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Plus – more farmer insights from our March 2023 Farm Futures grower survey

Jacqueline Holland, Grain market analyst

March 24, 2023

10 Min Read
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At a Glance

  • Corn acreage to decrease 1.1% YOY to 87.7 million acres due to high input costs, drought on the Plains.
  • Soybeans to see 2.5% increase to 89.6 million acres with a record-setting soybean harvest expected.
  • Total wheat acres projected at 45.7 million acres (+0.01% YOY) as poor winter wheat crops could be disced and replanted.

Drought and input costs are the driving forces for producers in the Plains this spring and those factors are likely to shake up acreage estimates beyond the Farm Futures’ projections published earlier this year.

2023 Farm Futures acreage and production forecasts

The Farm Futures March 2023 Survey, conducted March 4-14 via email, found that farmers are opting for more drought-resistant crops this spring as depleted soil moisture levels present a substantial challenge for farmers in the upcoming 2023 growing season. Steep input costs are also playing a factor in acreage decisions this spring. As a result, Farm Futures expects that 2023 corn planted acreage will drop 1% from last year to 87.7 million acres.

Our survey, which featured responses from 801 growers across the continental U.S., finds that soybean acres will rise 2.5% from last year to 89.6 million acres. Sorghum will also see a substantial acreage boost this year on the Plains, with Farm Futures forecasting a 35% annual acreage increase to 8.5 million acres.

While soft red winter wheat acres saw some expansion in Illinois last fall, Farm Futures is projecting USDA’s winter wheat acreage in the March 31 Prospective Plantings report next week will only reach 34.4 million acres, up over 3% from last year but down notably from the 37.0 million acres forecasted by USDA in January 2023. Spring wheat and durum sowings are expected to be over 1 million acres lower, in total, compared to last year.

Cotton acres declined 15% on the year to 11.6 million acres in the survey, likely reflecting low market prices and soaring input costs. Meanwhile, the market is bidding up rice acres, with Farm Futures projecting a 21% annual increase in rice acres that will rise to 5.4 million acres in 2023.

Corn’s acreage surprise

If Farm Futures’ projections are realized, the projected 87.7 million acres would be the smallest U.S. corn acreage planted since 86.4 million acres were planted in 2009. Assuming trendline yields of 177.6 bushels per acre (using a shorter time frame than USDA’s model, which calculates 181.5 bpa), 2023 U.S. corn production is expected to reach 14.1 billion bushels, making it the sixth largest corn crop in U.S. history.

Farm Futures survey respondents on the Plains showed the highest chance of abandoning corn acres in 2023, while the I-state corridor and Eastern Corn Belt are likely to remain steady in their rotations this year. Over 89% of respondents did not anticipate significantly deviating from 2022 crop rotations. Just shy of 11% of growers report having flexibility to change 50% or more of their acreage annually, based on market conditions.

Producers on the Plains may opt for more drought-resistant crops in the coming weeks that can guarantee adequate forage needs for the remaining livestock as farmers juggle ongoing drought conditions through the spring planting season, shrinking cattle herds, and growing expenses.

Sorghum will likely be a cheaper and less risky option for drought-stressed growers in the Plains, especially if spring rains are sufficient enough to justify discing in subpar winter wheat acreage for adequate feed forage this year. If the Farm Futures forecast is realized, the 8.5 million acres of sorghum to be planted would be the largest acreage planted in two decades and mirror 2012-2013 acreage changes.

If Farm Futures’ projections are realized, it will be only the third time in history (1983 and 2018) in which planted corn acres are lower than soybean acres. It would trail 1983’s margin of 3.6 million more acres of soybeans planted as the second largest acreage gap between the two commodities, coming in at 1.9 million more soybean acres than corn planted this spring.

The price implications of this scenario are likely to be profound for corn producers. The Farm Futures survey finds that growers have been aggressively selling 2022 harvest and making advance sales of 2023 and 2024 crops in preparation for lower prices. But a smaller acreage forecast will pay dividends for growers who have already forked over heavy cash sums to plant this year’s crop.

