POINTERS: Coming out of Covid-19 - What is the Agriculture Outlook for 2020 and Beyond?

By: Ms Emily French

Ms. Emily French is an experienced trader, analyst, broker and presently the founder & managing director of ConsiliAgra. Her passion for agriculture started early-childhood on a farm in north Idaho through earning a degree in Agricultural Business at Washington State University to starting her professional career with Cargill in 1996. Following Cargill, Ms. French worked for the U.S. Grains Council and World Perspectives in Washington, DC. She shifted to investment banking and OTC markets with National Australia Bank and Macquarie Bank. In early 2009, Emily left Macquarie to form ConsiliAgra – a brokerage and strategy group covering the world agricultural commodity markets, specializing in grain and oilseeds. Clients include flour mills, feed mills, ethanol plants, hedge funds, crush plants and investment banks. When not on an airplane, Ms. French resides in the mountains of the Pacific Northwest and can always be reached at: efrench@consiliagra.com

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The world is in the midst of full-blow pandemic with great uncertainty. The only thing that certain is its impact on everyone and everything.

When will we slowly return to normal in a recovery or rebound and what is the new normal?

What does agriculture world look like POST-COVID versus what had been the more norm of a PRE-COVID world?

Are we in the midst of what had been a more “just-in-time” inventory strategy to an evolution towards a “just-in-case” procurement strategy?

Do we see exporting countries becomes more food security sensitive – namely, the Black Sea?

Geo-politically, the China-U.S. trade relationships remains highly volatile given the U.S. Presidential election in November and what happens with the Phase I trade agreement?

How will all this impact the massive protein gap that exists in Asia?

Ms. French will give an overview of the global grain & oilseeds complex landscape with particular focus on those demand growth engines that were adversely impacted by COVID and where supply chain risks may lie. What are the known knowns and where or what are the greatest price risk threats to world importers as the markets trade at multi-year / decade low price points?

The presentation will include a look at the northern hemisphere planting and production cycle that is underway, in addition to key price relationships that will influence global trade flows.

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Questions & Answers (2) :

Nur Fairuz

4 years ago

Slide 3 of your presentation shows that funds short position is big in corn and soya meal as at 2 June, 2020. Would you be able to explain the reason why funds took that kind of a position. Going forward what actually happen to the market when the position is unwind.

Emily French:
Corn fund short - this is a reflection of adequate-ample world corn supplies with Argentina's corn harvest slowly wrapping up, Brazil safrinha corn harvest just starting (this crop is the one that handles much of the export biz that Brazil does) + U.S. weather / plantings and so on look much better than last year. In short - you are going to see a massive build in U.S. ending stocks vs demand headwind concerns, especially from the major growth engine being ethanol. Ethanol production has recovered but not nearly enough to prevent a contraction in demand. If funds cover their short position - it will likely not have a massive price impact to the upside given the U.S. farmer is undersold. Ergo - you will have a natural seller over this market on any price correction to the upside. Soymeal fund short - this is the biggest risk to the upside as soymeal lacks a natural seller (ergo - corn and soy and wheat, etc. have farmer selling that is over the market). We've seen what happens a few times when funds move to cover that short position (just look at the massive vertical price moves in soymeal charts and that is typically when funds are covering their short positions - and it usually happens into a vacuum). I think also some of that short is from where soy oil prices collapsed at the start of CY2020 - and so did oil share. As such, I do think some of this soymeal short is spread vs soy oil (ergo - long oil share: long soy oil / short soymeal).
4 years ago

Shaheen

4 years ago

Appreciate if you can share with us the problem that that palm oil main competitor Argentina, Brazil and US soybean is facing in this pandemic environment. How do they handle it. Issue relates to market access issue and planting.

Emily French:
There has been no issue with market access for soy oil for the majority of world buyers Planting � I would offer that U.S. soy planting is now done and the weather looks very good. Brazil is forecast to plant a recorded amount of soybeans in 2020-21 with the Real-USD providing record pices when it was 5.8-5.9:1. This has prompted a lot of farmer selling for 2020-21 � estimated at 35-40% sold. Ergo � if the crop = 130MMT � that would suggest the farmer has sold 45.5MMT � 52MMT As for Argentina, there will be minimal changes as the land is largely already in rotation. The challenge that Argentina always faces is its own government. With respect to soy oil, the major challenge for that has been SME (biodiesel) and exports into Europe, but that is an Argentina issue. With respect to Brazil soy oil / biodiesel � ANP has cut the blend rate from 12% to 10% , so that has throttled back demand there. Both countries face really poor crush margins, so that will be an ongoing challenge. With respect to logistics, there has been no problem due to COVID. The only major challenge has been for Argentina and the low water levels on the river (this has forced lighter load levels for all the vessels)
4 years ago