CIBC Notes EQUITY RESEARCH
December 3, 2023 Industry Update
Outlook For U.S. Farmers Improving
USDA published its third forecast for 2023 farm income on November 30 (the
first and second were released in February and August, respectively). The
2023 net farm ($151B) and net cash ($158B) income forecast is ~$10B
higher than the prior August outlook for 2023, and 31% and 15%,
respectively, above the 20-year inflation-adjusted average. Pro Farmer is
forecasting a slight increase in corn prices in 2024.
Pro Farmer Quarterly Grain Outlook - Healthy Crop Prices In 2024:
2024/25 U.S. corn stock-to-use ratio is forecast at 14.5% (farm corn price:
$5.00/bu.), down slightly vs. 15.0% Y/Y (farm corn price: $4.80/bu.). The
2024/25 soybean stock-to-use ratio is forecast at 6.7% (farm soybean price:
$12.50/bu.), up slightly vs. 5.1% Y/Y (farm soybean price: $13.00/bu.).
U.S. Farmers To Plant More Soybean / Less Corn In 2024?: The 2023-24
price ratio is above 2.5x, which favors soybeans. But war in Ukraine, and
how that might impact global supplies, remains unpredictable. Pro Farmer’s
early projection for 2024 corn and soybean plantings is 90.0MM and 88.5MM
acres, respectively, down 4.9MM and up 4.9MM acres Y/Y, respectively.
Canada YTD 2023 Farm Cash Revenue Record High, But Has Likely
Peaked: Canada farm cash revenue during the first three quarters of 2023
set another record at $70.4B, ~8% higher than $65.1B in the corresponding
2022 period. Higher crop (up 13% Y/Y) and livestock receipts (up 9% Y/Y)
more than offset lower Government payments (down 26% Y/Y).
Brazil – Improved Rain Changes, But Soybean Planting Still Well
Behind Average: Dry areas of central and northern Brazil are forecast to
receive needed rains during the next two weeks. Soybeans in Brazil were
74.6% planted vs. 87.3% average. This represents an advance of 6.6% for
the week and it is now the slowest planting pace in 14 years since 2009.
Potash – India Contract Price Signed At $319/t: Excluding U.S. NOLA
prices decreasing 2% W/W to $405/t, prices elsewhere were generally flat
W/W amid limited buying activity. The key items we are watching include: 1)
India contract priced signed at $319/t; 2) Brazil prices remain firm; 3) Brazil
port delays still a concern; and 4) U.S. NOLA prices soften $7-8/st W/W.
Tampa Ammonia Contract Rolls Over At $625/t: The Tampa ammonia
contract price rolled over at $625/t for December, while Midwest prices were
flat W/W/ at $738/st. Northwest Europe prices were down 2% W/W to $653/t,
and are now trading at a ~$130/t premium relative to cost of production.
MEOH December Contract Prices Up In North America/APAC, Flat In
China: MEOH set its North America and APAC December monthly contracts
at $575/t (up $26/t M/M) and $380/t (up $10/t M/M), respectively. The China
December price was set at $360/t, flat M/M. This implies a consolidated
average Q4/23 non-discounted price for MEOH of ~$420-$425/t, up ~$25-
30/t Q/Q. While this is slightly better than our Q4/23 estimate of $416/t, this
will likely be more than offset by the Egypt plant being down