The Corn Economy

Apr 8, 2024

Author: Krista Swanson

Motor gasoline use is expected to decline in the future even under a baseline case, but new tailpipe emissions rules really put the pedal to the metal – rapidly accelerating that process. This would be a major shock on demand for corn used to produce ethanol spurring potentially devastating impacts on farmers and the rural economy.       The New Tailpipe Emissions Rule The Environmental Protection Agency recently released its final rule for multi-pollutant emissions standards for model years 2027 and later light-duty and medium-duty vehicles with heavy reliance on the use of electric vehicles. The ruling dictates that sales of non-electric vehicles will drop from over 92% of new vehicle sales in 2023[i] to under 30% of new vehicle sales in 2032. In the EPA central scenario, that translates to a 6.9-billion-gallon reduction in motor gasoline use in 2032, a 5.7% decline from the baseline projection for that year. Motor gasoline use is expected to decline in the baseline, but...

Feb 16, 2024

Key Issues: Production

Author: Krista Swanson

USDA released the Grains and Oilseeds Outlook this week providing an initial look at the 2024/25 marketing year projections that include lower production, greater domestic use, increased exports, and higher ending stocks as compared to the current 2023/24 market years. The following is a summary and some additional context for five projections from the latest outlook.   Yield Corn yield is projected at 181 bushels per acre. Yield projections depend on the modeling approach and time series used. While a 3.7 bushel per acre increase over the 2023 record 177.3 bushels per acre may seem like a stretch, a regression on annual yields from 2023 to several different historical points including 1934, 1980, and 1996 all predict 2024 yields within about one bushel of the USDA projection.   Trendline yields are a reasonable expectation at this point. Adverse weather is generally thought to have a negative impact on yields but in 2023 a record yield was achieved in a year with widespread...

Feb 9, 2024

Key Issues: Trade

Author: Krista Swanson

A combination of climate, conflict, and currency values are factors in cost competitiveness that impacts transits and overall U.S. corn exports.   Climate Climate conditions brought widespread drought to the United States Corn Belt in 2023. Dry conditions in the Mississippi River basin led to record low water levels. As a result, barge weight and traffic restrictions were imposed, and the 7.7 million tons of corn moved by barge on the Mississippi River in 2023 was 30% lower than 2022 and 54% lower than 2021. Ultimately, the cost of added time and weight restrictions were factors contributing to a higher corn price at port but also meant pace of getting grain to the port was slowed.   Climate-induced waterway challenges for U.S. corn don’t end at the Gulf. Extreme drought has forced substantial scaleback of shipping through the Panama Canal, a key global maritime channel. The Panama Canal Authority (ACP) has reduced traffic to 24 ships a day, about two-thirds of the normal...

Dec 1, 2023

Key Issues: TradeTransportation and Infrastructure

Author: Krista Swanson

For the second year in a row, drought conditions are impacting transportation on the Mississippi River at the peak shipment point of the year. Shallower river levels mean barge weight restrictions, slower barge traffic, and higher costs to ship commodities on the river. Ultimately, this translates to a relatively lower price at the farmgate and higher cost for the world buyer.   Drought Slows Grain Barge Traffic in 2022 and 2023 The Mississippi River is an important channel for commodity transportation. The USDA reports the final mode of transport was barge for 13% of U.S. grains in 2020, and 46% of exported U.S. grains[i]. There are normally two peaks in grain barge movements, one in late summer leading up to the end of the marketing year for corn and soybeans, and the other emerging in the fall harvest season and into the post-harvest months.   The impact of low water levels on grain barge movements was notable in 2023, marking the second consecutive year of drought...

Oct 26, 2023

Key Issues: Production

Author: Krista Swanson

In the third quarter of 2023, the corn sector wrapped up the 2022/23 marketing year and entered the 2023/24 marketing year. Geopolitical tensions and international dynamics continue to be factors in the market. Looking ahead, war in Israel could have greater implications for corn if it spreads throughout the Middle East, along with the ongoing war in the Black Sea Region. On the macroeconomic side, interest rates continue to rise while the economy remains strong, a challenge for forecasting economic landing, especially considering geopolitical factors. Despite widespread drought across the corn belt during the growing season, the U.S. is positioned to produce one of the three largest corn crops on record. The positions the U.S. with grain needed to fulfill demand. Even with strong competition in the world market, the outlook for demand from ethanol, feed, and exports is more positive than last year. This report summarizes the State of the Corn Economy with a short perspective on...

