Strong Global Grain Production Isn’t Good Enough

David HightowerThe Hightower Report

Big Picture Factors • Cost of Production Pricing Not a downtrend signal• Goldman $20 oil Forecast was wrong 8.9 mbd!• Chinese Car sales Record - 73 million new cars • Gas Demand in the US Record $36 -$42• Production areas further from prime areas• Mkts work but not as efficient as desired• Low Prices cut supply and Increase demand

World Smog Index

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ChinaEthanolImports(cubicmeters)

Last3Months:385,710Total2015is25xGreaterThan2014

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ChinaCoalConsumption- AnnualInMillionTonnesofOilEquivilant

IfChinareducedcoalconsumptionfor2015by5%,thatistheequivilantof

1.29MillionBarrels/Day

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EIAGasolineDemand

MostRecent:9.671on07/08 Source:EIA

8.9mbd

Forward Issues• Don’t count out La-Nina The Time Is August• Flooding SE Asia China Typhoon Drought heat US• Deflation bottoms out gives way to Inflation• Chinese Corn Q/Q $10 Bill -3 billion • Record US gasoline demand despite economy• Indian growth & Production every year• Chinese Commodity Impact Remains

Double2014

IndianProduction10timesAustralia

PepperPricesOnionPrices,RicePricesCoffeePricesPalmOilprices

China Still A Force• China’s appetite for commodities is not waning, according to

analysis by the WSJ. • China still consumes “roughly 1/8th of the world’s oil, • 1/4th of the world’s gold, • 1/3rd of the world’s cotton • One half of all the major base metals”. • The Energy Information Administration predicts China will

account for over a quarter of the world’s increased demand in oil this year, despite the slowdown

Wall Street Journal

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MillionMetricTonnes(M

MT)

CropYearBeginning

ChinaSoybean- NetImport/Export

MostRecent:86.85AsOf07/12/2016 TheHightowerReport

NetImports

Feed Considerations• US pork exports during May totaled 458.83 million pounds,

the highest since April 2015. • US Exports reached 23.6% of total US production, the

highest percentage since June 2014.• Pork Exports to China totaled 72.9 million pounds, the

highest total since January 2012. • Pork exports to China have risen steadily since Dec when

the monthly total was only 17.6 million.• Chinese Hog herd expanding again

Edible Oil = Palm Oil= Prosperity

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CropYearBeginning

WorldPalmOil- EndingStocksvs.Stocks/UsageRatio

EndingStocks Stocks/UseRatioMostRecent:AsOf07/12/2016TheHightowerReport

35.890

22.704

14.672

0369

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MT)

CropYearBeginning

VegetableOil- MajorConsumers

China India UnitedStatesMostRecent:AsOf07/12/2016TheHightowerReport

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Soybean Rapeseed Sun Palm DataAsOf:06/30/2016

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Soybean Oil: US Weekly Export SalesAs % of USDA Forecast

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WorldOilseed- EndingStocks/UsageRatio

MostRecent:16.451%AsOf07/12/2016 TheHightowerReport

Grains – Shifting Fortunes• Historical High & Low Ending Bean Stocks • South America supply losses• Unrelenting Chinese demand• US pork exports/Chinese pork imports• August weather most critical for Soy Yield• Small setbacks in Palm production are huge for the

rest of the edible oilseeds

USDA SUPPLY/DEMANDUS SOYBEANS Jul Jul Jul

USDA USDA USDA 08-09 09-10 10-11 11-12 12-13 13-14 14-15 15-16 16-17

Planted Area (M Acres) 75.7 77.5 77.4 75.0 77.2 76.8 83.3 82.7 83.7 83.7 83.7 83.7Harvested Area (Acres) 74.7 76.4 76.6 73.8 76.1 76.3 82.6 81.8 83.0 83.0 83.0 83.0Yield (Bu/Acre) 39.7 44.0 43.5 42.0 40.0 44.0 47.5 48.0 46.7 44.7 46.7 48.2

Beginning Stocks (M Bu) 205 138 151 215 169 141 92 191 350 350 350 350Production 2,967 3,361 3,331 3,097 3,042 3,358 3,927 3,929 3,880 3,710 3,880 4,001Imports 13 15 14 16 41 72 33 30 30 30 30 30 Supply,Total 3,185 3,514 3,497 3,328 3,252 3,570 4,052 4,145 4,260 4,090 4,260 4,381

Crushings 1,662 1,752 1,648 1,703 1,689 1,734 1,873 1,890 1,925 1,925 1,925 1,925Exports 1,279 1,499 1,505 1,366 1,328 1,638 1,843 1,795 1,920 1,920 1,920 1,920Seed 90 90 87 90 89 97 96 97 95 95 95 95Residual 16 20 43 -2 16 10 49 12 30 30 30 30 Use, Total 3,047 3,363 3,282 3,159 3,111 3,478 3,862 3,794 3,970 3,970 3,970 3,970Ending Stocks 138 151 215 169 141 92 191 350 290 120 290 411

Stocks/Use Ratio 4.5% 4.5% 6.6% 5.4% 4.5% 2.6% 4.9% 9.2% 7.3% 3.0% 7.3% 10.3%

16/17 "What If's"

Drop of 2 bu/acre = 3% Stocks/Usage!

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Bushels/Acre

USSoybeansYield- ActualvsTrendline

Actual TrendlineUpdated:07/12/2016 TheHightowerReport

Going Forward Soybean• Feed mix demand to grow• Per Capita demand in 3rd world/developing rising• Asian & Indian Weather critical every year• Fishmeal substitutes spreading impact oil/meal • 8 yr low for palm oil stks; 19 year low stocks/usage• 10% drop palm oil exp = 4.4 mil tonnes but soyoil

exp from Argentina & US combined is only 7 mmt!• Soy wildly bearish to potentially bullish or very

Going Forward Corn• China Stocks Good or Bad• Final South American losses• How good is US Yield• Ukraine soon to be a major force• Deflated & Below COP Pricing?• China Imports & Chinese weather

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ChinaCorn- EndingStocksvs.Stocks/UsageRatio

EndingStocks Stocks/UsageRatioMostRecent:AsOf07/12/2016

TheHightowerReport

-16-14-12-10-8-6-4-202468

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CropYearBeginning

ChinaCorn- NetImports/Exports

MostRecent:0.98AsOf07/12/2016 TheHightowerReport

NetImports

NetExports

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WorldCorn- EndingStocksvs.Stocks/UsageRatio

EndingStocks Stocks/UsageRatioMostRecent:AsOf07/12/2016

TheHightowerReport|Source:USDA

Wheat• 29 Year high in stocks• Feeding wheat Pattern• Wheat Locked behind Soybeans then corn• India will be the next significant production focus

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WorldWheat- DaysofSupply

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NumberOfContracts

TheHightowerReport|Source:CFTCMax:50,736(8/7/2012)- Min:-122,081(3/1/2016)- MostRecent:-94,061(07/12/2016)

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