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The early view for 2023
As harvest concludes, the markets begin to play the guessing game for next year’s crops. Last year we saw the early estimates favored corn, with the later estimates shifting back toward soybeans as input costs rose throughout the winter. Farm Futures magazine led off the 2023 projection cycle in August. They surveyed producers to test the waters for plans on the next crop year. Their survey found farmers plan to plant 94.3 million acres to corn and 87.3 million acres to soybeans. Given the current acreage estimates for 2022, that is a 5.7 million acre increase for corn and 200,000 acre decrease for soybeans. So at the beginning of harvest, farmers across the country were looking to greatly expand corn area, while holding soybeans roughly at the same level. At roughly the same time, the Food and Agricultural Policy Research Institute (known as FAPRI) was preparing the mid-year update of its agricultural baseline model. While the model wasn’t quite as positive as the survey, the crop acreage estimates were still tilted toward corn, with 91.1 million acres of corn and 87.9 million acres of soybeans.
USDA released its preview of 2023 with the publication of their long-term projections earlier this month. Within these longer-term projections, USDA assumes normal weather patterns across the years. Thus, the ongoing drought does not weigh heavily on the supply forecast. For corn, USDA projects 92 million acres will be planted, landing between the FAPRI and Farm Futures estimates. So corn area is expected to increase by 3.4 million acres. With a trend yield of 181.5 bushels per acre, that would result in corn production of 15.265 billion bushels. As with the projections for 2022 at this time last year, these projections are for records in yield and production. With corn supplies expected to bounce back, corn usage will need to keep up to maintain prices.
On the corn demand side, overall usage is expected to rebound. Feed and residual use is projected to increase by 400 million bushels, reaching back up to 5.7 billion bushels. Most of the growth likely has to come from residual (mostly harvest and storage losses) as the livestock sectors are mixed, with the cattle herd still shrinking, the hog herd holding steady, and the growth being limited to the poultry flocks. Ethanol is projected to gain 50 million bushels, returning back to the usage seen with the 2021 crop. While ethanol has been competitively priced versus gasoline, utilization of both fuels has been impacted by inflationary pressures and the concerns about the general economy. Food, seed, and other industrial uses for corn are seen as holding steady over the coming crop year, at 1.45 billion bushels. But the number I’ll be waiting the most closely will be the export figure. USDA is projecting a 125 million bushel increase in corn exports for 2023, reversing the trend of lower international sales over the past couple of years. The combined shifts put total corn usage at 14.75 billion bushels, below the levels seen for 2020 and 2021, but 575 million bushels above 2022. The gain in production is well above the gains in usage, which translates to higher ending stocks, with stocks rising to 1.7 billion bushels. The 2023-24 season-average price is projected to fall to $5.70 per bushel, $1.10 below the 2021 price estimate.
Where USDA landed in-between FAPRI and Farm Futures for corn, the same is not true for soybeans. USDA was less optimistic for the oilseed, as they expect fewer soybean acres in the coming year. USDA’s projection is for 87 million acres to be planted to soybeans, down 500,000 acres from this year. If that holds, soybeans will hold in the 87-87.5 million acre range for the third year in a row. Given a trend yield of 52 bushels per acre, soybean production is projected at 4.48 billion bushels, 134 million bushels above this year’s crop and 15 million bushels above the 2021 crop. This would put total soybean supplies for the 2023-24 marketing year at roughly 4.7 billion bushels, which is roughly the same level as we started the 2020, 2021, and 2022 marketing years.
Soybean usage is projected to grow as well, but not nearly as much as corn did. Domestic crush is expected to increase by 50 million bushels, mainly driven by biofuel demand for soybean oil. Soybean exports are estimated to increase by only 5 million bushels, with the bulk of the beans headed to Asian ports. Chinese soybean demand remains the key, but concerns about continuing COVID shutdowns and poor crushing margins have dampened short-term expectations for large increases in Chinese purchases. Total soybean usage will roughly equal the total the market experienced in 2021 and will be just 55 million bushels higher than last year. The growth in production is set to outpace the growth in usage, so 2023-24 ending stocks are expected to increase slightly to 246 million bushels. As with corn, USDA expects prices to fall, with the 2023-24 season-average price estimate set at $13 per bushel, down a dollar from this year’s estimate.
Profit margins expanded greatly during the 2020 and 2021 marketing years. The 2022 marketing year has maintained the crop price strength from the earlier years, but production costs have risen, eroding the profit base. USDA’s projection for 2023 show that erosion continuing, while still maintaining an outlook for crop profits. The extent of that erosion will depend on producers’ ability to manage costs and capture pricing opportunities from the markets. Current futures for the 2023 crops point to season-average prices above USDA’s projections, with corn pricing in the $6 per bushel range and soybeans pricing around $13.30 per bushel. Just as we found over the past couple of years, the after-effects of a drought on the markets are typically some longer-term pricing advantages, as both nearby and deferred futures are boosted by the weather problems. That longer-term drought pricing is still keeping profits in front of us, rather than having them slide into the rear-view mirror.
Listen to the November 2022 Crop Market Outlook video for further insight on outlook forthis month.
Chad E. Hart, extension economist, 515-294-9911, firstname.lastname@example.org