Tight Profit Margins to Continue
Published: Friday, May 17, 2024
The following is from Todd Davis, Indiana Farm Bureau's chief economist.
Indiana Farm Bureau's Chief Economist Todd Davis is offering up his insights on the latest U.S. Department of Agriculture World Agricultural Supply and Demand Estimates (WASDE) report released May 10.
According to Davis, the USDA is predicting soybean stocks to increase quite a bit—105 million bushels more than 2023—and corn stocks to increase at a more modest 80 million bushels from last year.
"The initial price projections show that margins will remain pretty tight for our farmers as increased stocks will lower prices from last year," Davis said. "But it's always important to keep in mind that these predictions are preliminary, assuming there won't be any bad weather and everything comes together production-wise. There's still a lot of room especially for Mother Nature to fiddle with those numbers."
He also noted that weather events will impact the supply and use estimates. "USDA is currently assuming weather that would produce record yields, so any weather event that reduces yield potential would reduce supply and potentially reduce ending stocks," Davis added. "The acreage report that will come from the USDA on June 28 will provide an updated outlook from actual planting data."
USDA projects 2024 soybean production to increase by 285 million bushels (7%) from 2023 due to increased harvested area and projected yield. Total soybean supply is projected to increase by 350 million bushels (7%) due to the larger crop and increased carry-in from 2023.
USDA projects soybean ending stocks to increase to a 10.2% stocks-to-use ratio, with the average U.S. farm price lowered to $11.20 per bushel.
USDA corn stocks are projected to increase slightly (4%) due to a projected reduction in corn production, partially offsetting the larger carry-in from 2023.
U.S. average farm price for corn is projected at $4.40 per bushel, down 25 cents from 2023.
USDA is projecting the 2024 corn crop to reach 14.86 billion bushels. If realized, the corn crop will be 3.1% smaller from 2023 due to a 5% reduction in planted area that offsets the 2.1% larger projected trend yield of 181.5 bushels per acre. Still, the 2024 corn crop could be the third largest crop on record due to USDA assuming a record corn yield. When including the larger projected carry-in from the 2023 corn crop, the corn supply is projected to increase by 1% from last year.
On the demand side of the balance sheet, USDA is projecting a 50 million-bushel increase in corn used in ethanol production and exports from the 2023 crop. Total corn demand is projected to increase by 100 million bushels from the current marketing year to 14.8 billion bushels.
For soybeans, USDA is projecting the 2024 crop to be the second largest on record at 4.45 billion bushels. This potential 7% increase in production is due to the 3.2 million-acre (4%) increase in harvested area from last year combined with the projected record trend yield of 52 bushels per acre (3%). If realized, the 2024 soybean crop would be 285 million bushels larger than last year's crop. USDA projects the 2024 soybean supply to increase by 351 million bushels (8%) because of the larger crop and larger soybean carry-in from 2023.
Fortunately, USDA is projecting soybean use to increase with 125 million bushel increases in crush demand (5%) and exports (7%) from the current marketing year. Unfortunately, the increase in projected use will not compensate for the increased supply. USDA projects 2024 soybean ending stocks to increase by 31% to 445 million bushels, a 10.2% stocks-to-use ratio. The increase in relative stocks will place downward pressure on price, with the 2024 U.S. average farm price projected to fall by $1.35 per bushel to $11.20.
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