2023 Farm Futures corn acreage and production forecast

But Farm Futures’ supply and demand estimates for 2023 U.S. corn production hint at even tighter corn supplies amid the smaller acreage. The drought concerns could negatively impact yields down the road, which led our team to use a trendline yield calculation of 177.6 bpa.

Keeping consistent with USDA’s updated 2023/24 forecasts published at the February 2023 Agricultural Outlook Forum, we project domestic corn consumption in the upcoming marketing year will rise to 14.3 billion bushels, drawing ending stocks down to 1.2 billion bushels. That leaves the 2023/24 stocks-to-use ratio at 8.5%, which will be the sixth tightest ending U.S. corn supply on record. The current 2022/23 ratio rests at 9.7% - the 10th tightest on record.

Soybean surge?

Amid growing interest in renewable diesel production, producer preferences for more drought-tolerant crops, cheaper input expense outlays, and shrinking cotton acres in the Mississippi River Delta, soybean acres are likely to see a surge this spring.

Farm Futures’ 2023 soybean acreage estimate of 89.6 million acres is a 2.5% increase from 2022 soybean sowings and would trail 2017’s record of 90.2 million acres as the second largest in U.S. history.

Farm Futures used a more robust yield estimate than USDA’s current trendline yields to reflect recent yield advances more accurately. Assuming a 52.2 bpa national soybean yield, U.S. growers will harvest a record-setting 4.62 billion bushels of soybeans this fall.

Using USDA’s forecast of 4.46 billion bushels of 2023/24 U.S. soybean usage, which features a slight decrease to export shipments and a 4% increase in domestic crushing volumes, the Farm Futures’ estimates find that ending soybean stocks will grow to 382 million bushels in 2023/24 – the largest ending stocks value the soy complex has seen since the 2019/20 marketing year.

2023 Farm Futures soybean acreage and production projection

That would grow the 2023/24 ending stocks-to-use ratio to 8.6% - the 25th tightest ending soybean supply in U.S. history. The 2022/23 stocks-to-use ratio is expected to end at 4.8% - currently the eighth tightest on record.

That is likely to result in lower soybean prices in the 2023/24 marketing year. However, there is a caveat to that forecast: If renewable diesel capacity comes online at a rapid pace over the next 18 months – and if China opts for more soybean purchases this fall – the subsequent uptick in usage could tighten supply availability and lift prices.

Wheat re-shuffling

Farm Futures’ total wheat estimates are noticeably similar to year ago acreages. Our team’s acreage estimates still support a 3.4% annual increase in winter wheat acreage, though our deviation from USDA’s January 2023 winter wheat sowings of 37.0 million acres suggests that some growers in the Plains battling harsh drought conditions may opt for a more favorable crop risk outlay this spring, forsaking subpar winter wheat crops for crops with more drought resistance and a higher chance of yields.

Our survey did not inquire about other oilseed and small grain acreage intentions, which we suspect is the driving force behind reported contractions in spring wheat and durum acreages. Spring wheat acres are expected to drop 6% annually to 10.2 million acres while durum acres will shrink nearly half a million acres from last year to just shy of 1.2 million acres in 2023.

The Farm Futures trendline yield estimate for 2023 wheat is 48.6 bpa to reflect recent crop shortfalls and current drought conditions. As a result, annual wheat production is forecast at 1.8 billion bushels which will be a 9% increase from the 2022 harvest.

2023 Farm Futures wheat acreage and production projection

The yield catch-up and flat acreage trend will tighten ending stocks to 521 million bushels, marking the sixth consecutive year of declining U.S. wheat stocks. The stocks-to-use ratio will tighten from 29.9% in 2022/23 to 26.5% in 2023/24, putting ending supplies at the tightest level since 2013/14. While wheat prices may not return to 2022’s record highs, it is likely to keep a strong floor under domestic prices.

Other survey findings

Farmers haven’t been taking the good times for granted over the past two years and during the first few months of the year they have been bracing for lower prices to take hold of the commodity markets. Plus, many claim to remain spooked about soaring input costs.

