Q4 2019 Earnings Call
Ladies and gentlemen, please stand by your conference call will begin momentarily. Thank you for your patience simply standby.
[music].
Greetings and welcome to the Eagle bulk shipping fourth quarter 2019 results conference call.
At this time all participants are in listen only mode. Later, we will conduct a question and answer session and at that time, if he would like to ask a question. Please press Star then one.
As a reminder, this conference call is being recorded.
I'd like to turn the call over to Gary vocal Chief Executive Officer, and Frank de Costanzo, Chief Financial Officer of Eagle bulk shipping Mr. Vocal you may begin.
Thank you and good morning, I'd like to welcome everyone to Eagle Bulks fourth quarter 2019 earnings call.
To supplement our remarks today I would encourage participants to access a slide presentation is available on our web site at Eagle ships Dot com.
Please note that part of our discussion today will include forward looking statements.
These statements are not guarantees of future performance are inherently subject to risks and uncertainties you should not place undue reliance on these forward looking statements.
Please refer to our filings with the Securities Exchange Commission.
For more detailed discussion of the risks and uncertainties that may have a direct bearing on our operating results.
Our performance and our financial condition.
Discussion today also include certain non-GAAP financial measures, including EBITDA, adjusted EBITDA and PC.
Please refer to the appendix and the presentation in our earnings release filed with the Securities Exchange Commission from work information concerning non-GAAP financial measures and a reconciliation to the most comparable GAAP financial measures also note that the Baltic Supramax index or be outside that we were referencing this presentation is basis to be outside 58 index.
Please turn to slide five.
The fourth quarter was dynamic period for the shipping markets I want to transition for the company having reached a six year quarterly high in Q3 to be aside traded off in the fourth quarter to average approximately $10500 as we indicated in our earnings call in November.
Market weakness in Q4 was due to a number of factors, including Indonesia's ban on nickel or exports coming into effect import quotas on Chinese coal imports being Matt and a lack of U.S. soybean shipments. In addition, we believe the year end market was negatively impacted due to some factors related to IMO 2020 coming into effect on January.
First.
Legal achieved a net Tc for the fourth quarter of $11292 per day. According to a market outperformance of 1400, $30 or 15% looking back we've now outperformed in 11 out of the last 12 quarters for the full year 29 team.
You go achieved a net PC of 10385 per day, according to a market outperformance of 15% or 1300 $19.
Translates to an annualized value creation of $24 million basis, our current on fleet or 50 ships are highest year yet.
It's also noteworthy that we achieved this while positioning 34 ships into and out of yards in the Pacific Prescriber retrofits.
Moving into Q1 market weakness intensified on the back of traditional seasonal weakness relating to increased newbuilding deliveries and Chinese new year and was further exacerbated by higher fuel costs due to IMO 2020 feel switchover and now more recently the significant impact to trade demand as a result of the Corona virus will address the same.
More detail later, but our first and foremost concern is for the well being of those who have been affected and as a company for the safety awareness of our employees, including the crews on board our vessels in this regard we're taking precautions in line with guidance from relative and organizations in authorities and stand ready to adjust our actions as the environment dictates.
Quarter to date, the B S. I has averaged approximately $6000 per day, representing a drop of 44% as compared with Q4.
As of today, we fixed about 85% of our available days for the first quarter with a net PC of $10300 per day, representing our current total outperformance of around $4000 per day, when compared to the index is figures inclusive of approximate 2800 dollar T.C. benefit generated on our side.
Rubber fitted fleet from fuel spread savings, please turn to slide six.
Fuel cost for the majority of the industry, which is operating non scrubber fitted chefs increased dramatically with the inception of IMO 2020, or the same time fuel cost for those operating profit of chips like Eagle are benefiting from lower fuel pricing.
Fuel spreads between HFO NVR myself, all have been quite volatile since January with the actual fuel spread year to date close to 200 and the balance of the year now averaging around $150 per tonne.
