Author: Adam Rabinowitz

USDA released the latest World Agricultural Supply and Demand Estimates (WASDE) report on March 11, 2025.  The most significant item presented was a clarifying “note” at the beginning of the report that is important for users of USDA WASDE estimates to understand.

“The WASDE report only considers trade policies that are in effect at the time of publication.  Further, unless a formal end date is specified, the report also assumes that these policies remain in place.”

In other words, the effects of tariffs that are to be implemented in the future, even if already announced, are not included in the report estimates.  This includes the Canada and Mexico tariffs that have been suspended until April 2.  Alternatively, retaliatory tariffs from Canada, along with U.S. tariffs on China and China’s retaliatory tariffs are all currently in effect and are reflected in the current WASDE estimates as if they will continue indefinitely into the future.  Users of these estimates need to consider this factor in their interpretation.  

The effects of trade policy on markets are particularly important given the large percentage of exports that are reflected in crops contained in the WASDE report.  Table 1 shows the March 2025 WASDE estimates of supply, use, stocks, and prices of four major row crops produced throughout the southern region.  Total exports are reported, along with calculated exports as a percentage of total use.  Corn has the smallest estimated exports as a percentage of total use at 16%, followed by wheat and soybeans at 42% and cotton at 87%.  Thus, when and if tariffs are implemented, the USDA estimates have the potential to change with the inclusion of trade impacts in the WASDE report.  

Beyond this note, there was very little movement in current estimates.  The average price of wheat at $5.50 per bushel is 5 cents lower than a month ago, continuing a downward trend.    Ending stocks of wheat increased to 819 million bushels.  For U.S. corn, the USDA is projecting no change in ending stocks from the prior month, staying at 1,540 million bushels and maintaining a $4.35 per bushel marketing year average price for 2024/25.  Soybeans were also stable at the prior month’s estimates; however, the USDA revised the marketing year average price down 15 cents to $9.95 per bushel.  Meanwhile, the balance sheet for cotton remained unchanged from last month, while the marketing year average price was adjusted down a half cent to 63 cents per pound.  The next potential market mover from the USDA comes at the end of the month with the release of the Prospective Plantings report.

Table 1. 2024/25 Wheat, Corn, Soybean, and Cotton Supply, Use, Stocks, and Price Estimates, March 2025 WASDE

Data Source: USDA March 2025 WASDE

Rabinowitz, Adam. “March WASDE Estimates and Note on Inclusion of Trade Policy.” Southern Ag Today 5(11.3). March 12, 2025. Permalink

Knowing the expected cost of production for a farmer is essential for developing effective risk management and marketing strategies.  At an aggregate level, forecasts of costs provided by the USDA Economic Research Service (ERS) can offer a useful benchmark to help understand the gross revenue and cost of production for commodities at the national or regional level.  These forecasts can be used to determine breakeven prices to inform a risk management and marketing plan.

The ERS’s 2025 national cost of production forecast for major southern row crops (cotton, peanuts, corn, and soybeans) indicates a decline in fertilizer and interest costs, contributing to lower total operating cost for most crops compared to 2024, except cotton. However, rising custom rates, other variable expenses, and allocated overhead costs offset some of these savings, resulting in an expected total cost of production that is effectively the same (within +/- 1%) as the estimated 2024 cost of production.  As shown in Figure 1, peanuts has the highest forecasted total cost per acre ($1,181.84), followed by cotton ($899.96), corn ($871.09), and soybeans ($624.77), highlighting the significant investment in producing southern row crops. It is important to note that these forecasts were released by the ERS in November of 2024, before tariff threats were made, that if implemented may increase costs of some agricultural inputs, notably fertilizer.

At the currently forecasted cost of production, the negative returns experienced by row crop producers in 2024 are expected to remain a major concern for all four crops in 2025 if prices do not improve. Figure 1 shows the 2024/25 marketing year estimated gross revenue for each crop based on estimated yields and prices as of January 2025.  The gap between the two bars on each graph illustrates the potential shortfall in revenue needed to cover 2025 production costs if yields and prices are maintained at current 2024/25 marketing year levels.

