Farrer Capital Management

𝗙𝗮𝗿𝗿𝗲𝗿 𝗖𝗮𝗽𝗶𝘁𝗮𝗹’𝘀 𝗔𝗱𝗮𝗺 𝗗𝗮𝘃𝗶𝘀 𝗷𝗼𝗶𝗻𝘀 𝗖𝗿𝗼𝘀𝘀 𝗖𝗼𝗺𝗺𝗼𝗱𝗶𝘁𝗶𝗲𝘀 𝗕𝘂𝘆-𝗦𝗶𝗱𝗲 𝗣𝗮𝗻𝗲𝗹 𝗗𝗶𝘀𝗰𝘂𝘀𝘀𝗶𝗼𝗻 𝗶𝗻 𝗦𝗶𝗻𝗴𝗮𝗽𝗼𝗿𝗲 Farrer Capital Management’s Adam Davis was in Singapore recently, where he spoke as part of a fascinating Cross Commodities Buy-Side Panel Discussion at the CME Group's APAC Commodities Forum. As Chief Investment Officer and Co-founder at Farrer, Adam was one of four industry experts to reflect on the role of cross commodities investing in a volatile market. The panel was moderated by John Ricci, Managing Director of Agriculture and Alternative Investment Products at the CME Group. Among the talking points on the day were: 📌 How cross commodity investing can help mitigate risk and generate alpha in a volatile market 📌 The key considerations for investors looking to implement cross commodity strategies  📌 How technology and data analytics can be used to enhance cross commodity investing 📌 The most effective systematic strategies for managing risk in a changing market 📌 How volatility hedging might be used to protect portfolios from downside risk 📌 The tools and techniques available for systematic investors 📌 Driving innovation and growth in a time of transition 📌 How investors can identify and capitalise on opportunities for innovation and growth in commodity markets 📌 The key trends that will shape the future of commodity markets 📌 How investors can contribute to a more sustainable and equitable future for commodity markets The panel also spoke about the US elections and potential impact on commodity prices, as well as China’s impact on commodities and relative value. As well, Adam led a discussion on creating alpha in a Fundamental Macro Agricultural Fund. Alistair Fullerton, Les Finemore, Shawn Unger, Jonathan Haines, CFA, Josiah Binet

𝙅𝙤𝙣 𝙃𝙖𝙞𝙣𝙚𝙨 𝙟𝙤𝙞𝙣𝙨 𝙁𝙖𝙧𝙧𝙚𝙧 𝙖𝙨 𝙎𝙚𝙣𝙞𝙤𝙧 𝘾𝙤𝙢𝙢𝙤𝙙𝙞𝙩𝙮 𝙎𝙩𝙧𝙖𝙩𝙚𝙜𝙞𝙨𝙩 We are delighted to introduce Jonathan Haines, CFA as our new Senior Commodity Strategist at Farrer Capital Management. A welcome addition to the team, Jonathan (Jon) will lead the fundamental research program at Farrer, boasting more than 18 years’ experience in agricultural commodity markets. Over his career, Jon has held research and trading roles at both financial institutions and physical trade houses, building vast expertise in financial and physically traded markets, as well as in the coverage of grains, vegetable oils and soft commodities. Most recently, Jon was Research Director at Gro Intelligence, an innovative agriculture and climate data start-up. Here, he combined large agricultural data sets with geospatial climate and weather data to produce advanced crop analytics and tools for clients across the agriculture value chain. In addition, he advised on the development of sophisticated machine learning models to predict crop yields. In 2013, he was part of the team that successfully launched BTG Pactual’s commodity trading venture, which later became ECTP (Engelhart Commodity Trading Partners). Based in New York, Jon holds a Bachelor of Science from Cornell University and is a CFA Charterholder. Combining extensive experience in commodities research and trading with a significant background in leveraging large data sets to forecast crop outcomes and supply, he is already proving a wonderful asset to the Farrer Capital team. Adam Davis, Alistair Fullerton, Les Finemore, Shawn Unger, Josiah Binet

