USDA released the Grains and Oilseeds Outlook this week providing an initial look at the 2024/25 marketing year projections that include lower production, greater domestic use, increased exports, and higher ending stocks as compared to the current 2023/24 market years. The following is a summary and some additional context for five projections from the latest outlook.
Yield
Corn yield is projected at 181 bushels per acre. Yield projections depend on the modeling approach and time series used. While a 3.7 bushel per acre increase over the 2023 record 177.3 bushels per acre may seem like a stretch, a regression on annual yields from 2023 to several different historical points including 1934, 1980, and 1996 all predict 2024 yields within about one bushel of the USDA projection.
Trendline yields are a reasonable expectation at this point. Adverse weather is generally thought to have a negative impact on yields but in 2023 a record yield was achieved in a year with widespread drought in the growing season. That may influence in-season expectations for the impact of adverse weather on yields going forward. On the other hand, optimal environmental conditions in the growing season could support above-trend yields. It’s been more than a decade since there has been significant deviation in U.S. corn yield from the trendline – either above or below.
Acres
USDA left the expected corn planted area at 91.0M acres and harvested area at 83.1M acres, both unchanged from long-term projections released in November. The projection for 2024 corn acres is 3.6M acres less than farmers planted in 2023, but 2.4M acres greater than 2022 planted acres.
The USDA projection doesn’t always align with what farmers do. We saw that last year, when farmers planted 94.6M acres of corn, well above USDA’s February 2023 projection of 91M acres for the year. Aside from market signals, farmers weigh factors like agronomic advantages of rotation, farm yield of specific crops relative to the average, timing of seeding and harvest, and general management practices when they decide what to plant.
Production
Corn production is projected at 15,040 million bushels. This would be the third highest production, behind 2016, and the new record 15,341 million bushels set in 2023. Here are two examples to show what it would take to break that record, one keeping the harvested acres projection and one keeping the yield projection.
With 83.1 million harvested acres, a 184.6 bushel per acre yield would be needed to break the 2023 production record. With a 181 bushel per acre yield, 84.8 million harvested acres are needed, corresponding to about 91.1 million planted acres.
Demand
Total U.S. corn use is forecast higher in 2024/25 due to growth in all three of the leading use categories: feed, ethanol, and exports.
Although the cattle inventory is at the lowest level since 1951 and likely to decline further in 2024 putting a damper on beef production in 2024, increased production is expected for the hog sector and broiler meat production is forecast at a record level. Positive movement in production in some livestock segments, larger corn supply, and lower corn prices push feed demand to increase about 1% to 5.75 billion bushels.
Ethanol is forecast to use 5.4 billion bushels of corn, with expectations of modestly higher motor gasoline consumption and continued strength in ethanol exports. The expectation for modest global trade growth pushes corn exports 50 million bushels higher to 2.15 billion bushels.
Price
The forecast market year average price for 2024/25 is $4.40, forty cents lower than the $4.80 market year average price expected for 2023/24 and more than $2 lower than the $6.54 price for 2022/23.
Using the USDA cost of production forecast for corn and the 181 bushel per acre yield projection, the average cost of production is $4.80 per bushel for the 2024 crop. Lower yields would mean an even higher per-unit cost of production.
The average cost of production for corn drops just 6.2% from 2022 to the 2024 forecast, while the market year average price for corn drops 32%.
Summary
The latest USDA projections for corn include a record yield and the third-highest production, despite a forecast drop in acres. The forecast for rising domestic and export demand is positive but growing production results in plentiful supply and lower prices. Cost of production isn’t a factor in market price, but it’s certainly important to U.S. corn farmers. The fall in corn price has been five times greater than the slight relief in cost of production. The USDA March Prospective Plantings Report will be out in six weeks providing greater insight into what farmers intend to plant that could change the outlook.