CIBC Notes EQUITY RESEARCH
August 27, 2023 Industry Update
Crop Tours Point To Large U.S. Crop
Key Points
Pro Farmer (PF) concluded its 2023 national crop tour this past week (final
estimates released late afternoon on Friday), sampling corn and soybean
crops across key U.S. corn belt states. Historically, PF’s crop tour has been
pretty accurate directionally. The 2023 tour indicates that overall corn and
soybean yields should be lower than USDA forecasts, offset by higher
forecast harvest acres in the case of corn. The net result is PF forecasts
overall 2023 corn production (14.96B bu.) to be only 1% below USDA’s
current forecast, and still 9% higher Y/Y. PF forecasts the 2023 soybean
crop (4.11B bu.) to be 2% below USDA’s current forecast, and 4% lower Y/Y.
Panama Canal Restrictions To Remain: The Panama Canal expects to
maintain restrictions for at least 10 months amid a prolonged drought due to
the El Nino. The backlog of ships has reduced to 128 vs. 160 earlier this
month. Though this doesn’t appear to be a crisis, and dry bulk ships are
moving through the canal (albeit with delays), a further deterioration in this
situation has consequences for the agriculture/fertilizer market. Data from
the Panama Port Authority shows ~9Mt of corn and ~15Mt of soybean were
shipped through the Panama Canal in its F2022, representing about 4%-5%
and 9%-10% of global exports, respectively. Approximately 9Mt of fertilizers
were shipped through the Panama Canal during this same period. CRU data
shows that Brazil imported ~4.5Mt of potash from Canada in 2022, with the
majority of these cargoes likely transiting from the Panama Canal.
Ammonia Steadily Gaining Momentum: Northwest European spot prices
rose another 8% W/W to average $425/t, despite the TTF gas index receding
to ~$11/MMBtu. Middle East ammonia prices jumped 29% W/W to average
$400/t on recent spot trade activity. CRU notes that some market
participants believe the September U.S. Tampa ammonia contract could be
raised significantly to $350/t-$360/t (up from $295/t in August).
But Urea Markets Under Near-term Pressure: Global prices moved lower
following India’s IPL tender for 1.76Mt. China is expected to supply ~1.1Mt
(over 60% of the total volume). CRU now forecasts China urea exports in
2023 at 4.3Mt, close to the five-year average. Middle East and Black Sea
spot prices fell 4% W/W and 10% W/W to $380/t and $340/t, respectively. In
the U.S., seasonal declines in prices are emerging. U.S. NOLA and Midwest
prices both declined ~2% W/W to $360/st and $405/st, respectively.
Potash Prices Relatively Stable Across Key Regions: Brazil prices were
flat W/W at $358/t; NOLA prices rose 2% W/W to $328/st; and Midwest
prices declined 1% W/W to $393/st. Argus notes that Brazilian demand will
keep slowing after months of strength, putting downwards pressure on
prices. But interest for corn during Q4/23 may prevent a sharp price decline
in Brazil prices. In the U.S., demand continues to rise ahead of the fall
application and the need to replenish stocks will put upward pressure on
near-term U.S. prices.