Whether yields can provide increased revenue is a question for the future, but given national corn yields in 2024/25 being estimated at record levels and soybean yields being estimated at about 2% below record levels, it is more likely that price is going to be the primary driver to increase revenue for these crops. Meanwhile, multiple weather events made a major impact on cotton yields that were about 12% below record levels and peanut yields that were about 11% below record levels.  Therefore, some of the shortfall in revenue for cotton and peanuts could come from higher yields.

The other component of the revenue equation is price.  Determining a breakeven price assists in making informed decisions about the price necessary to cover production costs.  To determine a breakeven price, divide the forecasted cost of production by expected yield.  To help adjust for record yields or significant shortfalls, Table 1 shows the five-year average yield for each crop along with the computed breakeven price. At the current national forecasted cost of production and average yield for the last five years, the breakeven price for corn and peanuts would have to increase 17% over the estimated 2024/25 price.  For soybeans, the price would have to increase 21%, while cotton prices would have to rise 59%.  

Ultimately, the actual cost of production varies among individual farms, as it depends on many factors such as economies of size and scope, relationships with input suppliers, and adopted management practices. Actual yields also vary, and thus, producers need to consider their own potential breakeven price. Repeating this exercise for a specific farm can be helpful in planning, making risk management and marketing decisions, and finding potential opportunities to make efficiency improvements to reduce costs for the upcoming crop year. 

The August 2024 World Agricultural Supply and Demand Estimates (WASDE) report included indicators of record yields and production, lower average prices, and some mixed market signals in the week that followed the release.  On August 12, the USDA released the WASDE report projecting a record corn yield of 183.1 bushels per acre.  The increased corn yield more than offsets a reduction in harvested acres, resulting in a forecast of 15.15 billion bushels.  If realized, total U.S. corn production would be the third-largest corn crop on record, roughly 200 million bushels behind the 15.34 billion bushel record crop of 2023.  With increased exports, ending stocks are expected to fall slightly to 2.1 million bushels.

The USDA also reported a record soybean yield of 53.2 bushels per acre, and forecasted record production of 4.59 billion bushels.  Even with a small increase in projected exports, ending stocks are projected to increase significantly to 560 million bushels.  As a result of these projections, the average farm price for 2024/25 is projected to be $4.20/bu for corn (down 10 cents/bu from the month prior) and $10.80/bu for soybeans (down 30 cents/bu from the month prior).  

For cotton, acreage and production estimates were both lowered.  Yields are projected at 840 pounds per acre, while planted acres are down about 500 thousand acres.  Combined with an expected increase in the abandonment rate from the prior month, production estimates are expected to be 15.11 million bales.  Total use also is projected to decline with decreases in both domestic use and exports, resulting in a 4.5 million bale ending stock.  Even with lower ending stocks, the average farm price for 2024/25 is projected to be 66 cents/lb (down 2 cents/lb from the month prior).  

Long-grain rice production is expected to decline only slightly to 167.2 million hundredweight, with ending stocks following suit, down to 23.2 million hundredweight. The average farm price remained steady at $14.50/cwt.

The week that followed this report was filled with ups and downs, but overall indications of a low-price environment this fall and winter.  Table 1 illustrates the last futures market trade price for November/December contracts for corn, soybeans, cotton, and rough rice for each day since August 9, the day before the WASDE release.  On August 12, the day of the release, the corn contract increased 6.5 cents from the prior day, with an attempt to stay at the $4/bu mark that didn’t make it through Friday.  The November soybean futures price saw a 16.5 cent drop from the prior day and continued to fall thereafter, down to $9.57 by the end of day Friday, marking a one-week drop of 45.4 cents/bu.  Meanwhile, cotton appeared to make an attempt at the 70 cent/lb mark after the WASDE release, but ultimately has continued the fall to near 67.24 cents/lb by the end of the week.  Rough rice initially dropped 28.5 cents from the prior day, but did rebound to above $15/cwt before pulling back again to close out the week at $14.725/cwt.  The reaction to the August WASDE report indicates a continued downward trend in futures prices, with a high likelihood that prices remain depressed through harvest. The 2024/25 marketing year is setting up to be a challenging year for profitability for most farmers. Producers need to ensure they are obtaining the most out of their  marketing plans under these challenging circumstances.  

