Oilseeds Market Outlook

1. Futures market – what’s next?
Outlook 2020
“trade policy trumps fundamentals”
Pakistan oilseed summit
Lahore PAKISTAN
6 – 7 December 2019

2. ConsiliAgra agricultural market thesis
 The risk of a demand shock has quieted – even if China-U.S. sign Phase I – we are well past the golden
decade of global growth
 A supply shock is needed to reverse market sentiment / psychology as that demand driver is largely
missing – save for biodiesel for edible oils
 Overall feel – keep risk limited (trade the ranges) given two major unknown elements
 U.S. trade policy
 South American production
 South America & the Black Sea dominate world grain + oilseed trade flows and presently, world supplies
are adequate-ample and just-in-time inventory procurement strategies with the U.S. acting as the
transparent backstop for world buyers:
 Implied price floor = 350¢ corn, 400-425¢ wheat, 850¢ soy, $295-290 SM. BO = 3000 - 3300

3. The golden decade of globalization in agriculture + dietary shifts + biofuels
100.00%
105.00%
110.00%
115.00%
120.00%
125.00%
130.00%
135.00%
140.00%
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
10000
Soy oil Palm oil Canola oil
Industrial demand - edible oil (2005-2015 growth)
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
70.00%
80.00%
90.00%
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
Total demand growth + % gain in that decade
 Corn = 294.7MMT or
41.7%
 FSI growth =
160.5MMT (54.4%
of total growth) or
70.6% in a decade
 Wheat = 96.7MMT or
15.7%
 Soymeal = 100.4MMT or
46.5%
 Soy oil = 18.8MMT or
56.3%
 Palm oil = 27.2MMT or
83.8%
 Canola oil = 10.56MMT
or 60%
 Canola seed =
21.56MMT or 44.8%

4. Managed money investment thesis – what works, what doesn’t?

5. Macro drivers that currently feed + influence this agriculture thesis, bias and general outlook
 Globalization – from buzz to dud with a shift to nationalism
 Global debt – a new record + King dollar
 Global economic growth – cheap money + low commodity prices = consolidation
 Global poverty
 Population growth – youth + emerging economies + area of population growth
 Democratization of information + access to information
 The rise of the global farmer
 Consumer trends
 Trade wars
 Supply shock risks – comes from two areas: (1) weather + (2) pesticides

6. Globalization – from buzz to dud with a shift to nationalism

7. Global debt – a new record + King dollar = $250 trillion FH CY2019

8. Global economic growth – cheap money + low commodity prices = consolidation in agriculture

9. Global poverty – UN’s first sustainable development goal (SDG1)

10. Population growth – youth + emerging economies + area of population growth

11. Democratization of information + access to information

12. The rise of the global farmer

13. Consumer trends – what do they want besides everything?
 Better quality
 Greater
reliability
 Traceability
 Sustainability

14. Trade wars

15. World soy supply cushion & the difference between now and previous years
World supply cushion = 99.6 days vs
116.1 days in 2018-19
Key points:
 Who holds these stocks – becomes
critical in this just-in-time / not
wanting to take any more risk than
necessary given geopolitics
Exportable supply cushion – viewed
more in a 55+ day type scenario given
where soybean stocks are located
Range-bound trade – expected to
continue 950-850 barring any
production shocks or soymeal trading
sub-280 vs front month futures
0
20
40
60
80
100
120
140
World soybean supply cushion = 99.6 days

16. ENDING STOCKS: the “never (rarely) export” + “tough to buy because of politics” storage tanks
MY2019-2020
supply cushion =
99.6 days
China holds 20%
= 20 days
Argentina holds
27% = ~27 days
Bottom-line –
the world
soybean supply
cushion is more
in that 53 day
range 0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
35.00%
40.00%
45.00%
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
2000/2001
2001/2002
2002/2003
2003/2004
2004/2005
2005/2006
2006/2007
2007/2008
2008/2009
2009/2010
2010/2011
2011/2012
2012/2013
2013/2014
2014/2015
2015/2016
2016/2017
2017/2018
2018/2019
2019/2020
Argentina soy stocks - return to Peron-Kirchner export tax
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
0
5,000
10,000
15,000
20,000
25,000
2000/2001
2001/2002
2002/2003
2003/2004
2004/2005
2005/2006
2006/2007
2007/2008
2008/2009
2009/2010
2010/2011
2011/2012
2012/2013
2013/2014
2014/2015
2015/2016
2016/2017
2017/2018
2018/2019
2019/2020
China soy stocks - reserve building on tap for 2020?

17. ENDING STOCKS: the world’s largest soybean exporter + U.S. “transition” to global storage tank
MY2019-2020
supply cushion =
99.6 days
Brazil - the world’s
largest exporter +
favored origin to
China holds 31% =
31.6 days
U.S. – 2nd largest
exporter to store
13.5% or 13.5 days
– transparent
backstop for world
buyers
2 exporters
account = 45 days
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
35.00%
40.00%
45.00%
50.00%
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
2000/2001
2001/2002
2002/2003
2003/2004
2004/2005
2005/2006
2006/2007
2007/2008
2008/2009
2009/2010
2010/2011
2011/2012
2012/2013
2013/2014
2014/2015
2015/2016
2016/2017
2017/2018
2018/2019
2019/2020
Brazil soy stocks - world's largest exporter to store 31%
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
0
5,000
10,000
15,000
20,000
25,000
30,000
2000/2001
2001/2002
2002/2003
2003/2004
2004/2005
2005/2006
2006/2007
2007/2008
2008/2009
2009/2010
2010/2011
2011/2012
2012/2013
2013/2014
2014/2015
2015/2016
2016/2017
2017/2018
2018/2019
2019/2020
U.S. soy stocks - world's 2nd largest exporter to store 13.5%