Nearly 80% of respondents expect this year’s profits will be lower than last year’s. When we asked that question a year ago, only 62% of growers had that same expectation. More growers are placing their bets on falling prices, with 49% of respondents hedging crops in the past two or more years before they were harvested, up 3% from last year’s survey.

For those growers bracing for lower profits this year, 35% of respondents cite higher input costs as the primary cause. But another 32% expect lower commodity prices will be the primary source of shrinking profit margins this year. A total of 44% of respondents are projecting their cost of production will increase 6%-15% above last year.

Where are farmers looking to trim the fat? Over 67% of growers shared that equipment investments are the first item to go when belt tightening begins. But perhaps more interesting were the items that farmers are not skimping on even as profit margins shrink.

Barely 5% of farmers admitted to reducing phosphate and potash applications as well as consultant services amid falling profits. Another 4% will consider reducing chemical usage. Only 3% will reduce nitrogen applications. This suggests that farmers are not willing to change their fertilizer and chemical programs that ensure strong yields even in the face of tighter margins.

The sticker shock reaction to high fertilizer prices is fading as prices fall though – 62% of respondents in our January 2023 survey expected high input costs to be the driving force in smaller 2023 profits. But the fear of lower prices is creeping into the Heartland – in a big way.

Farmers were slow to book sales at the end of 2022 based on our January 2023 survey – likely for tax purposes. But they put the gas on the accelerator after New Year’s, selling old crop corn, soybeans, and wheat at a significantly faster clip than the same time last year.

Percent of crops farmers have priced for the coming year

And it wasn’t just old crops farmers were locking down prices on. Farmers are also booking 2023 and 2024 crops – that aren’t even in the ground yet – more aggressively than they were last March.

Even though the margins will be slimmer this year, farmers are already making plans on what to do with their earnings, though it is not as attractive as one would think. Farmers are focused strongly on reinforcing working capital reserves, with 40% of respondents planning to add 2023 profits to savings. Nearly 37% are planning on self-financing equipment purchases in the coming year and 18% will be financing their own new building or storage projects.

Debt management was also top of mind, and slightly more so than a year ago. In the March 2023 survey, 36% and 33% of growers indicated they would pay down long-term and short-term debt, respectively with 2023 earnings. In the January 2023 survey, only 31% of growers were prioritizing long-term debt payments with 2022 profits.

Other considerations

High input prices, weather, geopolitics, tight global supplies, and new markets are just a handful of the dynamics compounding on the commodity markets and farmers’ minds ahead of next week’s Prospective Plantings report. And the report (and our survey) isn’t a guarantee of acreage outlays – it is simply USDA’s (and our) best guess at what farmers want to plant this spring.

As many ag economists and analysts have said before me, weather will always have the last say when it comes down to final acres. Weather is likely to play a major role this year, as our survey findings suggest. But regardless, the low prices farmers have been worried about may not arrive on the horizon as quickly as originally planned.

For more detailed insights, I am in the middle publishing a series on our website that dives deeper into all of the factors shaping the 2023 planting season. I have already published columns about weather, USDA’s March 31 track record, and the new crop price ratio and will be posting articles about production costs and crop budgets in the next week.

About the Author(s)

Jacqueline Holland

Grain market analyst, Farm Futures

Holland grew up on a dairy farm in northern Illinois. She obtained a B.S. in Finance and Agribusiness from Illinois State University where she was the president of the ISU chapter of the National Agri-Marketing Association. Holland earned an M.S. in Agricultural Economics from Purdue University where her research focused on large farm decision-making and precision crop technology. Before joining Farm Progress, Holland worked in the food manufacturing industry as a financial and operational analyst at Pilgrim's and Leprino Foods. She brings strong knowledge of large agribusiness management to weekly, monthly and daily market reports. In her free time, Holland enjoys competing in triathlons as well as hiking and cooking with her husband, Chris. She resides in the Fort Collins, CO area.

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