2022 has been a historic year for grain prices. From dry weather to continued concerns about the war in Ukraine, grain prices remained elevated this year. But, some analysts think the tide is starting to change for 2023.
“I am wearing claws today,” said Dan Basse of AgResource Company during Farm Journal’s Milk Business Conference (MBC) this week. “As you think about the grain markets, we’re a little more bearish. And I think it’s due to the slowing U.S. export potential.”
Basse, who has been bullish the past two years, admits he’s now bearish. It’s not just the disappointing export picture.
“I’m a little concerned about ethanol, which has no growth. And I’ve got this monster, and I mean it’s a monster soybean crop growing in Brazil,” he adds. “So as I think forward, if we don’t have a weather problem in Argentina, I believe that next year, December corn can trade well under $5 A bushel, and that there will be relief to the U.S. dairy farmer, in particular. As all this new crush capacity starts to come on line in the fourth quarter of next year, soybean meal prices should come down because of renewable diesel. So as we see it, we’re starting to turn relatively negative tide on the beat and grain.”
Basse also doesn’t see the ongoing conflict in Ukraine being a bullish factor for grains in the new year. He says today’s data is proof.
“My problem I have today is that Ukraine in the Black Sea is going to export a record amount of wheat, and they’re following behind corn. So as long as that corridor stays open, and Ukraine’s offering corn so cheaply now, even with the Board of Trade, Brazil is going to export 7 million tons of corn this month,” says Basse. “I think as you look down the road, we’re just not competitive. And so my problem is the domestication of the U.S. grain industry time and that we need to fall to where the rest of the world is.”
Not everyone agrees. Mike North of ever.ag and Roland Fumasi or Rabobank are painting a different grain outlook picture. Both think prices will stay elevated in the new year.
“We’re actually pretty bullish on grain prices,” says Roland Fumasi. “We think next year, average wise, feed prices for dairy could come down by 5% to 10%. And really, that’s not much, given how high they are today. So, we expect corn, for example, to likely average around that $6 range through 2023.”
“I tend to agree and as we interface with our grain clients, what we see is, given the higher cost of production, which through the Midwest, we’re gauging somewhere between $5.50 to $6 on corn,” says North. “To incentivize that corn planting, we’re going to need to see prices at those levels to make it go in the ground. And with a tighter balance sheet, ultimately, I think there’s enough of a speculative play to keep things afloat at these current levels.”
