Category: Crop Marketing

On Friday June 28^th the USDA released its annual Acreage report. The report estimates planted acreage of principal crops based on producer surveys conducted in the first two weeks of June. Nationally, principal acres planted were estimated at 315.177 million acres, up 1.866 million acres compared to the March Prospective Plantings report and 4.424 million acres lower than last year (Table 1). Southern states accounted for 22.8% of principal crop acreage. The largest negative and positive percent change (highlighted in Red and Black in the tables below) in principal crop acreage compared to the March Prospective Plantings report, in the southern states, were Oklahoma -5% and South Carolina +8%. Tables 2-7 show acreage changes, by state, compared to last year and the March Prospective Plantings report for corn, wheat, rice, soybean, peanuts, and cotton. 

Corn acres planted were estimated at 91.475 million acres nationally, with the southern states accounting for 10.1% of planted acres. National corn acres were higher than most pre-report predictions and 1.4 million acres greater than the March Prospective Plantings report. Corn futures prices declined 13 to 16 ½ cents for the day. In the southern states, South Carolina had the largest increase, compared to the March report, adding 80,000 acres (+27%), while Louisiana and Tennessee had 9% decreases in planted acres. Nationally, the report indicated that corn left to be planted was 3.36 million acres.

All wheat planted acres were estimated at 47.24 million, down 258,000 acres compared to the March estimate. Revisions in acres were made for Alabama (-15,000 acres), Arkansas (+5,000), Georgia (-25,000 acres), South Carolina (-5,000 acres), Texas (-200,000 acres), and Virginia (-5,000 acres). Chicago wheat futures were down 4 ½ to 6 ¼ cents for the day, and Hard Red Wheat futures were down 4 ½ to 10 ½ cents.

Southern states account for 75% of rice production nationally, with Arkansas the largest producer. Rice acres planted were unchanged in Texas and Mississippi, declined 30,000 acres in Arkansas and increased 30,000 acres in Louisiana.  

Soybean acres were estimated at 86.1 million, down 410,000 acres compared to the March estimate – slightly lower than pre-report estimates. Soybean futures closed down ¾ to 2 ¾ cents for the day. In the southern states, planted acreage was reduced 10,000 acres compared to March, with reductions for Arkansas, North Carolina, and Oklahoma and increases for Alabama, Kentucky, Louisiana, South Carolina, and Tennessee. The report indicated that soybeans left to be planted were 12.8 million acres.

Peanut acreage increased 7% (106,000 acres) compared to the March report. Increased planted acres in Texas, North Carolina, Georgia, and Mississippi were only partially offset by a small reduction in Alabama.

Upland cotton acres were estimated at 11.488 million, nearly 1 million acres higher than the March estimate and pre-report forecasts. Cotton futures closed 1.63 to 2.21 cents per pound lower for the day. Texas planted acreage increased 890,000 acres compared to the March report, contributing by far the most to the change in national acreage. Arkansas had the largest percentage increase at +24%.

Overall, the report provided bearish news for several markets that had already experienced substantial price declines this growing season. Moving forward, prices will continue to react to weather and revisions to planted/harvested acreage estimates.

References and Resources

Barchart.com. Daily futures prices. Accessed at: https://www.barchart.com/futures/grains?viewName=main

USDA National Agricultural Statistics Service (NASS). June 28, 2024. Acreage Report. Accessed at https://usda.library.cornell.edu/concern/publications/j098zb09z

USDA National Agricultural Statistics Service (NASS). March 28, 2024. Prospective Plantings Report. Accessed at https://usda.library.cornell.edu/concern/publications/x633f100h

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.

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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/

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

USDA released its latest World Agricultural Supply and Demand Estimates (WASDE) on June 12^th. This report follows the first set of estimates for the 2024/2025 crop marketing year that were released in May. This month’s report continues to use the March Prospective Plantings report as the basis for estimated acreage. As a result, there were no changes to the production or price projections for most crops, with wheat and cotton the exceptions as shown in table 1.

