welcome [] · 2019-07-03 · thomson reuters is now refinitiv. shipping trends and challenges capt....
TRANSCRIPT
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WelcomeParis – 3rd July 2019
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Anne-Laure DelaplaceCustomer Success Manager, Refinitiv
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3
• 09:15 Session 1 - Shipping
Capt. Amrit Singh, Lead Shipping Analyst, Refinitiv, “Shipping Trends and Challenges”
• 09:45 Session 2 - Oil
Alex Pearce, Lead Analyst - Oil Research, Refinitiv, "European Refined Product Trends and Outlook”
• 10:30 Break
• 10:45 Session 3 – Agriculture
Jose Clavijo, Lead Analyst - Agriculture, Refinitiv, "Global Production & Weather Outlook”
• 11:45 Event End
Agenda
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4 Commodities Outlook Series 2019
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5 Commodities Outlook Series 2019
No Giveaways Here
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6
No Giveaways Here
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Capt. Amrit SinghLead Shipping Analyst, Refinitiv
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The Financial and
Risk business of
Thomson Reuters
is now Refinitiv.
Shipping Trends and ChallengesCAPT. AMRIT SINGH
July 3, 2019
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9
• Sanctions Impact
• Regulatory Issues
• Trade and Supply Outlook
• Challenges
Shipping Trends and ChallengesAGENDA
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10
Sanctions ImpactDecreasing VLCC Tonne-mile
400
450
500
550
600
650
700
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Bil
lio
ns
2016 (E) 2017 (E) 2018 (E) 2019 (E)
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11
Sanctions ImpactIranian Floating Storage Building-up
0
10
20
30
40
50
60
70
01-Jan-15 01-Jul-15 01-Jan-16 01-Jul-16 01-Jan-17 01-Jul-17 01-Jan-18 01-Jul-18 01-Jan-19
Ba
rre
ls (
m)
Global VLCC Floating Storage Iran VLCC Floating Storage
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12
Sanctions ImpactFreight rates driven by crude price
0
10
20
30
40
50
60
70
80
90
100
-20,000
0
20,000
40,000
60,000
80,000
100,000
Jan-15 May-15 Sep-15 Jan-16 May-16 Sep-16 Jan-17 May-17 Sep-17 Jan-18 May-18 Sep-18 Jan-19 May-19
Baltic VLCC-TCE (U$/day) Ice Brent Crude (US$/b) (RH axis)
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13
Fleet Speed SignalsHigh correlation between freight rate and vessel speed
11.0
11.5
12.0
12.5
13.0
13.5
14.0
0
20
40
60
80
100
120
140
Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Jul-18 Jan-19
Baltic TD3C ME Gulf to China (WS) VLCC Unladen Speed (Knots)
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14
Cumulative ImpactDecreasing Capesize Tonne-mile
500
550
600
650
700
750
800
850
900
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Bil
lio
ns
2016 (E) 2017 (E) 2018 (E) 2019 (E)
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15
Cumulative ImpactPeak in Laid-up Capesize Bulkers
0
10
20
30
40
50
60
70
80
90
100
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
5,000
Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Jul-18 Jan-19
Baltic Capesize Index Capesize Laid Up (Units) (RH axis)
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16
Regulatory Issues
2017Ballast Water Management Convention
(BWM)
All ships must have:
- Ballast water management plan
- Ballast water record book
- International Ballast Water Mgmt. Certificate
- Existing ships < 8 Sep.2017 to meet D1
- New ships > 8 Sep.2017 to meet D2
2019- Existing ships with
renewal survey 8 Sep. 2017 – 8 Sep. 2019
D1 standard- Exchange ballast water in open
seas
D2 standard– Involves ballast water mgmt.