Table 1. Futures Market Prices around the August WASDE Report for Nov/Dec Contract Dates for Select Commodities

References:

USDA World Agricultural Supply and Demand Estimates, August 12, 2024.  Available at: https://www.usda.gov/oce/commodity/wasde/wasde0824.pdf

Rabinowitz, Adam. “The Week that Followed the August WASDE Report.” Southern Ag Today 4(34.1). August 19, 2024. Permalink

The Nonrecourse Marketing Assistance Loan Program (MAL) is a marketing tool available for select commodities.  Authorized through Title I of the farm bill, MALs provide cash to producers at harvest to allow storage and marketing of the crop for a nine-month period following harvest.  Producers repay the MAL (with interest) or forfeit the crop that was pledged as collateral to the Commodity Credit Corporation (CCC).  MAL rates are defined in the farm bill for each eligible commodity and are thus a point of negotiation in farm bill debates. 

On May 1, 2024, the Senate Majority released their farm bill position, which details an escalator based on the percentage increase in cost of production compared to the previous five years, as estimated by the USDA Economic Research Service (ERS).  There is a cap in the Senate Majority position of a 10% increase over the 2018 Farm Bill loan rates.  

The House Committee on Agriculture then proposed new loan rates that are predominately 10% higher than the existing loan rates for the major crops listed in Table 1.  This proposal passed out of Committee on May 24, 2024.  Details of the two farm bill positions can be found in the May 24, 2024 Southern Ag Today article.

The purpose of this article is to explore the differences between the Senate Majority position and the House Ag Committee bill, as well as to illustrate the degree to which the MAL can be used as a marketing tool to cover operating costs of production.  Table 1 shows the ERS cost of production estimates, FAPRI projected commodity prices, the current loan rate, and the proposed Senate and House MAL rates.  The “percentage increase in operating cost” compares the 2024 estimate to the five-year average 2019-2023 operating costs.  In all crops listed there is at least a 10% increase in operating costs compared to the previous five-year average, with rice operating costs estimated at a 16.7% increase.  Therefore, the Senate position would trigger the 10% cap on the increase in MAL rates.  This means that both the Senate position and House committee bill would result in the same loan rate at the present time for all but peanuts and cotton.  There is an additional $0.50/ton in the Senate position for peanuts compared to the House bill.  The calculation of the upland cotton loan rate is more complicated than illustrated in the Senate summary document.  The 2018 Farm Bill specifies a range of $0.45-$0.52/lb for the loan rate.  At a 10% increase, that would result in the Senate position of $0.50-$0.57/lb.  The House bill specifies $0.55/lb, thus being higher or lower than the Senate position, depending on how it is implemented.    Furthermore, the Senate position would require an annual calculation for all loan rates and then an adjustment based on the current 2018 Farm Bill loan rates. 

The other question is the degree to which the MAL can be used as a marketing tool to provide short term funding compared to the operating cost of production for these crops.  Table 2 shows the ratio of the 2018 loan rate to the 2018 operating cost per unit.  For all but sorghum and upland cotton, the ratio was greater than 1.0, indicating coverage greater than 100% of the operating cost of production at the time the 2018 Farm Bill was written.  The Senate proposal at the 10% loan rate increase and the House bill produce the same ratios for all but upland cotton.  In both of these bills, there is a decrease in the ratio of the loan rate to the operating cost per unit for all crops other than barley and upland cotton.  In fact, corn, oats, rice, sorghum, and upland cotton all have a ratio below 1, indicating loan amounts less than 100% of the operating cost of production.  Farmers who use this marketing tool should consider this relationship to better understand how much of their operating costs can expected to be covered at harvest by this program.

References

Fischer, Bart. 2024. Battlelines Are Being Drawn: Comparing Current Farm Policy Proposals.  Available at: https://southernagtoday.org/2024/05/24/battlelines-are-being-drawn-comparing-current-farm-policy-proposals/

Rabinowitz, Adam. “Current Farm Bill Negotiations for the Marketing Assistance Loan Program.” Southern Ag Today 4(26.1). June 24, 2024. Permalink