Crop markets took the focus during the final day of Iowa State University’s Pro Ag Outlook.
Panelists taking part in the webinar series, which concluded Nov. 10, took a look ahead at 2023 and what prices may have in store for producers and end users. Chad Hart, Iowa State Extension economist, said there is quite a bit for economists to juggle going into the new year.
“When we are looking at things right now, we had the WASDE report that gave us a look at this year’s crop, and we also got a long-term forecast,” he said. “But you also have to look at the customers and what is happening with the economy.”
The Nov. 8 WASDE report showed fewer acres of corn planted in 2022 than expected due to wet weather. Hart said yields held strong despite drought conditions that emerged, with the USDA giving an average estimate of 172.3 bushels per acre. Expectations are for a rebound next year, and trend-line yields are for 181.5 bushels per acre.
Hart said the secondary market that affects corn more than others is ethanol, which is seeing some recovery back to historical averages.
“We’ve gotten past the COVID interruptions, another spike with the Texas freeze, but the market has been more volatile than in 2017 or 2018,” Hart said. “We reached record high ethanol stocks after COVID hit, but we’ve been holding stocks lower since then.”
In soybeans, acres were higher in 2022 than 2021, but yields were lower due to drought conditions. Production was slightly under last year, but perhaps most importantly exports dropped from last year as well.
“Since 2020 we’ve been on a fairly downward trend when it comes to international sales,” Hart said. “China represents our largest buyer, and 2020 was a surge from the Phase 1 trade deal. As that deal has faded into history, that has lightened over the last few years.”
With exports continuing to shrink, Hart said that may signal a top for soybean prices, which averaged $14 per bushel in 2022.
“If exports can hold, we’ll see overall usage hold and that should keep stocks tight, but they are expecting prices to weaken a bit,” he said. “The long-term forecast is that 2022 is our high-water mark for pricing and we will likely see some slow declines over the next year to year and a half.”
Hart said the reason for the slower decline in soybean prices is because overall soybean demand has continued to grow.
“It’s growing as fast as, if not faster than, soybean production,” he said.
That growth comes from renewable diesel and sustainable aviation fuel. Production plants for those products are popping up around the country, and more states have adopted or are considering a Transportation and Climate Initiative or Low Carbon Fuel Standard.
“That shows more demand for renewable fuels and longer-term pressure on the soybean market than any others,” he said. “It uses the same feedstocks as biodiesel, so that will be used in these areas.”