system
2020Global sulphur oxides in Fuel Oil capped at 0.5%
m/m (mass by mass) from 1 Jan. 2020 against the current
3.5% limit
Choices – Install scrubbers, use Low Sulphur Fuel Oil (LSFO) or
alternative fuel (LNG)
2024All ships must
meet D2 standard by 8 Sep. 2024
Source: International Maritime Organization (IMO)
Ballast Water Management and Sulphur Cap
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17
Scrubbers MarketGrowing demand for scrubbers, Open-Loop Type popular
Source: DNV-GL
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
>2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Total ships with scrubber units
34%
21%
14%13%
6%4%
2%
2%2%
1%
79%
18%2%
1%
74%
26%
0%
10%
20%
30%
40%
50%
60%
70%
80%
Bulk Carriers
Container Ships
Oil/Chemical Tankers
Crude Oil Tankers
Cruise Ships
Ro-Ro Carriers
Gas Tankers
General Cargo Ships
Ro-Passenger Ships
Car CarriersFerries & Others
Open-Loop Scrubbers
Hybrid Scrubbers
Closed-Loop Scrubbers
Unknown
Retrofits
Newbuilds
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18
• Look at SECA Implementation
• Past industry response to high fuel prices
• Challenges – Technical, operational, financial
IMO 2020 ScenarioThoughts on Implementation
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19
Bunker Fuel SensitivityVessel speed sensitive to bunker fuel pricing
11.6
11.8
12.0
12.2
12.4
12.6
12.8
13.0
13.2
0
100
200
300
400
500
600
700
Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Jul-18 Jan-19
ClearLynx Bunker Fuel Oil 380 cst-3.5% (US$) VLCC Speed Laden (Knots) (RH axis)
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20
VLSFO PricingNymex Futures
500
502
504
506
508
510
512
514
516
Oct-19 Dec-19 Jan-20 Mar-20 Apr-20 Jun-20 Aug-20 Sep-20 Nov-20
Nymex Singapore FOB Marine Fuel 0.5% (Platts) Futures (US$/t)
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21
Headwinds for ShippingDeceleration in Global Trade Growth
-15
-10
-5
0
5
10
15
World Trade volume of goods and services, % change Y/Y
Source: Eikon
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22
Fleet Supply GrowthRegulatory Requirements to ease some supply side pressure
5.7%
4.7%
2.5%2.3%
2.6%
3.0% 3.1%
3.9%
2.1%
1.5%
3.3%
5.8%
3.4%
1.1%
3.0%
1.9%
0
100
200
300
400
500
600
700
800
900
0%
1%
2%
3%
4%
5%
6%
7%
2013 2014 2015 2016 2017 2018 2019e 2020e
DW
T (
Mill
ion)
Capaci
ty G
row
th
Bulker (DWT) Oil Tanker (DWT) Bulker (Capacity Growth) Oil Tanker (Capacity Growth)
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23
An Option from Jan. 2020Slow steaming!
11.8
12
12.2
12.4
12.6
12.8
13
13.2
0
100
200
300
400
500
600
700
800
900
Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Jul-18 Jan-19
ClearLynx LSMGO Singapore (US$) ClearLynx IFO 380 cst-3.5% (US$) VLCC Speed Laden (Knots) (RH axis)
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24
• September 2019 – IMO Ballast Water Convention
• January 2020 – Global Sulphur Cap
• Trade Wars and Sanctions - Decelerating trade growth, decreasing tonne-miles
• Pressure on freight rates
• GHG Emissions Targets – 50% reduction in CO2 by 2050, compared to 2008
• Poseidon Principles Initiative by Banks
Challenges AheadShipping set to face headwinds
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Alex PearceLead Analyst - Oil Research, Refinitiv
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European Refined Product Trends & OutlookAlex Pearce – Lead Analyst, Oil Research
Jul 3, 2019
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28 European Refined Product Outlook
Agenda
Overview for Crude
Refinitiv Trade Flows
European Gasoline Outlook
– US outages create European opportunities
– West African stocks spell trouble for summer demand
European Jet Outlook
– Increasing flow from Arab Gulf & Asia
– Global slowdown could impact aviation demand
European Diesel Outlook
– Russian supplies compete with the East
– Diesel balanced in near term, but IMO 2020 looms
Refining Outlook
IMO 2020
Conclusions & Questions
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29
20
30
40
50
60
70
80
90
Jan-16 Sep-16 May-17 Jan-18 Sep-18 May-19
$/b
bl
Brent
WTI
20
21
22
23
24
25
26
mill
ion b
bls
European Refined Product Outlook
Refinitiv Crude OutlookSupply cuts expected to keep floor prices falling despite lingering demand concerns
Supply Outlook Demand Outlook
2 million bbls of OPEC supply cuts
since Nov-18
We estimate only 1 million bpd of
additional demand in 2019
Price Forecast
Supply pressure expected to result
in 2019 avg. $69.20/bbl
Source: Refinitiv Oil Research Source: Refinitiv Oil Research Source: Refinitiv Oil Research
-0.2
-0.1
0.0
0.1
0.2
0.3
0.4
0.5
US China Europe Japan India MiddleEast
mill
ion b
pd
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30 European Refined Product Outlook
Refinitiv Trade Flows
Tracking Vessels Making Assessments
Model-based assimilation of data on vessel locations and cargoes combined with systematic analyst review of
outputs across clean, dirty, LNG, LPG and bulk tankers.
