2018 Outlook for Grains and Oilseeds

Transcription

1 2018 Outlook for Grains and Oilseeds Present to the American Fats and Oils Associa;on October 2017 AdvancedEconomicSolu0ons

2 US$ Declines from Peak - Now at lowest point since October 2015 Currently in a Risk-off Environment US dollar has weakened since mid-jan Lack of legislaave progress Stronger economic condiaons outside the US Further declines in US dollar are possible over remainder of 2017 October 2017 Advanced Economic Solu0ons 2

3 Soybean Futures ($/Bu): trading at 19 th percentile Soybean Futures (Real/Bu): trading at 63 rd percentile October 2017 Advanced Economic Solu0ons 3

4 Crude Oil Produc0on/Stocks - Fundamentals less bearish October 2017 Advanced Economic Solu0ons 4

5 Crude Oil Prices Con0nues to Appear Range-bound - NYMEX Crude Oil Futures as of 10/6/17: $ U.S. crude oil stocks are declining from peak levels - US producaon growth rate slows - Best Bet remains crude oil prices trading mostly in range of $45-55 during through mid-2018 October 2017 Advanced Economic Solu0ons 5

6 Huge Spec Fund Buying During May-July - Now Funds Are Sellers! Key weather risks have come and gone As a result, funds have become sellers of futures, reducing their long posiaons Spec funds dictate the path prices take, but not their final destination October 2017 Advanced Economic Solu0ons 6

7 Summer 2017 Weather: Limited Issues - Excluding Northern Plains Short-term Crop Moisture October 2017 Long-term Crop Moisture Advanced Economic Solu0ons 7

8 Corn Remains the Dominant Crop in the U.S. October 2017 Advanced Economic Solu0ons 8

9 Near-trend 2017 US Corn Yields - USDA esamaang 2017 US corn yield at BPA (vs. trend 170.8) - USDA adjustment from Sept to final averages +/-3 BPA BPA US Corn Yields : Trend: F: October 2017 Advanced Economic Solu0ons 9

10 Corn Exports Forecast to Decline Sharply in 2017/18 - Reflects sharp rebound in Brazil exports in coming months Weaker export demand will compound the bearish risks to corn prices in the coming months October 2017 Advanced Economic Solu0ons 10

11 Large Corn Stocks Mean Low Corn Prices 20% U.S. Corn Stocks-Use Ratio (16/17 & 17/18 Forecast) 18% 16% 18.5% 17.6% 16.5% 17.2% 14% 12% 13.9% 12.7% 13.1% 11.6% 12.6% 12.7% 10% 8% 8.6% 7.9% 7.4% 9.1% 6% 4% 2% 0% 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 Ample corn stocks through 2017/18, and with that another low price year October 2017 Advanced Economic Solu0ons 11

12 Corn Prices Collapse as Weather Concerns Depart October 2017 Advanced Economic Solu0ons 12

13 Corn Prices Remain at Historically Low Levels October 2017 Advanced Economic Solu0ons 13

14 2017/18 US Wheat Ending Stocks Declining US WHEAT ENDING STOCKS (17/18 Forecast) 1184 MM Bushels /09 09/10 10/11 11/12 12/13 13/14 14/15 15/16 16/17 17/18F October 2017 Advanced Economic Solu0ons 14

15 Wheat Prices Follow Corn Sharply Lower October 2017 Advanced Economic Solu0ons 15

16 Wheat Futures Remain at Historically Low Levels October 2017 Advanced Economic Solu0ons 16

17 World Oilseed Demand Growing Faster Than Yields: Need More Oilseed Acres! - Very strong growth in annual global protein meal demand (+3.6%) and global vegoil demand (+3.8%) - Oilseed crop yields have been rising at an average annual rate of around 1.7% - US soybeans gain % - Implication: More oilseed acreage will continue to be needed to meet global demand - World soybean acreage needs to rise by around 2 mm acres each year October 2017 Advanced Economic Solu0ons 17