This has come in since the outbreak of the Corona virus, but forwards have been widening over the past few days and we believe spreads will continue to move up as and when oil demand normalizes.
Order to start crystallizing part of our scrubber investment returns we've entered into hedges for approximately 25% of our scrubber related fuel spread exposure for 2020 and 2021. These are at average prices of 240 and $150, respectively and as of today those hedges have a mark to market positive.
Well you around $5 million.
Please turn to slide seven.
EBITDA adjusted for certain noncash items totaled $9.8 million for the fourth quarter down around 25% as compared to Q3 bar TC performance increased in Q4, EBITDA was negatively impacted by significant off hire days as we work to complete our scrubber retrofit program.
Ahead of IMO 2020.
We incurred a total of 740 days off hire during Q4, the largest in our history has 18 ships for more than 35% of our fleet weren't a Chinese shipyards at some point during the quarter, it's had a material impact to our earnings which Frank will discuss in more detail.
In order to be able to maximize the potential fuel spread benefit our objective from the beginning had been to complete the scrubber retrofit program by January 2020, and we achieved just that as of the end of January we had 38 scrubbers fitted with just three units, which we ordered last summer remaining to be installed during Q1.
This scrubber retrofit program has been a monumental task for our company and its successful and timely execution as a result of great teamwork and dedication across the organization.
Once our program is fully complete well have a total of 41 vessels were 82% of our own fleet fitted with exhaust gas cleaning systems. This makes eagle the largest donors scrubber fitted supramax ultramax vessels and we believe this provides us with it in competitive advantage has only about 7% of the mid sized Drybulk fleet that's been fed it.
Although it's early days or IMO 2020 compliant strategy is delivering value since implementation on January 1st we estimate our scrubber investment has yielded roughly $9.5 million an incremental revenue for the company.
Based on our expectations for a continued positive forward fuel spread environment between HFO and VR CFO, we believe the contribution from our investment in scrubbers, we'll continue to be meaningful.
With that I'd like to turn the call over to Frank who will review our financial performance.
Thank you Gary.
Please turn to slide nine for a summary of our fourth quarter 2019 financial results.
Revenue net of both voyage in charter hire expenses totaled 41.9 million for the fourth quarter, 3% lower than the prior quarter.
The company reported a net loss of 11.2 million for the fourth quarter or a loss per share of 16 cents.
Adjusted EBITDA came in at 9.8 million.
Operating performance for Q4 was negatively impacted by several factors, including.
Lower available days due to scrubber installation off hire.
Higher vessel expenses due to onetime startup costs relating to our ship acquisitions.
Higher operating expenses driven by the previously disclosed OPEC settlement and onetime legal charges.
It is noteworthy that taking into account scrubber off hire along with the onetime events mentioned above our earnings were impacted by approximately 12.1 million or 17 cents per share in the quarter.
Let's now turn to slide 10 for an overview of our balance sheet and liquidity.
Total cash inclusive of 5.5 million of restricted cash was 59.1 million at December 31st 2019, which represents a decrease of roughly 42 million from prior quarter end.
The decrease in cash was primarily driven by dry docking expenditures.
The installation of scrubber and ballast water treatment systems and the purchase of the last three Ultramaxes, we acquired impart offset by the draw from our new Ultracargo debt facility.
The company's total liquidity as of December 31st 2019 was 129.1 billion comprised of total cash or 59.1 million in 70 million of Undrawn revolving credit facilities.
In the fourth quarter net cash provided by operating activities came in a 2.7 million.
For the full year net cash provided by operating activities was 21.7 million.
Total gross debt excluding debt issuance costs as of December 31st 2019 was 474.7 million an increase of 25.3 million from the prior quarter.
The increase in debt is primarily due to incremental borrowings related to vessel acquisitions under the new ultra low debt facility impart offset by debt principal repayments.
Please turn to slide 11 free cash walk for Q4 in full year 2019.
The chart at the top of the slide lays out the changes in the company's cash balance in Q4 29 team.