Collect Data
Vessel characteristics, historic and
current positions, fixtures, port
inspections, customs data
Create best view of current and
historic tracks using AIS and
algorithms, route profiling
Underway or discharged, single or
multiload, cargo and volumes,
mitigating missing data using analyst
expertise
Flow Creation Flow Updated Throughout Lifecycle Flow Discharge
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31 European Refined Product Outlook
Gasoline Trade FlowsEurope is a key exporter to the US and West Africa
Source: Eurostat
8.7 mmt
(+28%)
10.5 mmt
(+17%)
1.1 mmt
(+15%)
1.2 mmt
(-77%)
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32 European Refined Product Outlook
US Refinery Outages Opens Transatlantic ArbCapitalising on export opportunities
United States FCC Outages
Source: Reuters
Gasoline margins were languishing in Europe and
Asia for most of Q1 on oversupply and weaker
demand, plunging margins to 7-year lows.
Sellers were thrown a lifeline as a string of refinery
issues in the US opened the arbitrage, causing a
resurgence in prices and margins.
FCC outages (gasoline producing refinery units)
dropped sharply in April.
The issues have now largely been resolved which has
begun to curb import demand.
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33
-$5
$0
$5
$10
$15
$20
30Nov18
14Dec18
28Dec18
11Jan19
25Jan19
08Feb19
22Feb19
08Mar19
22Mar19
05Apr19
19Apr19
03May19
17May19
31May19
-10
-8
-6
-4
-2
0
2
4
6
8
10
$/b
bl
mill
ion b
bls
US Gasoline Inventory Change NWE EBOB Crack
European Refined Product Outlook
Europe Gasoline Margins Tied to US Inventory ChangesCapitalising on export opportunities
US Gasoline Inventory Net Change vs. NWE EBOB Crack
Source: EIA, Refinitiv
US stocks drew down sharply in the wake of the
outages, European stocks meanwhile were
burgeoning from an abundance of cheap sweet crude.
Cracks rose steadily across March and April on the
arbitrage, before slowing as inventory drawdowns
slowed.
US refiners now gearing up to produce more gasoline
following completion of turnarounds.
Recent inventory data already shows a steep rebuild
of stocks, as domestic production and imports reverse
losses.
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34
Unplanned US outages push April gasoline exports
from NWE to record highs.
Physical flows correlate with EBOB-RBOB spread
when accounting for 1 month lag as traders fix arbs.
Exports slow in May and June as US capacity comes
back online forcing European sellers to look
elsewhere for supply.
Shutdown of PES refinery after a fire likely to boost
exports in the near term, however gasoline prices
were already falling in NWE due to glut.
European Refined Product Outlook
Northwest European Gasoline to USCapitalising on export opportunities
NWE to US Gasoline Trade Flows
Source: Refinitiv Oil Research
-10
-5
0
5
10
15
20
25
0
200
400
600
800
1000
1200
1400
1600
Jan-1
8
Feb-1
8
Mar-
18
Apr-
18
May-1
8
Jun-1
8
Jul-18
Aug-1
8
Sep-1
8
Oct
-18
Nov-1
8
Dec-
18
Jan-1
9
Feb-1
9
Mar-
19
Apr-
19
May-1
9
cts/
gal
kt
ARA Scandinavia
United Kingdom France
Others EBOB-RBOB Spread +1M
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35
West African demand more sporadic as purchasing
mainly price driven.
NWE gasoline cargoes routed to West Africa increase
when demand from the US tapers off and vice versa.
Fewer barrels headed to WAF from NWE during April
as rising US prices diverted supplies across Atlantic.
Flows from ARA storage make up the bulk of exports
to West Africa as spot demand and larger vessels
more frequent.