18. World soy production to fall 13MMT short in 2019-2020 ….
This is a “warning” sign and will be an underlying
theme and influence for soy futures through CY2020
BOTTOM-LINE: for every 1MMT lost (production) or
gained (demand) – it removes one day of supply from the
world’s supply cushion
RISKS
 China soybean import demand – does the
government push to expand state reserves and bring
in more of the world’s supply cushion into their own
country (positive for U.S. or Argentina)
 China soybean and soymeal demand – is
understated if their hog sector can recover faster than
expected (SM demand shows contraction (-331KMT).
Soy demand +200KMT). As a reminder – from 2015
to 2016 – SM demand increased ~6MMT (+9.5%).
During that same period – soy demand increased
7.6MMT
-25,000 -20,000 -15,000 -10,000 -5,000 0 5,000 10,000 15,000 20,000 25,000
2000/2001
2001/2002
2002/2003
2003/2004
2004/2005
2005/2006
2006/2007
2007/2008
2008/2009
2009/2010
2010/2011
2011/2012
2012/2013
2013/2014
2014/2015
2015/2016
2016/2017
2017/2018
2018/2019
2019/2020
World soybean production vs consumption

19. SOYBEANS: U.S. ending stocks – will decline 50% vs 2018-19 record but…..
The U.S. storing more of world
soybean stocks should be viewed
by world importers and users as a
positive feature for a supply
source. Similar to what we’ve
seen in corn + wheat market /
transitions.
KEY QUESTION – what is the
market willing to pay for the U.S.
to store more of the world’s
soybeans rather than Argentina?
COST OF DEBT? Will the U.S.
farmer be the first to capitulate
and sell its on-farm stocks versus
debt cost-financing constraints in
2019? This would be a bearish
trigger
-30,000
-25,000
-20,000
-15,000
-10,000
-5,000
0
5,000
10,000
15,000
20,000
25,000
U.S. soy production - change year vs year
-23.9MMT0
5,000
10,000
15,000
20,000
25,000
30,000
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
2000/2001
2001/2002
2002/2003
2003/2004
2004/2005
2005/2006
2006/2007
2007/2008
2008/2009
2009/2010
2010/2011
2011/2012
2012/2013
2013/2014
2014/2015
2015/2016
2016/2017
2017/2018
2018/2019
2019/2020
U.S. ending stocks - decline due to production -> not demand
Prod Stocks

20. WORLD SOY OIL: biodiesel + China edible oil imports key demand drivers for 2020
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
0
2000
4000
6000
8000
10000
12000
2000/2001
2001/2002
2002/2003
2003/2004
2004/2005
2005/2006
2006/2007
2007/2008
2008/2009
2009/2010
2010/2011
2011/2012
2012/2013
2013/2014
2014/2015
2015/2016
2016/2017
2017/2018
2018/2019
2019/2020
World industrial demand of soy oil - % total demand
0
5
10
15
20
25
30
35
40
45
50
World soy oil supply cushion = 22 days
 China Oct 2019 palm oil
imports = 795.2KMT – up
73.1% vs Oct 2018
 China Oct 2019 soy oil
imports = 98.2KMT- up
48.9% vs Oct 2018
 Monitor China crush rates
(-9.4%) – if this picks up on
better crush margins ->
will impact edible oil
imports
 Monitor U.S. oil yield –
October NOPA crush =
11.57 (vs 11.68 Sept &
11.71 Oct)
 Brazil B13 – March 2020

21. OIL SHARE: the most important price relationship in 2020

22. Argentina faces unknown with the return of Peronism 10 December 2019
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
Argentina soymeal exports - 45%
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
Argentina soy oil exports – 50.9%
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
14.00%
16.00%
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
Argentina soybean exports - 5.9%

23. Monthly soybean prices … China-U.S. trade war dominates
Soybeans back to decade-low
prices
Funds – record short in May
2019 and then went long and
now back to healthy short in
the market
USDA has no growth for China
soybean crush
World soybean market under
goes same transition / shape as
world wheat and corn markets
when it comes to Chicago
futures and U.S. storage tank
role

24. Monthly soymeal prices – bouncing off multi-year lows – feed demand expands Funds are short soymeal with
soybean short vs soy oil long
Brazil crush rates – remain a
challenge (more SM to be
consumed domestically)
World soymeal demand faces
challenges of African Swine Fever
Argentina protein levels -
challenge
ASF – does the consumer shift
away from pork and towards
other protein (eggs, poultry,
aquaculture)?
U.S. soymeal export sales are off
to a slow start (-15%) to MY2019-
2020 – forecast to decline 1.5%

25. Monthly soy oil prices – funds long + palm oil + U.S. oil yield + China Soy oil prices have been locked in a
downtrend since 2011 – now
consolidating (funds long 67K vs record
long = 126.5K)
Bottoming price action in soy oil charts
as the focus is on China + palm oil
prices
World veg oil supplies show a decline in
stocks for 2019-2020 with U.S. soy oil
ending stocks to fall once again on
biodiesel demand
Brazil biodiesel program becomes
“more interesting” given crush capacity
constraints (poor margin environment)
– greater shift to soybean exports
versus domestic crush
Argentina politics is a major question
for world soy oil values

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