Rain ensures lower prices for 2024/25

Rain brings crops, and two reports from the U.S. Department of Agriculture in mid-August offered the first on-the-ground insight into how much corn, soybeans and wheat American farmers will grow in this wet grain year.

On August 12, the U.S. Department of Agriculture estimated that the 2024 U.S. corn crop would total 15.1 billion bushels (bu.), down slightly from last year but still the third-largest crop on record. The national record yield of 183.1 bu. per acre is nearly 6 bu. more per acre than in 2023.

High production usually means low prices, and the U.S. Department of Agriculture estimates that the average price for the 2024/25 corn crop will fall to $4.20 per bushel, down 45 cents per bushel from the soon-to-end current crop year and a whopping $2.34 per bushel less than the 2022/23 average of $6.54.

Higher production also means higher ending stocks, but falling prices can reduce rising inventories if they stimulate new purchases. The USDA doesn't expect that to happen next year. Worse, ethanol producers will consume the same amount of corn this year as last year, 5.45 billion bushels, while exports will rise by an almost imperceptible 50 million bushels.

This means that corn stocks will be at 2.07 billion shillings in a year, 10% more than today. This is a tough hurdle for the weak prices.

The upcoming soybean crop will be a huge success, according to USDA crop counters: total US soybean production will reach an all-time high of $4.6 billion in 2024/25, up 10% from last year. The estimated national yield per acre will also be a huge success: $53.2 billion.

But the stunning crop will produce a price-shattering surplus of 560 million bushels, or nearly 220 million bushels more than this marketing year, and a projected average price of $10.80 per bushel, $1.70 below the current year's average and a shocking $3.40 per bushel less than two years ago.

A significant part of this price decline depends on the continued increase in global oilseed production, notes the US Department of Agriculture. Global soy and rapeseed production is expected to increase by an estimated 4.5 million tons – mainly due to increased acreage in Russia, Ukraine, India and the West African agricultural country of Benin. This expected production is already pushing US prices to their knees.

U.S. wheat producers face the same problem as corn and soybeans, despite less acreage in 2024. However, better yields pushed production up to 2 billion bushels, up from about 170 million bushels more than a year ago.

This rebound – as well as increasing global competition – means that U.S. wheat inventories will rise again while prices continue to fall in the coming year. For 2024/25, the USDA expects all U.S. wheat prices to average $5.70 per bushel, about $1.25 less per bushel than a year ago.

Rain also brings sugar, both cane sugar in the deep south – mainly in Florida, Texas and Louisiana – and beet sugar in the far north, mainly in Minnesota and North Dakota. Overall, the USDA estimates total sugar production in 2024/25 at 9.5 million short tons.

Cotton production will also rise sharply: an estimated three million bales of 220 kg each, or a whopping 25 percent more than last year. Since there are only a few cotton mills in America, the US Department of Agriculture expects 12 million bales – 80 percent of this year's harvest of 15 million bales – to be exported. However, stocks are being built up to keep prices stable.

What this year's wet weather cannot produce, however, is more income. In February, the U.S. Department of Agriculture forecast U.S. net farm income for 2024 to be $116 billion, down 25 percent from 2023. These August production and consumption estimates strongly suggest that number will fall even further when the department revises its farm income estimates on Sept. 5.

This is further proof that when it rains, it rains heavily.