AgriculturalSciencesSectorStillNeedtobeSelectiveas#sNeedtoComeDownConsiderably;PreferCPCtoFertsintoYE;SearchingforN-P-KCostCurveSupportFertilizers|SectorReview■StillSearchforDirection–Trade,WeatherandS/DFactorsAllinPlay:Theglobalagcomplexcontinuestosearchfordirectiongivenaplethoraofcatalysts,including(i.)aneventualUS/Chinatraderesolution(upto~$25blnofincrementalagriculturaltrade),(ii.)the“final”tallyoftheUScropandsubsequenteffectonthe2020outlook,(iii.)changestoglobalrenewablemandates(USmovestobenefitE15,RenovaBioinBrazil,etc.),(iv.)theeventual“reversal”ofASF,and(v.)theeffectofnewN-P-Ksupplies(what’shittheglobalmarketin’19vs.what’s“left”for’20andbeyond).Wemaintainourthesisthatinvestorsneedtobeselectivewithintheagspace,citingourbeliefsthat(i.)‘20fertconsensus#sneedtofallmaterially,(ii.)N-P-Kmarketswillremainsupply/cost-curvedriven(i.e.–evenmodestincreasesinN-P-Kdemandwillfailtomateriallymoveprices),and(iii.)developedmarketagcommunitiesstillfaceseveralhurdles(credit,broadtradeuncertainty,etc.)andincreasingcompetitionfromLatam.Overallinvestorsentimentleanscautiouslyoptimistic.■RisktoUSProductionEst’sistotheDownside,ButDon’tExpectTimelyUpdates:Followingaslewofchannelchecks,itisclearthatbothharvestratesandyieldswillfallshortofUSDAexpectations,butwedon’texpectanymeaningfulchangesforthetimebeing.It’sworthflaggingevenSenatorGrassley(R-IA)israisingconcernsre:theUSDA’sforecastsandmethodologiesinDC,sofarmercomplaintsarenotbeingoverlooked.Whilewedonotsubscribetotheultrabullviewoncorn(~95mmin’20,>$4.50/buprices,etc.),basedonourworkthereisenoughsubstancetounderwritecornproduction~5-7%belowtheUSDA,whichinturndrivesthestock:useratiodowntothe≤10%range.TheCSUScornB/Sreflects~88.5mmacresofcorn(-1%yr/yr)w/yieldsin~162bu/ac,whileourUSsoyB/Sreflects~76mmacres(-14%yr/yr)w/yieldsinthe~46bu/acrange.Ourpricedecknowreflects$3.80-4.30/bu/$9-10/bufornewcropcorn/soy,respectively.■PotashMarketsStabilizing;ChinaContractand‘20DemandareNowKey:Recentsupplycurtailmentannounce...
