Record U.S. Crops Lower Prices: What USDA Forecast Means for Ag

Corn field landscape

In its World Agricultural Supply and Demand Estimates (WASDE) report for May, USDA offers its first official assessment of global supply and demand and U.S. commodity prices for new crop in marketing year 2023/24.

Corn Forecast: Neutral to Bearish

The U.S. corn outlook for 2023/24 calls for increased production, greater domestic use and exports, and higher ending stocks. U.S. growers are expected to plant 92 million corn acres. If trendline yields of 181.5 bushels per acre hold, the 2023 crop could produce a record 15.3 billion bushels, up 10% from last year.

Total corn use domestically is projected to increase 5% compared to 2022/23. Corn used for ethanol is projected to grow 1% because of increased gasoline consumption and inclusion rates into gasoline. Meanwhile, corn for feed and residual use is expected to be up 7%.

Slumping corn exports have grabbed much of the attention recently. In its May report, USDA lowered old crop (2022/23) exports an additional 75 million bushels to 1.775 billion, a 28% drop from last marketing year if realized.

By comparison, USDA projects exports for the 2023/24 U.S. crop to rise 325 million bushels to 2.1 billion due to lower prices and increased global trade. Even with its projected rebound of U.S. corn exports, USDA expects Brazil to be the world’s top exporter for the second consecutive year.

What does this report mean for corn producers?

Figure 1: Corn: Spread Between Old and New Crop Carryout And Year-over-Year Percentage change in marketing year average price for 1974/75 to 2023/24

Despite a projected large U.S. crop in 2023, USDA’s report was neutral to bearish for corn. Expectations heading into the report favored supply outpacing use and that is what we got:

  • The stocks-to-use ratio, at 15.3%, would be the highest level since 2018/19, while the season-average farm price would decline $1.80 from the last marketing year to $4.80 per bushel.
  • Ending stocks are projected up 805 million bushels from last marketing year, which if realized, would be the highest year-over-year increase since 2004/05.
  • The spread between old and new crop carryout in 2023/24 would be the sixth highest since 1974/75. As Figure 1 shows, each of these periods have experienced large price swings toward the downside, setting up for bearish expectations for the upcoming marketing year.

The corn balance sheet likely will change in coming months as weather will play an important role. Margin management will be key.

US Corn Stocks To Use and average farm price for 2009/10 to 2023-24F

Soybean Forecast: Bearish

USDA anticipates 87.5 million acres of soybeans planted, trendline yields of 52 bushels per acre and a resulting record 4.51 billion bushels, an increase of 5.5% from last year.

US Soybean Stocks To Use and average farm price (2009-10 - 2023-24F)

The result could be increased supplies, crush and ending stocks, according to USDA. Soybean crush is projected to reach a record 2.31 billion bushels, up 4.1% from last year. Favorable crush margins and strong demand for soybean oil as a biofuel feedstock are expected.

USDA forecasts soybean meal disappearance to increase 2% compared to 2022 due to lower prices and modest growth in poultry production.

Exports are projected to fall by 40 million bushels to 1.98 billion. This is partly due to increased production in South America. Limited gains in global import demand also could lower U.S. soybean exports.

Compared to 2022, soybean ending stocks are projected higher at 335 million bushels, close to the crop’s 10-year average.

What does this report mean for soybean producers?

A large crop is expected to reduce the U.S. season-average price for soybeans to $12.10 per bushel compared to $14.20 per bushel in 2022/23. The stocks-to-use ratio is projected to increase from 4.9% to 7.6%, which is still below the 10-year average of 8.3%.

Overall, the report was bearish for soybeans with estimates for 2023/24 ending stocks 53 million bushels above trade expectations.

Wheat Forecast: Bullish

The 2023/24 outlook for U.S. wheat includes lower supplies and exports, increased domestic use and smaller stocks.

U.S. Wheat Stocks-to-Use and average farm price for 2009-10 - 2023-24F

Continued drought shaped USDA projections for wheat production. Despite the big jump in planted acres, USDA projects only slightly more bushels – 1.659 billion for 2023/24 versus 1.65 billion this year. As a result, smaller beginning stocks and lower U.S. wheat supplies are forecast.

Total wheat use continues its downward trend to a projected 1.837 billion bushels for 2023/24. This would be the lowest level since 1976/77.

What does this report mean for wheat producers?

USDA pegged 2023/24 U.S. ending stocks at 556 million bushels, below the average trade expectation of 602 million bushels. If realized, this would be 7% lower than last year and the lowest ending-stocks level since marketing year 2007/08.

The stocks-to-use ratio is projected to decline for a sixth consecutive year. At 30.3%, this would be the tightest level since 2013/14.

The projected 2023/24 season-average farm price is $8 per bushel, down $0.85 from last year’s record high. Overall, the report for wheat was bullish and the wheat balance sheet remains tight.

Global Corn and Soybeans (Brazil and Argentina)

The market has paid close attention to the 2022/23 corn and soybean crops in Brazil and Argentina. Brazil is expected to harvest massive corn and soybean crops while Argentina continues to be impacted by severe drought.

Brazil’s corn production came in higher than pre-report expectations and was increased 5 million metric tons to a record high 130 million metric tons in the USDA report. In a bit of a surprise to the market, Argentina’s corn production also increased above the markets expectation, coming in 2 million metric tons above pre-report expectations for a projected total of 37 million metric tons.

Despite Brazil’s large corn crop this year, the global stocks-to-use ratio remains below its 10-year average at 25.6%.

For soybeans, Brazil’s production came in slightly higher than the trades expectations -- 155 million metric tons (a record if realized) versus 154.9 million metric tons. USDA kept Argentina production at 27 million metric tons; trade expectation signaled 24.4 million metric tons.

The global stocks-to-use ratio for corn is tight. It is near the 10-year average for soybeans.


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