European Refined Product Outlook
West African Gasoline DemandCapitalising on export opportunities
NWE to West Africa Gasoline Trade Flows
Source: Refinitiv Oil Research
0
200
400
600
800
1000
1200
1400
1600
1800
2000
Jan-1
8
Feb-1
8
Mar-
18
Apr-
18
May-1
8
Jun-1
8
Jul-18
Aug-1
8
Sep-1
8
Oct
-18
Nov-1
8
Dec-
18
Jan-1
9
Feb-1
9
Mar-
19
Apr-
19
May-1
9
kt
ARA Scandinavia United Kingdom
France Others US Exports
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36 Edit presentation title on Slide Master using Insert > Header & Footer
West African DemandWAF stocks lower but NWE losing import share
West Africa Imports by Origin
Source: Refinitiv Oil Research
Nigeria Demand
Source: JODI
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Jan-1
8
Feb-1
8
Mar-
18
Apr-
18
May-1
8
Jun-1
8
Jul-18
Aug-1
8
Sep-1
8
Oct
-18
Nov-1
8
Dec-
18
Jan-1
9
Feb-1
9
Mar-
19
Apr-
19
May-1
9
Jun-1
9
NWE Others
0
500
1000
1500
2000
2500
3000
3500
4000
4500
Imports Demand Closing stocks
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37 European Refined Product Outlook
European Gasoline OutlookCautious outlook for European gasoline
ARA Gasoline Inventories Gasoline Cracks
ARA stocks have now rebounded
above 5-yr avg.
Cracks still supportive over
summer, resurgence in Jan 20 (IMO
2020 effect?)
Cumulative US Gasoline Imports
US gasoline imports are below
seasonal average so far
Source: Insights Global
Source: Refinitiv Oil Research
Source: EIA400
600
800
1000
1200
1400
1600
1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52
k m
t
Week
5Y Range 2019 2018
$0
$2
$4
$6
$8
$10
$12
$14Gasoline Crack NWE Curve
Gasoline Crack Sing Curve
Gasoline Crack US Curve
0
2000
4000
6000
8000
10000
12000
1 4 7 101316192225283134374043464952
2019 2018 2017
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38 European Refined Product Outlook
Jet Trade FlowsEurope is a major importer of jet from the East
Source: Eurostat
14.6 mmt
(+18%)
2.7 mmt
(+37%)
811 kt
(-73%)
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39
Europe a key destination for jet produced in the Arab
Gulf, India and North Asia and is steadily increasing.
Typically Asia draws in jet for kerosene heating
demand during winter months, while air travel
demand in Europe pulls more barrels West.
Diesel margins have outperformed jet which has kept
focus on refiners to maximise road fuel production,
tightening prompt supplies.
More spot vessels heading around the Cape instead
of Suez due to market in contango.
China also exporting more jet to Europe on increased
export quotas.European Refined Product Outlook
Jet Arbitrage From East of SuezSwing supply from East increasing
AG/Asia to NWE Jet Trade Flows
Source: Refinitiv Oil Research
600
800
1000
1200
1400
1600
1800
kt
East of Suez Jet To NWE
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40
However, demand outlook for jet fuel growth this year
wavering in the face of global economic slowdown.
March revenue per passenger kilometer (RPK) rose
just 3.1% year-on-year, the slowest growth of any
month in the last nine years (IATA).
Europe second largest market (26.7%) after Asia-
Pacific (34.4%) in terms of passenger airline revenue,
but concerns over GDP growth, Brexit weighing on
growth.
High profile airline closures also reflective of capacity
versus demand, which may impact jet fuel demand for
rest of year.
