Vincent.Andrews@morganstanley.comNeel.Kumar@morganstanley.comLisa.De.Neve@morganstanley.comAngel.Castillo@morganstanley.comSteven.Haynes@morganstanley.comMichael.Slutsky@morganstanley.comZack.Grymes@morganstanley.comAttractiveMORGAN STANLEY & CO. LLCVincent AndrewsEQUITY ANALYST+1 212 761-3293Neel Kumar, CFAEQUITY ANALYST+1 212 761-4573MORGAN STANLEY & CO. INTERNATIONAL PLC+Lisa H De NeveEQUITY ANALYST+44 20 7677-0250MORGAN STANLEY & CO. LLCAngel CastilloEQUITY ANALYST+1 +1-212-761-1931Steven K Haynes, CFARESEARCH ASSOCIATE+1 +1-212-761-1492Michael SlutskyRESEARCH ASSOCIATE+1 212 761-5877Zackery S GrymesRESEARCH ASSOCIATE+1 212 761-3809ChemicalsNorth AmericaIndustryViewGlobal Chemicals, Agriculture & Packaging ConferenceGlobal Chemicals, Agriculture & Packaging Conference|| Global Global2020 Conference FeedbackOverall sentiment from 50+ companies was positive as therecovery runs ahead of expectations, most notably in ag,construction, autos and China. Tempering some of thisoptimism is COVID Wave 2 concerns, some feedstock reflation,and temporary cost outs returning.Recovery gaining momentum, but largely in expectations. Company messagingwas broadly consistent with discussions at 3Q results, with a stronger thanexpected recovery in September continuing through October and into the firstweeks of November, though with some concerned about what we have beencalling the "December" effect, particularly in Europe where COVID Wave 2restrictions are foreshadowing such. In our view, any 4Q weakness will likely bemade up in 1H21, which we would expect the market to ultimately prefer given itimplies higher growth rates off of the 2020 look through year. China andconstruction remain bright spots while autos has recovered faster than most hadexpected, albeit weighted to China and the US. That said, Europe, Oil & Gas andaerospace have recovered at a notably slower place. Given limited visibility,companies were cautious to opine on the sustainability of the pace of recoveryinto 2021, although some noted that any expected improvement in volumes tobe partially offset by temporary cost savings unwinds and higher bonus accruals.Pricing and spread momentum appears to be positive for the most part but therewere some suggestions that raws are now moving higher.An increasingly attractive Ag set-up into 2021 was a key discussion point byinvestors and companies alike given: (1) improving farmer economics (corn>$4/bu and soy >$11/bu with FX driving higher returns in Brazil), (2) strongfertilizer demand led by Brazil, India and China leaving potash (K) and phosphate(P) producers committed through 2020, and (3) depleting channel inventories(esp. for P & K), as well as nitrogen-based fertilizers seeing (4) a rebound inindustrial demand, (5) higher energy prices increasing the middle of the nitrogencost curve which could lead to higher price lows during shoulder season. Mostrecently, we note significant early fertilizer buying in China, an important catalystsuggesting that a new potash contract could be agreed to before inventorylevels are drawn down to "normal" levels, and (6) the potential of renewablediesel demand for vegetable oil to drive an upcycle.Bayer / Corteva outlook commentary suggests seeds could be poised to rebuildits stature following multiple years of subordination to crop chemicals.Improved farmer economics from higher corn and soybean prices are clearlyreengaging investors with seeds for 2021. Multiple years of competitiveskirmishes and limited to negative price/mix first led to investor doubts about thehegemony of seeds versus crop chemicals and then (in 2019 and 2020) theMorgan Stanley does and seeks to do business withcompanies covered in Morgan Stanley Research. As aresult, investors should be aware that the firm may have aconflict of interest that could affect the objectivity ofMorgan Stanley Research. Investors should considerMorgan Stanley Research as only a single factor in makingtheir investment decision.For analyst certification and other important disclosures,refer to the Disclosure Section, located at the end of thisreport.+= Analysts employed by non-U.S. affiliates are not registered withFINRA, may not be associated persons of the member and may notbe subject to FINRA restrictions on communications with a subjectcompany, public appearances and trading securities held by aresearch analyst account.1November 16, 2020 05:01 AM GMTmantle was handed over to crop chemicals. While 2020 itself was a mixed yearfor seeds, there was some second derivative improvement in seed pricerealization (particularly at Corteva) and the recent registration of Bayer's Xtendsoybean line seems to have further cooled competitive pricing concerns as withhigher soft commodity prices farmers' seed focus appears to have returned tomaximizing profitability by maximizing yield versus the past few years ofmaximizing profitability by minimizing cost of goods sold. This means a shift backto higher performing and higher ASP seeds. To be clear, w...
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