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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