May 21, 2024

Demand, supply top ‘24 list for farmers, markets

Even as he donned an orange Illini cap, Steve Johnson, retired from Iowa State University Extension, advised farmers attending a Whiteside County Farm Bureau-sponsored outlook meeting to adopt the “Hawkeye strategy” and “lower your expectations.” Large U.S. crops of corn and soybeans in 2023, along with reduced export demand, means that farmers will face headwinds in 2024. Johnson advised farmers that a lower-price environment for corn and soybeans may be the new normal as markets become more comfortable with lower ending stocks.

ROCK FALLS, Ill. — More supply, less demand, where do we go from here?

Larger supplies of corn and soybeans and less demand will bring hard questions — and harder decisions — for farmers in 2024, according to a former Iowa State University Extension economist.

“I think maybe the bigger question mark for ‘24 is — are we going to have that demand out there?” said Steve Johnson, a retired specialist in farm management, at an outlook meeting sponsored by Whiteside County Farm Bureau.

“I think there are a lot of headwinds blowing against the grains for ‘24, just lots of uncertainty. We just harvested the biggest U.S. corn crop in history, 15.1 billion bushel crop. The supply is just way too large for the demand,” he said.

Two major markets, ethanol and biofuels and feed for livestock, continue to support the U.S. corn market, according to Johnson.

“Ethanol and feed is just carrying us right now. We need high crude oil prices so we can make ethanol. If you ever take ethanol, the Renewable Fuel Standard, away, you are going to have $2 or $3 in front of your corn,” he said.

“You ought to be fighting — whether it’s in Farm Bureau or a commodity group, you better be fighting.”

While livestock feed demand continues to be strong for corn and soybeans, demand from that sector may be slowing as 2024 moves forward.

“We have record ethanol demand, but now our livestock herds are getting thin. You have the smallest mother cow herd in 60 years. We just don’t have as many cows,” Johnson said.

“The hog industry does not look real profitable right now, thank you, California, and Proposition 12.”

Export demand has dropped. A higher U.S. dollar can shoulder some — but not all — of the blame.

“Where is the export market? People are finding someplace else to buy corn rather than from the U.S, primarily because of the high U.S. dollar,” the economist said.

Johnson said he is concerned that other factors may be impacting exports, indicated by the World Agricultural Supply and Demand Estimates report published in November by the U.S. Department of Agriculture.

“What happened to our export market? Our exports were 2.4 billion in 2022. They are 2.05 billion bushels now. They were buying more of our corn when it was higher priced.

“Now that corn is lower priced, they are buying less corn? There is something going on in our export program that we are not seeing, in global demand for U.S. corn,” he said.

“That is a real concern that I don’t think we paid much attention to until we saw the November USDA WASDE report. There are some real issues. They increased demand for ethanol, increased demand for feed, but they left that export demand the same. What happened to our exports, even at lower prices?”

So, what can farmers do?

“I think key for 2024 is the Hawkeye strategy. Lower your expectations,” the economist said.

Coming off of several years of record farm income and higher crop prices, Johnson said farmers need to adjust their expectations.

“The reality is that we are going to likely trend into 2024 with lower prices for the ‘24 crop because we have such large ending stocks, especially on corn,” he said.

For corn growers, the answer is simple.

“Well, we have to stop growing so much corn — you go first!” said Johnson, to laughter from the audience.

If fall anhydrous application is any indication, it won’t be the “I” states that blink on corn planting for 2024.

“As I came across Iowa, I was more likely to hit a nurse tank than a deer. There was so much anhydrous going on across Iowa,” Johnson said.

Fall tillage also indicated that corn acres likely aren’t going down anytime soon.

He said he’s been seeing big rippers being used to rip the cornstalks. “With this Bt technology, these stalks are extremely stiff and tight. You either have to mow them off, roll them up in bales or we bury the stalks. That was taking place everywhere,” Johnson said.

“Thirty-three percent of our rotation in Iowa is corn on corn. It tends to be one of the more profitable rotations. The reason we’ve seen so much corn on corn in Iowa is the demand for corn.

“With the livestock, we have to have so much corn and I think you are going to continue to see this deep ripping and incorporation of stalks.”

Barring a major weather catastrophe, technology will continue to push the production of large U.S. corn and soybean crops.

“The corn yields that we got on Nov. 9 were record yields in Indiana and Ohio. You have a lot of people who can grow a lot of corn. You did it this year with less than average rainfall. It probably says a lot about technology, whether it be seed or crop protection or tillage,” the economist said.

“You just don’t have to have a whole lot of moisture. Somehow, that corn finds that moisture and we don’t stress the crop like we did.”

Even as farmers may have to adjust their expectations away from recent high profit years, Johnson said they can still be alert to rallies and opportunities to sell at higher prices.

“You get a secondary chance. This doesn’t always happen. It happened in July. Funds came back in and bought, gave you another chance to sell, but around $5.60, $5.65,” he said.

“You say, ‘well, that’s not high enough, it has to go higher.’ It never went back. We’re not going back, folks. We’re not going back. Until we have some sort of shock, we should kind of get used to this.”

Setting a realistic price objective and keeping an eye out for rallies — and selling that rally — is one strategy.

“If I had to say, what is my price objective for this winter? The March. Five bucks. Not $6. Not $5.50. Five bucks. Sell the rally this winter, but sell it for the July,” Johnson said.

“Then, if you have the bushels and they are on your farm and they are dry, great. Deliver them in May and June. That is when we probably see better basis.”

For soybeans, the picture is not quite as sober. Soybean prices may be reflecting a new normal when it comes to ending stocks.

“While we went to the moon last year, average cash prices over $14, now we are coming down. The world is becoming more comfortable with these tight ending stocks,” the economist said.

“Brazil is No. 1, then the U.S., then Argentina, Paraguay, Uruguay. As long as every six months, we have a large crop, I think the market feels comfortable with these ending stocks of sub-300 million bushel.”

Johnson said farmers still holding soybeans should be keeping an eye on weather in South America.

“When we get problems in South America, sometimes we see this late winter rally. That is probably one that I would want to take advantage of in pricing new-crop ‘24 beans. There is some concern and that is what is supporting the bean market,” he said.

“If we rally with that South American crop problem, I would be selling ‘24 beans. I think beans could be more profitable than corn. I think beans could be more profitable because the upside is still sitting there.”

Jeannine Otto

Jeannine Otto

Field Editor