CIBCEQUITY RESEARCH
September 5, 2022 Industry Update
Record High 2022 U.S. Farm Income
Key Points
According to USDA’s September 1 forecast, F2022E net farm income is
forecast at $147.7B, marking a $7.3B (+5%) Y/Y rise vs. F2021, and a
$53.2B (+56%) rise vs. F2020. Adjusted for inflation, the F2022E net farm
income forecast is ~1% lower than F2021, but still ~42% higher than the 20-
year average (F2002-F2021). The forecast for F2022E is notably higher than
USDA’s last forecast on February 4, 2022, prior to Russia’s invasion of
Ukraine. Note that we hosted a group investor call with NTR on September
1, with management relaying a similar message, i.e., grower economics
remain very strong (U.S. corn/soybean margins ~90%/60% above the 10-
year average). Link to report - Lunch With CEO, Ken Seitz.
FAPRI Projections Point To High Crop Prices Continuing In 2023/2024:
FAPRI expects tight global supplies to result in record prices for wheat/cotton
and nearrecord prices for corn/soybeans in 2022/23E. In 2023/24E, FAPRI
projects corn prices to drop to $5.22/bu., wheat to $7.11/bu. and soybean to
$12.36/bu. While lower Y/Y, prices are still much higher than historical levels.
Shrinking U.S. Corn Crop Estimates: December corn futures held firm at
$6.65/bu. (largely flat W/W) given shrinking U.S. corn crop estimates, despite
general pressure on commodities from building macroeconomic concerns.
Note, the latest U.S. corn crop estimates from ProFarmer, Cordonnier and
StoneX are all below USDA’s August estimates. ProFarmer’s 2022 crop tour
implies national U.S. corn production of 13.76Bn bu. (yield of 168.1
bu./acre), below USDA’s August estimate of 14.36 Bn bu. (175.4 bu./acre).
Nitrogen Prices Surge With European Capacity Closures / Nord Stream
Issues: Black and Baltic Sea urea prices were up +37% (+$200/t) W/W to
$740/t, while U.S. NOLA barge urea prices rose ~11% (+$68/st) W/W to
$698/st. We now estimate that ~52% of total European ammonia capacity
and ~40% of European urea capacity (excluding Ukraine and Russia) is
shuttered or curtailed. On September 2, Gazprom announced a halt of gas
supplies to Europe through the Nord Stream pipeline after finding an oil leak.
Potash / Phosphate Price Softness Continues: Potash prices in Brazil fell
another $25/t W/W to $780/t-800/t. Brazilian MAP prices fell $15/t W/W to
$800/t and are now down roughly $500/t vs. peak levels four months ago.
A Bumper, Near-record Canadian Crop For F2022: StatsCan forecasts
F2022E Canadian crop production of 96Mt, +37% higher Y/Y. The forecast is
only ~2% lower than the record F2020 Canadian crop. This is positive for
AFN’s Canadian segment sales in Q4/22 (and going into F2023).