Corn prices are poised for recovery to levels well above those investors are factoring in, supported by growing demand which farmers will struggle to match, Monsanto said – foreseeing a recovery in values of a key weedkiller too.
The group - outlining its confidence in a sharp recovery in earnings growth in the year to August 2017, after unveiling below-forecast results, 2,600 job cuts and a tepid expectations for expansion over the coming year – flagged the prospect of support from higher crop prices.
"The fundamentals of agriculture… remain compelling," said Hugh Grant, the Monsanto chief executive.
Focusing on corn, he flagged an "unwavering" demand trend which was poised to drive prices to levels the market has not seen since June last year.
"Macro demand [for corn] remains robust," he said, citing growth of 1.3bn bushels a year over the past three years, fuelled by extra requirement for livestock feed as meat consumption grows.
"More than 90% of this growth in demand over this timeframe has been driven by feed and underpinned by middle-class protein consumption, which we expect to continue," Mr Grant told investors.
However, meeting this level of production increase, at a time when growth in agricultural land is "effectively constrained", would require a rate of yield increase of nearly 3% a year, twice the rate that the group believes likely.
"And it needs to be delivered in the face of the challenges presented by climate change."
The prospect of growth of some 500m-550m bushels a year in production raises the prospect of a "moderating" stocks-to-use ratio as – a key pricing metric, indicating the relative abundance of a crop, and so the degree to which buyers will be forced to pay up to secure supplies.
Mr Grant forecast a "modestly improved commodity corn price environment" beginning in the group's 2017 financial year, which starts next September.
Brett Begemann, the Monsanto chief operating officer, said that "beyond fiscal year 2016, we expect commodity [corn] prices to lift to $4.50-plus" a bushel, a price not seen by a spot contract in Chicago's futures market since June last year.
The spot, December contract was on Friday trading at $3.94 ¾ a bushel, with the futures curve showing values at $4.25 a bushel entering calendar 2017.
The comments contrast with a downbeat assessment from the United Nations Food and Agriculture Organization on Thursday of the trend in crop prices, and follow a forecast from Macquarie of ag market "bloodletting".
However, Macquarie counted corn among the few agricultural commodities on which it had a "bullish" outlook.
Monsanto executives also expanded on a forecast of a "small but steady" recovery in prices of glyphosate, the basis of its Roundup herbicide, predicting a decrease in a stream of Chinese supplies behind the weakness.
Pierre Courduroux, the Monsanto chief financial officer, said that "we wouldn't call necessarily the bottom from a price perspective, but we are expecting that, over time, we will see some level of rebounding glyphosate pricing".
"Based on our estimates, right now, most of the China producers would be selling below cost.
"We don't believe this is sustainable," although "it may last for a couple of months", he said.