Post on 31-May-2020
transcript
Major Junctions AheadEnergy, Grains and Metals
David HightowerPresident, The Hightower Report
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Coco
a
Whe
at
Palla
dium Corn
Live
Cat
tle
Soym
eal
Cano
la
Gold
Nat
ural
Gas
Soyb
eans
Cott
on OJ
Silv
er
Lean
Hog
s
Roug
h Ri
ce
Plat
inum
NY
ULS
D
Soyb
ean
Oil
LME
Copp
er
Bren
t Cru
de
Copp
er
Coffe
e
Suga
r
WTI
Cru
de
RBO
B Ga
s
Lum
ber
2018 Commodity Performance - Annual Percent Change
Source: Bloomberg
-600,000
-300,000
0
300,000
600,000
900,000
1,200,000
1,500,000
1,800,000
2,100,000
2,400,000
95 97 99 01 03 05 07 09 11 13 15 17 19
Non-Financial - COT - Futures and OptionsNon-Commercial and Nonreportable Combined Net Position
Number Of Contracts
The Hightower Report | Source: CFTCMax: 2,102,118 (2/14/2017) - Min: -321,202 (2/16/1999) - Most Recent: 833,655 (02/12/2019)
Major Market Issues to Consider
• Global Sentiment Ruptured by trade/Saved by trade?• Higher/Lower tariffs are inflationary if growth survives • Chinese Crude oil Cost US versus Brent• African Swine fever THE Commodity story of 2019• Dollar Maximum bull condition is past• Grains bearishness reaches well into next crop cycle• Clean air effort/Exports Natural Gas/Ethanol/Biodiesel• Year of Commodity Substitutions
2019 Views
• US/Global Economic Outlook• Impact of foreign policy and tariffs on trade• Economic volatility in South America• China protein demand down-ASF, US demand stable• Renewed focus on Bio-fuels• Gold - A Bullish Shift in classic fundamentals• Where is all the Oil going?
4.55.05.56.06.57.07.58.08.59.09.5
10.010.511.011.512.012.5
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Barr
els
/ D
ay
EIA Weekly Crude Oil Production
Most Recent: 12.1 on 02/22 Source: EIA
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300
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ion
Barr
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EIA Weekly Crude Oil Stocks
Most Recent: 445.865 on 02/22 Source: EIA
US Production +3 mbdUS Exports +3.4 mbd
Pemex-PDVSA-Libyia-Aramco-Funds
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Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Perc
ent
of O
pera
ting
Cap
acit
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EIA Weekly Refinery Operating RateCurrent Year vs. Last Year vs. Average
2019 Last 5 Yr AvgMost Recent: 87.1 on 02/22 Source: EIA
Sabine Pass Feb 2016 – Top 5 2020
Source: US Department of Energy
Tightest in 6 Years
Monthly Natural Gas
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on C
ubic
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EIA Working Gas In Storage5 Year Comparison
2015 2016 2017 2018 2019 Most Recent: 1,539 on 02/22/19
Source: US EIA
Grains at Maximum Bearishness!Period of Highest Supply Assumptions
Assumption of flawless South American supply Higher US Soy acres ReversedLittle Concern for El-Nino/Palm Oil/SEA-China FloodingA Peak in World ending stocks off SA Production/Slowing/Trade/economic fear/Oil slumpChinese Corn Supply views coming down to reality Declining world stocks Corn/Wheat/Palm?
Surprise Demand/Bull IssuesBio-Diesel Profitability & SEA MandatesSoaring Hog liquidation/supply & then soaring production outside of ChinaChina Ethanol target a game changer Net Corn use increase 27.5 metric tons /1.1 bill ion bushelsChina 2-3 billion gallon Ethanol Import 5 billion gallon demandFund activity from short to long or from minor long to big longsTotal Chinese bean imports Not Total Chinese imports from the USChinese Corn/DDG imports
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T)
Crop Year Beginning
China Corn - Net Imports / Exports
Most Recent: 4.95 As Of 02/08/2019 The Hightower Report
Net Imports
Net Exports
Source: USDA
0255075
100125150175200225250275300
88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18
Mill
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ric
Tonn
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MM
T)
Crop Year Beginning
China Corn - Domestic Usage
Feed OtherMost Recent: As Of 02/08/2019The Hightower Report
Source: USDA
Record Production Needed Ahead
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80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18Est
US Corn Ending Stocks / Usage Ratio
The Hightower ReportMost Recent: 11.67% As Of 02/08/2019Source: USDA
If Only 2 million Acres Higher; Tightness AheadUSDA SUPPLY/DEMAND 2019/20 ProjUS CORN Dec Dec Dec
USDA USDA USDA 10 Year11-12 12-13 13-14 14-15 15-16 16-17 17-18 18-19 Trend
Planted Area (M Acres) 91.9 97.3 95.4 90.6 88.0 94.0 90.2 89.1 91.0Harvested Area (Acres) 83.9 87.4 87.4 83.1 80.8 86.7 82.7 81.8 83.5Yield (Bu/Acre) 146.7 123.2 158.2 171.0 168.4 174.6 176.6 178.9 176.5
Beginning Stocks (M Bu) 1,128 989 821 1,232 1,731 1,737 2,293 2,140 1,781Production 12,314 10,755 13,829 14,216 13,602 15,148 14,604 14,626 14,746Imports 29 160 36 32 68 57 36 45 50 Supply, Total 13,471 11,904 14,686 15,479 15,401 16,942 16,934 16,811 16,577
Feed & Residual 4,512 4,309 5,002 5,286 5,118 5,470 5,298 5,500 5,575Food, Seed & Industry 6,431 6,044 6,531 6,595 6,647 6,885 7,058 7,080 7,190 Ethanol for Fuel 5,000 4,641 5,124 5,200 5,224 5,432 5,605 5,600 5,700 Domestic Total 10,943 10,353 11,533 11,881 11,765 12,355 12,355 12,580 12,765Total Exports 1,539 730 1,921 1,867 1,899 2,294 2,438 2,450 2,425 Use, Total 12,482 11,083 13,454 13,748 13,664 14,649 14,793 15,030 15,190Ending Stocks 989 821 1,232 1,731 1,737 2,293 2,140 1,781 1,387
Stocks/Use Ratio 7.9% 7.4% 9.2% 12.6% 12.7% 15.7% 14.5% 11.8% 9.1%
Source: USDA & Hightower
Ethanol Developments• China imported ethanol from Indonesia and Malaysia 1st Time
Indonesia in July and Malaysia in Aug & Sept• US origin ethanol imports incur a 70% import duty in China.
