The following is a brief analysis by Krista Swanson, the lead economist for the National Corn Growers Association.
The United States Department of Agriculture’s (USDA) annual Agricultural Outlook Forum began yesterday with a 2023 Agricultural Economic & Foreign Trade Outlook by Chief Economist Seth Meyer. The USDA coincidingly released the 2023 Grains and Oilseeds Outlook. This provides a near-term update to the USDA Long-Term Projections Report. The report was released earlier this month but used a baseline set in October 2022. Highlights from the USDA Ag Outlook Forum for corn center on new forecasts for acreage, yield and production, price and use.
- Acreage Projections for 2023: USDA provided an update to planted acres for major commodity crops. Although the economic-based approach for these estimates differs from the farmer-based survey responses used for the upcoming March 31st Planting Intentions Report, it provides insight into what we may expect. Corn is projected on 91.0 million acres. This is a reduction from the October 2022 baseline projection of 92.0 million acres, but up 2.4 million from 2022 planted acres. Soybean acres are projected to remain the same as 2022, at 87.5 million acres, while a large increase is expected in wheat, jumping from 45.7 million acres in 2022 to 49.5 million acres in 2023. Overall, combined acreage for the three crops is projected at 228 million acres, a 2.8% increase from 2022.
- Yield & Production Projections for 2023: Corn yield is projected at 181.5 bushels per acre in 2023, a 4.7% increase from the 173.3 bushels in 2022. If realized, this yield across the 91 million projected acres would result in a 15.1 billion bushel corn crop. Falling behind only 2016/17, that would be the second-highest production on record and 10% higher than the drought reduced 2022 crop. The 181.5 projected corn yield is achievable, but is above a longer-term linear trend dating back two or more decades, which produces a trendline yield of about 179 to 180 depending on years used. A shorter-term linear trend of recent yields would indicate a trendline yield greater than 181, but also has greater variance and lower confidence in predictability.
- Price Projections for 2023/24 Marketing Year: Corn price is projected at $5.60 per bushel for the 2023/24 marketing year, a decrease from the $5.70 projection in the October 2022 baseline, and $1.10 lower than the $6.70 revised price projection for 2022/23 corn. USDA estimated the total cost of producing corn in 2023 at $4.80 per bushel, a commodity specific figure that will not be updated until May. A $5.60 marketing year average price would result in an $0.80 per bushel average profit margin in 2023, or $145.20 per acre, on average. Prices of soybeans, wheat and cotton for 2023/24 are also projected lower than 2022/23. The soybean to corn futures price ratio is near 2.35. Although it has strengthened in favor of soybeans over the past month, it remains lower than recent years and below the longer-term trend of around 2.5. Despite some strengthening for soybeans, the change is unlikely strong enough for soybeans to win over any undecided corn versus soybean acres at this point.
- Use & Exports Projections for 2023/24 Marketing Year: USDA projects higher domestic use and foreign demand for corn in the 2023/24 marketing year as compared to 2022/23. While ethanol use is expected to remain flat year to year, the big driver in domestic demand change is a 6.2% increase in feed use. Exports are projected to increase 275 million bushels, or 14.3% to 2.2 billion bushels, with expectations for lower exportable supply from Ukraine and continued demand from China. The projected increased demand is surpassed by the larger production forecast and results in a higher projected stocks-to-use ratio at 13% for 2023/24, compared to 9.1% for 2022/23. There is room for growth in corn use this year and in future years, supporting our continued pursuit in biofuel policy, trade relationships, and new markets that use U.S. corn.