𝘼𝙧𝙜𝙚𝙣𝙩𝙞𝙣𝙖’𝙨 𝙁𝙖𝙧𝙢𝙚𝙧𝙨 𝙁𝙖𝙘𝙚 𝙉𝙚𝙬 𝙏𝙝𝙧𝙚𝙖𝙩 𝘼𝙢𝙞𝙙 𝙂𝙡𝙤𝙗𝙖𝙡 𝙒𝙖𝙧𝙢𝙞𝙣𝙜: 𝙇𝙖 𝘾𝙝𝙞𝙘𝙝𝙖𝙧𝙧𝙞𝙩𝙖 Global warming has introduced a formidable new challenge for Argentina’s farmers: a tiny yellow insect, just 4mm long, thriving in warmer temperatures and capable of carrying a devastating disease that stunts the growth of corn. Following two severe droughts, Argentine farmers were confronted last year with this new menace – the leafhopper, or "la chicharrita". In the most recent Argentine harvest, earlier this year, it is estimated that over 20% of national corn production was lost due to the damage inflicted by leafhoppers. As the world's fifth-largest corn producer, Argentina’s farmers faced a crippling blow, further exacerbating the financial strain from previous droughts. The surge in leafhopper populations is closely linked to climate change. Over the past 50 years, the number of frosts has decreased from roughly 15 to fewer than 8 annually. Leafhoppers, which cannot survive temperatures below 4 degrees Celsius, are now flourishing in areas where they previously could not. This week, Farrer Capital Management's Senior Portfolio Manager Les Finemore visited Córdoba to speak with farmers ahead of the summer planting season. He reported that leafhopper numbers in northern Argentina are as much as 10 times higher than normal, and the insect has now been found nearly 1,500 kilometres (932 miles) south of its traditional range, in regions previously too cold for its survival. The implications are severe, not only for Argentina’s domestic corn market but also for global corn supply. Argentine farmers are planning to switch a significant portion of their corn area to soybeans this year due to the leafhopper threat. Some farmers mentioned that they would not plant corn at all, such is the gravity of the situation. Additionally, farmers are opting for lower-yielding corn varieties with higher disease tolerance and shifting planting earlier in October and November to move the critical pollination and yield-determining window into January – a strategy that unfortunately increases the risk of heat stress. This shift is further driven by deep negative corn margins and the higher fertiliser requirements of corn compared to soybeans, at a time when Argentina is contending with elevated fertiliser costs due to import taxes that are set to abate in September. We believe the global corn market is currently underestimating the severity of the switch from corn to soybeans and the resulting yield reductions in Argentina. Private estimates are forecasting significant drops of 17-23%, and after surveying farmer groups, we believe the reduction could be even greater if certain variables play out, potentially bringing production well below 50 million metric tonnes in a country capable of producing over 60 million metric tonnes. This would mark the smallest area planted with corn in Argentina in over six years.

𝙍𝙚𝙩𝙖𝙞𝙡 𝙗𝙚𝙚𝙛 𝙥𝙧𝙞𝙘𝙚𝙨 𝙧𝙚𝙖𝙘𝙝 𝙖𝙡𝙡-𝙩𝙞𝙢𝙚 𝙝𝙞𝙜𝙝, 𝙗𝙪𝙩 𝙛𝙧𝙤𝙢 𝙬𝙝𝙖𝙩 𝙡𝙚𝙫𝙚𝙡 𝙙𝙤 𝙐𝙎 𝙘𝙖𝙩𝙩𝙡𝙚 𝙥𝙧𝙞𝙘𝙚𝙨 𝙧𝙞𝙨𝙚 𝙞𝙣𝙩𝙤 𝙣𝙚𝙭𝙩 𝙮𝙚𝙖𝙧? A run of softer US consumer data in the last week has added to the body of evidence that the Fed’s efforts to achieve a ‘soft landing’ for the US economy may have been successful. An annual increase in inflation of less than 3% in July marked the lowest price growth since February 2021, as the US printed a 2.9% gain in data released last week. Flat PPI growth and a jump in the unemployment rate to a three-year high of 4.3% sent expectations of imminent Fed rate cuts soaring, with Fed funds futures pricing in a full four cuts by December. Retail beef prices have been at elevated levels in 2024 but reached all-time highs in the last month. Ground beef and sirloin steak cuts reached record prices in July and have carried that momentum into August. Despite the price momentum, two pending policy announcements have caused us to be bearish near-term US cattle prices with a 2-3 month view. Kamala Harris, on Friday, is expected to unveil a proposed ban on ‘price gouging’ in the food industry, with sweeping administrative powers for federal authorities to police the practice. The agricultural sector was not specifically named, but with supermarket beef prices sitting 33% higher than pre-pandemic levels, it is likely to be a target. US cattle prices are also highly correlated with US interest rates, with changes in the Fed Funds rate passed through the supply chain. We are watching the policy-sensitive US 2-year yield as a key relationship with live cattle. As the Fed begins cutting the cash rate, we expect the impact to be immediately felt in US cattle prices. Bearish sentiment over proposed price controls, combined with an imminent rate cut at the Fed's September meeting, will play out in the cattle market over the next few months. Drought conditions in key states for beef production combined with narrow processor margins will continue to add downward pressure on US feeder and live cattle prices near term with a structural case for higher prices next year. The key question: from what level do US cattle prices rise into 2025? #FarrerCapital #beefprices #cattleprices #supplychain #beefproduction #pricegouging #foodindustry #agriculture #agrihedgefund Adam Davis, Les Finemore, Alistair Fullerton, Josiah Binet, Shawn Unger

