thomson reuters eikon lanworth methodology agriculture
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For more information: Santo Haryowibowo, Thomson Reuters Jakarta Indonesia, +62 815 1085 2000, [email protected]TRANSCRIPT
AN INTRODUCTION TO LANWORTH
THOMSON REUTERS LANWORTH
CHRISTOPHER BRISCH, Market Specialist, Agriculture, Americas
LANWORTH VALUE PROPOSITION
• The characteristic volatility of the agricultural
commodities markets is due largely to poor
information, typically on the supply side.
• Modern science, data, and models—in the hands of
expert analysts—can yield accurate, early season
agricultural supply forecasts.
• An objective, independent view of regional, national,
and global supply is essential to successful medium-
and long-term agricultural commodities trading.
• The means to develop such a view are beyond all
but the most capable research desks.
LANWORTH VALUE PROPOSITION (CON’T)
Lanworth analyzes medium- to long-term supply side price
drivers but does not forecast prices directly.
LANWORTH VALUE PROPOSITION (CON’T)
Example: South America soybean production 2011/12; getting it right is
important but getting it right first is ever more so.
In this morning’s WASDE, USDA lowered 2011/ 12 Argentina and Brazil soybean production by a combined
4.0 million tons to 45.0 and 66.0 million tons. The expected changes bring USDA’s Argentina and Brazil
soybean production estimates within 1-2 million tons of Lanworth’s mean estimates (43.4 and 65.4 million
tons) and lower world soybean ending stocks by 1.8 million tons. CONAB’s updated Brazil soybean
production estimate, also released this morning, stands nearly identical to Lanworth’s at 65.6 million tons.
However, Lanworth’s estimate of soybean production in Rio Grande do Sul remains 1.0 million tons below
CONAB’s and indicates both CONAB and USDA will likely lower Brazil soybean production again in May.
Further reduction of USDA’s Argentina soybean production estimate will become more likely should updated
estimates from Bolsa de Cereales in Buenos Aires fall below 45.0 million tons. USDA lowered 2011/ 12 US
soybean ending stocks by 0.7 million tons to 6.8 million tons (250 million bushels), partly on the basis of
lower South American supply.
As Lanworth anticipated, USDA did not raise 2011/ 12 US corn feed and residual disappearance despite
anomalously low Q2 2011/ 12 corn ending stocks, citing the potential for increased wheat feeding and use of
early harvested corn in Q4 2011/ 12. Should it occur, use of early harvested corn would be accounted for in
USDA's January 2013 (Q1 2012/ 13) Grain Stocks report.
USDA lowered 2011/ 12 China corn beginning stocks by 4.0 million tons on the basis of increased feed use in
2010/ 11; simultaneous reduction of 2011/ 12 feed use resulted in net loss of 1.0 million tons to 2011/ 12 China
corn ending stocks. In Lanworth's view, the loss partially corrects official overestimates of China corn
production between 2009/ 10 and 2011/ 12, but there remains substantial risk that USDA will recognize as
much as 7.0 million tons lower China corn supply in the May or June WASDE.
USDA lowered 2011/ 12 Argentina corn production by 0.5 million tons to 21.5 million tons, well within
Lanworth's confidence envelope of 20.8 [19.8-21.9] million tons. USDA and CONAB estimates of 2011/ 12
Brazil corn production now stand at 62.0 and 65.1 million tons, higher than Lanworth’s 60.6 [57.7–64.6]
million tons. Relative to CONAB, Lanworth’s expectation for second corn production stands 2.7 million tons
lower across Mato Grosso do Sul and Paraná, assuming 25% below normal precipitation through May.
Lanworth CP09 Tuesday, April 10, 2012 Page 1 of 2
WORLD CROP PRODUCTION
PRODUCED BY THOMSON REUTERS LANWORTH
100
105
110
115
120
125
130
135
1-Nov 1-Dec 1-Jan 1-Feb 1-Mar 1-Apr
Million T
ons
USDA
LW
1100#
1150#
1200#
1250#
1300#
1350#
1'Nov# 1'Dec# 1'Jan# 1'Feb# 1'Mar#
US¢/bushel#
CME#July#Futures#
Paranaguá#Basis#
0.7#
0.8#
Healthy#VegetaK
on#Den
sity#
2008/09#('37%)#2009/10#(+5%)#2010/11#('13%)#2011/12#('14%#to#'22%)#
Figure: Lanworth and USDA (WASDE) estimates of combined 2011/ 12 Brazil and Argentina soybean production.