18 China Soybean Imports Con0nue to Grow - China buys equivalent of 80% of US Soybean Crop China Soybean Imports & Share of World Trade Million Tonnes % % % 57% % 59% % 62% 63% 63% 62% % 60% 50% 40% 30% 20% China Share of World Trade K Vessels Per Month 30 07/08 08/09 09/10 10/11 11/12 12/13 13/14 14/15 15/16 16/17 17/18 10% October 2017 Advanced Economic Solu0ons 18

19 World Oilseed Output 2017/18 Forecast to Slow to +1% More Oil Less Meal October 2017 Advanced Economic Solu0ons 19

20 South American ProducAon Off Slightly in 2017/ Brazil/Argentina Soybean Production (MMT, 16/17 & 17/18 Forecast) /13 13/14 14/15 15/16 16/17 17/18 Argentina Brazil Increase in 2017/18 S. American area offset by lower yields October 2017 Advanced Economic Solu0ons 20

21 Corn/Soybean Acreage Universe ConAnues to Grow Now being led by gains in soybean area October 2017 Advanced Economic Solu0ons 21

22 Soybean-Corn Price Ratio Reaches Highest Level in Over 11 Years - Higher ratio generally leads to larger share of C/SB universe going to SB SB-Corn Price Ratio vs. SB Area as % Corn (72% correlation) SX as % of CZ (during prior Feb) % 70% 75% 80% 85% 90% 95% 100% US Soybean Acreage as % of Corn Acreage October 2017 Advanced Economic Solu0ons 22

23 US Soybean ProducAon up 30% in 4 Years Gains reflect larger area, but also higher yields In recent years, the trend in US soybean yields has accelerated October 2017 Advanced Economic Solu0ons 23

24 US SB Stocks & Prices - 17/18 end stocks forecast at 11.7% of use highest in 11 years - Soybean futures forecast average $10.09, in spite of larger stocks Annual Soybean Futures vs. Soybean Ending Stocks-Use 2016/17 Forecast Stocks-Use: 8.0% Futures Price: $ /18 Forecast Stocks-Use: 11.2% Futures Price: $ Annual Soybean Futures vs. Soybean Ending Stks-Use (AES Forecasts) Nearby Soybean Futures % 6.0% 8.0% 10.0% 12.0% 14.0% 16.0% 18.0% 20.0% US Soybean Ending Stocks-Use October 2017 Advanced Economic Solu0ons 24

25 Favorable Outlook for U.S. Protein Meal Demand 10.0% 8.0% 6.0% 4.0% VS Yr Ago 2.0% 0.0% -2.0% -4.0% -6.0% -8.0% -10.0% Domestic Soymeal Usage (16/17 & 17/18 Forecast) 9.2% 4.0% 3.0% 3.0% 0.9% -0.4% -0.8% -0.1% -7.6% 09/10 10/11 11/12 12/13 13/14 14/15 15/16 16/17F 17/18F US Protein Production (CY) Beef +5.3% +2.7% Pork +3.6% +3.4% Chkn +1.5% +2.4% Turkey +0.3% +3.0% Milk +1.7% +1.9% Eggs +2.3% +1.4% October 2017 Advanced Economic Solu0ons 25

26 Soybean & Soymeal Futures Decline from July Highs Driven by fund selling, favorable weather, August USDA crop report Downside in prices remains limited, primarily due to Chinese demand October 2017 Advanced Economic Solu0ons 26

27 Soymeal Futures Trading Between the 20 th & 40 th PercenAle October 2017 Advanced Economic Solu0ons 27

28 Palm, Soyoil, Canola lead World Vegoil ProducAon Indonesia & Malaysia account for 25% of world vegoil output October 2017 Advanced Economic Solu0ons 28

29 World Vegoil Imports Spread Among Many Countries US is World s 3 rd Largest Importer October 2017 Advanced Economic Solu0ons 29

30 Canada s Canola Supply/Demand Canola oil from Canada is growing in importance for the US vegoil situation October 2017 Advanced Economic Solu0ons 30

31 Es0ma0ng Crops Takes A Lot of Work Typical USDA crop analyst s boots: Typical StatsCan crop analyst s boots: October 2017 Advanced Economic Solu0ons 31

