Strong Global Grain Production Isn t Good Enough David Hightower The Hightower Report
Big Picture Factors Cost of Production Pricing Not a downtrend signal Goldman $20 oil Forecast was wrong 8.9 mbd! Chinese Car sales Record - 73 million new cars Gas Demand in the US Record $36 -$42 Production areas further from prime areas Mkts work but not as efficient as desired Low Prices cut supply and Increase demand
World Smog Index
200,000 180,000 160,000 140,000 China Ethanol Imports (cubic meters) Last 3 Months: 385,710 Total 2015 is 25x Greater Than 2014 120,000 100,000 80,000 60,000 40,000 20,000 0 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16
2000 1800 1600 1400 China Coal Consumption - Annual In Million Tonnes of Oil Equivilant If China reduced coal consumption for 2015 by 5%, that is the equivilant of 1.29 Million Barrels / Day 1200 1000 800 600 400 200 0 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 Crop Year Beginning
EIA Gasoline Demand 10.0 9.5 8.9 mbd Million Barrels / Day 9.0 8.5 8.0 7.5 7.0 6.5 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 Most Recent: 9.671 on 07/08 Source: EIA
Forward Issues Don t count out La-Nina The Time Is August Flooding SE Asia China Typhoon Drought heat US Deflation bottoms out gives way to Inflation Chinese Corn Q/Q $10 Bill -3 billion Record US gasoline demand despite economy Indian growth & Production every year Chinese Commodity Impact Remains
Double 2014 Indian Production 10 times Australia Pepper Prices Onion Prices, Rice Prices Coffee Prices Palm Oil prices
China Still A Force China s appetite for commodities is not waning, according to analysis by the WSJ. China still consumes roughly 1/8 th of the world s oil, 1/4th of the world s gold, 1/3 rd of the world s cotton One half of all the major base metals. The Energy Information Administration predicts China will account for over a quarter of the world s increased demand in oil this year, despite the slowdown Wall Street Journal
Million Metric Tonnes (MMT) 95 90 85 80 75 70 65 60 55 50 45 40 35 30 25 20 15 10 China Soybean - Net Import / Export Net Imports -5 05 90 92 94 96 98 00 02 04 06 08 10 12 14 16 Most Recent: 86.85 As Of 07/12/2016 Crop Year Beginning The Hightower Report
Feed Considerations US pork exports during May totaled 458.83 million pounds, the highest since April 2015. US Exports reached 23.6% of total US production, the highest percentage since June 2014. Pork Exports to China totaled 72.9 million pounds, the highest total since January 2012. Pork exports to China have risen steadily since Dec when the monthly total was only 17.6 million. Chinese Hog herd expanding again
Edible Oil = Palm Oil= Prosperity
10 9 8 World Palm Oil - Ending Stocks vs. Stocks / Usage Ratio 19% 18% 17% Ending Stocks (MMT) 7 6 5 4 3 16% 15% 14% 13% 12% Stocks / Usage Ratio 2 11% 1 10% 0 9% 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 Crop Year Beginning The Hightower Report Most Recent: As Of 07/12/2016 Ending Stocks Stocks / Use Ratio
Million Metric Tonnes (MMT) 39 36 33 30 27 24 21 18 15 12 9 6 3 0 Vegetable Oil - Major Consumers 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 35.890 22.704 14.672 The Hightower Report Most Recent: As Of 07/12/2016 Crop Year Beginning China India United States
$ / Ton Rotterdam 2,200 2,000 1,800 1,600 1,400 1,200 1,000 800 600 400 200 Cash: Weekly Vegetable Oils - 10 Years Rotterdam Soybean Rapeseed Sun Palm Data As Of: 06/30/2016
120% Soybean Oil: US Weekly Export Sales As % of USDA Forecast 100% 80% 60% 40% 20% 0% Aug Oct Dec Feb Apr Jun Aug 15/16 5 Yr Avg
World Oilseed - Ending Stocks / Usage Ratio 24% 21% 18% 15% 12% 9% 6% 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 Crop Year Beginning Most Recent: 16.451% As Of 07/12/2016 The Hightower Report
Grains Shifting Fortunes Historical High & Low Ending Bean Stocks South America supply losses Unrelenting Chinese demand US pork exports/chinese pork imports August weather most critical for Soy Yield Small setbacks in Palm production are huge for the rest of the edible oilseeds