European Refined Product Outlook
Air Travel Demand Growth SlowingGlobal economic slowdown dragging on jet demand
Air Travel Demand Growth by Region
Source: IATA
0%
2%
4%
6%
8%
10%
12%
2013 2014 2015 2016 2017 2018 2019F
RPK %
Y-O
-Y
Global North America Europe Asia-Pacific
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41 European Refined Product Outlook
European Jet OutlookBearish outlook for European jet
ARA Jet Kero Inventories Jet Cracks
Open arb sees counter seasonal
stock build, now above 5-yr average
Supplies keep pressure on front of
cracks curve (contango)
Total East Exports
Flows from AG/Asia declining
despite summer approaching
Source: Insights Global
200
300
400
500
600
700
800
900
1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52
k m
t
Week
5Y Range 2019 2018
$14
$15
$15
$16
$16
$17
$17
$18
$18
$19
$19Jet Crack NWE CurveJet Crack Sing Curve
0
1
2
3
4
5
6
Jan Feb Mar Apr May Jun Jul
mill
ion t
ons
2018 2019
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42 European Refined Product Outlook
Diesel Trade FlowsEurope is a major importer of diesel from Russia, East and US
Source: IIRSource: Eurostat
22.3 mmt
(-3%)
5.4 mmt
(-30%)11.4 mmt
(+31%)
1.1 mmt
(-42%)
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43
Russian dominance to supply majority of diesel to
NWE is under threat from increasing capacity in Arab
Gulf/Asia.
Flows tracking indicates that imports East of Suez
exceeded Russian arrivals during May.
Maintenance and Russian pipeline issues has opened
up opportunity to supply more diesel from the East as
softer demand in Asia keeps focus on Europe.
US flow has remained weak on poor arbitrage
economics but increased gasoline output could push
more barrels across Atlantic over summer.
European Refined Product Outlook
Diesel Supply CompetitionCompetition intensifies as Russian output dips
Russia/East Diesel Flows to NWE
Source: Refinitiv Oil Research
0
200
400
600
800
1000
1200
1400
1600
1800
2000
kt
Arab Gulf India Russia
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44 European Refined Product Outlook
European Diesel OutlookBalanced outlook for diesel
ARA Diesel/Gasoil Inventories Diesel Cracks
Stocks fairly balanced in ARA as
tepid demand meets steady inflows
Cracks under pressure although
effect of IMO2020 clearly priced in
$13
$14
$15
$16
$17
$18
$19
$20
$/b
bl
NWE Diesel Crk MED Diesel Crk
ARA Diesel Crk
Arbitrage
-$13
-$12
-$11
-$10
-$9
-$8
-$7
-$6
$/t
on
Diesel EW Spr
Arb Closing
Arb Opening
East Arb more workable towards
year end, slumps in 2020
Source: Refinitiv Oil ResearchSource: Refinitiv Oil Research
Source: Insights Global
1000
1500
2000
2500
3000
3500
4000
1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52
k m
t
Week
5Y Range 2019 2018
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45 Edit presentation title on Slide Master using Insert > Header & Footer
Refining OutlookEuropean margins losing support, Asia remains weak
NWE Margins US PADD3 MarginsSingapore Margins
NWE slate margins slipped below
2018 levels as gasoline loses
support on weak US arb
Asia margins remain pressured
by glut of light distillate
production from Chinese teapot
refineries
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
US margins pressured by
higher heavy oil prices for
coking
Source: Refinitiv Oil Research
-2
0
2
4
6
8
10
12
14
16
18
1
12
23
34
45
56
67
78
89
100
111
122
133
144
155
166
177
188
199
210
221
232
243
254
2019 2018 2017
0
2
4
6
8
10
12
1
12
23
34
45
56
67
78
89
100
111
122
133
144
155
166
177
188
199
210
221
232
243
254
2019 2018 2017
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Source: Refinitiv Oil Research-5
0
5
10
15
20
25
1
12
23
34
45
56
67
78
89
100
111
122
133
144
155
166
177
188
199
210
221
232
243
2019 2018 2017
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Source: Refinitiv Oil Research
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46 European Refined Product Outlook
IMO2020To Scrub Or Not To Scrub?
HSFO vs 0.5% Scrubber Payback
HSFO
0.5%
Spread
$/ton SpreadC
on
su
mp
tio
n
0
1
2
3
4
5
6
Year
s
40 tons/day 80 tons/day
($3.5m Scrubber)
Source: Refinitiv Oil Research
$20
$30
$40
$50
$60
$70
$80
$90
$100
$110
$120
Jul-19
Sep-1
9
Nov-1
9
Jan-2
0
Mar-
20
May-2
0
Jul-20
Sep-2
0
Nov-2
0
Jan-2
1
Mar-
21
May-2
1
Jul-21
$/t
on
HSFO vs LSFO (Hi-Lo)
$480
$482
$484
$486
$488
$490
$492
$494
$/t
on
$275$280$285$290$295$300$305$310$315$320$325
$/t
on
$150
$160
$170
$180
$190
$200
$/t
on
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47
• OPEC cuts and sanctions on Iran and Venezuela have been effective at cutting supply despite rising
US output, however this is against a background of reducing global demand. We maintain that
supply side factors will provide a floor to prices this year.
