Press and Media
by Asim Anand, September 5, 2019
New Delhi — Growing uncertainty around the US-China trade dispute has left American farmers grappling with high soybean stocks and falling soybean prices, as they face limited options in selling their inventory.
US soybean stocks are estimated at 29.13 million mt end-August, which is the end of the 2018-2019 marketing year, up 144% year on year, the US department of Agriculture said in its monthly report.
The average price of US soybean in the 2018-2019 marketing year is estimated at $8.50/bu, down 9% year on year, as sales plummeted and inventory shot up due to the trade tensions, the USDA report said.
Ever since the trade tensions started, US soybean has been selling at a discount of $15/mt to the Brazilian beans, S&P Global Platts data showed.
According to Platts assessments, since January 2019, the average monthly loading price of SOYBEX FOB Santos and SOYBEX FOB Paranagua were assessed at $355.96/mt and $355.34/mt, respectively. While the average monthly loading price of SOYBEX FOB New Orleans soybeans was $340.49/mt.
Before China slapped a tariff on US soybeans in July last year, China bought 29.6 million mt of US-origin soybeans, accounting for 55% of total 2017-2018 (July-June) US exports. Since July 2018, China’s imports of US beans have fallen 77% year on year to 6.7 million mt.
“Since China accounts for almost 65% of global soybeans demand, it is impossible for the US to find significant alternatives for such a big demand driver,” Matheus Pereira, director of agro-consultancy firm ARC Mercosul, told Platts.
Soybean buyers such as the European Union, Mexico, Egypt, Japan, Indonesia, Taiwan and Thailand, together, buy only around 25% of US soybeans in a marketing year, the USDA exports data released last week showed.
“It is impossible for US soybean to replace the Chinese market,” Terry Reilly, senior commodity analyst at OTC Global Holdings’ Futures International said.
BRAZIL, ARGENTINA BENEFIT
Brazilian soybean has benefited the most from the US-China trade dispute, a recent Chinese customs report showed. In 2018-2019 (July-June), Brazil shipped 65.8 million mt of soybeans to China, up 19% year on year, the report said.
Brazil-origin beans account for 80% of Chinese soy purchases so far in 2019.
With Brazilian soybean inventories expected to decline in the fourth quarter of 2019, China is expected to turn its focus on Argentinian supplies. Argentina, the world’s third largest soybean exporter, is expected to export 7.75 million mt to China in the 2018-2019 marketing year (October-September), up 267% on the year, according to the latest USDA report.
“If the US-China trade tensions continue, we see China buying soybeans exclusively from South America,” JCI China, a Shanghai-based agro-analytics company, told Platts. Simultaneously, US soybeans might sell a fraction of their inventory to Brazil and Argentina [to satisfy their local crushing demands], it added.
China may turn to US soybeans only in an unlikely event of catastrophic weather hitting the South American region, and hampering the soy harvest there, Pereira said.
The US has been making efforts to find new markets ever since China started to buy more from Brazil, JCI China said.
Replacing China with other developing regions, such as South Asia, may take a few years, Pereira said. For instance, India’s rising middle class is expected to double its purchasing power in four to six years, he said. Soybean consumption is seen as directly proportional to the average income of a country’s middle class.
The US and China are set to meet in Washington in October for yet another round of trade talks.
“US-origin soy may not be excluded entirely by the Chinese consumers, even after the trade tension is over, but there is a huge risk in my opinion that the American beans may become a secondary supplier in the Chinese market, unless there are severe droughts in the South American region,” Pete Meyer, head of Grain and Oilseed Analytics at S&P Global Platts Analytics said.
“And US soybean can’t afford to be a stopgap supplier to China,” Meyer added.
“It takes years and years to cultivate a client and only a few minutes to lose that client,” Meyer said, adding that buyers have long memories.
HOUSTON (August 21, 2019) – OTC Global Holdings (OTCGH), leading independent interdealer broker in over-the-counter commodities, today announced the addition of Aaron Easterling as Vice President of Business Development. Easterling, who brings more than 13 years of experience leading talent initiatives in global alternative investment management to the company, will be responsible for helping the firm identify and recruit premier candidates to OTCGH’s nearly 20 independent brokerage shops across the globe.
