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Written by Guil Signorini, Department of Horticultural and Crop Science, The Ohio State University
Earlier this season, we warned of apparent optimism for Brazil’s grain production in the 2023/24 season. Belatedly, it appears that the public authorities in Brazil and the United States (CONAB and USDA, respectively) have recognized what we have been discussing and revised their forecasts downward. In February, CONAB reviewed its soybean yield forecasting model and lowered Brazil’s production forecast from 162 million tonnes in November 2023 to 149.4 million tonnes (down 7.8%). USDA maintained more conservative changes, now at 156 million tons, compared to 163 million tons three months ago (down 4.3%). The corn forecast was also revisited as expected. Forecasts decreased by 4.8% (CONAB) and 3.9% (USDA), with the Brazilian corporation forecasting 113.7 million tons and USDA 124 million tons for the entire 2023/2024 corn season.
Aside from the (still) considerable differences between agency estimates, my concern was with the interference that inflated official forecasts could cause in future prices. CME Chicago futures are not showing any major reaction to the supply withdrawal now that the forecast looks more realistic for Brazil. Financial analysts rightly saw this coming. CME soybean futures are bearish, while corn futures are modestly recovering. So, as of the end of February, the March 2024 soybean futures price was $11.29 per bushel. It has been trading around $11.45 per bushel for the next several months, with both prices falling below $12 per bushel. Corn futures are bullish, with a range of $4.24 for May 2024 delivery to $4.61 for December 2024 delivery.
Official and reputable research groups are somewhat consistent with the numbers from CME Chicago when making predictions for the upcoming American season. The Feb. 8 WASDE USDA report projects average farm prices for soybeans and corn at $12.65 and $4.80 per bushel, respectively. Researchers at the University of Illinois FarmDock argue that favorable weather conditions and the resulting large crop volumes could further pressure farm prices. International ending stocks are also expected, probably due to lower imports in major Asian countries. FarmDoc projects average U.S. farm gate prices for new crops of soybeans and corn at $11.30 and $4.40 per bushel, respectively.
U.S. farmers should consider these price projections carefully as a tough season appears to be in the offing. I say I’m taking on the challenge with my marketing and farm income hat on. First, the average farm prices listed above are very different from prices from the past season or two. With soybean and corn prices above $13.60/bushel and $5.70/bushel this season, they are effectively out of reach, highlighting the need for a solid marketing plan that combines forward sales, targeted orders, and storage. Become. Second, the news of tight commodity prices comes at the same time as the Department of Agriculture communicates significant declines in farm income projections. According to the February report, agricultural net cash income in 2024 is estimated to be 24.3% lower than in 2023 and 39.8% lower than in 2022. Net agricultural cash receipts include cash receipts from agriculture and farm-related receipts (including direct farm program payments from the federal government). government) minus cash expenditures. The main drivers of the sharp decline in farm income are a 6.3% decrease in crop receipts (partially reflecting the price trends mentioned above) and a 3.7% increase in cash expenditures compared to 2023.
On the bright side, Brazilian producers’ experience with purchasing inputs could have an offsetting effect. According to a recent report by IMEA (Mato Grosso Institute of Agricultural Economics), farmers spent 16.4% and 25.3% less on corn and soybean fertilizer this season compared to the 2022/23 season, respectively. The Commodity Market Outlook prepared by the World Bank (WB) supports these numbers. WB’s Fertilizer Price Index is down nearly 35% compared to his year ago, and the index is at its historical average. The WB index is expected to decline by a further 15% during 2024, creating a positive scenario for the US season. When it comes to crop protection, Brazilian farmers continue to suffer from increased expenditures, mainly due to the development of weed resistance. Fortunately, the US forecast is very different. Prices for chemicals and biopesticides are projected to increase by 0.8% to 2% compared to 2023, adding some pressure to the marketing side of U.S. agribusinesses. Finally, seed costs have increased for the second consecutive season in Brazil. IMEA reports that high-tech corn operations spent 12% more on corn seed than last season (up 35.4% compared to 2021/22), due to the impact of reforestation operations as documented in a previous article There is also. Soybean seed prices have fallen by 17% compared to last season, but continue to rise compared to two years ago (36% increase compared to 2021/22). Looking to the upcoming U.S. farming season, corn seed prices are expected to decline slightly, while soybean seed prices are expected to remain at similar price levels to 2023.
The US growth period is approaching, and the challenge lies in marketing and sales. Projections show revenue declines for both soybean and corn production. It is the right thing to do to plan your sales in advance to manage risk and further reduce farm gate prices. The forecast also suggests that farmers may be looking to realize fertilizer cost savings while keeping chemical and seed expenditures at the same level or lower than last season. It will be another great harvest season, rooted in the hard work and resilience of the American people.
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