The two large bars in the left revenue and operating expenditures are simple look at the operations.
The net of the two bars is positive die million, which comes in very close to our Q4 adjusted EBITDA number.
To the right you will find a bar covering the 6 billion of Drydocking costs Capex of 8 million for scrubbers and ballast water treatment systems.
Along with a vessel S&P bar totaling 62 million covering the purchase of three ultramax vessels.
The 33 million dollar bar represents the net proceeds from the new ultra co debt facility accordion draw.
And finally, the bar totaling 18 million.
For debt principal and interest we paid in Q4 2019.
Let's now discuss the charted the bottom half of the slide which displays the changes in the company's full year cash balance.
The net of revenue and operating expenses are bars is positive 49 million, which is very close to our full year adjusted EBITDA number.
To the right you will find a bar covering the 12 million for dry docking embark totaling 58 million for capex on scrubbers and ballast water treatment systems.
He bar totaling 114 million, where the seven ultramax vessels, we purchased during the year in part offset by the fourth Supramax vessels, we sold.
Barb totaling 152 million representing the cash proceeds we received from the convertible bond debt offering new ultra co death to fill the accordion draw.
And the debt refinancing in January 2019.
The final bar on the right totaling 46 billion covers a debt principal and interest paid for the full year 2019 on our existing debt facilities.
Let's now review slide 12 for our cash break even for shipped per day.
For the full year 2019 cash breakeven per ship per day came in at $10080 $1722 higher than the prior year.
The year on year increase is primarily a result of the increase in debt principal payments related to the new ultra co debt facility.
Along with the increase in our operating expenses.
Full year 2019 vessel expenses or Opex came in at $4859 per ship per day $134 higher than prior year.
As I previously indicated opex was impacted by onetime vessel acquisition cost.
In 2019, Drydocking came in at $702 per ship per day $218 higher than 2018.
Please note that drydocking costs are a function of the age of the vessels.
Drydocked as well as the additional upgrades perform to improve the long term fleet performance.
That being said the average age of ships dry dock to 2019 was older than the age of those performed in the prior year.
Catchy name 2019, excluding certain nonrecurring items came in at $1681 per ship per day up $115 from prior year.
It's worth noting that our DNA per ship calculation is based only on our owned vessels.
In this regard if we were to include the chartered in days in our calculation 2019 gionee per ship per day would be $1388.
Cash interest expense for the full year 2019 came in at $1471 per ship per day, which is $120 higher than full year 2018.
The increase is primarily due to increased debt leading to our vessel acquisitions and less ownership days, which will normalize in 2020 as the 50 vessels in our fleet will be fully accounted for the year.
Cash debt principal payments in 2019 came in at $1366 per ship per day, which is $1134 higher than prior year.
The increase is attributable to our principal repayments are the new ultra low debt facility.
Looking forward to Q1 2020, Breakevens, we see opex in debt principal repayment around EUR 20, <unk> 19 levels gene a to move down to circa $1550 per ship or day.
Interest expense to increase slightly due to the full year impact of the additional debt in dry docks, which will come in as per the capex wide in the appendix of our presentation.
This concludes my comments I will now turn the call back to Gary.
Thank you Frank Please turn to slide 14.
As indicated earlier on the call apart from the seasonal factors, which traditionally affect the first quarter Drybulk market has been negatively impacted in Q1 by both IMO 2020 coming into effect, particularly for owners that do not have scrubber fitted fleets and the Corona virus.
In terms of IMO 2020 <unk>.
Unfortunately, given weak demand dynamics in early Jan owners are non scrubber fitted ships were essentially unable to pass on extra fuel cost to charters and this in turn has pushed time charter equivalent rates down significantly.
While we had expected this to moderate post Chinese new year Corona virus has led to major trade impacts, particularly for cargos into China.
This is clearly evident.
In the number of Chinese pork costs, which actually decreased post Chinese new year by about 30% from pre holiday levels. When normally we would have seen an increase.
