Another strong production year
At the beginning of the new year, USDA updates the ag sector by providing the final production numbers for the previous year and early look at usage based on the data since harvest. This year’s final numbers revealed larger corn and soybean crops, but relatively smaller changes in crop usage. With supplies growing faster than usage, projected stocks at the end of the marketing year have increased and the price estimates for the 2023 crops have declined from the lofty heights of the past couple of years. Profit margins have tightened substantially, but profit opportunities have not completely disappeared. The economic outlook for 2024 is somewhat of a return to normal, where prices are roughly in line with production costs and profits can be captured sporadically throughout the year.
On the production side, the storyline was very similar to the previous couple of years. After a fourth year of drought across a significant part of the US, corn yields across the nation were better than expected. The final national yield estimate reached a record 177.3 bushels per acre, up 2.4 bushels from the prior estimate and 0.6 bushel higher than the previous record. Record yields were established in the eastern Corn Belt. The Plains states also captured much improved yields, as did most of the Southeast, with the exceptions of the Virginias, Georgia, and Florida. However, the drought intensified in the upper Mississippi region, lowering corn yields in the states surrounding Iowa along the Mississippi River. Iowa’s corn yield was slightly higher, gaining a bushel to reach 201 bushels per acre.
The pattern for soybean yields was somewhat similar. While the national yield was not a record, it was a good yielding year despite the weather challenges. The national yield of 50.6 bushels per acre is a bushel higher than the 2022 crop. The eastern Corn Belt (Indiana and Ohio) set records, along with Arkansas, Mississippi, Tennessee, and South Carolina. Seven states produced lower soybean yields in 2023, with the largest reductions in Louisiana, Virginia, Wisconsin, and Kansas. For Iowa, the state average soybean yield fell 0.5 bushels to 58 bushels per acre.
Within the most recent estimates for the 2023 corn crop, production, usage, and stocks increased. USDA found that farmers harvested fewer corn acres than previously projected, lowering harvested acreage by 0.6 million acres. However, the increase in corn yields more than offset the drop in acreage. The final estimate for corn production came in at a record 15.342 billion bushels, up 108 million from the previous estimate. And, as is usually the case, when the production estimate increases, so do usage estimates. USDA added 25 million bushels to feed and residual usage and 50 million bushels to ethanol production. With production rising faster than usage, the 2023-24 ending stock estimate rose by 31 million bushels, to 2.162 billion bushels, adding roughly 800 million bushels to stock levels. Given the small upward adjustment in stocks, USDA lowered its season-average price estimate by five cents to $4.80 per bushel.
The soybean data tells a similar story to corn. Like with corn, the 2023 projected harvested area fell, by roughly 400,000 acres, but the increase in yields more than offset that. The combination brought the production estimate up by 36 million bushels, putting national production at 4.165 billion bushels. For the most part, soybean usage estimates were held steady, with soybean crush at 2.3 billion bushels and exports at 1.755 billion bushels. Thus, 2023-24 ending stocks increased by 35 million bushels, to an estimate of 280 million bushels, which is 16 million bushels higher than the 2022-23 ending stock number. Based on that, USDA reduced its 2023-24 season-average price estimate by 15 cents to $12.75 per bushel.
The pricing outlook for 2024 is mixed. Current futures for the 2023 crops have fallen below USDA’s season-average estimates. However, futures for the 2024 crops are higher than USDA’s early projections for those crops. For old crop pricing, the markets are searching for potential increases in crop usage, with exports being the most likely target. Both corn and soybean prices have some carry built into futures through mid-year. Corn futures continue to build on that carry into the new crop, reflecting the continuing drought and the expectation of fewer corn acres planted this spring. Meanwhile, soybean futures take a step back for the new crop, as many of the acres leaving corn will end up in soybean production. For both crops, prices have moved back into the range of production costs. So, in a sense, the markets have returned back to normal, where prices roughly equal costs and profits can sporadically be captured.
Listen to the latest Market Outlook video for further insight on outlook for this month.
Chad E. Hart, extension economist, 515-294-9911, firstname.lastname@example.org