没有合适的资源?快使用搜索试试~ 我知道了~
瑞信-美股-农业行业-美国农业科技:生物燃料逆风使农业防御力更为悲观-527-23页.pdf
需积分: 0 0 下载量 180 浏览量
2023-07-26
14:31:10
上传
评论
收藏 1.23MB PDF 举报
温馨提示
试读
23页
瑞信-美股-农业行业-美国农业科技:生物燃料逆风使农业防御力更为悲观-527-23页.pdf
资源推荐
资源详情
资源评论
Agricultural Sciences Sector
Biofuel Headwinds Negating the Defensibility
of the Ag Sector, But Fert Cost Curves Should
Eventually Re-Connect vs. Low Expectations
Fertilizers | Sector Review
More to Global Ag Story than US Corn – Though Aid is Necessary: The vast majority
of investors don’t want to “touch” ag due to ’21 corn acre risk, but we stress that’s ignoring
> 90% of the equation. We retain significant concerns re: (i.) biofuel demand (US corn, SE
Asia Palm Oil, Brazilian sugar), (ii.) further China / US political hostility (lack of trade flows,
RMB depreciation), (iii.) 2H seed price competition (esp. Retail channel), (iv.) ongoing US
uncertainty for ’21 given carry concerns (biofuels, feed, etc.), and (v.) EM FX volatility. As
much as that’s a lot to keep one up at night, we note: (i.) all three macro fertilizers are fairly
close to their respective global cost curves (N is below parity, P is close & K slightly above),
(ii.) the initial ~$19bln of farmer aid is an incredible safety net (esp. as many farmers’ crop
inventories are “under water”), (iii.) ’21 global input demand should still grow off of a lower
base (despite lingering crop inventory headwinds), (iv.) CPC demand is still poised to be
healthy in certain regions / crops, and (v.) China replenishing inventories of corn and / or
soy could be the positive catalyst the industry desperately needs on the global demand front.
Breaking Down the ~$19bln of US Ag Aid – More is Needed, But It’s a Start: While
the US ethanol industry was under pressure prior to a COVID-19 world (+consequent effect
on gasoline demand), industry consumption of corn was still comfortably >5bln bu p.a. It’s
now clear all COVID-19 headwinds on corn demand could result in +/- 1bln bu of demand
degradation, or +/- 5-7% of the upcoming crop (i.e. – new supply); these effects will likely
be felt in both the ‘19/’20 and ‘20/’21 crop yrs. For the new crop season there is still a risk
of a >3.5bln bu carry (>75% higher vs. normal expectations), so there is still a core demand
issue heading into ’21. That said, of the $19bln slated for US ag aid, ~$3.9bln is slated for
“row crops”, which provides a valuable safety net. Bottom line, the ag community will still
face an inventory issue into ’21 (w/ the only solutions being a weather event, increases in
Chinese demand or materially lower ’21 corn acres), but the worst case scenario appears to
be off the table (widespread insolvencies, etc.) due to swift policy actions. That said, most
of our contacts still suggest there is an underlying demand issue that still requires solving.
India CPC is Potentially About to “Upgrade”, But Higher Costs an Issue: The Indian
Ministry of Agriculture released a draft regulatory framework banning the import, distribution,
manufacture and use of 27 pesticides, citing health risks to human and animal life, and bans
in other countries. Companies have ~45 days to respond with comments and challenges.
While the outcome is still uncertain (as alternative products are more expensive), this could
eventually present tailwinds for some multinational manufacturers w/ replacement products.
FMC Still the Core Ag Long, CF / MOS Retain Favorable Risk/Reward Ratios: Sorry
to bore everyone, but FMC remains our top pick of the space. Three catalysts to monitor in
the 2H are: (i.) FMC’s ability to recapture FX headwinds via price (Latam, Asia, etc.), (ii.)
the outlook for other coarse grains / soy / F&V (to offset cotton headwinds), (iii.) success of
the SAP implementation, and (iv.) further deals on the fungicide front (purchases, IP swaps).