Sep 28, 2023

Key Issues: Production

Author: Krista Swanson

USDA recently lowered the national corn yield projection from 175.1 to 173.8 bushels per acre and raised both planted and harvested acres. The increase in acres more than offset the impact of the yield decline, with a 23-million-bushel increase in projected corn production, still rounding to 15.1 billion bushels.   Should we expect further adjustments in corn acres and yields in upcoming reports? This question is on the minds of farmers and industry stakeholders right now. With great variability in early harvest reports, the answer will become clearer as U.S. corn farmers progress to the finish. In the meantime, here’s a look at three historical data relationships to provide historical context.   Path of Projected Planted Acres for 2023 USDA initially projected 92.0 million planted corn acres, based on farmer intentions in March 2023. Farmer surveys of actual planted acres and area remaining to be planted in the first two weeks of June led USDA to raise the projection to 94.1...

Sep 1, 2023

Key Issues: Production

Author: Krista Swanson

Remarkable growth in corn yields has boosted corn productivity in the United States over the past century. While corn production has risen, the land used to grow corn has not. United States farmers planted an estimated 94.1 million acres of corn in 2023, the highest level since 2013.   Despite status as the highest acreage of this decade, it falls short of the more than 100 million acres of corn farmers planted a century ago. In the past decade, U.S. corn production is over six times production of the 1930s with fewer corn acres.   Corn Yields Throughout the 1930’s the average U.S. corn yield was 24.2 bushels per acre, grown on an average of 102.2 million acres for an average production of 2 billion bushels of corn. In contrast, the 2010s brought an average U.S. corn yield of 161.5 bushels per acre, grown on an average of 91.4 million acres for an average production of 13.5 billion bushels of corn. In the decades between, yield grew steadily. On average, the annual increase in...

Aug 10, 2023

Key Issues: Production

Author: Krista Swanson

In the second quarter of 2023, drought was a big concern for corn growers. Despite drought concerns throughout the growing season, the U.S. is on track for record corn production, as of the July projections. While earlier in the season many were expecting corn yields to drop further from the initial trend yield projections, that isn’t as clear now as weather has turned more positive. The outlook for record corn production for 2023/24 is dampening price expectations. The USDA is projecting a $4.80 per bushel market year average price for 2023/24, a drop of $1.80 per bushel from 2022/23. Although the most recent cost of production forecast for 2023 shows relief in farm inputs, higher costs for interest and overhead expenses are keeping the total cost of growing corn elevated. Price expectations for 2023/24 are 27% lower than last year while the total cost of production is only 2.5% lower, putting pressure on farm margins for many corn farmers. Tomorrow USDA will release the August...

Jul 27, 2023

Key Issues: Trade

Author: Krista Swanson

Mexico is an important trade partner and leading export destination for U.S. corn. As Mexico’s domestic use of corn more than doubled over the past decade, the U.S. has helped meet the country's growing demand. Mexico issued a decree in February 2023 calling for the immediate ban on genetically modified (GM) corn in the masa or tortilla flour food sector. The Office of the U.S. Trade Representative (USTR) is in consultations with its Mexican counterparts over the issue. Continued and strengthened trade with Mexico is important to U.S. corn.   In this article, I’ll present a look at Mexico’s corn import needs and changes in trade flow patterns. First up, three takeaways from the analysis, followed by more detail.   Three Takeaways Mexico has made notable reductions in white corn imports from the United States in this marketing year. Through May, U.S. white corn exports to Mexico were 84.5% lower than the same period a year ago. And the U.S. total exports of white corn to...

Jul 5, 2023

Key Issues: Production

Author: Krista Swanson

Fourth of July fireworks weren’t the only eruptions in the nation over the past week – the corn market experienced an upheaval in reaction to unexpectedly high corn acres, weather pattern shifts, and stabilizing crop conditions. In the week from June 26 to July 3, the December 2023 corn futures contract dropped nearly a dollar landing at $4.93. Here is a look at the factors that led to this position and what we may expect ahead.   Analysis of Corn Acres, Weather, & Crop Conditions In their quarterly crop acreage report, USDA raised the 2023 corn planted area estimate to 94.1 million acres, a 2.1 million acre increase from the earlier estimate, and a 6% increase from 2022. The only two years in which corn-planted acres have exceeded the updated 2023 estimate are 2012 with 97.3 million acres and 2013 with 95.4 million acres. In 2016, the U.S. achieved a record corn production of 15.15 billion bushels with 94.0 million planted acres.   Ultimately this level of corn acres...