32 World Palm Output Forecast to Gain 7% During 17/18 Stocks set to rebound sharply Rebound in palm oil output is key negative price feature for soyoil futures October 2017 Advanced Economic Solu0ons 32

33 Larger Palm Supplies Driving More Ample World Vegoil Supplies 15.0% 14.0% World Vegoil Stocks as % of Usage 13.6% 14.2% 13.7% 13.0% 12.0% 11.0% 10.0% 9.7% 10.3% 10.4% 10.5% 11.8% 11.2% 9.9% 10.5% 9.0% Larger world vegoil supplies, but what about US biodiesel policy? October 2017 Advanced Economic Solu0ons 33

34 Variability in Oil Yields Can Drive Soyoil Supplies, Prices Pounds Per Bushel Annual Soyoil Crush Yield (16/17 Forecast) /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 Larger world vegoil supplies, but what about US biodiesel policy? October 2017 Advanced Economic Solu0ons 34

35 Food Use Gains led by Canola Oil During 2017/18 Canola food use has risen 50% over the past 5 years Est. U.S. Food Use: Soyoil / Canola / Palm Oil Usage (MM Lbs, 16/17F & 17/18F) Palm For Food Canola Food /12 12/13 13/14 14/15 15/16 16/17F 17/18F Source: USDA, AES US Soyoil Food Majority of US canola oil used is sourced from Canada October 2017 Advanced Economic Solu0ons 35

36 2017 Biodiesel Supply Declines on Reduced Imports BD Imports Likely Near Zero in 2018 Due to Import Tariffs October 2017 Advanced Economic Solu0ons 36

37 Tariffs on Imported Biodiesel Would Reduce Imports, Increase Soyoil Use For Biodiesel EPA proposed a 2018 advanced mandate of 4.24 B gallons (vs mandate of 4.28 B) Imported by diesel accounted for 24% of advanced RINS in projecaon of 13% Largest share (85%) comes from ArgenAna Recently the Department of Commerce announced plans to place a tariff of ~50% on imported ArgenAne biodiesel Tariffs would cause potenaal reducaon of 300 mm gallons of supply during 2018 Equal to 1.2 B pounds of soyoil Net result: More soyoil use for biodiesel, higher soyoil prices October 2017 Advanced Economic Solu0ons 37

38 Timeline for 2018 Advanced Biofuel Mandates (RVOs) 7/5/17: EPA announced proposed mandates for 2018 Advanced 4.24 B gallons (vs B YA) Implies ~2.5 B gallons of biodiesel or renewable diesel (same as YA) 8/22/17: Dept. of Commerce finds Argen0na subsidizing biodiesel coming into U.S., begins collec0ng deposits for tariffs of 40-64% 10/4/17: EPA requests further comments on cuts to 2018 RVOs, in light of tariffs placed on Argen0ne BD imports Nov 30: EPA deadline for establishing 2018 RVOs Early 2018: Final determina0on by Dept. of Commerce and ITC on tariffs on Argen0ne biodiesel Nov/Dec/Jan (?): Congress addresses reinstatement of $1 biodiesel tax credit Including poten;al move of tax credit from blender to producer This presumably would be ;ed to Congress passing a tax reform package Next 6 Months: Nego;ated deal with Argen;na, elimina;ng tariffs? October 2017 Advanced Economic Solu0ons 38

39 October 2017 Advanced Economic Solu0ons 39

40 Soyoil Stocks Outlook Sharply higher BD use would create extreme tightness in soyoil market October 2017 Advanced Economic Solu0ons 40

41 Weekly Soyoil Futures (2012-Present) Soyoil (Futures) Share of Crush Value October 2017 Advanced Economic Solu0ons 41

42 Soyoil Futures Trading Between the 20 th and 40th PercenAle October 2017 Advanced Economic Solu0ons 42

43 2018 Outlook for Grains and Oilseeds Present to the American Fats and Oils Associa;on October 2017 AdvancedEconomicSolu0ons

44 October 2017 Advanced Economic Solu0ons 44

45 October 2017 Advanced Economic Solu0ons 45