The world of commodities has changed. "Just in time" inventories are no longer safe, labor problems are worse than before and food manufacturers are facing the worst of this disruption. says Tom Scott, Vice President, Agribusiness Consulting at S&P Global Commodity Insights. Learn more at Geneva Sugar Conference | Geneva | April 14-16, 2024

Energy companies and biofuel makers are looking at agricultural investments as a hedge against shortages of good quality feedstocks. But this could be just the first phase of a growingly competitive global market for feedstocks. Learn more at Geneva Sugar Conference | Geneva | April 14-16, 2024

Agricultural companies can no longer exist in information silos, says Tom Scott, Vice President, Agribusiness Consulting at S&P Global Commodity Insights. Current and accurate data holds the key in ever-changing markets. Learn more at Geneva Sugar Conference | Geneva | April 14-16, 2024

The US Department of Agriculture has revised the corn yield estimate for marketing year 2023-24 (September-August) to 175.1 bushels/acre from 177.5 bu/acre, according to the Aug. 11 World Agricultural Supply and Demand Estimates report.US corn production for MY 2023-24 is forecast 209 million bu lower to 15.111 billion bu, while corn beginning corn stocks are 55 million bu higher, the USDA said in its latest report.The yield revision comes following a prior revision in the June-July forecasts for the first time since 2012. This is largely because of a dry start to crop development in much of the US Corn Belt in June, which, despite showers in July, has trimmed the top-end yield potential, according to analysts.In a survey conducted by S&P Global Commodity Insights, producers reported better yields than in 2022, despite crop conditions being at five-year lows.The USDA has made no change to import projections, which stand at 25 million bushels, while exports are lowered by 50 million bu to 2.05 billion bu.In all, the USDA has reduced the 2023-24 US corn ending stocks estimate by 60 million bu to 2.202 billion bu. This is 745 million bu above year-on-year estimates.The domestic total fell to 12.340 billion bu, which is still above last year's 12.060 billion bu.The total supply estimates for August have fallen to 16.592 billion bu compared with 16.747 billion bu in July, still above the 15.142 billion bu in the previous year.The USDA has increased the average farm price by 10 cents to $4.90/bu, which is still lower than $6.60/bu in the 2022-23 estimates.Beyond the USThe latest WASDE report estimates Brazil's production for MY 2023-24 at 129 million mt, unchanged on the month. However, the USDA increased Brazil's current corn crop by 2 million mt to 135 million mt, owing to the positive yield farmers reported as they harvest the second corn crop.While imports for Brazil 2023-24 corn are estimated at 1.20 million mt, exports are at 55 million mt. The beginning stock projections for August are increased to 8.97 million mt from 7.97 million mt in July.Similarly, for Argentina, overall production for MY 2023-24 was estimated at 54 million mt, significantly above the previous year's 34 million mt. Imports are projected at 0.01 million mt, while exports are at 40.50 million mt, compared with the 22 million mt in 2022-23 estimates."Corn production for Ukraine is higher (27.50 million mt in August against 25 million mt in July), with increases to both area and yield as timely rainfall and a lack of extreme heat during July boost yield expectations," the USDA said."Ukraine corn exports are unchanged with the expiration of the Black Sea Grain Initiative," the USDA noted in its latest WASDE report. The ending stocks, on the other hand, surged 180% to 3.89 million mt.China's 2023-24 corn production is reduced by 3 million mt to 277 million mt, as excessive wetness in key producing provinces in Northeast China and on the North China Plain reduces yield prospects. The production nears 2022-23 estimates of 277.20 million mt, after posting an increase from June to July.In the USDA report, China's import projections are pegged at 23 million mt, unchanged on the month, but 5 million mt higher than the previous year. With key corn-producing provinces witnessing excessive water, crop damage, and the effects of recurring typhoons, an increase in Chinese corn imports is expected, especially amid the fall of the Black Sea Grain Initiative.