In ferts, we expect volatility to continue throughout US summer fill, but we believe cost curve
support will be incrementally evident in the coming months, which should improve sentiment.
27 May 2020
Equity Research
Americas | United States
DISCLOSURE APPENDIX AT THE BACK OF THIS REPORT CONTAINS IMPORTANT DISCLOSURES, ANALYST CERTIFICATIONS,
LEGAL ENTITY DISCLOSURE AND THE STATUS OF NON-US ANALYSTS. US Disclosure: Credit Suisse does and seeks to do business
with companies covered in its research reports. As a result, investors should be aware that the Firm may have a conflict of interest that could
affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.
Research Analysts
Christopher S. Parkinson
212 538 6286
Kieran de Brun
212 538 3440
Harris Fein
212 538 3064
Global Ag Market Updates
US Market Summary
The vast majority of our recent conversations hinge on the length and magnitude of US ethanol
headwinds and trade with China. No one we speak to is bullish, but there is some “hope” that
Chinese demand will emerge in a “meaningful way and save the day”. Prior hopes that a Phase
1 US / China trade deal will result in material benefits across the ag value chain have now been
diluted to comments equating to “the Chinese still need food security and we need the demand”.
Due to US gasoline (+consequent ethanol) demand falling -50% to -60% in the early stages of
the US COVID-19 outbreak, we project >750mm bu of demand degradation from lower yr/yr
biofuel consumption, distributed between the ’19 / ’20 and ’20 / ’21 crop years. The ethanol
industry was already ailing before the COVID-19 demand headwinds, including various lawsuits
w/ the EPA re: refinery blend waivers and challenging economics. This is likely why top-tier US
producers such as Marquis Energy and POET were so quick to react during the initial stages of
the outbreak. At peak, the #s we keep hearing from the industry are that ~140-150 US ethanol
facilities (out of ~200 in the US) were shut-down or running at materially lower op rates. There
is some debate on how many facilities may never produce again without further US government
support. Naturally, there remains a strong lobby in Washington from the NCGA to: (i.) promote
higher ethanol blends (to establish a low carbon / high octane fuel) and (ii.) further solidify the
US as the partner of choice in key trade regions post USMCA / Phase 1 of the China deal,
which we’ll still be monitoring, but these initiatives appear to be on the backburner for now.
There are a few adjustments to our US corn B/S including: (i.) an increase to US corn acres to
94mm – 95mm (vs. USDA est’s at 97mm; ND prevent plant acreage could be up to ~1.5mm
acres at the time of publication), (ii.) significantly reduced ethanol demand est’s, (iii.) slightly
lower feed demand, and (iv.) higher export flows (still not reflecting the potential for large ’20
/ ’21 Chinese purchases). On our first point, we’d highlight large areas of the US N. Tier states
(incl. the Dakotas) remain unplanted and prevent plant dates are rapidly approaching. This could
be a factor in the USDA eventually reducing its supply projections, which should ease some
concerns. Bottom line, we now expect a ’20 / ’21 carry of 3.4bln to 3.7bln bu, w/ the risk to
the upside if the US receives optimal weather (the mid/end of June and early July now matter).
Figure 1: US Corn Carry Over (mm bu)
Figure 2: US Soybean Carry Over (mm bu)
Source: USDA
Source: USDA
3.4-3.7bln
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
400-420mm
0
100
200
300
400
500
600
700
800
900
1,000
Figure 3: US Corn Acres (mm)
Figure 4: US Soybean Acres (mm)
Source: USDA
Source: USDA
Figure 5: US Wheat Acres (mm)
Figure 6: US Cotton Acres (mm)
Source: USDA
Source: USDA
Our new crop price deck still reflects $3.00-$3.50/bu and $8.25-$9.25/bu for new crop corn
and soy, vs. the current contract prices of ~$3.34/bu and $8.55/bu respectively. It’s fairly early
to discuss the ’21 season, but new crop futures are reflecting a corn:soy ratio of +/- 2.5 to 2.7,
favoring soy on the margin (in a “normalized” environment). With the current demand prospect
for soy better than corn, we’d argue corn acres are poised to fall to the 88mm to 91mm acre
range in ’21 (at or slightly below ’19 levels), w/ soy stable in the 84mm – 86mm acre range.