• Gasoline outlook for European refiners has become more challenging over the summer, with recent
rally in cracks losing steam, which appears to be tipping NWE into oversupply without sufficient US
and WAF demand to support.
• Jet arbitrage has been open for some time resulting in a bearish outlook for the summer, global
demand for jet fuel also looking uncertain.
• Diesel more balanced with steady imports from the East offsetting reduced Russian flows, however
tepid demand could threaten fundamentals if Middle East exports pick up and/or Asian demand
weakens.
European Refined Product Outlook
Conclusions
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Jose ClavijoLead Analyst - Agriculture, Refinitiv
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The Financial and
Risk business of
Thomson Reuters
is now Refinitiv.
Global Production & Weather Outlook
José Clavijo, Ph.D.
Lead Analyst - Agriculture Research
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51
Where have we been?
State of the Grains &
Oilseeds Markets
Where are we now?
Current Status & Outlooks
Where are we going?
Forward Weather
Where are the
biggest risks ahead?
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52
• Formerly known as Lanworth/Thomson Reuters
• 18 specialists in Chicago, Dubai, Hamburg, Kiev, London, Moscow, Oslo, Rotterdam, Singapore
• Mission is to provide customers with:
✓timely, accurate crop production forecasts
✓short and long-term weather data and insight
✓detailed and complete flows of imports/exports
✓cash price collection and market analysis
✓Data feed solutions
Refinitiv Agriculture & Weather Research
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53
Where have we been?
State of the Grains &
Oilseeds Markets
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54
Global Production(2009/10 to 2018/19)
Global Ending Stocks(2009/10 to 2018/19)
Corn Soy Wheat RapeseedSource: USDA PSD
All values are in million metric tons
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
2,200
0
100
200
300
400
500
600
700
+286
+101
+44
+12
+443
+194
+50
+72
-1
+315
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55
U.S. CBoT Wheat Composite
Front Month ContinuationSource: Refinitiv Eikon
In the last decade…
✓ Global production increased by nearly 20%, adding more than 100 MMT,
despite stable area
✓ Russian production more than doubles following greater investment in
inputs (e.g., seeds and technology)
✓ EU produced on average 13 MMT more soft wheat compared to previous
decade, much of it attributable to yield increases in the east and south
✓ U.S. ending stocks balloon despite declining area
✓ Argentina production reaches record high following end of export quotas
✓ Right weather, right time
$7.00/bushel
$5.00/bushel
$9.00/bushel
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56
U.S. CBoT Corn Composite Source: Refinitiv Eikon
In the last decade…
✓ Globally, more than 10 million hectares and 100 MMT have
been added to the balance sheet
✓ Ending stocks more than doubled
✓ Production out of the U.S. grows more than 30% compared to
previous decade following increases to area and yield
✓ Removal of corn export quotas in Argentina cause area to
nearly double
✓ Second crop corn area in Brazil also reaches new highs with
total production now exceeding 100 MMT
✓ Production in China breaks multiple records
✓ Right weather, right time $6.00/bushel
$4.00/bushel
$8.00/bushel
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57
U.S. CBoT Soybean Composite
Front Month ContinuationSource: Refinitiv Eikon
In the last decade…
✓ 20 million more hectares planted globally
✓ Global ending stocks more than doubled
✓ Brazil ramps up planted area surpassing U.S.
production for the first time
✓ Soybean area and yield in the U.S. breaks multiple
records
✓ In Argentina, removal of export quotas for corn and
wheat lead to less soybean area, but high yields
keep production levels at or near record
✓ U.S.-China Trade War shifts China’s import market
almost entirely to South America, causing U.S.
ending stocks to triple in only three years
✓ Right weather, right time
$14.00/bushel
$11.00/bushel
$17.00/bushel
$8.00/bushel
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58
Where have we been?
State of the Grains &
Oilseeds Markets
Where are we now?
