Our most recent publications are summarized in the blocks below and you can browse through all our reports to the right of the blocks. We encourage you to request a trial for full access to our research.
Old McDonald Doing Better Than Ronald – High Crop Prices Great for Farmers, Negative for Happy Meals
The North American agriculture sector is benefiting from elevated crop prices that have lifted farmer income despite higher input costs – a quick reversal is unlikely.
High Ex-US energy prices, notably natural gas, are benefits shown in many sector reports, but it’s only selectively spurring growth Capex for some, such as Occidental.
North American petrochemical and fertilizer producers benefit from advantaged global feedstock cost positions, but their demand profiles are notably different.
We highlight a few trends in carbon capture and sequestration noted in energy sector reports while further discussing recently proposed US Climate policies.
Demand headwinds continue to mount globally relative to supply; however, logistic issues, such as European issues with low Rhine river water levels, continue to linger.
The Inflation Reduction Act – the reworded and watered-down climate policy for the US – stands a chance of passing. We think it could drive some real action.
We suspect there will be much more debate about the tax aspects of the bill than the climate piece, and much of the climate piece could drive real investment.
We like the changes to 45Q as we think the incentive is now more equitable and does not penalize the smaller emitters: the higher value will drive investment.
We look at why some of the proposed materials investments matter – yet more shortfalls in renewable power installation – good for coal, but tighter natural gas.
Otherwise, it’s reporting season, and we see many presentations displaying how well companies think they are doing on the ESG front – we are seeing a lot of fluff.
Chain Smoker – High Energy Sector FCF & Long-Term Return Risks To Lift Its Chemical Chain Investments
Energy sector growth investment will increasingly target derivative product chains, such as chemicals, as upstream long-term return risk and ESG pressure remain high.
We discuss Enterprise Products 2Q22 results and highlight the US ethylene cost advantage relative to Asia, elevated NGL fractionation margins, and its ambitions.
The Andersons 2Q results illustrate many areas of the US agriculture economy are in great shape, supporting our constructive near-to-medium term views.
Berry Plastics highlights the GHG emission footprint of plastic packaging is lower than many alternatives. We also note hydrogen blending prospects with natural gas.
We flag falling freight rates from China to the US, material sourcing issues facing German automakers, and US Dollar strength relative to other major currencies.
Global agriculture and energy commodity price strength remain significant YoY end-use inflation and 2Q earnings season topics, but most have fallen from 2Q22 highs.
We find US energy cost advantages relative to Europe displayed in many 2Q sector reports. We highlight result postings from Devon Energy, Williams, and Marathon.
The CF Industries 2Q report and outlook align with our positive agricultural market view. We remain much more cautious on global commodity chemical sector trends.
National oil companies, not big oil companies, generate most O&G sector emissions and have been slower to adapt to climate change initiatives, limiting global efforts.
We discuss the recent slowdown in US and China manufacturing, the downward trend in global freight rates, and lingering supply shortages in Germany.
Global chemical sector profit outlooks for 2H22 are trending increasingly negative. We add to our general market views and discuss why the profit outlook downgrade from Covestro is worth notice.
USGC ethane values decreased relative to Ex-US naphtha values WoW, modestly steepening the global ethylene cost curve at the feedstock level. US natural gas also fell compared to Brent Crude.
US spot benzene values fell WoW relative to US spot propylene and ethylene values, with all three reflecting MoM declines. Global polymer values face downward pressure relative to feedstocks.
Macro indicators for farm-input sellers improved WoW. Corn, soybean, and canola prices leaped higher WoW, with US corn prices rising more than soy, and UA fertilizer prices on avg. also increased.
Those scrambling to support the case that the US is not in a recession are missing the point – a spending slowdown is happening, and 1H22 will not be the “worst”.
Still, we find pockets of extreme strength and related investment opportunities – agriculture and some energy transition sectors top our list.