𝗚𝗹𝗼𝗯𝗮𝗹 𝗔𝗴𝗿𝗶𝗧𝗿𝗲𝗻𝗱𝘀 𝗖𝗼𝗻𝗳𝗲𝗿𝗲𝗻𝗰𝗲 𝗼𝗻 𝗔𝘂𝘀𝘁𝗿𝗮𝗹𝗶𝗮’𝘀 𝗚𝗼𝗹𝗱 𝗖𝗼𝗮𝘀𝘁 Farrer Capital Management was thrilled to participate in the Global AgriTrends Conference on the Gold Coast, Australia, last week. Our Chief Investment Officer and Co-founder Adam Davis (pictured) spoke of Farrer Capital’s global insight, while we also heard from the world’s leading meat and livestock analysts, Brett Stuart and Simon Quilty. Another highlight from the event was a presentation from weather expert, Professor Art Douglas, who shared a really comprehensive long-range weather presentation with attendees. Some of the key takeaways from the Conference: 📌 La Niña forming in 2024 is not yet a given. If it does develop, it will be weak to moderate and hit in Q4 2024.  📌 There is an increasing possibility of El-Niño re-establishing itself in April 2025. 📌 Not all La-Niña or El Niño patterns are created equally. 📌 Global beef supply is about to get a whole lot tighter with herd rebuild cycles in 25/26 in Brazil, Australia and the US – the first time all three cattle producers have cycled together for over 20 years. 📌 Feed Grain markets are bearish, but bullish catalyst included crowded speculative short positioning, a forecast for an overly cold and dry planting period ahead for US wheat regions, and a persistent dry pattern in Brazil. The knowns are bearish, but the unknowns are reason for caution.  📌 Australian wheat production estimates are growing and consensus now firming above 30mmt (USDA 30mmt), as big production potential in NSW offsets drier than normal conditions in Victoria and South Australia. A La Niña may result in a wet harvest. #GlobalAgriTrends #FarrerCapital #weather #LaNina #ElNino #agriculture #agrihedgefund #investment Alistair Fullerton, Les Finemore, Josiah Binet, Shawn Unger

𝗖𝗮𝗻𝗼𝗹𝗮 𝗛𝗼𝗹𝗱𝘀 𝗡𝗲𝗮𝗿 𝗦𝗲𝘃𝗲𝗻-𝗠𝗼𝗻𝘁𝗵 𝗛𝗶𝗴𝗵 𝗮𝘀 𝗔𝗱𝘃𝗲𝗿𝘀𝗲 𝗪𝗲𝗮𝘁𝗵𝗲𝗿 𝗛𝗶𝘁𝘀 𝗖𝗿𝗼𝗽𝘀 Farrer Capital Management’s Chief Investment Officer, Adam Davis, spoke with Keira Wright from Bloomberg News earlier this week, about the current dry weather in the Canadian Prairies and why it may lower Canola yields during the crucial flowering stage. Canola futures are trading near a seven-month high at present, as weather woes threaten yields in key growing regions. In addition, while recent wet conditions in Western Australia have slightly improved Canola crop prospects, sub-soil moisture is still at historically low levels. According to Davis, this has “lit a fire under Canola prices”. #FarrerCapital #canola #canolacrops #Canada #CanadianPrairies #Australia #agriculturalcommodities #weather #investment #agriculture #agrihedgefund #hedgefund Alistair Fullerton, Les Finemore, Shawn Unger