Current Status & Outlooks
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59
✓ Once an area of huge concern,
the return of rainfall in early
spring stabilized outlooks, with
the key exception of rapeseed
✓ However, heat and dryness is
now returning
✓ Slowest spring planting pace
in more than 40 years
✓ Corn planted area down at
least 8 million acres from
USDA March outlooks
✓ Producers grappling with lower
canola plantings following bans
by China
✓ Low soil moisture and poor
emergence in some areas
3rd straight season
of drought following
plantings of winter
crops
✓ Lower corn area following
government policies
promoting soybeans and
maintaining food crops, but
weather has been
favorable to-date
✓ Fall armyworm causing
damage to crops
Favorable weather,
higher plantings led
to record corn, wheat
and rice production
Favorable winter and early
spring weather led to ever
increasing production
estimates, but a shift to
warmth and dryness is
garnering attention
Massive inventory of corn
and soy this season as
weather remained largely
favorable throughout the
growing season
Winter and spring
wheat conditions
rated very highly
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60
Crops in good
condition, in
flowering to early
ripening, but heat
and dryness impacts
evidentGood to excellent
conditions, some
abiotic/biotic stress
Crops in excellent
condition, in
early/mid-ripening,
minor stress
observed
Crops in excellent
condition, in
early/mid ripening,
minor stress
observedKrasnodar City
Rostov-on-Don
Azov Sea
Ukraine
Krasnodar
Krai
Rostov
28 May – 02 June
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✓ Total wheat area at a record 27.8 million
hectares
✓ Winter wheat production at 51.4 MMT with
total wheat at 71.7 MMT, third highest on
record
✓ Late winter precipitation, lack of damaging
cold, and adequate early spring weather kept
conditions relatively good
✓ However, a shift warmth and dryness in late
May and early June in the west/south has
drawn down yield potential
Russia Wheat
34
47
51
34
45
48
45
49
64
62
42
56
38
52
5961
73
85
72 72
Production (MMT)Source: USDA PSD & Refinitiv Ag Research
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65
✓Winter crops in overall good condition
following a mild winter and spring to-
date, but heat and dryness have been
the theme in June
✓Wheat production at 25.5 MMT, near
historical highs
✓Corn production at 31.0 MMT, 2nd
highest production on record
Ukraine Wheat & Corn
10
21 21
4
1819
14 14
26
21
17
22
16
22
25
27 27 2725 25
0
5
10
15
20
25
30
4 4 47
97 6 7
11 1012
2321
3128
23
28
24
36
31
0
5
10
15
20
25
30
35
40 Corn Production (MMT)Source: USDA PSD & Refinitiv Ag Research
Wheat Production (MMT)Source: USDA PSD & Refinitiv Ag Research
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66
Crops showing
signs of persistent
dryness and heat
Good conditions,
but late-season
dryness impacts
evident
Crops developing
rapidly, only minor
late-season heat
stress
High vegetation
density, only minor
late-season heat
stress
17 Jun – 21 June
Paris
Berlin
Hamburg
Brussels
Munich
Düsseldorf
Reims
Cologne
Metz
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✓Wheat production highest in 4 years
✓Soft wheat = 146.1 MMT
✓Durum wheat = 8.7 MMT
✓ Rapeseed production down to a
decadal low at just 18.9 MMT
✓Corn production now down to 60.4
MMT
European Wheat, Rapeseed & Corn
Rainfall
deviation
last 60 daysSource:
Refinitiv Eikon
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70
Burst grain silos in Fremont County, IowaMay 17, 2019Source: Reuters Pictures
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71Source: USDA, Refinitiv Eikon
✓ What did farmers plant?
✓ How are yields affected?
U.S. Corn Planting Pace
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72
To Plant or Not Plant?
Farmers basically had/have (!) 3 options:
1. Not Plant. Accept a known return for Prevent Plant (PP) payment, likely resulting in
negative farm incomes✓ Still have to pay to plant cover crops to keep erosion down
✓ Unclear if PP acres qualify for Disaster Relief
✓ Do not qualify for MFP (though payment for cover crop is being considered)
2. Plant. Hope for higher prices. Likely more downside income risks than taking PP
payments.– Qualify for MFP
3. Do Both. Hedge income risks by planting corn/soy on best yielding farmland (if
possible) and take PP payments on lower yielding farmland
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73 Can grain production meet demand?
