PEORIA, Ill. — Buoyed by continued strong export and domestic demand, U.S. corn and soybean markets should remain profitable throughout 2023. This is according to DTN grain market analyst Todd Hultman, who told farmers at the 41st Greater Peoria Farm Show (GPFS) that his projections also come with a “list of worries” that could potentially impact the markets in a negative manner.

“Of course we’re seeing talk every day about inflation and interest rates, and a possible recession. We’re probably going to have another rate hike on December 14 when the Fed meets again. Ukraine is one of the world’s most fertile regions and a major food producer. The world is having a tough time getting by without Ukraine’s contributions. This is messing up not only our grain markets, but also our energy markets and our fertilizer markets,” said Hultman, who was in town to present his 2023 Ag Market Outlook from November 29 through December 1 at the Peoria Civic Center, site of the three-day GPFS. “This makes it more difficult to predict what might happen with the markets in the next year.”

One thing will be certain regarding corn consumption, according to DTN’s lead analyst: there will be great demand for corn ethanol to stretch tightened fuel supplies. In addition, increasing demand for renewable diesel — a new fuel product that requires soybean oil — will help ensure strong soybean demand. 

“This is a supply story,” Hultman said. “We have a new corn trading range that is roughly between $5 and $8 (per bushel) because we have much fewer supplies of corn available. Instead of a two billion bushel carry, USDA is now estimating 1.8 billion bushels. Now our corn exports are off to a slow start, so maybe that’s 1.3 billion bushels in reality. But that’s still far less than the two billion we are used to, and that’s why we’re seeing the higher price trading range.”

With no new competing supplies coming until Brazil’s second crop in July 2023, “time is on your side for corn,” Hultman told the Peoria-area farmers. 

“Our U.S. supplies are only going to get tighter as the winter progresses, and we’ll get our turn at better export sales,” he said. “Brazil’s corn is now cheaper, but that won’t be the case for long. They’ll sell out their supply and by late January-early February we should start seeing better business. Part of this is that we won’t have the usual competition from Ukraine.”

In addition, world corn stocks are growing tighter, Hultman continued, with USDA currently estimating corn supplies at 3.7 billion bushels (excluding China) for the year ahead. It is the second lowest world corn stocks estimate in the past nine years.  

With demand surging, corn futures are shaping up nicely, Hultman pointed out. Cash corn bids around the Midwest averaged $6.75 per bushel for corn as of November 28, according to the DTN National Index of 3,100 cash bids. This represents the strongest corn basis for this time of year in over 20 years.

“If I say nothing more about corn demand, that should tell you everything you need to know right there. Those are the actual bids out there for corn, and that tells me more about the market and demand for corn than anything. I see that as a very positive outlook.”

With the probability of no La Nina weather influence in store for growers next year, Hultman said farmers might consider forward-pricing some of their 2023 corn crop. “There’s a chance we could have a better weather crop next year and have a little in reserve at the end of the growing season. It may be time to think about doing some forward pricing when you get to say, April or May,” he recommended. 

Soybean basis strongest in 20 years

“We have a new demand component for soybeans in renewable diesel that we didn’t have before,” Hultman said, “and just like with corn there are tighter supplies that aren’t going to be solved easily in a moment. We are looking at a new trading rate of $12 to $18 (per bushel).”

With the DTN National Soybean Index at $14.35 per bushel at the time of his presentation, the average national soybean basis is the strongest in the past two decades, the market analyst shared. 

‘What changed here? Soybean oil is what changed. It is needed to stretch fuel supplies, and the new product is renewable diesel. We talked a little about it here last year, and it is such a good product that the oil companies have invested in it as well as the soybean processors,” said Hultman. “It’s a low carbon fuel that seems to work well with the other petroleum diesel, so they can drop it in the pipeline, they can transport it, you can blend it with your fuel at any percentage, and it seems to have beneficial properties to boost regular diesel even at a low blend rate. Unlike with ethanol, there’s no fight between the oil industry and our ag interests.”

To provide the infrastructure necessary for an expansion of renewable diesel production, capacity for soybean oil has been boosted by 110 percent in the past year, with around 17 new processing plants coming online. “In the next few years you’re going to be seeing a lot more of this,” said Hultman, before offering an opinion on the Biden administration’s goal of requiring the U.S. auto fleet to convert to 50 percent electric vehicle production by 2030. 

“You can’t just think you’re going to shut down the oil and gas industry. It’s going to take time, and it’s going to take more than a couple of decades,” he said, before adding that the reported U.S. soybean crush is up significantly in order to meet new demand for biodiesel. “We’ve always had strong demand for soybean meal, but now in addition we have strong demand for bean oil that we’ve never had before. It’s why we’re seeing a big increase in crush.”