Positively we've seen a rebound in this metric over recent weeks and we're now back around pre Chinese new year volumes.
Notwithstanding the weak market.
The B S. I bottomed at 50 $152 per day on February 13, and is now trading back over 7000 with the forward curve, indicating rates for Q3 Q4 in the mid $10000 range given the erratic supply demand dynamics as I think its noteworthy to look at the extreme differential which currently exists.
Between the Atlantic and Pacific markets. Please turn to slide 15 for look at this graphically.
Here, we depict the Atlantic versus the Pacific B S. I premium we added this slide to the deck due to the extreme disparity while the overall market is averaging 7000, the Atlantic be ASI is close to $10000, while the Pacific is hovering around 4000.
Although this differential ebbs and flows around seasonal factors, it's been exacerbated this year due to the significant falloff in demand into China.
As we've mentioned in prior calls the Atlantic market tends to trade at a historical premium averaging around 30% due to structural supply demand dynamics as you can see the Atlantic premium skyrocketed to a 15 year monthly high in January reaching 180%.
[noise] volatility presents challenges, but opportunities as well given that we operate our ships between the Atlantic and Pacific Basin impart to capture arbitrage opportunities looking forward. We expect a mean reversion will occur the Pacific rates rebounding and narrowing the gap as and when trade normalizes.
Please turn to slide 16.
That's all supply growth remained elevated in Q4, despite a drop in newbuilding deliveries a total of 108 vessels amounting to 11.8 million deadweight tons delivered during the quarter for the full year, a total of 432, new ships hit the water in 2019.
It's noteworthy that there was very little slippage in 2019, whereas most ships in the order book delivered a schedule.
Demolition of older tonnage totaled 26 vessels during the fourth quarter amounting to 2.5 million deadweight tons.
For the full year of 2019 scrapping increased year over year to totaled 7.8 million deadweight tons or 82 vessels.
It's worth noting that only 18 ships or just want to half a 1% of the Handymax fleet was scrapped in 2019.
This figure for tens that there's a growing backlog of potential scrap candidates in the mid size segment and given current fuel pricing and market dynamics, we believe scrapping is likely to increase.
Given the above net fleet growth came in at 3.9% in 29 team for the total Drybulk fleet about a point higher than was widely expected earlier in the year.
In terms of forward supply growth things look more positive, whereas the drybulk order, but currently stands at 9% and for the Supramax Ultramax segment, just 6.5% the lowest level in over 20 years in 2020, Drybulk net fleet growth is forecasted to be around 3.4% within Supramax Ultramax segment.
<unk> percentage point lower at 2.4, although we believe it's likely that number will be even lower due to the potential for increased scrapping due to weak market conditions as well as productivity issues at Chinese shipyards due to the Corona virus. A total of 256 Drybulk ships were ordered in 2019 to put this in context, there's only been.
One other time in the past 15 years, when so few vessels were ordered.
Within the mid size segment 77 ships brought in 2019 or 2% or the fleet.
As we indicated on our last earnings call due to a number of factors, including the price advantage or second hand ships versus new buildings as well as the uncertainty surrounding future propulsion technology. We remain optimistic we will not see immaterial pick up in ordering for the foreseeable future without a very significant pickup in rates.
Please turn to slide 17.
Global growth expectations for 2020 as forecasted by the Imap revise down in January to 3.3%. This was on the back of weaker prospects for somebody emerging markets, including India, which experiencing weakness in domestic demand.
With the onset of the Corona virus, they've been has been a severe shock to economic activity in China, the Chinese purchasing managers index for manufacturing.
Which came out a few days ago tumbled in February to 35.7 from 50 to month prior to put this in perspective. This has been the sharpest drop in manufacturing activity since the 2008 financial crisis, I think underscores the massive impact the virus has had on this country in terms of the rest of the world. It's impossible to know how to Corona virus will ultimately.