The balance of planted acreage will likely revert to spring wheat, alfalfa, canola and other row
crops (in “marginal” areas in the West and North). Bottom line, while the ’21 yr/yr comp is
drastic, we’d remind investors ’19 wasn’t exactly catastrophic. We expect the retail chain,
distributors and traders to remain incredibly cautious in the interim (and hoard cash), but we
believe we still aren’t on the edge of an “all out” ag apocalypse (and we’ve been LT bears).
Seed Market Outlook
Given the volatility of soft commodity markets and macro uncertainty, seed price cards are the
last thing on anyone’s mind. That said, if current dynamics hold until fall, we believe competition
will be fierce into ’21 (it’s always tough, so we’d stress the word incremental). As we wrote last
week, we see incremental competition in the retail channel from both multinationals and US
regionals. Several factors support this preliminary view, incl: (i.) a renewed focus on the retail
channel by several mid/large platforms (incl. CTVA, AgReliant), (ii.) the growth aspirations of
mid-size seed producers (Beck’s, Stine, etc.), (iii.) agricultural productivity launches (i.e. – traits)
beginning to “plateau” (CTVA’s Qrome is the key exception), and (iv.) the growing presence of
proprietary NA retail brands. Bottom line, it’s too early to make a quantitative call, but the yr/yr
risk on apples : apples corn seed pricing is to the downside (product mix is incrementally crucial
to price / mix results). Final Latam production #s will also be important for investor sentiment.
94-95mm
82
84
86
88
90
92
94
96
98
84-85mm
60
65
70
75
80
85
90
95
45-46mm
20
25
30
35
40
45
50
55
60
13.5-14.5mm
0.00
2.00
4.00
6.00
8.00
10.00
12.00
14.00
16.00
18.00
20.00
Crop Protection Chemical Outlook
Based on several adverse weather events affecting global ag markets in ‘19, we forecast CPC
growth in the -2% to +2% range for 2020 (lower ’19 base benefit offset by beginning regional
inventory issues). However, we stress the largest issue multinational CPC producers face is
depreciating FX, especially in Asia and Latam. As much as we retain concerns re: the ability of
the industry to “recover” FX headwinds (less of a concern for FMC given past success), it’s a
key variable (post organic growth) to drive share prices and factor into ’21 / ’22 perceptions.
US Agricultural Relief from the CARES Act
We’re still receiving plenty of questions (from investors and farmers) re: the CARES Act and the
distribution methodology. The application process isn’t in full swing (began May 26
th
), but the
details for all eligible farmers and ranchers can be found here. The crux of the initiative appears
to be ~$16bln direct farmer aid, which breaks down losses incurred between mid-January ’20
and April ’20 (incl. spoiled / unpaid products) and primary compensation for “ongoing” market
disruptions (via the Commodity Corporation Charter Act). While we still view the entire industry
as “under pressure” for the time being, the quick math suggests this will be temporarily enough
to avoid the worst case scenario. While we believe more aid will be necessary, it’s plausible the
Trump administration may direct tariffs directly to agricultural entities (as it has done) and / or
legislate additional funding for the Commodity Credit Corporation (via the USDA programs).
As we note above, these programs are intermediate term “fixes”, so we’ll also be watching
closely re: the Trump administration’s: (i.) approach towards RFS waivers (a large issue at
present), (ii.) any efforts to “prop up” the energy industry (+consequently ethanol), and (iii.)
initiatives for further commodity purchases (the other initial ~$3bln in aid). Bottom line, we
expect US agricultural support to be an ongoing development, especially in an election year.
