Audio Transcript:

Brady Brewer: Hi, and welcome to the Purdue Commercial AgCast, the Purdue University Center for Commercial Agriculture’s podcast featuring farm management news and information. I’m your host, Brady Brewer, and joining me today is Dr. Chad Hart, who’s a professor of economics and crop market specialist at Iowa State University. Welcome Chad. Let’s start with what you think we need to be paying attention to for 2024.

Chad Hart: Well, I think as we’re looking at ’24, I’ve described it as a return to normal. The idea is that what we’ve seen the past few years has been some incredibly strong farm incomes, profitability within the industry that is sort of whittled away here in 2023.

And so when I’m looking at where prices are setting up, how trade is sort of setting up, where we’re seeing our demand structure, it’s pointing to prices around breakeven cost or production cost. Which is, I call it the normal state of affairs, because farming is a competitive industry. That tends to mean long term profitability is around zero or prices are around cost. And that’s the situation we seem to be setting up right now.

Brady Brewer: Before we get into today’s topic, I just want to remind all the listeners, you can find the podcast on the Center for Commercial Agriculture’s website at purdue.edu/commercialag or any of your major podcast providers. On today’s episode, we are doing a followup to the 2024 Top Farmer Conference where Dr. Hart was a speaker on the 2024 market outlook. Chad, what are some of the big picture items for 2024?

Chad Hart: I’ll relate it to something that actually was mentioned at the Top Farmer Conference when the macroeconomist, Jim Bullard was up talking. And he basically pointed out that, you know, the general economy is pulling off this soft landing. And I’m sort of arguing ag is pulling off the same thing too. That as we look at what the farm economy is doing, normally we follow profitability with a significant loss to balance out here. No, we’re just coming down towards breakeven. And I think the big key, when I’m looking at 2024, is going to be international demand because that’s the demand picture for our crops and livestock that can really swing to either soak up, if we have big crops and big production, or pull back when we don’t.

Brady Brewer: Now there are a lot going on on the international stage when you think about political conflicts, trade disruptions Any particular ones that you’re paying attention to? Whether it be maybe the the China and Taiwan issue, or the Israel and Gaza conflict or the Ukraine and Russia conflict. Any of those in particular you’re paying attention to that may provide clarity on our markets?

Chad Hart: Well,I think as we’re looking right now, when we look at things like, uh, the Gaza war right now, or even the Ukrainian war right now. I would say those are sort of baked into our markets. We know the impacts those have had. The market seems to be comfortable with where that’s going. I think when we’re looking forward here, it’s more a case of, you mentioned China, Taiwan. Where is the next potential political disruption that could really hit us here? And I think it is looking at the U.S.-China relationship. Mainly because of trying to figure out how the issue of Taiwan is going to be handled. How are we going to discuss that? Because China has always looked at Taiwan as part of of mainland China. On the other hand, we’ve sort of recognized it as an independent land. Yet, when we talk about it officially, we never state it that directly. And so, that’s going to be a big issue that will have large ramifications, not only for the general economy, but the ag economy specifically, because of how much we do trade with China.

Brady Brewer: Yeah. They are a large purchaser of our agricultural commodities, and ag is a large, one of the major exporting sectors of our economy. So definitely an important part of when we think about what corn and soybean price are going to be. So speaking of corn and soybean price, let’s transition to maybe the more market outlook. What is in store for corn here in 2024?

Chad Hart: Well, that’s the deal. I think 2023 we watch prices erode. What you’re seeing for 2024 is, at least the futures market is trying to say, that we’re trying to build back up again. And basically we’re trying to build back up towards breakeven. So when I’m looking at, you know, cost structure, we’re looking at around a $5 per bushel corn breakeven cost. And that’s where the markets are trying to head back to now. We went a little bit below that here at the end of 2023. Now we’re trying to build back up. And I’m going to argue the reasons that the market is sort of doing that, at the same time too, where USDA is saying, no, we may see even lower prices in 2024. Due to two things. One, USDA’s numbers right now don’t reflect the drought situation that continues to dominate across a lot of the, the center part of the country here. And then two, it’s this export picture. And looking at what we’ve seen, especially in the corn market, has been a fairly good rebound in export sales in the international marketplace. That should help boost prices a little bit as we move through the year.

Brady Brewer: What about soybean markets?

Chad Hart: Soybeans, um, I’ll put it somewhat similar in that, you know, in this case we’ve seen prices come down a little bit. The differences here would be, I guess I’ll frame it, the market is more optimistic about ’24 than USDA is, but that also doesn’t necessarily mean that prices are going to rebound. In fact, if anything, we do expect soybean prices to work their way lower over the next year. And a lot of that has to do with we expect more soybean acreage this coming spring, because of when you’re looking at the financial ratios between corn and beans. It’s leaning towards soybeans. We’re going to see more acres move that way. That’s going to mean more production and putting downward pressure on that price.

Brady Brewer: Is input costs a big issue or a big factor in the increasing soybean acres, with maybe lower fertilizer, with elevated fertilizer prices, and I realize they’ve came down from where they were in the recent past, but is that’s what driving that? Or what’s driving that increase in soybean acres?

Chad Hart: Well, I think there’s still a little bit of that on the input cost side, but I would say there’s also this, let’s call it the challenge of what we just went through in 2023. Because I think a lot of the adjustment we’re going to see in acreage is going to happen, especially when we look towards the Great Plains. So think North Dakota, South Dakota, Nebraska. And what they’re dealing with right now, in fact I was just up in Fargo about a month ago, and I was amazed to see the big piles of grain on the ground up there. They’re dealing with incredibly large supplies at this time, which is depressing corn prices more than any other commodity in the area. And I think it’s those areas that are shifting, so it’s more of a price slash basis problem than a cost problem for them that may push them towards more oil seeds in 2024.

Brady Brewer: Yeah, so some market factors are dictating what, what farmers are thinking about planning here in 2024.

So there you have it. That’s the market outlook for both corn and soybean along with commentary on trade, which will continue to be a big factor for what happens to those prices for both corn and soybean here through the rest of this year.

Just want to remind everyone, for more farm management news and economic information, visit us at the Purdue Center for Commercial Agriculture’s website at purdue. edu backslash commercial ag. You can also find us on Twitter with the handle at PUCommercialAg. You can also find more farm management news and information at Iowa State University’s website. If you Google card, CARD, or Ag Decision Maker, it will take you to Iowa State’s website. On behalf of the Center for Commercial Agriculture here at Purdue University, we thank you for listening.