The impact activity either directly or via supply chain disruptions. However, given the correlation between global GDP growth in Drybulk demand our industry has clearly been impacted well, we don't know exactly when we're confident that return to normalization will be supported by both a restocking of inventories as well a stimulus from central banks and governments.
As we saw earlier this week when the fed cuts benchmark interest rate. Additionally, trying to typically realize an infrastructure spend to stimulate economic growth and try bulk is a direct beneficiary of such policies given the importance of the commodities, we carry notwithstanding the current uncertainty with the macroeconomic environment, We believe eagle.
Is uniquely positioned to navigate through this period and then capitalize on the expected recovery given our strong balance sheet, our active owner operator model as well as our industry leading position with scrubbers.
With that I'd like to turn the call over to the operator and answer any questions you may have operator.
Thank you.
Ladies and gentlemen, if you have a question at this time. Please press the star followed by the number one key on your Touchtone telephone. If your question has been answered or are you wish or move yourself from the Q. Please press the pound key once again to ask a question. Please press Star then one now.
And our first question comes from John Chapelle from Evercore ISI. Your line is open.
Thank you good morning, Gary.
Morning, John.
Gary just three hopefully quick ones for you persons more of a clarification as you read through the earnings release and the revenue section. It says that the decrease in revenue was due to a decrease in a charter high rates year over year. If you read the charter hire expense. It says a there was partially offset by higher charter rates.
Every year. So can you just help us kind of clarify why were.
The rates and maybe the core fleet lower year over year in Fourq, you, but and the charter in fleet higher year over year was it just a great.
For Q 18 result in a tough comp or how did that kind of play out.
Yeah, sorry, John I think the chartering rates are higher of other vessels that we chartered in although year over year the market was lower.
The overall be ESI market was sub 10 last year down about $1000 year over year, but you know potentially chartering in Ultramax I don't have a specific figures, we definitely can get back down that what was the second one.
Well that was that that was the first question. Okay, maybe maybe it segways into the second one then you spoke on slide 15 about you know the massive premium or the Atlantic TCV <unk> Pacific So.
You said you expect mean reversion have you positioned your fleet, maybe aggressive leaves the wrong word, but maybe with a bias towards the mean reversion a that you've spoken about are you still trying to maybe balance between the two basins, especially now that the majority of the scrubbers had been fitted and you're not kind of tied to the Pacific has you may have been though.
The recent past.
Yeah. It's a great question I mean, we're actually now majority back in the Atlantic and we worked hard to do that which clearly impacts rates you know the backhaul market today for a supramax is just above zero on altrus, probably around 1500, given the obviously the earning capacity. So so that's been that's been costly on our performance a in order to get.
Get it back to a a premium there I mean at the moment or as you would imagine with a week separate market share shifts are paid significantly more to go out to an area, but but we're definitely looking at the potential with that mean reversion to take some of that Atlantic position and and more balance it into specific taking.
Taking that over the next say number of months and then and then of course, you know, it's a contrarian type position, but we don't do things in the extreme you'll never see has put our entire or even a vast majority of our fleet and one basin or the other but but I think it's worth showing because visit as a huge discrepancy obviously if you avishai.
I'm sitting and ER and the Pacific right now versus the Atlantic <unk>, Alright that makes sense and the final. One you mentioned on slide 17, you know the IMF taking their forecast on it obviously incredibly fluid situation you guys are on the grounds so to speak by all the different commodities that you move in the far east have you seen any kind of.
If occasion of an uptick a industrial production or demand a in China is it feels like the cases, there maybe peaked in and people are returning back to work after the a extended holiday.
Yeah, I mean, there's no question, we're seeing much more inquiry I am cargos, a and and it's showing in the market I mean, the while I was just handed is the index, which came out while we were doing well were during our call here you know on it and it's up but the I'd be a size up to 77 today and part of that is $300 in south.
Pete Asia, we're definitely seeing more more cargo we have we have ships that are doing the last three or you know what during the last three scrubber retrofits this quarter and labors, there and working a NFL and it feels quite good but as you said, it's a fluid.
