but still historically large
General range of forecasts earlier this summer
8
U.S. Corn Yields Slightly Below Trend
70
90
110
130
150
170
190
89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19
Yield (bushe
ls/acre)
U.S. Corn Yields (1989‐2019)
= RecordYield= Trend Line Yield= 5% Below Trend
8/31 Years (26%) = Record Yield2/31 Years (6%) = Consecutive Record Yields5/31 Years (16%) = 5%+ Below Trend
9
Frost Watch - A Race to MaturityDate of Median 1st 28 F Freeze
Late planting has put plant development well behind average Biggest risks are in the Dakotas and the Eastern Corn Belt NOAA’s current September forecast does not have a major freeze
1 0
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
180,000
200,000
Major Corn Exporters: production & exportsBrazil Prod. Argentina Prod. Ukraine Prod. Combined Exports
Data Source: USDA
Global Corn Exports: record crops for all 3 of the U.S.’s major export competitors
U.S. (Gulf) $160Brazil $155Argentina $143Ukraine $182
FOB Export Values, spot ($USD/MT)
1 1
‐50
‐30
‐10
10
30
50
1‐Sep 1‐Oct 1‐Nov 1‐Dec 1‐Jan 1‐Feb 1‐Mar 1‐Apr 1‐May 1‐Jun 1‐Jul 1‐Aug
Cents/Bu
shel
Decatur, Illinois Corn Basis
14/15 15/16 16/17 17/18 18/19
Data Source: Reuters
Cash Corn Prices: the threat of shorter crops in the East has rallied corn basis to new highs
1 2
Weekly Corn Prices: continuing to fall post August USDA report shock
Delayed planting
USDA surprise
Demand destruction
Chart: DTN
1 3
Corn Market Forward OutlookBearish Scenario (▼)• USDA’s production forecast validated at harvest• Demand struggles continue• Higher acres/good early S. American conditions
Bullish Scenario (▲)• Major freeze, surprising acreage revision• Tight fisted farmer• Major ethanol mandate change
Outlook: barring a major harvest surprise, look for prices to shed some of the remaining risk premium they have left as we get closer to harvest• Further demand cuts could partially offset yield/acreage reductions• Cash corn prices will stay firm, especially in the ECB
1 4
WHITE CORN MARKET
1 5
Global White Corn Market 3 year high in WC premiums during U.S. planting
U.S. planted area up but harvested area down
Delayed planting presents yield and quality concerns
Stable food demand, exports down 8% - 10%, and lower feed/industrial usage
Mexico Market: another solid crop due to favorable growing conditions Record demand (feed) tightens stock levels
Per capita corn consumption has declined
South Africa Market: drought conditions led to lower 19/20 crop Strong exports to neighboring countries
Supplies are high enough to meet export + feed demand
1 6
U.S. White Corn Ending Stocks: below trend yields and only a moderate reduction to demand drops stocks to a 4 year low
7.86
13.48
15.43
10.58
14.17
6.64
1.19
10.15
5.30
14.85
12.87
4.425.29 4.89
3.88
0.37
6.58
21.94
11.57
4.20
0
5
10
15
20
25
00/01 01/02 02/03 03/04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14 14/15 15/16 16/17 17/18 18/19 19/20
Mill
ion
Bus
hels
U.S. White Corn Ending Stocks
Imported Mexican corn
Over produced to meet potential SAF demand
1 7Data Source: USDA
White Corn Premiums Over Yellow Futures
1 8
WHEAT & FLOUR MARKET
1 9
45% 45%38%
34%
30%
14%15%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1974 1977 1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010 2013 2016 2019
World Share of Wheat Exports (1973 ‐ 2019)Australia Canada European Union Black Sea United States Others
Data Source: USDA
Global Wheat Exports: Russia’s emergence as a major producer and exporter has cut into U.S. export share
2 0
Chart: USDA
Record Global Wheat Production in 2019
2 1
25
30
35
40
45
50
55
60
65
70
1909
1912
1915
1918
1921
1924
1927
1930
1933
1936
1939
1942
1945
1948
1951
1954
1957
1960
1963
1966
1969
1972
1975
1978
1981
1984
1987
1990
1993
1996
1999
2002
2005
2008
2011
2014
2017
2020
Millions
U.S. Winter Wheat Planted Acres (1909 ‐ 2019)
Lowest Winter Wheat Acreage in over 100 Years
Data Source: USDA
2 2
2019-20 U.S. Wheat S/D: good yields and lower exports have offset the lower acreage base
Source: USDA
0
500
1,000
1,500
2,000
2,500
3,000
0
200
400
600
800
1,000
1,200
1,400
Prod
uctio
n & Ex
ports
(mil b
u.)
