Lower average corn, soybean prices predicted for 2024

CHAMPAIGN, Ill. — U.S. farmers produced a decent corn crop in 2023 that has led to a substantial increase in supplies compared to last year.

“We had 95 million acres planted with a 175-bushel yield number that resulted in 15 billion bushels of corn,” said Joe Janzen, assistant professor in the College of Agricultural, Consumer and Environmental Sciences at the University of Illinois.

“The yield was below trend, but we’ve been in a below-trend yield situation for the last five years,” said Janzen during a presentation at the Farm Assets Conference, hosted by U of I Extension and the farmdoc team.

“For the rest of the year, most of the action will tend to come from the U.S. export number,” he said. “A year ago, we had really disappointing corn exports, but export numbers have rebounded in a significant way.”

The ending stocks number for corn is estimated at a little over 2 billion bushels.

“That is a relatively burdensome level of ending stocks and that’s going to drive prices lower,” Janzen said. “We’ve seen a pretty substantial year-over-year decline in the season average price at the farm gate from $7 per bushel a year ago down to $4.85 per bushel.”

The soybean situation is somewhat different.

“Driven in part by those extra corn acres, there were fewer soybean acres in 2023, totaling 83.6 million acres,” Janzen said. “That kept the supply situation relatively tight for soybeans relative to corn.”

Usage for soybeans is based on the domestic crush and exports.

“Historically, it has been close to half of the soybeans go to domestic crush and the other half to exports,” the agricultural economist said. “But we’re moving to a situation where the domestic crush is becoming more important and part of that is the increase of renewable diesel.”

Janzen is optimistic about soybean exports.

“Last week, we saw large export sales announced by USDA, so that leaves us with a tight ending stock situation at around 200 million bushels,” he said. “The USDA average price forecast is at $12.90 per bushel.”

For the 2024-2025 crop year, the U.S. Department of Agriculture is predicting U.S. farmers will plant 91 million acres of corn.

“Given where we’re at with new crop prices, there is maybe some room to dial that number back because corn prices are fairly low relative to soybean prices,” Janzen said.

“The USDA has 181 bushels per acre for the national corn yield estimate, and if we get that trend-line yield, even with the lower acres, we’ll still have about 15 billion bushels of corn produced in the U.S.,” he said. “That keeps the supply pipeline pretty full going forward.”

The USDA is projecting modest growth on feed use and no growth on ethanol use in 2024.

“The USDA is fairly optimistic on exports at 2.05 billion bushels and that gets us to a relatively burdensome stocks to use level of 18%,” Janzen said.

“That’s typically associated with prices that have a 4 in front of them and not a 5 or 6,” he said. “The USDA price projection is $4.50 per bushel and I’m a bit more optimistic at $4.70 per bushel.”

Given the current soybean prices, there is a reason for farmers to plant more soybeans than last year.

“The USDA is projecting 87 million acres and I say we add more to that,” Janzen said. “The trend-line yield estimate is 52 bushels per acre, but we haven’t hit that in the last two years.”

For usage, the USDA is estimating a strong domestic crush, increasing it a little bit from the prior year and there is relative optimism for soybean exports. The USDA forecast for price in 2024-2025 is $11.30 per bushel.

“The planting decision will be driven by the relative price of corn and beans and the current ratio is around 2.5,” Janzen said. “The new crop futures for soybeans are 2.5 times the price of corn and that will favor beans.”

A Look Ahead

“Headed into 2024, it looks like it could be very similar to where we were in 2013,” said Nick Paulson, assistant professor in the College of ACES at the U of I.

“The good news is we had a couple really good income and return years on average and most farm operations have taken advantage of that and put themselves in a good financial position to weather a period of lower returns,” Paulson said.

Unfortunately, production costs closely followed the trends in income during 2021 and 2022.

“In 2022, on average it cost almost $1,200 per acre for corn production and in 2023 we’re expecting production costs to continue to creep up,” Paulson said.

“Potentially there could be some relief in 2024 driven by lower fertilizer prices, but no significant reductions on the cost side,” he said. “We tend to see costs follow returns with a one- to two-year lag on both the upside and downside.”

Therefore, Paulson said, it is not an optimistic picture.

“We’re looking at 2023 and 2024 returns below the cash rent levels we see in central Illinois,” he said.

One strategy for farmers in 2024 is to focus on maximizing efficiencies.

“Make sure your machinery is appropriately sized for your operation,” the U of I professor said. “And look at your tillage and see if there’s any way to reduce tillage passes or make lighter tillage passes.”

There is some optimism in 2024 for interest rate reduction, Paulson said.

“For capital purchases, use the good years to invest and then pull back in leaner times to manage through tighter returns,” the professor said.

“Getting cash rents down is easy for us to say, but it is hard to implement,” he said. “Communication with landlords is key to make sure they understand the economics.”

Paulson also encourages farmers to focus on marketing.

“Be in a position to take advantage of profitable sales opportunities,” he said. “That becomes more important when we’re entering into a market squeeze for 2024.”