US short- and long-term power demand forecasting is becoming increasingly challenging as the power generation fuel mix shifts more toward weather-dependent renewables and energy storage resources, and extreme weather becomes more common, causing power grid operators to adopt new load forecasting approaches. The increase in renewable energy penetration is making day-ahead load forecasting more dependent on accurate weather forecasting, with extreme weather creating additional challenges. For example, temperatures across PJM Interconnection territory plummeted beginning on Dec. 23, 2022, and the cold lasted into the morning of Dec. 25, with record lows in some areas as well as record drops in some regions. PJM said it was the most drastic temperature drop in a decade, and power demand during the Christmas weekend was an "extreme outlier" in magnitude and timing. The weather event put extreme stress on the power grid, and the rapid power demand increase resulted in extremely elevated power prices. Zonal power prices reached as high as around $4,300/MWh Dec. 24, according to PJM. The highest December PJM West Hub daily average real-time on-peak price of $1,111.90/MWh was reached Dec. 23, according to PJM data. Regarding long-term planning, power system operators have traditionally relied on historical weather patterns to help create power demand forecasts, but with weather becoming more erratic because of climate change, historic weather dynamics are becoming less reliable indicators of future conditions. Short-term adjustments Asked how increased weather-dependent renewables penetration is impacting load forecasting day-ahead, an ISO New England spokesperson said in a recent email that the rise in weather dependent renewable penetration, particularly behind the meter solar production, has "introduced a significant level of variability to electricity demand, particularly during daylight hours." This increased variability presents a challenge for day-ahead and short-term load forecasting and to address this, ISO New England has recently implemented two new load forecasting projects within the last 10 months, the grid operator said. Artificial Intelligence is also playing a role in short-term power demand forecasting. In the short-term forecast process, a variety of load forecast models and "model blending algorithms" are employed to inform the human forecasters in their decision-making to produce a final forecast, the spokesperson said, adding that "the models and tools we use are machine learning and AI-based algorithms," and these encompass "neural network models and gradient boosting models that employ tree-based learning algorithms." The New York Independent System Operator is also working to address these short-term load forecasting challenges. "In terms of the short-term, day ahead and, real time, the NYISO has for the last several years, developed essentially working with third-party contractors, a pretty robust framework for collecting actual and forecasted output for both wind and solar resources," Tim Duffy, NYISO's manager of demand forecasting and analysis, said in a recent phone interview. The grid operator is working with contractors that facilitate the data gathering and forecasting process, and then NYISO integrates that into its day-ahead as well as real-time forecasting process, Duffy said. Extreme weather can also be a challenge for NYISO weather forecasters when storms move through, and the grid operator relies on various services for that data. Duffy said NYISO uses and is looking to expand the use of "probabilistic forecasting." A deterministic forecast might predict no clouds tomorrow at 3 pm, while a probabilistic forecast provides a more detailed prediction, like there is a 30% chance of cloud cover tomorrow at 3 pm, and that additional level of detail on the forecast uncertainty enables grid operators to better manage costs and risks when dispatching generation resources, according to the US Department of Energy. Regarding the use of AI, Duffy said NYISO is using neural nets as part of its day-ahead load forecasting, whether that is considered to be AI or machine learning. Long-term challenges Given the evolving nature of weather patterns due to climate change, "we are actively investigating methods to incorporate the anticipated impacts of climate change into our supporting data and overall forecasting methodology," the ISO-NE spokesperson said, adding that "we anticipate implementing the selected chosen solution within the next couple of years." The ISO is also collaborating with the Electric Power Research Institute, an independent nonprofit energy research and development organization, to conduct a probabilistic energy security study to assess energy security risks. The major challenges in long-term load forecasting center on understanding and modeling emerging technologies such as distributed energy resources like solar PV and batteries as well as technologies involved in electrifying and decarbonizing the heating and transportation sectors, the ISO-NE spokesperson said. The NYISO's Duffy highlighted that understanding the timing of the energy transition is critical. "We can understand what the end state will be, whether that's 2030, 2040, 2050, 100% electric, but it's really the path to get there and the timing of the increased penetration of electric vehicles and building electrification," he said. "That really, in my mind, is the biggest challenge."

In terms of investments and consolidation, what lies around the corner for global agricultural companies? A conversation with Tom Scott, Vice President, Agribusiness Consulting at S&P Global Commodity Insights.Save the date for Geneva Sugar Conference 2024

Mark Thomas examines how a wave of low-carbon projects in the Middle East, funded by petrodollars, is pushing the region’s energy and chemical companies to achieve their net-zero goals by 2050. Article included in Commodity Insights Magazine. View full issue

Weak El Niño conditions emerged across the equatorial Pacific Ocean as sea-surface temperatures crossed the threshold of 0.5 degrees Celsius above average, the US Climate Prediction Center said in its June 8 forecast.The US climate agency said there is an 84% chance of weak conditions turning moderate November-January and a 56% chance of a strong El Niño emerging."In summary, El Niño conditions are present and are expected to gradually strengthen into the Northern Hemisphere winter 2023-24," the agency said in its report.The US climate agency has forecast sea surface temperatures to be more than 1.5 C higher than average by November.Australia's Bureau of Meteorology has forecast a 70% chance of an El Niño forming in 2023 and changed the outlook to an El Niño alert, the bureau said June 6. It forecasts that sea surface temperatures will be 2 C higher than average by October.El Niño increases the tendency for wetter conditions in East Africa and East Asia and drier conditions, including drought, in West Africa, southern Africa, India, Southeast Asia, Australia, and the northern areas of South and Central America.Likely impact on crop prospectsThe formation of an El Niño in 2023 is likely to have a significant impact on agricultural production and may alter trade routes in the near term.The likely El Niño may lead to poor showers over parts of Australia, Brazil, India, and Southeast Asia, which may weigh on grains and oilseeds.Trade participants mostly agree that a severe El Niño condition would be detrimental to Australian crops. Many are looking at the timing and severity of the phenomenon and project that wheat planting would be completed beforehand."The timing and severity of El Niño [is important]. So far it looks like if it comes, it will come late and likely not be too severe, which will further assist in minimizing any impact," IKON Commodities CEO Ole Houe said.For the marketing year 2023-24 (October-September), Australia is expected to harvest 26.2 million mt, down 34% on the year.Drier weather from a potential El Niño will also affect palm oil production in Indonesia and Malaysia, which accounts for 85% of the world's palm oil supply.El Niño's effect on Malaysia's palm oil production may be seen in the latter half of 2023 and in 2024, the director general of the Malaysian Palm Oil Board, Ahmad Parveez Ghulam Kadir, said May 26."If this El Niño persists for a long time, a reduction in palm oil production could reach up to 20%, as seen in 2016," Ghulam Kadir said.On the other hand, it may help bring above-average rainfall in parts of Argentina and the US and boost the crop output in these regions. It may also boost prospects for soybean, corn, and wheat crops in the US and Argentina.