SIOUX FALLS — Todd Hultman said if there’s one thing predictable about crop price markets, it’s that they’re unpredictable.
“Markets are human. Markets are uncertain. We get surprised when things happen we don’t expect and there are things that aren’t predictable,” Hultman told the audience Thursday, Jan. 25, at a 2024 crop price outlook seminar at the Sioux Falls Farm Show.
Every year brings a new set of circumstances that drive the price of corn and soybeans up or down, and this year is no different. Hultman, a grain analyst with DTN, said price outlooks for 2024 will revolve around developments such as increased competition from Brazil, war destabilizing the Middle East, potential drought in Panama and waning demand from China for soybeans.
Some factors make the early 2024 markets look bearish, Hultman said.
When it comes to Brazil, the country has continued to increase its production of corn and soybeans. Their products, grown on a southern hemisphere timeline, are becoming serious competition for the United States, taking a bite out of American exports. That includes decreased demand from China, a major consumer of agricultural products.
Shipping challenges are also taking shape. The conflict going on between Israel and Palestine is drawing involvement from Iran, affecting shipping lanes in the Red Sea. A drought in Panama is also reducing the capacity of its famed canal, with work shifts at the site down to 24 from 38 due to falling water levels.
The situations in Panama and the Red Sea only compound the problems created by the war between Ukraine and Russia, Hultman said.
“Our trade routes are getting choked up,” Hultman.
Russia has also put a massive effort into increasing wheat production, primarily to use as political leverage in smaller countries around the world. Offering some of the world’s cheapest wheat, Russia can use that perceived generosity as a bargaining chip, bolstering a positive image and earning votes from those countries at entities like the United Nations.
Those factors are expected to cut into grain profitability for United States farmers, but there are upsides. The world is finally recovering fully from the global COVID-19 pandemic, and with oil and gas production returning to pre-pandemic levels, gas and diesel prices have gone down, lowering input costs on the farm.
“The good news is that just last October we finally returned our domestic oil production back above the pre-COVID peak. It was 13 million barrels per day, and then came a sharp drop-off,” Hultman said. “Since October it’s roughly 13.2 million barrels to 13.3 million barrels per day, and that helps prices significantly. That’s why gas and diesel prices came down, and it’s easing our inflation problems.”
Hultman also noted that other input costs, such as fertilizer, have gone down since last year.
Since market fluctuations can come from any number of factors, it can be hard to speculate on commodity prices. But in general, Hultman is seeing a range of $4.25 to $5.50 per bushel of corn as 2024 progresses and a range of roughly $12 to $14 per bushel of soybeans.
When it comes to longer-term outlooks, Hultman said the blossoming ethanol and biodiesel industries may be the best avenue to increasing domestic demand for both corn and soybeans. Both industries have taken root and are growing in the United States, and that in turn can increase home demand for those projects and help negate the waning interest from markets like China.
Hultman noted that over the past 34 years, when compiling data on costs, corn had 13 profitable years for farmers, 10 of which had been since the ethanol industry started to come into its own in 2007-08. Soybeans saw a similar pattern since the arrival of ethanol on the scene.
“That’s just how important the biofuel market has been to profitability for United States agriculture,” Hultman said. “With soybeans, we see a similar influence. It’s not just good for corn, but also for soybeans when corn is more profitable.”
Ethanol production has been a relatively small portion of the fuel industry, but that small portion has already meant big returns, Hultman said.
“Just think — the thing that surprises me when talking about ethanol in 2007, there was only a 10% share in the gasoline market. It’s not like we disrupted the world in a major way. It was a sliver into a big energy market and look how much impact it had on profitability,” Hultman said. “That’s a very positive influence from what I would say was a very modest change.”
Now biodiesel production, and its increased demand in large markets like California, and soybean crush plants,
are providing a value boost for corn and soybeans.
“The crush has provided phenomenal returns for soybeans the last two years since the renewable diesel market got going in 2021 and 2022. Now in 2023, processors have had the best crop they’ve ever had. It’s been a great thing for them,” Hultman said. “For our ag markets right now, it’s working very well and offering very good demand for soybeans at a time when we would otherwise be hurt by Brazil’s big crop.”
Following the meeting, Hultman repeated to the Mitchell Republic that the potential the biofuels industry has to positively affect the United States grain market is huge.
“(The impact potential) is huge,” Hultman said. “Anytime you can get the world to come to you and offer more markets and more opportunities for you to sell your grain, that’s good news. And that’s what we’re seeing in the Midwest.”
Erik Kaufman joined the Mitchell Republic in July of 2019 as an education and features reporter. He grew up in Freeman, S.D., graduating from Freeman High School. He graduated from the University of South Dakota in 1999 with a major in English and a minor in computer science. He can be reached at email@example.com.
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