Drop of 2 bu/acre = 3% Stocks/Usage! USDA SUPPLY/DEMAND 16/17 "What If's" US SOYBEANS Jul Jul Jul USDA USDA USDA 08-09 09-10 10-11 11-12 12-13 13-14 14-15 15-16 16-17 Planted Area (M Acres) 75.7 77.5 77.4 75.0 77.2 76.8 83.3 82.7 83.7 83.7 83.7 83.7 Harvested Area (Acres) 74.7 76.4 76.6 73.8 76.1 76.3 82.6 81.8 83.0 83.0 83.0 83.0 Yield (Bu/Acre) 39.7 44.0 43.5 42.0 40.0 44.0 47.5 48.0 46.7 44.7 46.7 48.2 Beginning Stocks (M Bu) 205 138 151 215 169 141 92 191 350 350 350 350 Production 2,967 3,361 3,331 3,097 3,042 3,358 3,927 3,929 3,880 3,710 3,880 4,001 Im ports 13 15 14 16 41 72 33 30 30 30 30 30 Supply,Total 3,185 3,514 3,497 3,328 3,252 3,570 4,052 4,145 4,260 4,090 4,260 4,381 Crushings 1,662 1,752 1,648 1,703 1,689 1,734 1,873 1,890 1,925 1,925 1,925 1,925 Exports 1,279 1,499 1,505 1,366 1,328 1,638 1,843 1,795 1,920 1,920 1,920 1,920 Seed 90 90 87 90 89 97 96 97 95 95 95 95 Residual 16 20 43-2 16 10 49 12 30 30 30 30 Use, Total 3,047 3,363 3,282 3,159 3,111 3,478 3,862 3,794 3,970 3,970 3,970 3,970 Ending Stocks 138 151 215 169 141 92 191 350 290 120 290 411 Stocks/Use Ratio 4.5% 4.5% 6.6% 5.4% 4.5% 2.6% 4.9% 9.2% 7.3% 3.0% 7.3% 10.3%
US Soybeans Yield - Actual vs Trendline Bushels / Acre 50 48 46 44 42 40 38 36 34 32 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 Updated: 07/12/2016 Actual Trendline The Hightower Report
Going Forward Soybean Feed mix demand to grow Per Capita demand in 3 rd world/developing rising Asian & Indian Weather critical every year Fishmeal substitutes spreading impact oil/meal 8 yr low for palm oil stks; 19 year low stocks/usage 10% drop palm oil exp = 4.4 mil tonnes but soyoil exp from Argentina & US combined is only 7 mmt! Soy wildly bearish to potentially bullish or very
Going Forward Corn China Stocks Good or Bad Final South American losses How good is US Yield Ukraine soon to be a major force Deflated & Below COP Pricing? China Imports & Chinese weather
140 120 China Corn - Ending Stocks vs. Stocks / Usage Ratio 122% 106% Ending Stocks (MMT) 100 80 60 40 90% 74% 58% 42% Stocks / Usage Ratio 20 26% 0 10% 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 Crop Year Beginning The Hightower Report Most Recent: As Of 07/12/2016 Ending Stocks Stocks / Usage Ratio
Million Metric Tonnes (MMT) 8 6 4 2 0-2 -4-6 -8-10 -12-14 -16 China Corn - Net Imports / Exports Net Imports Net Exports 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 Crop Year Beginning Most Recent: 0.98 As Of 07/12/2016 The Hightower Report
230 210 World Corn - Ending Stocks vs. Stocks / Usage Ratio 50% 45% Ending Stocks (MMT) 190 170 150 130 110 90 40% 35% 30% 25% 20% 15% Stocks / Usage Ratio 70 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 Crop Year Beginning 10% The Hightower Report Source: USDA Most Recent: As Of 07/12/2016 Ending Stocks Stocks / Usage Ratio
Wheat 29 Year high in stocks Feeding wheat Pattern Wheat Locked behind Soybeans then corn India will be the next significant production focus
280 260 240 World Coarse Grains - Ending Stocks vs. Stocks / Usage Ratio 37% 34% 31% Ending Stocks (MMT) 220 200 180 160 140 28% 25% 22% 19% 16% Stocks / Usage Ratio 120 13% 100 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 The Hightower Report Source: USDA Most Recent: As Of 07/12/2016 Crop Year Beginning Ending Stocks 10% Stocks / Usage Ratio
150 World Wheat - Days of Supply 140 130 120 Days 110 100 90 80 70 60 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 Crop Year Beginning Most Recent: 126.97 As Of 07/12/2016 The Hightower Report
60,000 40,000 20,000 0-20,000-40,000-60,000-80,000-100,000-120,000-140,000 Wheat - COT - Futures and Options Non-Commercial and Nonreportable Combined Net Position Number Of Contracts 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 The Hightower Report Source: CFTC Max: 50,736 (8/7/2012) - Min: -122,081 (3/1/2016) - Most Recent: -94,061 (07/12/2016)
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