The spring planting season is fast approaching, and in 2024, it might come particularly early due to the mild winter we’ve had throughout the Midwest. This should allow farmers to get into the field sooner and not feel as crunched for time compared to other years.
Even with an extended planting window, operators will want to take a strategic and thoughtful approach to their crops to help ensure a successful year. It may be even more important than usual to think strategically this year, as U.S. farm income is estimated at $116.1 billion1, which would be a $40 billion decrease from 2023 and a 37% decline from the record $185.5 billion in 2022. Decreased commodity prices and relatively high input costs are driving the lower estimate, and as a result of this outlook, some farmers may be more cautious about major purchases such as new machinery or land.
U.S. row crops
The USDA released updated crop estimates in their February 8 World Agricultural Supply and Demand Estimates (WASDE) report. The 2023 U.S. corn yield is at 177.3 bushels per acre, unchanged from January’s estimate, while the stocks-to-use ratio is 5% higher than last year at 14.9%. The soybean yield is 50.6 bushels per acre, which is also unchanged from January’s estimate, and the stocks-to-use ratio is 1.5% higher than last year at 7.6%.
Export demand for these crops will likely not increase in the short term due to the substantial price advantage Brazil has over the U.S.
The 2024 crop insurance price guarantees are also currently being calculated and are nearly solidified at $4.73 for corn, $11.70 for soybeans and $7.00 for spring wheat. Eyes will focus on these prices throughout February and on March 28, when the USDA is set to release the 2024 Acres and Stocks report, providing another substantial acreage allocation of corn versus soybeans.
The USDA released its first iteration of the 2024-25 balance sheet at its Agricultural Outlook Forum on February 15. Planted corn acres were estimated at 91 million acres with a trendline yield of 181 bushels per acre, which would push the stocks-to-use ratio to 17.9%. Planted soybean acres were estimated at 87.5 million acres with a trendline yield of 52 bushels per acre. Soybean stocks-to-use ratio would also increase to 9.9% if estimates are met. Continue to watch the corn-to-soybean price ratio to incentivize further acreage changes.
Lastly, natural gas prices have been relatively low throughout the last 12 months, which leads to optimism with nitrogen prices. March 2024 futures of Henry Hub Natural Gas are down 45% year-over-year.
U.S. livestock and dairy
The U.S. cattle herd is at a 73-year low of only 87.2 million head, which will support elevated beef prices. The primary reason for the low herd was the extreme drought last year throughout much of U.S. cattle country.
Elevated cattle prices may eventually impact milk prices. Dairy producers in a position to consider any herd reduction are greatly enticed today by elevated beef prices. A reduction in the dairy herd will put downward pressure on milk supply and may cause a price rally.
The entire livestock sector is also currently benefitting from lower feed costs.
Local ag outlooks
Jared Nelson, Ag Banker, Casselton, ND
“The nice fall allowed a lot of farmers to get quite a bit of work taken care of. The mild winter is allowing us to hopefully have an early spring with some nicer weather, and not as much of a mad dash to get planting done. It also means we may be lacking some moisture going into spring planting, but hopefully we can catch some timely rains, which we have been lacking the last couple of years.
“We continue to see quite a bit of land coming up for sale in the area. Those who are willing to pay the high price for the land have an opportunity to buy if interested.
“My biggest concerns for 2024 include falling prices, which are going to really tighten up the numbers for farmers. We also continue to see land rents and real estate prices increasing. Finally, the lack of snow cover and the warmer temps have allowed topsoil to be really blown around this year.”
Andy Zuidema, Ag Banker, Willmar, MN
“It’s looking like an early spring, which is helpful and exciting! We have had some good moisture in December and throughout January. Land values are staying strong, too, with recent sales around $10,000 per acre.
“Corn and soybean crop yields were good in this area last year, along with sugar beets.
“My biggest concern for 2024 is negative commodity prices, though we may just be in a correction period.”
Global agriculture
In Brazil, the second corn crop, or “safrinha” crop, is currently being planted ahead of the historical average date, and its condition will be worth watching closely throughout the next few months.
To the south, drought conditions have reemerged in Argentina, causing concern for both corn and soybeans during critical growth stages. Over half of the country’s corn is currently tasseling, according to the Buenos Aires Grain Exchange (BAGE).
The USDA estimates that combined corn exports for Brazil and Argentina will be 93 million metric tons, a 16% increase year-over-year. This will be very bearish for U.S. corn prices if there are no production issues in South America.
Meanwhile in the Middle East, ongoing conflicts in the Red Sea region are causing logistical issues for both grains and inputs around the world.
What to watch for
There are many variables heading into the 2024 crop year that farmers should watch out for and we will be monitoring. This includes renewable fuel regulations, such as the U.S. Department of Energy’s Renewable Fuel Standard, which requires renewable fuel to be blended into transportation fuel in increasing amounts each year. We’re also seeing the emergence of renewable aviation fuel as an increasingly viable alternative.
Weather in both North and South America will be top of mind as well. Meteorologists are starting to forecast a shift from the current “Super El Niño” weather pattern to a “La Niña” pattern, which will lead to a normal to wet spring followed by a hotter and drier late summer. A key question will be whether the Corn Belt receives adequate moisture come planting season.
Finally, the estimated acres of both corn and soybeans in the U.S. for 2024 will be important to track. As always, connect with an experienced ag banker for guidance with your ag operation.