So product development, new products, and line extensions. And then you take the kind of under that umbrella, some of the big drivers of course, it’s the veg oil, S&D in North America, because as we saw it play out in ’23 and it will continue in ’24, we’ve got a new industry with new demand building. The markets doing its work, supply is adjusting, and it can be pretty sensitive to that oil pipeline, veg oil prices in North America, which of course, is fairly sensitive to the crush margins in North America. And the other, of course, is Argentina, where you’ve got a weather situation there much better than last year where bean production should maybe be double what last year was and you’ve got a new government in place and so how other policies and incentives play out, I think that’s a big one to watch.
And then of course, you always have got to think about China, not only their economy and how it develops the macro just from an overall demand, and then of course, how they think about stocks building. So I think those are kind of the big flags that we think about right now. If you look at the curves and the outlook, people aren’t predicting much disruption at this point.
Ben Theurer: Thank you very much.
Gregory Heckman: Thanks, Ben.
Operator: The next question is from Adam Samuelson with Goldman Sachs.
Adam Samuelson: Yes, thank you. Good morning, everyone.
Gregory Heckman: Hi, Adam.
John Neppl: Good morning.
Adam Samuelson: Hi. So maybe continuing along that kind of line of questioning, if you think about kind of the approximately $9 EPS, it would seem to imply give or take a $1 billion of segment profit reduction on a year on year basis. And just helping, can you help dimensionalize the segments where that’s coming? Presumably merchandising – processing is the largest contributor, but at least frame kind of what kind of year on year decline, you’re currently kind of thinking about for refined and specialty oils, sugar, just to help put the decline in processing in better context. Then I got a follow up.
John Neppl: Yes, Adam, this is John. I think there are really three big drivers to the year over year change, and the largest is what we’re assuming on the processing side certainly globally that’s probably, I’d say close to 80% of the variance. When you look at the gross variance, we have some things that are going to be up, we expect to be up, but that’s a big piece of it. And then the other big drivers, RSO, Refined and Specialty oils being down from probably a couple of hundred million from where we finished this year in 2024 and then the other one is sugar, we’re calling down given ethanol prices and environment in Brazil. But then we have some other things going the other direction to ultimately get to the change. But certainly the largest is a processing segment at this point.
Adam Samuelson: Okay, that’s helpful. So, I mean, within that processing, if it’s 80% or so, that implies something, what, a $70 to $80 – sorry, $15 to $20 a ton lower kind of global kind of crush margin, decline on your footprint. Can you help frame kind of regions where that is kind of a larger kind of headwind versus not, and how more North America crush and soy meal and the return of Argentina to the export market in the second quarter kind of is factoring into your kind of the regional balance of your network.
Gregory Heckman: Yes, let me start. I’ll start on that. Yes. So if you think about and maybe back into it from soft seeds, we still expect those to be strong but kind of down slightly. They’ll be off some from ’23 but should still be good in both Europe and North America. But soy is really the one, as you’ve called out. So I think everything will be softer if you look at the regions except Argentina, which Argentina was a drag last year to everything and we had to cover it with the global system. So now you’ll see Argentina be better as we get into harvesting Q2 and you start to see the crush come up there. Of course it’ll depend on, as we said, the government policies and how the farmer markets. But that’ll be key. South America, you know, Brazil continues to currently be strong on new crop.
But of course it’s inverted as well where we’re seeing farmer liquidity be slower there and then the EU right now pretty strong in the spot and that’s been on meal demand. But again, the curves are inverted there as well. In the U.S., while the Q1 is good, of course we see the curves kind of be that weaker in Q2 and Q3 and then contemplate a better Q4 with the new crop. And then I think the farmer selling, which I said, it’s slower on all regions and they’ll be very hesitant here until the market kind of settles out and we see some direction.
Adam Samuelson: All right, that’s some really helpful color. I’ll pass it on. Thanks.
Gregory Heckman: Thank you.
John Neppl: Thanks, Adam.
Operator: The next question comes from Steven Haynes with Morgan Stanley.
Steven Haynes: Hi, good morning and thanks for taking my question. If I could just come back to the guidance for ’24 real quick. Was hoping maybe you could just give a bit more color on how you see that. Maybe phasing out over the course of the year would imagine that 1Q maybe has some favorability and it’s still from the back half of 2024. So I know you don’t give quarterly guidance, but if you can maybe help size your expectations for the first quarter versus the balance of the year, that would be helpful. Thank you.
John Neppl: Yes, Steven, this is John. We’re looking today when we look forward at our forecast, we’re expecting it to be pretty closely balanced between first half, second half, actually pretty close to 50/50. And I would say waiting on the first half of the year, more 60:40. And on the back half of the year, kind of the mirror image more of a 40:60. That’s kind of how we’re seeing the year at this point.