Exports out of Indonesia and Malaysia into China are duty free.
• The domestic price of ethanol in China is $686.09/cu m. The cost of US-origin ethanol is $848/cu m after adding the 70% import duty and 16% VAT.
• 20,000-25,000 cu m of ethanol exports from Indonesia to China in Oct.
Bio-Diesel• Indonesia domestic usage on the rise; Starting Sep, 20% palm oil
blend biodiesel for railways and electricity generators • Indonesia Jan to August exports running 127,000 above last year• US biodiesel from soy oil 7.8 bp +9.8% last year and up 26% 2 years • Brazil biodiesel production up 28% from last year • Argentina biodiesel exports, up 7.5%• Malaysia biodiesel output jumped 25% to 900,000 mandate now
10% vs 7% previous• Asia used cooking oil is showing huge demand jump from Europe• EU Countervailing duty will cause Competition for SEA Biofuel supply
Minor Palm Changes are a BIG Deal
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Palm Oil Exports Comparison
World Malaysia IndonesiaMost Recent: As Of 02/08/2019The Hightower Report
Domestic use = Lower Global SupplyBiofuel = El Nino33
Source: USDA
Veg Oil Condition is Tight
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88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18Crop Year Beginning
World Soyoil - Ending Stocks / Usage Ratio
World United StatesMost Recent: As Of 02/08/2019 The Hightower ReportSource: USDA
Market Personality
• Weak El-Nino 2015 Oil Reaction then 25 to 38 • El-Nino Zones 3-4 not 1-2 • Less wind shear & Aussie drought Singapore 14• Oil Volume Pre 2008 434K 2019 3.1 ml• Oil Open interest 2008 200K 2019 500K Net Short • Volatility in Soybeans
China’s We have a Case, or two, of ASF
• Hundred of cases reported 1,000,000 killed• Concern cases are being covered up fits history• Taiwan herd 5.39 ml, US 74.5 ml, 700 million China• Starting over retaining breeding stock during spread?• US Production 1st to 2nd quarter production down• Vietnam Philippines Thailand• Feed Mill diversification Aqua/pets/Bio?/rabbits
Fishmeal Price 2.5 Times Soymeal
Fishmeal +$1,000/Salmon fed fishmeal -17% -2017
Central Bank Buying Trend Returns
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World Central Bank Net Gold Sales
Data As Of 2018Q4 Source: World Gold Council/THR
Net Purchases
Net Sales
Gold Investment
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Gold Derivative HoldingsMonthly/Million Troy Ounces
Gold derivative holdings are below their 2012 highs, but are seeing inflows at the start of 2019
and are closing in on a new 5 1/2 year high!
Source: Reuters
World Copper Exchange stocks
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"Combined" Exchange Copper StocksLME+Shanghai+Comex/Weekly/Thousand Tonnes
While the "combined" exchange copper stocks total has risen in recent weeks....
....it remains far below its highs during 2018!
Source: Reuters
2019 Hog Action - A major Impact?
• If ASF disease destroys 16% of China's herd, all of the pork exporters in the world would need to double their exports to make up the difference.
• If US doubles exports in 2019, US per capita supply would drop to a record low.
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US Monthly Pork Exports
Most Recent: 501.94 as of Oct 2018 Source: USDA
April 2018: 547,931New High (back to at least Jan
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Hogs - COT - Futures and Options CITCommodity Index Trader Net Position
Number Of Contracts
The Hightower Report | Source: CFTCMax: 127,379 (6/3/2008) - Min: 46,004 (3/3/2009) - Most Recent: 65,176 (02/12/2019)
Balance Sheet Run-Off
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313.9 287.3 263.9 225.4 225.2 208.2
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S Do
llarsLargest Foreign Holdings of US TreasuriesBillion US Dollars/October 2018 (Latest TIC Report)
While China and Japan continue to hold the top two spots in foreign holdings of US Treasury Securities, their combined total
has fallen by $89 billion during the first ten months of 2018!
Source: US Dept. Of Treasury
While China and Japan continue to hold the top two spots in foreign holdings of US Treasury Securities, their
combined total fell by $89 billion during the first 10 months of 2018.