𝙄𝙩’𝙨 𝙜𝙚𝙩𝙩𝙞𝙣𝙜 𝙝𝙤𝙩 𝙞𝙣 𝙝𝙚𝙧𝙚! 𝙀𝙭𝙩𝙧𝙚𝙢𝙚 𝙝𝙚𝙖𝙩 𝙞𝙣 𝘾𝙖𝙣𝙖𝙙𝙞𝙖𝙣 𝙥𝙧𝙖𝙞𝙧𝙞𝙚𝙨 𝙩𝙝𝙧𝙚𝙖𝙩𝙚𝙣𝙨 𝙛𝙡𝙤𝙬𝙚𝙧𝙞𝙣𝙜 𝘾𝙖𝙣𝙤𝙡𝙖 Canola remains one of the last commodities in our investment universe with residual weather risk, according to Adam Davis, Co-founder and Chief Investment Officer at Farrer Capital Management. And right on cue, extreme heat is moving into the Canadian prairies – the key Canola growing region of North America – where above average heat threatens flowering Canola crops. Alongside this, Farrer Capital has been monitoring high temperature records that are being set across the West and Northwest of the United States. According to Agriculture and Agri-Food Canada/ Agriculture et Agroalimentaire Canada (AAFC), Canola displays heat stress during flowering, with subsequent yield loss when temperatures reach beyond 29.5 Degrees Celsius. We note expected temperatures of 30-38 degrees this week in Saskatchewan, Manitoba and Alberta. These risks come at a time where EU supply is already declining and although Australia – a key supplier to the EU – has received some recent rainfall, its year-to-date growing season rainfall in the key regions of Western Victoria, South Australia and WA, is tracking at just 40-80% of normal. Perhaps adding to the acute market impact of these conditions is the fact that the investment community holds a near record net short position in both Canola and Spring wheat, so we are shaping up for a really interesting 10 days. #FarrerCapital #Canada #Canolacrops #Canola #SpringWheat #weatherrisk #agriculturalcommodities #agriculture #hedgefund #agrihedgefund #investment Les Finemore, Alistair Fullerton, Shawn Unger

The US swine industry is encountering significant financial challenges in 2024, and the reality is that these challenges are likely to persist into 2025. Last week, Farrer Capital Management’s Senior Portfolio Manager, Les Finemore, attended the National Pork Industry Conference (NPIC) in Wisconsin, where he engaged with key figures in the swine industry, including large producers, nutritionists, veterinarians, and bankers, gaining valuable first-hand insights. The pork market is currently oversupplied, leading to a collapse in December US hog futures, which have fallen over 18% since May. This oversupply is driven by an increase in pigs per litter in 2024, resulting from significant genetic improvements and a lack of PRRS and PEDv disease pressure. US hog producers are now facing severe negative margins, which could lead to bankruptcies in the coming months and a reduction in the sow breeding inventory. In private 1:1 meetings at NPIC, producers spoke about changes in their production plans that will have a dramatic impact on the US Lean Hog Futures curve across the remainder of 2024 and 2025. We believe there are several trading opportunities across the futures curve as these supply and demand fundamentals play out, offering investors in the Farrer Capital Global Commodities Fund access to a unique and uncorrelated return stream. #NPIC #NationalPorkIndustryConference #Wisconsin #FarrerCapital #swineindustry #hogfutures #uncorrelatedreturns #agriculture #hedgefund Adam Davis, Alistair Fullerton, Shawn Unger

The US swine industry is encountering significant financial challenges in 2024, and the reality is that these challenges are likely to persist into 2025. Last week, Farrer Capital Management’s Senior Portfolio Manager, Les Finemore, attended the National Pork Industry Conference (NPIC) in Wisconsin, where he engaged with key figures in the swine industry, including large producers, nutritionists, veterinarians, and bankers, gaining valuable first-hand insights. The pork market is currently oversupplied, leading to a collapse in December US hog futures, which have fallen over 18% since May. This oversupply is driven by an increase in pigs per litter in 2024, resulting from significant genetic improvements and a lack of PRRS and PEDv disease pressure. US hog producers are now facing severe negative margins, which could lead to bankruptcies in the coming months and a reduction in the sow breeding inventory. In private 1:1 meetings at NPIC, producers spoke about changes in their production plans that will have a dramatic impact on the US Lean Hog Futures curve across the remainder of 2024 and 2025. We believe there are several trading opportunities across the futures curve as these supply and demand fundamentals play out, offering investors in the Farrer Capital Global Commodities Fund access to a unique and uncorrelated return stream. #NPIC #NationalPorkIndustryConference #Wisconsin #FarrerCapital #swineindustry #hogfutures #uncorrelatedreturns #agriculture #hedgefund Adam Davis, Alistair Fullerton, Shawn Unger

This week, Farrer Capital Management's Senior Portfolio Manager, Les Finemore, spent time visiting farms across the US Midwest, where he met with farmers and examined crops first-hand. With almost perfect growing conditions, there is currently an abundant supply of corn and soybeans worldwide. This anticipated surplus, exacerbated by weak Chinese demand for US commodities, has had a dramatic impact on the market. Over the past month, US Corn and Soybean futures prices have fallen by over -11% and -8%, respectively. This market pressure is now driving local prices below the cost of production for some farmers in the US. #FarrerCapital #agriculturalcommodities #hedgefund #futuresprices #agrihedgefund #corn #soybeans #crops #commodities #agriculture #markets Alistair Fullerton, Adam Davis, Shawn Unger