Table 1: WASDE Estimated and Projected Prices 5 by Crop and Marketing Year

Cotton’s 2024/2025 marketing year average price is a projected $0.70/lb., which represents a $0.04/lb. decrease from last month’s projection. This change was driven by a 0.45 milllion bale increase in the estimated cotton stocks at the start of the marketing year, bringing estimated stocks up to 2.85 million bales. The revision to beginning stocks was due to a halfmillion bale reduction in expected U.S. cotton exports during the 2023/2024 marketing year. While global demand for cotton remains strong, U.S. cotton export sales have been slower than expected amid tight supplies, and Brazil is expected to overtake the U.S. as the top cotton exporter for 2023/2024. If realized, this would mark the first time since the 1992/1993 marketing year that the U.S. would not be the world’s top cotton exporter. As a result of reduced exports, U.S. cotton stocks are projected to increase to 4.1 million bales at the end of the 2024/2025 marketing year. 

On the other hand, the projected 2024/2025 marketing year U.S. wheat price increased by $0.50 to $6.50/bu. This price increase is due to a 25 million bushel increase in projected exports this coming marketing year, in spite of a slight increase in projected U.S. wheat yields and soft harvest-time prices in the United States. The increase in U.S. exports follows a 1% decrease in projected global wheat production because of yield reductions for major wheat exporters Russia, Ukraine, and the European Union. The decreased global yield projections were driven by dry weather in Russia and Ukraine, late-season frosts in Russia, and excessive precipitation in France.

Looking ahead, we should expect to see more significant changes in next month’s WASDE report. On June 28^th, USDA is scheduled to release the Acreage report, which will likely result in adjustments to acreage planted and harvested estimates for most row crops. These updated acreage estimates will affect projected production and be taken into account in the July WASDE report.

References

Biram, Hunter, and Ryan Loy. “May WASDE Projects Higher Supplies and Lower Prices Again in 2024.” Southern Ag Today 4(20.1). May 13, 2024. Available at: http://southernagtoday.org/may-wasde-projects-higher-supplies-and-lower-prices-again-in-2024/

USDA-NASS. World Agricultural Supply and Demand Estimates. June 12, 2024. Available at:  https://www.usda.gov/oce/commodity/wasde/wasde0624.pdf

USDA-FAS. Cotton: World Markets and Trade. June 12, 2024. Available at:  https://downloads.usda.library.cornell.edu/usda-esmis/files/kp78gg36g/xk81m8188/xs55p371r/Cotton.pdf

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Sawadgo, Wendiam. “June WASDE Report Projects Increases to Wheat Prices, Decreases to Cotton Prices.” Southern Ag Today 4(25.1). June 17, 2024. Permalink

U.S. exports can be a key driver for commodity prices. U.S. production of corn, soybean, and wheat exceeds domestic use, making access to export markets crucial. Data from 2018/19 to 2022/23 shows that corn, soybean, and wheat exports are dominated by a few key countries. For corn, the United States, Brazil, Argentina, and Ukraine constitute 85% of global exports (Figure 1). For soybeans, Brazil is the largest exporter followed by the United States and Argentina; together, the three countries account for 90% of soybean exports (Figure 2) and 84% of soybean meal exports. Wheat exporting countries are more diversified, with the United States, Russia, the EU, Canada, Australia, Ukraine, and Argentina making up 84% of the market (Figure 3).

In 2022/23 Brazil overtook the United States in corn exports and is expected to remain the largest export competitor to the United States. In the 2022/23 marketing year, Brazilian soybean exports nearly doubled those of the United States, and Brazil is projected to maintain its role as the worlds largest exporter of soybeans. In 2023/24, Brazilian exports are estimated at 50 million metric tons (MMT) of corn and 102 MMT of soybeans. Brazilian export projections for 2024/25 are at 49 MMT of corn and105 MMT of soybeans. In comparison, the United States is estimated to export slightly more corn at 55 MMT and 46 MMT of soybeans in 2023/24. 2024/25 U.S. export projections are at 56 MMT of corn and 50 MMT of soybeans. Wheat export patterns have remained relatively stable, despite geopolitical conflicts affecting some regions. The largest question for 2024/25 wheat exports pertains to Russia, which is experiencing weather-driven yield and quality issues in addition to the war with Ukraine.

Export data is vital for commodity marketing. Weekly, the USDA Foreign Agricultural Service reports sales transactions entered into with a buyer outside the United States. In addition to the weekly reporting requirements, daily reports to USDA FAS are required for any export sales activity of quantities totaling 100,000 metric tons or more of one commodity sold in one day to one destination or 200,000 metric tons or more of one commodity sold to one destination during any reporting week. Positive U.S. export bookings support domestic commodity prices. If exports exceed projections or expectations, prices will typically rise, offering a potential opportunity for producer sales. 