We’re being asked to display the $16bln by agriculture “type”, for which Senator Hoeven’s (R-
North Dakota; integral to drafting the legislation) website breaks down the aid as follows:
-$9.6bln for the Livestock Industry:
-$5.1bln for cattle
-$2.9bln for dairy
-$1.6bln for hogs
-$3.9bln for row crop producers (corn, soy, etc.)
-$2.1bln for specialty crop producers (fruits & vegetables, etc.)
-$500mm for “other crops”
*payment limit is $125k per commodity with an overall limit of $250k per individual or entity
**payments are expected by early June
27 May 2020
Agricultural Sciences Sector
5
Global Nitrogen Overview
Global urea markets are continuing their 2020 roller coaster ride, with our initial skepticism in
January materializing before we became more optimistic in early March (we note NOLA prices
were >35% trough to peak during the first ~4 months of the year). Unfortunately, optimism for
global prices is being short lived (post a robust early spring application season), as ample global
supply availability is stable despite strong demand in Central Asia, Australia and Eastern Europe.
With Brazil in off-season (and a weak BRL), ongoing trader reluctance to hold inventories, and a
“hand to mouth” approach from distributors, we continue to see volatility continuing into 3Q.
However, we stress investor sentiment for nitrogen is near rock-bottom, as evidenced by key
producers being up ~5% to 15% during a week during which markets received some of the
worst price points we’ve seen since ’17 (i.e. – NOLA urea barges trading at +/- $180/st). At
this juncture we’d stress global markets are in disarray, w/ MENA prices well below global cost
curve economics (CSe -$15/t to -$25/t parity discount to China), while US prices are dipping
below their own parity to MENA prices (CSe -$20/t to -$35/t parity discount to MENA non-
US). The bottom line is either (i.) global demand falls so precipitously that global trade no longer
requires Chinese urea (an unlikely scenario given new project delays), or (ii.) global urea prices
will “re-connect” at some point during 2H20. We’re the first to concede that “excel math” does
not always work in the near term for cost curves, but will drive prices over longer periods of time.
China was filling the void in the global export market during 1Q, supporting our view that it will
still continue to act as a global price setter (and LT price ceiling). As domestic feedstock prices
appear stable (though FX now depreciating), we believe the price back-drop will remain range-
bound, likely in the $210/t - $250/t range (vs. current export offers in the $230/t - $240/t
range as of May 25
th
). The slight difference vs. our prior est’s is due to a lower RMB, as well as
coal prices falling ~50 RMB vs. 1Q highs. As a reminder, US tariffs are still in effect, meaning
parity price adjustments should be assessed to Latam (mutual ground for activity) as US imports
are overwhelmingly provided by MENA producers. As we cite above, both MENA FOB rates and
NOLA prices are currently trading below parity, so the question remains “when will China return
to the export market?”. We believe another Indian tender in June will be a very telling sign, but
it’s still uncertain. The key for the US is lower supply availability out of MENA producers in 2H,
meaning bulls should want MENA tonnes being directed to Central Asia, the Pacific and Latam.
As a result of current global demand, we maintain our forecast for China urea export activity
(incl. Iranian re-export tonnage), at 4mmt to 5mmt - though we’re favoring the low end of the
range (due to our concerns in SE Asia). Our price desk now reflects ~$210/t to $250/t FOB
rates, which assumes an RMB in the ~7 to 7.20 range (lower vs. our last update) & anthracite
coal in the 950-1050 RMB/t range (~50 RMB lower at the mid-point vs. prior CSe). To put
these price levels in perspective, this equates to roughly $7MMBtu to $8MMBtu in gas costs.
剩余22页未读,继续阅读
资源评论
2301_77342543
- 粉丝: 37
- 资源: 5761
上传资源 快速赚钱
- 我的内容管理 展开
- 我的资源 快来上传第一个资源
- 我的收益 登录查看自己的收益
- 我的积分 登录查看自己的积分
- 我的C币 登录后查看C币余额
- 我的收藏
- 我的下载
- 下载帮助
安全验证
文档复制为VIP权益,开通VIP直接复制
信息提交成功