Situation right and so we don't want to get ahead of ourselves here that this this is passed but it definitely feels much more positive and and much more activity, whereas you know four weeks ago. They were ships that that we're sitting fortunately not scrubber footage hubs, but they were definitely older supramaxes that we're sitting a not being able to get any business at all and I think that.
That's a completely mitigated at this point, okay, great. Thanks, a lot for the thoughts Gary Thank you.
Thank you and our next question comes from Randy given from Jefferies. Your line is open.
Oh, the gentleman has it gone.
Good morning right.
Hey, see I'm just looking on the one Q <unk> guidance. You know you said, it's about a 4000 premium compared to the benchmark I think you said 2800 was scrubber related so I guess the additional 1200 is that all just Atlantic over Pacific or are there other things there you know the ascribing to.
That kind of premium.
I mean for first of all and I. Appreciate the question a in order to clarify it I'm sick 2800 is what the scrubber fitted shares have been able to generate as a premium I'm, having said that with ER. We now have 38 ships, but overall for for the quarter slightly less than 30 at about 75% of our fleet.
If you take the 2800 on those ships and netted out over the entire fleet you get down to about a 2100 dollar benefit spread out amortized over there over the whole fleet. So about half of the 4000 comes from that and the other half from outperformance comes from various.
Aspects of course, where you position your ships is important but it's also arbitrage its chartering other vessels right. It's what we call, creating asymmetric optionality between chartering ships optional periods using derivatives dynamically hedging and things like that so it's it's absolutely not just being in the in one basin versus the other but.
It's a it's a multi strategy approach and that's you know I think speaks to the fact of why we've been able to outperform you know 11 of the last 12 quarters and and Q1, a you know looks looks quite strong. So I think pretty confident that you can make that 12 out of 13.
Okay, and then kind of following up on that the 2000, a day premium likely falling here as the spread has been tightening.
How has your kind of forward hedge position changed here in the last few weeks I know you gave an update on your IMO call I guess, a month or so ago I'm just trying to get update currently where that stands.
Yeah I believe you know, we we'd mentioned were about 25% covered on our hedge position for both 2020 and 2021 and those hedges averaged 240 dollar fuel spread for 2020 on 150 for 2021. So if you take that where the you know blended you're you're right now based on.
On the spot here you know you're probably looking at about 175, 420, 20 on a blended basis and actually the hedge position for 2021 is very much in line with the forward market, which has moved up from sub 140, just a week ago too about about 150 now.
Sure.
That's one way that's it for me. Thanks again, great. Thank you Randy.
Thank you and again, ladies and gentlemen to ask a question. Please press Star then one.
Our next question comes from Amit Malhotra from Deutsche Bank. Your line is open.
Hey, Good morning, guys. This is Chris Snyder on for a minute.
You guys. It sounds like you continue to outperform the broader benchmark in the Q1 bookings guidance, but you also had a significant number of vessels coming out of the yard in Q4, following scrubber installations and as you.
Guys have talked about already or the rates and the Atlantic are coming in at a pretty significant premium to the Pacific. So could we have <unk> you know I'm, assuming there kind of the fleet positioning there was a bit of a headwind.
You know the outperformance like we've seen an even more significant outperformance you know if we kind of adjusted for that.
There's there's no question that our outperformance was impacted significantly by the need to position 30, 37 ships in and out of yards of which 35 of them more into into China, especially given the fact that if the majority of our fleet more than 50% typically is any at all.
And I can have you given time and any time, you don't have a free hand to trade, it's going to impact that so there's no question in our minds and in Q4, you know those ships coming out you know put us in a position to move other ships out of out of Asia, knowing that the ships would it be coming out of yard. So yeah, we feel confident that we would've done.
Better in in 2019 in terms of outperformance it was still our best one and as mentioned on the call. You know we are about 24 million of value creation, but button no question about it if you were to speak to our commercial team I think they say they hadn't you know one hand tied behind their back for for a significant number other positions.