“At OTCGH we are focused on growing two things in order to continue succeeding, our people and technology resources,” said Javier Loya, OTCGH’s chairman and chief executive officer. “However, we fully realize that without great people the best technology in the world is useless. We’re excited to welcome a seasoned professional like Aaron to this team and know that he will only help us further enhance the quality of employees at this company as well as that this will lead to even better client service in the end.”
Prior to joining OTCGH, Easterling was the Chief Human Resource Officer and Portfolio Manager for Velocity Merchant Energy LP for more than 10 years. Easterling, who has a bachelor’s degree in business management from Southeastern Oklahoma State University, also previously served in various Talent Acquisition and Account Management roles with HBK Capital Management, Countrywide Financial and Management Alliance Group.
“While many companies search for a ‘silver bullet’ among the continued changes in the market, OTCGH knows that it starts with great people and is willing to invest in this belief by hiring the best to continue providing unparalleled customer service to its clients,” added Easterling.
For more information about OTCGH please visit www.otcgh.com.
About OTC Global Holdings
Formed in 2007, OTC Global Holdings has become the world’s largest independent institutional broker of commodities, covering financial and physical instruments from offices in Chicago, Des Moines, Geneva, Houston, London, Louisville, New Jersey, New York and Singapore. The company is a leading liquidity provider on CBOT, ICE, NYMEX and NFX, ranking number one amongst its peers in numerous derivatives contracts across biofuels, emissions, commodity index products, crude oil, natural gas, natural gas liquids (NGLs), metals, petrochemicals and refined products, power, proppants, soft commodities, and weather derivatives. The company serves more than 450 institutional clients, including over 70 members of the Global Fortune 500, and transacts in hundreds of different commodity delivery points in Asia, Europe and the Americas. To learn more about the company, please visit www.otcgh.com or go to https://player.vimeo.com/video/146686709.
It may be time to start building power plants in Texas again.
The state’s generators made a killing this week as unrelenting heat sent electricity prices skyrocketing to unprecedented levels, briefly blowing past a $9,000 a megawatt-hour ceiling. That put producers more than two-thirds of the way toward profits that the state’s power market monitor says could touch off a power plant build-out. And the region’s only halfway into the cooling season.
“We need these kinds of days” to demonstrate that the state is ripe for new plants, Scott Burger, an energy research fellow at the Massachusetts Institute of Technology, said in an interview.
An expansion would make for a dramatic turnaround in the Lone Star State and stand in stark contrast to the glut of generation nationwide. The U.S. has become so awash in cheap natural gas and renewable power resources in recent years that electricity prices have, in some places, plunged below zero. This supply excess has forced massive, aging coal-fired power plants to retire, leaving a void that wind farms were expected to more than make up for in Texas.
Texas, however, is facing record electricity demand, especially in the west where power-hungry shale drillers are exploring for oil and gas. And winds weren’t strong enough to rescue the region earlier this week as Dallas baked in 103-degree Fahrenheit (39-degree Celsius) weather. Generation from turbines has plunged for three straight days.
“I like renewables and having our grid have a lot of wind in the mix,” said Campbell Faulkner, chief data analyst for commodities broker OTC Global Holdings. But to keep the system running, he said, Texas needs other power generation resources.
The last gas-fired plant that came into service in the region was actually an old one that NRG Energy Inc. resurrected in May to cash in on the gain in power demand. Meanwhile, in the last six months of 2018, three gas-fueled projects and five wind projects were canceled. Another 2,485 megawatts of gas, wind and solar projects were delayed, according to grid operator Electric Reliability Council of Texas.
Faulkner sees this week’s price spikes as a wake-up call for Texas, one that could bolster the case for a so-called capacity market in which power generators are paid to guarantee future supplies. “They are going to either have to move to a capacity-market style or you are going to see some weird things happen in the summertime,” he said.
Houston remains under a heat advisory through 7 p.m. Wednesday, but the high likely won’t surpass 100 degrees, according to the National Weather Service. Electricity consumption is forecast peak today at around 72,000 megawatts, Ercot said. That’s below the record set Monday of 74,531 megawatts.
On Monday, wholesale power jumped 36,000% to average as much as $6,537.45 a megawatt-hour across the Texas grid. It surged more than 49,000% on Tuesday to hit the $9,000 price limit that Ercot set to avoid runaway prices under extreme circumstances. Other markets rode that surge, too. Futures prices for power next July and August also jumped to the highest in five months, and the Ercot North daily price settled at a record $1,400 a megawatt-hour Tuesday on the Intercontinental Exchange.