Weather events in other major exporting countries, particularly in South America, can signal support for prices and provide opportunities for increased U.S. commodity sales, especially for corn and soybeans. Wheat can be less sensitive to weather as wheat is produced on six continents in both hemispheres, so production is spread throughout the calendar year. Wheat can be strongly influenced by geopolitical and weather events, making it harder to predict specific timing for market changes. 

Exchange rates can also affect exports. The strengthening of the USD, relative to the export competitor’s currency, can make U.S. exports relatively more expensive to an importer. A weakening USD makes U.S. exports more competitive.

The competitiveness and small number of countries in export markets, particularly Brazil and Argentina in corn and soybeans, along with the past relative stability in wheat exports underscores the importance of monitoring both export trends and external factors to optimize commodity marketing strategies.

Figure 1: World Corn Exports by Country, 2018/19-2022/23 Marketing Years Average (%)

Figure 2: Soybean Exports by Country, 2018/19-2022/23 Marketing Year Average (%)

Figure 3: World Wheat Exports by Country, 2018/19-2022/23 Marketing Year Average (%)

References

USDA Foreign Agricultural Service. Production, Supply and Distribution.https://apps.fas.usda.gov/psdonline/app/index.html#/app/advQuery.

USDA Foreign Agricultural Service. Export Sales Reporting Program. https://fas.usda.gov/programs/export-sales-reporting-program and https://apps.fas.usda.gov/export-sales/esrd1.html.

Gardner, Grant. “Ag Export Percentages: A Focus on Corn, Soybeans, and Wheat.” Southern Ag Today 4(24.1). June 10, 2024. Permalink

Calculating trendline yields can be a useful tool for budgeting or developing a crop marketing plan. Using trendline yield estimates at the start of the production year can assist in determining potential profitability, at current market prices, and determine if additional sales or price risk management is warranted. Projected yields should be periodically revisited during the production year to make adjustments to management practices and marketing strategies to improve the likelihood of positive financial outcomes. This article examines differences in linear trendline yields for corn across Southern States.   

There is tremendous variability in average USDA NASS corn yields across the Southern States (Figure 1).  Over the past five years (2019-2023), Arkansas had the highest average corn yield at 179.8 bu/ac followed by Kentucky (177.6 bu/ac) and Mississippi (176.2 bu/ac). The lowest five-year average yields occurred in Texas (121.2 bu/ac), North Carolina (129.2 bu/ac), and South Carolina (129.8 bu/ac). 

Projected linear trendline yields in 2024 for corn, using USDA NASS data from 1980-2023, vary tremendously (Table 1). The slope coefficient, in Table 1, provides the annual average increase in yield for each state from 1980 to 2023. The constant in Table 1 is the initial yield at the start of the linear trend line. For example, on average from 1980-2023, corn yields in Mississippi increased 3.33 bu/ac per year from a starting trendline yield of 43.57 bu/ac. An easier way to think about this is that over a ten-year period, average yield in the state of Mississippi increased by 33.3 bu/ac. Increases can be a result of production practices (such as irrigation) or technology (genetic improvements). In the past ten years (2014-2023), the increase in annual yield improvement for most Southern states has slowed.  R² is a measure of the proportion of variation in the dependent variable (yield) that can be explained by the independent variable (time). Across the Southern U.S., we see tremendous variation in the R² for linear trendline yields, ranging from a high of 0.926 for Mississippi to a low of 0.285 for Texas. Low R² values indicate that the independent variable (in this case time) does not explain the variation in yield, thus other variables need to be considered when projecting yield.  

Ideally, projecting annual yield should be conducted at the farm or field level using producer data. Crop insurance records or yield monitor data can allow producers to analyze, and project, yield and production to guide management and marketing decisions.

Figure 1. Corn Yields in Southern States, 1980-2023 

References

USDA NASS Quick Stats. Corn Yields, 1980-2023. Accessed at https://quickstats.nass.usda.gov/  

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Smith, Aaron. “Corn Yields and 2024 Projected Linear Trendline Yields in Southern States.” Southern Ag Today 4(23.1). June 3, 2024. Permalink