USDA shocked the markets in the June Acreage ReportBut, are the findings conclusive?
16% still to
be sown at
survey time
40% still to
be sown at
survey time
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74
• USDA will re-interview farmers in most of the
Corn and Soy Belt in July
• USDA can access FSA data, which gives an
idea of extent of prevent plantings
• USDA will also utilize other information, such
as satellite imagery
• Findings published in August 12th Crop
Production, which won’t contain objective
yield survey.
• WAOB will likely incorporate new number in
the July WASDE.
Can grain production meet demand?
Revisions will come in August… but how big will they be?USDA will keep the market on edge until the August Crop Production report.
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United States Corn & SoybeansYields will be impacted as well… but how much?
✓ Late planting does not necessarily equate to dismal yields (e.g., 2009)
✓ Nor does early planting equate to high yields (e.g., 2012)
✓ Why? Because other subsequent factors influence yield
Shortened growth cycles Pollination coinciding with
warmer temperaturesHigher disease and
insect pressure
Frost risk as grain fill
extended later into season
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United States Corn & Soybeans
82.4
75.1
USDA Refinitiv
83.8
82.7
USDA Refinitiv
166
160
USDA Refinitiv
49.5
48.6
USDA Refinitiv
13.7
12.0
USDA Refinitiv
4.15
4.02
USDA Refinitiv
347
306
USDA Refinitiv
113
109
USDA Refinitiv
Harvested Area
(million acres)
Yield
(bushels per acre)
Production
(billion bushels)
Production
(million metric tons)
-7.3 -1.7 -41
-1.1 -0.9
-6.0
-.13-4
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77
Where have we been?
State of the Grains &
Oilseeds Markets
Where are we now?
Current Status & Outlooks
Where are we going?
Forward Weather
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78
North America: weather going forward in Jul-Aug Will spring crops get any relief?
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79
Europe & Black Sea: weather going forward in Jul-Aug How much will crops bounce back from last season?
PrecipitationTemperature
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80
Australia: weather going forward in Jul-Aug Drought remains a major concern.
Temperature Precipitation
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81
China: weather going forward in Jul-Aug Mixed weather, mixed impacts.
Temperature Precipitation
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82
Where have we been?
State of the Grains &
Oilseeds Markets
Where are we now?
Current Status & Outlooks
Where are we going?
Forward Weather
Where are the
biggest risks ahead?
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83
✓ Biggest downside watch area
for corn and soy
✓ Further cuts to area will
automatically result in less
production
✓ Yield potential could also be
very low if forward weather
proves unfavorable
✓ Wheat, both winter and spring,
also at risk
Record low soil moisture
coupled with dry forward
weather forecasts in the east
✓ Armyworm likely to have
already reached Northeast
putting corn and soy at risk
✓ Forward weather may turn hot
and dry, but can current soil
moisture levels offset?
Continuation of drought on the
Canadian Prairie putting spring
crops at downside risk, but cool
and wet forecast could
normalize the situation
✓ Warm and dry weather staying entrenched over much
of southern Russia and Ukraine drawing down
production putting later planted wheat at risk as well as
spring crops
✓ Heat and dry weather potentially spreading eastward
into spring wheat growing regions
✓ Too early to make a call on yield
✓ Risk to upside as planted area
likely to increase as South
America benefits from US-China
Trade War
Forecasts indicate potential
for failed monsoon
Heat and dryness
returning with a
vengeance over the
next 6-10 placing
spring crops at risk
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84
Global Production (2018/19 to 2019/20)
Global Ending Stocks(2018/19 to 2019/20)
Corn Soy Wheat RapeseedSource: USDA PSD & Refinitiv
All values are in million metric tons
-71
-11
+36
-1
-46
-89
-6
+4
0
-90
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
2,200
0
100
200
300
400
500
600
700
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Research Analysis Home page:
Click on “Analysis” tab in Agriculture App
Agriculture Weather Dashboard:
Click on “Weather” tab in Agriculture App or search “AWD”
Twitter:
twitter.com/RefinitivAgri
LinkedIn (Refinitiv Commodities):
https://www.linkedin.com/groups/3908202
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Thank [email protected]
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Thank You