USDA is projecting higher production of major commodities for the upcoming crop season for the U.S. and globally. The agency releasing their baseline projections for the upcoming marketing year at the USDA Ag Outlook Forum.
USDA is looking at increases in acreage for the three primary crops in 2023 with the biggest increase coming in wheat. As a result of that and a break from La Nina, the season average prices received by farmers for all three crops are projected to be lower than in 2022. However, they remain higher relative to historical averages over the past 10 years.
The agency projects the biggest drop in price for corn, down $1.10 from this year. USDA Chief Economist Seth Meyer estimating ending stocks will be up 620 million bushels to 1.889 billion bushels based on a record yield of 181. 5 bushels per acre and 2.4 million more acres. He says its due to the market signals which includes lower input prices. He says, “The corn to bean price ratio still gives you a little bit of favor to corn relative to where we’ve been at in history hence that 91 million acres of corn.”
However, the pressure on corn prices will also come from higher Brazil production. Meyer says, “You’re looking at a crop that’s approaching 100 million metric tons this year with normal weather, that’s a big crop that has implications for U.S. producers. On top of that the Chinese are now accepting Brazilian corn.”
Soybeans will also have increased South American competition with another record crop on tap in Brazil and Argentina seeing a rebound from their drought-stricken crop. Meyer says, “What do you think that crop looks like next year? You know you’re talking something into the neighborhood of 220 million metric tons of production. Somewhere in that neighborhood under normal weather assumptions that’s a lot of beans.”
But he expects this to be offset by higher U.S. crush demand. So, soybean acreage remains unchanged and ending stocks are only projected to grow 65 million bushels from last year. With a historically low 6.5% stocks to use ratio, prices will drop only 10%. Meyer says, “So as crush margins are good maybe we export a little less beans and we crush a little bit more domestically this has been one of the drivers in the soybean market here is crush. Folks got in their mind a 25% increase in crush capacity over the next several years.”
Wheat acres are also forecasted to be up 3.8 million acres from last season as higher prices plus crop insurance guarantees incentivized planting. “Those high prices for wheat some of it related to war in Ukraine you will observe that farmers have responded and planted a lot more wheat,” he says. So, USDA project a 7% increase in wheat ending stocks to 608 million bushels and a 50-cent drop in average price for the year.
Cotton acres are forecast at only 10.9 million acres, down 21%, but with higher yield, production is expected to be up nearly 8% which puts USDA’s price projection at 80-cents.
