On June 22 and 23, I attended the Global AgInvesting 2009 conferencein New York, sponsored by Soyatech.This week’s commodity report is a summary of the main themes covered during the two day event.
The timeliness of this conference attracted participants from all over the world, with a noticeably large representation of growers/land developers in South America.Further, the conference was generally very well attended with a mix of banks/funds, land investors, analysts and growers, without any one group being particularly dominant – the overall attendance directly contrasts with many of the recent commodity events that I have been to (and others that I have declined), most of which seem to be suffering from the broader effects of cost cutting and travel restrictions.The conference was marketed as an event to address the following questions:
•What are some of the demand drivers for crops over the next decade?
•What are some of the risks?
•Where will the new major croplands be developed?
•How will prices respond to these anticipated trends?
•Will the infrastructure be sufficient to handle projected demand?
•How can investors participate?
Day 1 – Supply, Demand & Infrastructure
The first sign of a good program is a diverse lineup of speakers.From my experience, most conference value actually comes from outside of the lecture, whether it be in poster sessions (this conference did not have any), coffee breaks or during the networking receptions.The speakers on the first day were certainly qualified in their respective areas.However, I did not come away from the morning sessions with anything particularly new or noteworthy.The first speaker of the day (Wayne Jones) is a division head at the OECD, providing a high level summary of their outlook as it pertains to changes in the primary driving fundamentals in global agri, and what to –> expect over the next decade.When discussing price expectations for the global grain complex over the next 6-24 months, Mr. Jones did note that any price expectation is useless without a solid view on crude prices or biofuels expectations, but then did not provide a solid projection on either of these variables.So the overall outlook of 10-40% increases in basic food prices above current levels in the coming years loses meaning without taking these items into account.When addressing longer term trends, the usual suspects were discussed: population growth expectations, biofuel demand, land availability, and climate disruptions.But none of these were treated with any rigor.The next speakers, from Bunge and Hi-Bred/Dupont respectively, provided more of the same.Mr. Elmore at Hi-Bred did however provide some interesting facts that I was not aware of (including, half of the world’s pork originates from China).It is not as though the first three speakers of the day all gave talks consisting of irrelevant facts…it is just that most people in attendance probably already know (or at least should know) most of what was discussed.I feel that at an agricultural commodities conference in the grains space, the presenters should assume a general level of knowledge of market fundamentals, and that most people would like to hear something that might not be currently ‘in the market’.It was refreshing when Dr. William Wilsonof North Dakota State University provided his unique perspective on grains, with particular emphasis on wheat in the FSU.I encourage readers to look into Dr. Wilson’s research and extension work for his insight and expectations on the long term trends for FSU countries.As a researcher, I appreciate his perspective as someone who not only visits the areas where he is focusing on, but who is actively involved in intercontinental collaborations.The global perspectives of too many ag economists are shaped by weeks/months of sitting in offices, digesting work of others, with the obligatory annual visit (to say China or the Black Sea region) for a conference.Many academics who focus on the scientific and economic components of global agriculture offer something different, which includes getting out in the field, collaborating with numerous universities and governments, and actually seeing, touching and experiencing the subjects of their research.This is why the work of academics, particularly at land grant institutions, is a collective resource that is in my opinion severely underutilized by both the private and public sectors.At the end of is talk, Dr. Wilson gave a shout out to the November 2008 issue of WIRED, which contained a great piece titled the Future of Food, which I appreciate.
Day 2 – Global Opportunities and Sustainability
I think that for those in the audience who came to AgInvest in search of new investment opportunities, the second day of the conference provided more of what they may have been looking for.Some unique insights were shared on land management and potential non-traditional land investment avenues.I particularly enjoyed the talk of Susan Payne, CEO of Emergent Asset Management.Ms. Payne, along the lines of Dr. Wilson, brings the perspective of someone with global on-the-ground experience, and a look into her portfolio and overall interest in future land development across several African countries will be an emerging investment theme for the coming years.
If any readers would like to discuss the details of this conference in more detail (there are too many to write about), please feel free to contact me. Thanks toSeekingAlphafor providing access to the conference.
Yesterday, I had the privilege (compliments of SeekingAlpha) of attending the first WIRED Magazine Disruptive by Design conference, held at the wonderful Morgan Library and Museum in New York. The majority of conferences that I attend are usually research and/or application oriented, where most of the real value from attending comes from discussions at the poster sessions; speaker-only conferences more often than not do not live up to their expectations. But yesterday’s event provided an exception. From the opening address by WIRED’s Editor-in-Chief Chris Anderson to the final discussion with GE’s CEO Jeffrey Immelt, every talk provided a healthy balance of challenge and opportunity, and from my perspective, at a small and growing technology company, the timing of the event was perfect. Others (including Tim O’Reilly) have done a great job in capturing many of the memorable moments of the day, and many of the videos are already available, so I will just offer a couple of notable points offered by a few of the day’s speakers.