LANWORTH ANALYST TEAM
• Lanworth’s agriculture analyst team presently
consists of 15 domain specialists supported by two
data specialists.
• Current domain specialties include geography,
agronomy, anthropology, remote sensing,
meteorology, and numerical climatology.
• All domain analysts hold M.S. or Ph.D. degrees and
together have language competency in Portuguese,
Spanish, Chinese, and Hindi.
LANWORTH PRODUCTION PROCESSES
Lanworth’s globally consistent methodology combines:
• Forward models that predict plantings based on regularities
such as farmer rotation patterns, and yield based on
climatological processes and trends.
• Diagnostic, simulation, and multivariate deterministic
models that integrate weather, soils, and management data
into realistic, causal frameworks for yield prediction.
• Satellite imagery that provides an independent check on and
input into planting and yield models.
• Field observations that validate image and model analysis.
• Project → Calibrate → Validate
US Corn & Soybean plantings
Factors impacting corn
& full season soy area % of variance explained
Realized profitability of corn &
soybeans in recent seasons 73.8%
Area planted to winter wheat 3.3%
Expected profitability of new crop
corn & soybeans in late autumn 6.7%
Expected profitability of new crop
corn & soybeans in early spring 2.4%
% of US corn planted by 25 April 7.4%
8
Corn/Soy Rotations in central Illinois (red box zoomed in following slide)
9
2005 2006
10
Platform: Satellite Imagery
Corn
W. Wheat
Soy
Grassland
Jan Mar May Jul Sep Nov
Temporal Signatures, US - Nebraska
• Quantify area planted to each crop
• Observe planting and flowering date
• Observe areas under stress where we need to direct our field teams
• Quantify area lost to flooding or other extreme weather events
Platform: GPS–spatially verified field observations are overlaid on top of satellite imagery maps
• Routes cover major producing districts in major producing states
• Planned from imagery to capture variability in field density, size, and type
• Skilled observers collect 500+ points per day, noting tillage and planting practices, crop types and residues, growth stage and condition
• Field observations supplemented by systematic telephone surveys of yield expectations at maturity and harvest
Lanworth ground reference collection routes, June 2010. More than 30,000 GPS points were collected by five field teams to support US corn, soybean, spring wheat planted area estimates.
Platform: providing an edge on crop yield
Figure: Lanworth and USDA estimates of 2011/12 US corn (left) and soybean (right) yield. USDA
estimates are from the July WASDE and August through November Crop Production reports.
• Lanworth monitors the resources the crop receives that cause grain fill
• Other forecasters try to sample the results of grain fill
• This allows Lanworth yield forecasts to beat other forecasters and the USDA by 2-4 weeks to the most accurate estimate
Biophysical plant growth and development models intake daily observed
precipitation, daytime/nighttime temperature, solar radiation, soil moisture
levels in localized regions.
Year Soil moisture August (mm per 1.6 m) Min
imum
Tem
pera
ture
, Jul-
Au
g (
F)
3-15% below
Within 5%
3-15% above
Deviation from US corn
yield trend
2013/14 scenarios
more than
15% below
66.2 and 68.8 F
Trend, 1985-2012
2013/14 US yield outlooks Corn: 155.7 [132.9-166.8] bpa
Soybeans: 43.0 [38.8-45.3] bpa
2013/14 US Drought And Weather Outlook
2013 routes for yield data collection BR/AR
South America Field Observations
Northern Buenos Aires
Southern Córdoba
Southern Santa Fe
Total
2011 2012 2013 2013/2yr ave
2,245 2,115 2,395 10%
2,143 1,531 2,413 31%
2,651 1,909 2,724 19%
2,315 1,861 2,486 19%
Beans per square meter
South America Crop Vegetation Density Profiles
Central Argentina
25Nov 5Jan 15Feb 25Mar 5May
Ve
ge
tatio
n In
de
x
Paraná
1Nov 10Dec 20Jan 1Mar
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