End Stocks (m
il. bu
.)U.S. All Wheat Supply & Demand
Ending Stocks Production Exports
Hard Red Spring wheat stocks are forecasted to be at a 32 year high Hard Red Winter wheat stocks down on the year but well above average
2 3
$0.50
$1.00
$1.50
$2.00
$2.50
$3.00
Aug‐14 Jan‐15 Jun‐15 Nov‐15 Apr‐16 Sep‐16 Feb‐17 Jul‐17 Dec‐17 May‐18 Oct‐18 Mar‐19 Aug‐19
$/Bu
shel
Kansas City Wheat Basis (13% Pro)
Data Source: Reuters
Winter Wheat Basis: supported by a lower protein crop. Adequate spring wheat supplies for blending should limit rallies
2 4
Weekly KC Wheat Prices: hit 13+ year lows this past week
EU & Australia drought
Weak corn market
U.S. prices uncompetitive
Chart: DTN
5 straight years of record global production
2 5
Wheat Market Forward OutlookBearish Scenario (▼)• Favorable spring wheat harvest• $USD strength, slower exports• U.S. corn stocks near current forecast• Steady to higher acres in EU/FSU
Bullish Scenario (▲)• Corn harvest issues• Lower 2020 winter wheat area• Further delays to the spring wheat harvest• S. Hemisphere growing problem
Outlook: with prices at or near decade plus lows, downside from here feels limited with the market now in “oversold territory”. With record global production expected and adequate U.S. stocks, look for forward carry to come out of the market as we move through time.• Wheat basis should stay supported with the lower protein crop• HRW will struggle to attract acreage at current price levels
2 6
VEGETABLE OILS MARKET
2 7
Soybean Exports to China: South America has been able to satisfy China’s soybean import needs as the Trade War drags on
Chart: Bloomberg
2 8
1,070
755
573
449 438370 348 334 329 302 292 290 278 248 215 209 208 205 197 196 191 181 178 169 151 141 138 128 112 92
0100200300400500600700800900
1,0001,100
Million
Bushe
ls
U.S. Soybean Ending StocksUSDA WASDE Report
0
20
40
60
80
100
120
Endin
g Stok
cs (M
MT)
Crop Year
World Ending Stocks - SoybeansUSDA - Foreign Agriculture Service
**Expect an increase in 19/20 acres in South America given the currency situation of both Brazil
and Argentina
**The soybean balance sheet lost 12.5 million acres from last year and stocks
will still be the 2nd highest ever
Data Source: USDA
2 9 Chart: FAO
African Swine Fever: continuing to spread with now 149 reported outbreaks across 32 Chinese provinces and spreading
3 0
Global Vegetable Oil Supplies: a slowdown in oilseed crush and very strong demand for biodiesel production tightens oil supplies
6.0%
7.0%
8.0%
9.0%
10.0%
11.0%
12.0%
0
5
10
15
20
25
99/00
00/01
01/02
02/03
03/04
04/05
05/06
06/07
07/08
08/09
09/10
10/11
11/12
12/13
13/14
14/15
15/16
16/17
17/18
18/19
19/20
Ending
Stocks/Us
e
Ending
Stocks (M
MT)
Ending Stocks of World Veg OilsPalm Rape/Canola Soybean Sun ES/U %
Data: USDA
3 1
U.S. Soybean Oil Supplies: despite soybean crush running at record levels for the better part of the year, soybean oil stocks are at their lowest level since 2004
Data Source: National Oilseed Processors Association
3 2
Assumptions:Board Crush 0.88Oil Yield 11.62
Soybean % Prod. Value
Futures 28 29 30 31 32 33 34 35 367.00 18.99 19.67 20.34 21.02 21.70 22.38 23.06 23.73 24.417.50 20.19 20.91 21.64 22.36 23.08 23.80 24.52 25.24 25.968.00 21.40 22.16 22.93 23.69 24.45 25.22 25.98 26.75 27.518.50 22.60 23.41 24.22 25.02 25.83 26.64 27.45 28.25 29.069.00 23.81 24.66 25.51 26.36 27.21 28.06 28.91 29.76 30.619.50 25.01 25.91 26.80 27.69 28.59 29.48 30.37 31.27 32.16
10.00 26.22 27.15 28.09 29.03 29.96 30.90 31.83 32.77 33.7110.50 27.42 28.40 29.38 30.36 31.34 32.32 33.30 34.28 35.2611.00 28.63 29.65 30.67 31.69 32.72 33.74 34.76 35.78 36.8111.50 29.83 30.90 31.96 33.03 34.09 35.16 36.22 37.29 38.35
Current Market SX19 8.69BOV19 28.64
Soy Complex Price Relationships: strong demand for soybean oil in biodiesel production and weakened soymeal demand as a result of ASF is supportive to soybean oil’s share of product value
3 3
Weekly Soybean Oil Prices: struggling to trade independently of the weak soybean market
Upside has been capped by the Trade War and large palm oil supplies
Chart: DTN
3 4
Soybean Oil Market Forward OutlookBearish Scenario (▼)• Trade War drags on well into 2020• U.S. soybean stocks remain large• Higher acres/good early S. American conditions• Crush margins stay strong
Bullish Scenario (▲)• Trade War resolution• Increases to the BioD mandate• S. American crop problem• ASF continues to spread
Outlook: soybean oil has the fundamentals to move higher, but rallies will struggle to maintain strength without the support of soybeans. Look for the July lows to hold for the short term.• Oilshare to stay supported• Possibly lower 2020 U.S. soybean acres again
3 5
Palm Oil Supply & Demand
• Production is seasonally increasing. Q3 and Q4 is peak production• Month to month production gains versus last year continue to widen• Exports increased 7% last month and were 24% higher than 2018• Stocks are at a 1 year low, falling for a 5th straight month
Data Source: MPOB
3 6
Weekly Palm Oil Prices: longer term cyclical trends signal that the old lows will prove as firm support levels moving forward
Bullish Market Factors• India & China demand, ASF impacts• Indonesian BioD production
exceeding expectationsBearish Market Factors• Narrowing gasoil spreads• EU phasing out of PME
Chart: DTN
3 7
Managing your business’s risk to fluctuating commodity prices
3 8
Best in Class Commodity Risk Management Have a Risk Policy Position limits, defined roles Alignment on risk tolerance
Develop a unified Risk Management Strategy
Avoid key decision making during peak volatility Markets are emotional
Know your risk – define your Even Position Keep purchases and sales in balance
Raw materials priced Forward sales priced
3 9
If you have any additional questions or requests for information please contact me at [email protected]
Visit us at: www.grmcorp.com
Thank You!!