Yes, because just kind of feel like the headwind was almost you know double whammy in some sense because not only wasn't impacting the flexibility and trading but you're also having to put them all into the base about a significantly weaker.
So does but fortunately it feels like a one time kind of about or just isn't onetime event yeah.
I mean, that's that's a good point also yeah onetime event in that we could have spread out our scrubber installs you know over a greater period.
We made a concerted effort has things backed up to two push hard to get this done by January 1st because you know if we had 10 of these ships are ready on July 1st instead of January 1st we were forgot about five what we calculate to be about $5 million on a half a year on 10 ships of scrubber premium.
And it doesn't come back right I mean that is that is just effectively money against the project. So yeah Q4 was tough in that regard we had 18 ships in a yard at one given at least part of the quarter I'm never had before don't expect we ever well, but but you know as you said you know onetime event, that's behind US we have.
We have three ships a that where we're working to get done within this quarter and then we'll be completely I have this completely behind us and just looking on the revenue side.
Yeah for sure and then just next so China stimulus is becoming a pretty major narrative in you know the entire equity market.
Hi stuff you know a dry bulk of course is a big beneficiary of that I'm, you know iron ore gets a lot of attention, but can you maybe talk about which marketable cargos will benefit here and would also just assume you know China ramping up has to carry positive implications for scrubber spreads as well.
Yes, I mean first of all you're right iron ore and ties and by but of course, you also have I mean coal is a huge commodity as well that that we move and as you have stimulus and and steel production infrastructure spend it theres energy energy consumption around that and the other thing is.
We expect steel it's expected that steel movements. This year will be will be higher than in the past two years, where it was negative in the last few years sort of Buda first year and that's one of the largest or is the largest minor bulk in terms of volume. So on a weighted basis. That's really important but you also have you know various cargo other cargoes.
You know wars, Hawaii limestone gypsum things like that that are all part of construction and building and we move we move a considerable amount of those cargos as well and then in metals. You know we move things like you know a manganese ore from West Africa into China, That's a significant trade for us a as well as bauxite.
So there's a it really is the kitchen sink and that's one of the benefits you know of my of minor Bulks. If it's a very diverse in both in terms of commodity as well as sourcing in terms of geography.
Yeah, and then just one more if I could grain activity out of Brazil seems to be ramping up can you just kind of remind us of the grain seasonality here you know first South America, then kind of how that leads into the north American grain season in any kind of outlooks or anything you guys are hearing about how the grain season is shaping up I guess, particularly south.
America, just because it's a more near.
Sure. So you're absolutely right I mean grain is is the seasonal driver overall and if you think about its its southern hemisphere is is if spring into into summer and then northern hemisphere as falling to winter. So it's starting to ramp up now March but it really typically.
It seems that take a while to you're going usually and it really hits normally in may and it's been a longer over you know years.
10 years ago, it used to be maybe a six day week season, it's definitely become longer for a number of reason storage capacity hedging capability to farmers things like that but now it typically goes into September and what we've seen in the last few years with the absence of U.S. soybeans moving its gone even longer and then typically the North American girl.
Rain season gets ramped up kind of end October November November and carries on into January I mean, we haven't seen and the data shows that that we haven't seen buying a Chinese buying of soybeans in any meaningful way a and you know Unfortunately, there was a lot of optimism on the back of the phase one trade.
Ill, but now we have the corona virus. So it's going to be interesting, Brazil crop is gonna be strong this year, but you know we obviously, we expect there will be competition from the U.S. market given the the trade deal I just mentioned.
I appreciate all the color that does it for me. Thanks for the time guys great. Thank you Chris.
Thank you and I am showing no further questions from our phone lines and I'd like to turn the conference back over to Gary vocal for any closing remarks.
Thank you operator, we have no further remarks I'd like to thank everyone for joining us today on our quarterly earnings call and wish everyone a great day.
Ladies and gentlemen, thank you for participating in today's conference. This does conclude the programming email disconnect everyone have a wonderful day.
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