Corn prices took a nearly 10-cent tumble on Friday after the U.S. Department of Agriculture (USDA) surprised markets with an unexpectedly large estimate of the 2023 U.S. corn crop.
U.S. farmers produced a record 15.3 billion bushels last summer, according to the USDA's January World Agriculture Supply and Demand Estimates report. A record yield of 177.3 bushels per acre more than offset a 600,000 acre decline in harvested area, according to USDA.
Most traders and industry leaders had expected a smaller 2023 crop on account of dry weather across the U.S. Corn Belt, said Chad Hart, a professor in the Iowa State University Department of Economics. And it is unusual to see the USDA increase its yield estimate to this extent after November. But it is consistent, he said, with reports from the farmers themselves.
“As we watched this crop come in at harvest, every time we looked at it, it got a bit bigger,” Hart said. “In talking with producers across the country, a lot of them did have better crops than they expected.”
The size of the crop, Hart said, was partly a result of well-timed rains across the Corn Belt, and also a result of improvements in production practices that have helped farmers grow more corn with limited moisture. And those improvements could be put to the test again in 2024, he said, with long-term forecasts so far calling for another year of dry weather.
Despite those forecasts, Hart said corn prices remain on the downward trend that seems to promise lower feed costs in 2024. Soybeans, too, seem set to decline, although at a slower pace. Soybean prices seem unlikely to return to pre-pandemic levels as a result of growing demand from biofuel production, Hart said.
Shipping disturbances and geopolitical conflict will also influence prices in 2024, Hart said.
Although livestock producers should see some relief from high feed costs in the coming year, Hart said many producers will still face slim profit margins in the months to come due to increases in the cost of labor, land and the animals themselves.