Free
Nearly all of the talks contained some version of the ‘now is the time to innovate’ mantra. Anderson’s opening talk was dead-on. He focused on the central argument in his new book, titled ‘Free’. Using Jell-O to illustrate his point, he successfully demonstrated how a 19th century business model is just as, if not more, important in 2009. Judging from a few of the comments heard outside, some in the crowd might not have gotten the point of free (or near free) product distribution in order to gain an advantage via branding and loyalty, but for those in technology/product development, particularly at leaner organizations, the message was clear. There were three successive talks that I was looking forward to hearing (Elon Musk, Shai Agassi, and Vivek Kundra), and none of them disappointed. As I have been following from the periphery some the things that Musk’s companies have been doing in recent years, I was very interested in hearing his thoughts. Most interesting from his talk, and refreshing, was his emphatic stance that science/technology companies should be largely run by science/technology people. As Weather Trends is a company where nearly all of the management has a technical background, it was nice to hear this. He actually stated his thoughts on what it takes to be a successful manager today more bluntly, which the video clip will attest to.
Man-Made Katrina
Whether or not you agree with Agassi’s ideas (I happen to), listening to him talk about his vision of a world that is built around renewable energy was inspiring. What was better was how he was extremely well versed with facts to back up any criticisms of his idea; everything that was thrown at him from the session’s moderator was tactfully answered with an answer that was so appropriate, it almost seemed staged. And his description of Detroit as a ‘Man-Made Katrina’ underscored reasons why something new is necessary. Finally, I honestly did not know much about the Federal Government’s CIO Vivek Kundra before yesterday morning, but after seeing his vision for data.gov, I am putting him on my radar as well.
These were, in my view, the highlights of the conference. A short story could be written about Bezos’ talk, which again was entertaining and enlightening. Skipping over the Kindle stuff, he emphasized his views on the importance of innovative R&D, and risk taking. Successful leaders always emphasize the need to encourage risk taking and failure, but Bezos went further by drilling home the point that that there is a misconception that failure is always expensive; this far from true. This is the same as science in general. More knowledge is usually gleaned from failed experiments than those that reproduce prior results.
This table shows the 7 day Cooling Degree Day outlook for major US demand markets. Colors and value in second row fore each city represent cooling demand vs. the same time of last year.
In addition to the numerous references to this topic in our weekly commodity newsletters, one of our posts last week mentioned that we have been monitoring ocean conditions over the last few months to track and forecast conditions that serve as precursors to El Nino development later this year. To monitor these changes, we now have a feature in our MYskeye global weather mapping tool that allows for visualization of daily ocean temperature anomalies vs. the previous year. When we analyze phase transitions between El Nino and La Nina, looking at temperatures vs. last year is more useful than comparing to ‘normal’, which is what most providers show.
This global temperature mapping function is just one more of the many useful features that we are incorporating into MYskeye for our clients.
This is another new global mapping capability that is incorporated into our MYskeye global weather mapping platform. We have taken global maps that were developed to forecast minimum relative humidity and wind speed/direction, and combined them to construct an index that will be useful to identify global crop regions that may be susceptible to weather induced stress or disease. One example would be rust, which is a fungal disease that affects numerous commercial crops, primarily soybeans. While moist conditions are favorable for development, dry windy conditions are precursors for transport, so anticipating these conditions, even within the 14 day window, can be very valuable for growers and traders alike. The top image in the above map shows the global daily forecast for these parameters. Users can then zoom in on a continent or growing region of interest and anticipate when and where a potential problem could arise. These maps are available through a daily forecast for days 1 through 14, and in the near future, they will be available from day 1 through day 335, along with the other suite of Weather Trends forecasts.
The 30 day cooling degree day (CDD) outlook for major US markets is shown in the table above. Colors indicate CDD forecast relative to same period of last year. From an energy demand perspective, we are not expecting any significant demand spikes at the front end of the cooling season. Clients can access the 35 day outlook on a rolling basis, updated each day.
The recent SST anomalies are showing increasing warming around 120-130E, with a particular change of the warm surface waters north of Australia. The image at the top left shows the monthly SST anomalies, compared to the top right which show the most recent weekly anomaly. A significant warming can be seen in equatorial regions, coupled with a sharp reduction of the cool anomalies to the north. This ties into the potential for El Nino development that is more rapid than many might expect. The satellite map at the bottom of the image also shows the increased convective activity that accompanies these warmer surface waters. As the El Nino develops and the warm surface water mass migrates eastward, the convection will move with it, leaving northern Australia dry, again. After numerous seasons of dryness, the last year saw Queensland sugarcane growing regions receive a precipitation pattern that aided struggling growers. If this El Nino does in fact develop as we think it might, the region’s cane growers might be faced with dryness that will nagatively impact the start of the 2009/10 crop, further exacerbating next year’s supply balance.
Corn planting in the US should be closing in on completion this week. Rain in the short range forecast for this week could slow the final stages of planting; see current radar with corn/soybean regions shaded below. As we are now in June, corn planting progress to date pushes corn to a ‘late plant’ scenario with our models, which highlights the potential for yield limitations. Soybeans will be a bigger story this week as crop is likely no more than 70% complete. Early activity focuses on expectations for planting progress that will be released in today’s USDA-NASS report (4:00 pm EST). Coupled with the planting delays are the expectations for lower bean inventories (per a 12 May USDA report). Dryness in some of the main grain/oilseed growing regions in South America (Argentina’s bean estimates reduced again), Western Australia and China will add to the uncertainty regarding crop size. In addition, the FAO food price index remains firm and crude oil is now moving to the upper $60 range with WTI crude futures above $67, the highest since last November.
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