Agricultural Commodities Forecast 2023 Update
U.S. farm income is on the decline, partly due to an anticipated drop in total cash receipts for key agricultural commodities.
After seeing record-high income in 2021 and 2022, farmers have started to feel the decline in profits that started at the beginning of this year. The 22 percent drop in farm income is due to a multitude of reasons, including higher input costs, fewer government payments, rising farm equity, and a decrease in cash receipts.
In this article, we dive deeper into the forecasted decline in agricultural commodity cash receipts and the factors involved so you can be more informed when it comes to your operation’s financial future.
Crop Commodity Prices
Corn
This year, corn had the seventh-lowest yield in 35 years, which places it in the 20th percentile. Adverse weather and higher production expenses may be to blame for the low yield. Despite lower production, corn prices are still expected to decline. Corn receipts are expected to fall by $8.5 billion, or 9.6 percent. This is partially due to international trade dynamics, including the cancellation of large shipments to China. Mexico, one of the United States’ largest corn customers, is also shifting more of its imports to Brazil amid the ongoing GMO corn ban trade dispute, softening global demand for U.S. corn.
Soybeans
High imports in 2022 led to a higher-than-usual supply of soybeans at the beginning of this year. Domestic soybean production is down 95 million bushels, to 4.2 billion. Soybean exports are also expected to decline due to lower yield and production, along with more competitive prices coming out of Brazil. Due to competition abroad, receipts are predicted to decrease by $5.4 billion this year, or 8.6 percent.
Fruits and Nuts
In times of inflation, people tend to switch to lower-priced goods. Because fruit and nuts tend to be higher priced items when compared to other agricultural products, some farmers theorize demand is just lower this year. “The marketing of nuts did not do as well as in other years. Normally we have been able to distribute 1.5 to 2 pallets per week of walnuts, but this year sales were much slower,” said Mustafa Kamcili, the Managing Director of Morgenland, and international fruit and nut producer. Because of this, cash receipts for fruits and nuts are expected to fall by $0.6 billion (2.3 percent) in 2023.
Vegetables and Melons
Vegetables and melons are one of the few crops expected to experience an increase in cash receipts in 2023. “Overall, [inflationary] price levels have remained about the same in terms of fruit. Vegetables, on the other hand, have seen significant increases in price, especially lettuces and, more recently, cucumbers,” Kamcili explained. Thanks to growth in both prices and quantity sold, vegetables and melons are predicted to increase 15.9 percent, or $3.6 billion.
Wheat
Domestic wheat production is down five million bushels from last month and is at its lowest levels since 1972. Drought conditions in the Pacific Northwest, decreased planted acreage, and an estimated 15 percent decrease in yields are to blame. However, this low production is not expected to increase demand. Lack of competitive pricing in global markets is keeping the U.S. wheat export outlook down. The price per bushel remains stagnant at $7.50.
Cotton
Cotton stock started high this year, despite a 2.5 million-bale decrease in production compared to 2022. A drought in Texas is to blame for this big drop in production, as 40 percent of U.S. cotton is produced in the state. This is expected to lead to lower export rates, less domestic use, and an overall decrease in stock at the end of 2023. This short supply will likely lead to higher prices—cotton is forecast to increase by three cents to 79 cents per pound.
Rice
Average rice yield is forecast up 100 pounds, at 7,699 pounds per acre. New, more weather-resistant varieties of rice are contributing to this increased production. The USDA raised its estimate for rice production by four percent for 2024 because of more planted fields in California. Despite greater supplies, a slight increase in price is forecasted for U.S. rice, with an anticipated increase of $1 per cwt, to a total of $15.50 per cwt. However, medium and short-grain rice will likely remain the same at $24.80 per cwt. India’s recent ban on the export of non-basmati white rice is expected to benefit U.S. rice producers with stronger export demand, particularly from Iraq. U.S. rice may also backfill into the Caribbean, along with parts of Central and South America.
Animal and Livestock Commodity Prices
Cattle and Calves
In 2022, dry weather reduced the amount of pasture available for grazing, forcing many ranchers to send a higher-than-average number of cattle to slaughter, driving quantity up and demand down. Because of this shrinking herd number, cattle and calves may experience lower quantities sold this year. Input costs are up and demand is unchanged, so growing prices are predicted to outweigh the decrease in quantity sold. The commodity is forecast to grow 17.8 percent, or $15.3 billion.
Dairy
Milk production forecasts have been lowered compared to July 2023. Cow inventory has declined for two years, and the output per cow forecast has been reduced for 2023. A weaker demand for cheese and butter has also reduced the export forecast. However, lower inventory has increased the price of milk to $19.35 per cwt.
Broilers
Broiler production is forecasted due to a combination of factors, including higher input costs and lower-than-anticipated hatchability rates. This has translated to a lower price forecast, with broiler receipts down $6.5 billion or 12.9 percent. Producers are keeping a close eye on potential disease outbreaks after nearly 50 million birds were lost in 2022 due to avian influenza.
Hogs
Unlike cattle and calves, hogs are expected to experience a decline in cash receipts due to a challenging year. California Proposition 12 has created significant challenges and market uncertainty for pig farmers across the country. Persistently high production costs also continue to be a major challenge to pig farmers’ profitability. According to the National Pork Producers Council, average cost and breakeven levels are nine percent higher than one year ago and have increased 60 percent over the last three years.
Stay Resilient in a Fluctuating Agricultural Commodity Market
At AgAmerica, we stay informed on the ebb and flow of the agricultural commodity market to better anticipate needs and help our clients make more informed agribusiness decisions. This industry expertise, combined with our wide range of financing options, enables us to create customized loans that can effectively mitigate risk and boost your farm’s strengths.
As commodity prices fluctuate, you deserve a lender who understands the changing nature of the agriculture industry and who is dedicated to your long-term success. Our range of loan options allows your financing to be as adaptable as you. If you’re looking to conserve cash flow in a suppressed commodity market, click the link below to learn more about our interest-only payment options.
