Several of the factors that impacted trade in 2023 will again be primary topics to start 2024.

One of the of the most highly debated topics in the market right now is how much crop loss we may see in Brazil from recent weather conditions. Some firms believe minimal loss has taken place so far, including the USDA and Brazil’s own CONAB. Others are much lower with some at 155 million mt.

One thing we need to remember that even if Brazilian soybean production falls to the low end of trade guesses it would still be the second largest on record and more than enough to satisfy demand. Last year, Brazil grew a 158 mmt soybean crop and we are still seeing record exports of that inventory as the harvest of this year’s crop gets underway. We also cannot overlook the fact that Argentine soybean production this year will be nearly twice what it was last year.

We are starting to see more debate over next year’s potential acres in the United States. Several analysts are stating they believe U.S. farmers will seed more soybean acres this year, given the price spread between new crop contracts. While this is a factor, the simple fact U.S. farmers planted a large 94.9 million acres of corn, and a lower 83.6 million soybean acres last year may cause some acres to shift to soybeans. Farmers across the United States favor corn production over soybeans, though, and this may reduce the numbers of acres they shift to soybeans. Farmers also tend to hold crop rotations as well.

Another factor that may prevent a decline in corn plantings is a correction to input costs to more appealing levels, mainly nitrogen-based fertilizers.

The USDA’s Economic Research Division has released its cost of production estimates for corn and soybeans for the 2024 growing season. This group is putting the 2024 cost of production on corn at $869.52, down from the 2023 number of $897.28. On soybeans, the 2024 cost of production is estimated at $614.81 compared to $623.63 last year. These are still well above the 2021 costs of $735.19 on corn and $531.77 on soybeans. Energy costs are projected to remain elevated this year, but these will be offset by lower seed and fertilizer expenses. Fertilizer this year is projected to be the lowest cost in the past three years.

While production expenses are forecast to be lower in 2024, commodity values are expected to remain pressured as well. The USDA is currently predicting an average corn cash value of $4.85 for 2024, compared to $6.54 last year. The average soybean cash price is estimated at $12.90, down $1.30 from last year.

One of the greatest impacts on cash flow in 2023 that will again be a factor in 2024 is elevated interest rates. The Federal Reserve made several interest rate hikes going into 2023 but opted to hold rates steady as the year ended. These higher rates impacted agriculture from elevated costs of production to higher carrying charges to lower borrowing levels. The Fed is now indicating they may start to cut rates in 2024 if the U.S. economy continues to slow. This would be a great benefit for agriculture, but economists are still predicting elevated interest costs to last well beyond 2024.

Interest rates have also impacted commodity demand. Buyers are not as willing to load up on raw products given the higher costs associated with elevated inventory. Consumer demand has also slowed from high costs. These changes are not just taking place in the domestic market but the global market as well. Some import buyers have struggled with not only elevated borrowing costs, but a lack of credit given a tightening global economy.

Before long all interest in the United States will shift to the upcoming spring planting season. As it does, more interest will again fall on U.S. weather patterns. The last growing season in the U.S. was less than ideal, with several regions of the country experiencing drought. Even so, U.S. yields were on the high side of historical averages and better than expected. This is especially the case on corn, where production was record sized.

A concern over this situation is that much of the U.S. remains in drought conditions. Roughly 45 percent of both corn and soybean production regions are still reporting abnormally dry soils. While this is well below the peak totals from last summer, there are concerns drought will again be a factor in 2024. While this is possible, it may be difficult to get trade to react given recent crop sizes with less-than-ideal conditions.

One thing we can expect in 2024 is a continuation of the high volatility that was seen in 2023.

RISK DISCLAIMER: The risk of loss in trading commodity futures and options is substantial. Before trading, you should carefully consider your financial position to determine if futures trading is appropriate. When trading futures and/or options, it is possible to lose more than the full value of your account. All funds committed should be risk capital. Past performance is not necessarily indicative of future results. The information contained in this report is collected from a variety of sources and is believed to be reliable but is not guaranteed to be accurate. This report is provided for informational purposes only and is not furnished for the purpose of, nor is it intended to be relied upon for specific trading in commodities herein named.