Falling input prices feature in the 2023-24 and the 2024-25 crop years, partially offsetting lower prices for many ag commodities. There’ll be more margin pressure, especially for Western crops, than the sector has seen recently. This year, we’ll be watching global stocks-to-use ratios, global weather forecasts and equipment costs as three significant influences on crop profitability.
Commodity prices for the 2023-24 marketing year (MY) have fallen year-over-year (YoY), but for corn, spring wheat, and feed barley, they may already have bottomed out (Table 1). Canadian feed barley prices have been pressured by the availability of relatively cheap U.S. corn and lack of export demand and Canada’s barley carryout is expected to be in line with the five-year average. However, low supplies due to drought-related yield reductions on the prairies will help to boost prices for the new MY and keep them well above the five-year average.
Larger global and U.S. corn supplies will continue to weigh on Canadian prices, as will increases in 2023-2024 production and imports. Despite this pressure, prices should remain above the five-year average as carryout supplies are expected to be 11% below the five-year average. Canadian non-durum wheat supplies are better than expected given 2023 prairie growing conditions, but this year’s carryout stocks are expected to be 14% below the five-year average. With export strength continuing amid low global wheat supplies and domestic use forecast in line with historical trends, 2024-2025 prices will be roughly in line to slightly higher YoY.
The 2024-25 MY shows soybean, canola, yellow pea, and lentil prices falling YoY again. Soybean and canola prices will be pressured by ample global soybean supplies going to the vegetable oil and biodiesel markets, and a possible increase in U.S. soy acres in 2024. Brazil’s soybean production is a wildcard to monitor. Peas are likely to continue falling or stabilize at lower levels, despite the recent removal of tariffs on Canadian yellow peas applied by the Indian government, as the move is temporary. Durum is expected to stabilize at last year’s prices but remain above the five-year average.
On the expense side, all fertilizer prices are expected to be lower YoY as input costs continue to stabilize. Although commodity prices are dropping, fertilizer prices are dropping more quickly, easing some margin pressure. Eastern profitability (winter wheat, corn and soybeans) will be tight but close to break-even over the three-month outlook period. Western margins will face considerably more pressure. Downside risk will come from increasing equipment and interest expenses as the sector grapples with rising costs per acre.
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