The grid operator warned of power shortages on Tuesday. For the first time since January 2014, it declared an energy emergency, calling on all power plants to ramp up and asking customers to conserve. At one point on Tuesday afternoon, the region’s power reserves had dwindled to a record 2,121 megawatts, less than 3% of total demand on the system.
Monday’s rally alone “made lots of money” for generators, said Beth Garza, director of independent market monitoring for Ercot. Power generators NRG and Vistra Energy Corp. rallied, gaining 1.9% and 2.4%, respectively, on Tuesday.
While steep, the price spikes proved short-lived. They lasted all of five hours on both Monday and Tuesday. By Tuesday evening, power demand had fallen and temperatures were back in the 90s. Power was trading at around $25 a megawatt-hour.
At 5:30 p.m. local time, Ercot declared that it had returned to “normal grid conditions.”
Please find the article linked here and full coverage in the email below:On the Brink of Blackouts, Texas Makes Case for New Plants
by Mark Watson, August 13, 2019
Houston — As the Electric Reliability Council of Texas’ power demand neared another record for peakload Tuesday afternoon and ERCOT called for energy conservation, real-time wholesale power prices, including congestion and price adders, topped $9,000/MWh.
As a heat wave continued to grip the state, ERCOT set a record of 74,531 MW Monday, and real-time prices spent two hours and 15 minutes above $1,000/MWh, hitting as high as $6,537.45/MWh. Real-time prices spent another 2.5 hours between $100 and $999/MWh Monday.
High temperatures hit 100 degrees Fahrenheit in Houston Monday and 101 in Dallas and San Antonio, according to CustomWeather. They were forecast to hit 102 F in Dallas and San Antonio Tuesday and 99 F in Houston.
Around 2 pm CDT Tuesday, ERCOT forecast load to peak at 75,586 MW, but by 4:15 pm, that forecast had fallen to 74,552 MW, which still would have been a record. As of 4:30 pm CDT, ERCOT reported current system load at 74,181 MW. ERCOT’s previous record, set July 19, 2018, was 73,473 MW.
Systemwide prices, including scarcity adders and congestion, topped $100/MWh at 3 pm CDT Tuesday, settling at $216.09/MWh for the first 15 minutes. By 2 pm, the systemwide average was $2,004.19/MWh, and it stayed above that through at least 4:15 pm CDT – above $9,000/MWh for the period after 3:30 pm.
A weather system was forecast to move through much of the state Wednesday, limiting highs in Dallas and Houston to the low to mid-90s, but San Antonio was still expected to hit 100 F.
Around 3:15 pm Tuesday, ERCOT declared an Energy Emergency Alert, as physical reserves had fallen below 2,300 MW, and called for voluntary energy conservation between 3 pm and 7 pm CDT. The EEA allows ERCOT to “call on all available power supplies, including power from other grids, if available,” according to an ERCOT EEA document.
ERCOT made it through the summer of 2018, which was hotter through June and July, without having to declare an EEA.
The Public Utility Commission of Texas also called on residents to limit their electricity usage.
“When the energy demands of our state’s steadily growing population and booming economy intersect with hot summer temperatures, the supply of power can get a little tight, so we’re calling on Texans to help moderate demand for electricity with a few simple choices during the late afternoon hours this week,” PUC Chairman DeAnn Walker said in a media release.
Asked to speculate about the long-term effects of this week’s heat wave and power market behavior, Campbell Faulkner, senior vice president at OTC Global Holdings, an interdealer commodities broker, said that if the market has to reach the next level of Energy Emergency Alert, ERCOT can reduce system demand by interrupting power for large industrial customers who have contractually agreed for such contingencies.
If such an event happens, Faulkner said that “in the long term the market will likely move to a capacity market structure.”
“This is due to the fact that ERCOT has not replaced a lot of the coal fleet retirements with large gas-fired base load [generation] due to financing costs and variability [historical] of natural gas [prices] as compared to coal/nuke fleet,” Faulkner said in an email Tuesday. “Today there is concern about rotating outages and automatic load shed if the total load is not reduced…. Over the past two days the variability in grid frequency shows that the market and generators are struggling to maintain grid tie and voltage.”
Please find the article linked here and full coverage in the email below: ERCOT real-time wholesale power prices spend hours above $2,000/MWh