SIOUX FALLS — Todd Hultman said if there’s one predictable thing about crop value 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 new cases that push corn and soybeans up or down, and this year is no different. Hultman, a grain analyst at DTN, said the value outlook for 2024 will revolve around developments such as Brazil’s biggest festival, the destabilizing war in the Middle East, a potential drought in Panama and a decline in demand for soybeans from China.
Some factors make the early 2024 markets look bearish, Hultman said.
As for Brazil, the country has continued to increase its production of corn and soybeans. Their products, grown in the southern hemisphere, are a serious festival for the United States, reducing American exports. This includes a decrease in demand from China, the main customer for agricultural products.
The demanding situations of shipping are also taking shape. The ongoing conflict between Israel and Palestine is attracting Iranian involvement, affecting the Red Sea sea routes. A drought in Panama is also reducing the capacity of its famous canal, with operating hours reduced from 38 to 24 hours due to falling water levels. .
The scenario in Panama and the Red Sea exacerbates the disorders created by the war between Ukraine and Russia, Hultman said.
“Our industrial routes are congested,” Hultman said.
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.
These issues are expected to reduce the profitability of grain for U. S. farmers, but they have benefits. Through it all, the world is fully recovering from the global COVID-19 pandemic, and with oil and fuel production returning to pre-pandemic levels, fuel and diesel costs have fallen, cutting agricultural input costs.
“The good news is that last October, despite everything, we got our domestic oil production back above the pre-COVID-19 peak. It was thirteen million barrels a day, and then there was a big drop,” Hultman said. Since October, that’s about 13. 2 to 13. 3 million barrels per day, which is helping costs significantly. That’s why gasoline and diesel prices have gone down, and that is alleviating our inflation problems.
Hultman also noted that the costs of inputs, such as fertilizer, have come down since last year.
Since market fluctuations can be caused by a number of factors, it can be difficult to speculate on commodity prices. But overall, Hultman expects a variance of between $4. 25 and $5. 50 per bushel of corn as 2024 progresses and a variance of about $12 to $14 per bushel of corn as 2024 progresses. with a bushel of soybeans.
As for the long-term outlook, Hultman said the thriving ethanol and biodiesel industries could possibly be the most productive way to increase domestic demand for corn and soybeans. Both industries have taken root and are developing in the U. S. , which in turn may increase domestic demand for those projects and mitigate waning interest from markets such as China.
Hultman noted that over the past 34 years, when compiling price data, corn has had thirteen successful years for farmers, 10 of which have been since the ethanol industry began to take off in 2007-08. Soybeans have experienced a similar trend since the advent of ethanol.
“This is how the biofuels market has affected the profitability of U. S. agriculture,” Hultman said. “With soybeans we see a similar influence. This is not only smart for corn, but also for soybeans, as corn is more profitable. “
Ethanol production is a small component of the fuel industry, but that small percentage has already generated big profits, Hultman said.
“Think about it: what surprises me when we talk about ethanol in 2007 is that there was only a 10% share of the gas market. It’s not that we’ve turned the world upside down in a primary way. It was a breakthrough in a primary energy market and let’s look at the effect it had on profitability,” Hultman said. “It’s a very positive influence compared to what I would call a very modest change. “
“Crushing has generated phenomenal yields for soybeans over the past two years, since the launch of the renewable diesel market in 2021 and 2022. Now, in 2023, processors have had the most productive crop they’ve ever had. It’s been a smart thing to do. For them,” Hultman said. For our agricultural markets, this has been working very well lately and represents a very smart demand for soybeans at a time when we would otherwise be affected by Brazil’s mammoth crop. “
After the meeting, Hultman reiterated to Mitchell Republic that the biofuels industry’s influence on the U. S. grain market is enormous.
“(The potential impact) is huge,” Hultman said. As long as you can get the world to come to you and give you more markets and more opportunities to sell your grain, that’s good news. And that’s what we’re seeing in the Midwest.