Analyst Sees Corn-to-Beans Acreage Shift
Published: Friday, January 26, 2024
U.S. growers are expected to plant more soybean acres this year, at the expense of corn, according to one market analyst.
Hugo Van Roessel, a grain merchant at Central States Enterprises in New Haven, offered his thoughts on the 2024 market outlook during a session last Wednesday at the Fort Wayne Farm Show. He said an acreage shift is very likely to occur.
"It just feels that our supply side (for corn) is burdensome today," Van Roessel said. "The market will fix that through the corn-to-bean ratio."
In 2023, farmers planted the second highest number of corn acres ever, at 94.6 million acres. That resulted in record production of 15.3 billion bushels and record yields of 177.3 bushels per acre. This was remarkable considering that much of the western Corn Belt experienced drought conditions last summer.
Although exports were up 25% in 2023, the big story, according to Van Roessel, is that the U.S. ended the year with a relatively high stocks-to-use ratio of 14.85%. It should be below 10%, he said.
Farmers are expected to cut back on corn acreage this year. Van Roessel expects farmers to plant 91 million acres this year; USDA will provide an official estimate on March 31.
Even if farmers plant less corn this spring, the market is beginning the year with an oversupply of corn. Those stocks will weigh on the market during the growing season, resulting in an estimated stocks-to-use ratio of 17.12% at the end of the 2024, Van Roessel said.
"It's going to be difficult for this market to grab on to much of anything for it to rally," he said. "We're either going to need to see those export numbers really jump or we're going to have to pull acres out of corn production and switch them to something else."
That "something else" could be wheat or soybeans. He expects a majority of the acreage shift will favor beans.
The current stocks-to-use ratio for soybeans, at 7%, is much better.
"That's not an overabundance of soybeans," the grain merchandiser said.
Even though U.S. soybean exports are off compared to the previous year, domestic crush is ramping up. That is due to higher production of biodiesel and sustainable aviation fuel.
"That's going to be one of our biggest supporters in our soybean market," he said.
However, he said Argentina, traditionally a big player in the soy crush market, fell off last year due to drought. If Argentina comes back, it could impact the U.S. crush market.
"All eyes will be on that as far as crush margins go here this next year along with the Renewable Fuels Standard," Van Roessel said.
USDA expects U.S. soybean exports to decline by 11% in 2024. Shipments to date are down 20%, Van Roessel said.
Competition from South America is the main reason why U.S. soybean exports have fallen.
"If everything stays on track, they (Brazil and Argentina) are going to produce roughly twice as many soybeans as the U.S. this year," Van Roessel said. "Expectations are that they will produce three times as many beans as the U.S. in 10 years."
Much of Brazil's growing soybean production is purchased by China. According to a report issued last Saturday, Brazilian soy exports to China in 2023 increased by 29%, while U.S. exports to China were down 13%.
Brazil supplied 70% of China's 2023 soybean exports while the U.S. supplied 24%.
Van Roessel's advice to the farm show audience was to have a marketing plan in place. For corn, the market follows a seasonal pattern. Corn prices are usually highest from mid-March through mid-June.
"The most important part is to have a plan," he said. "Have some target orders out there. Have an idea of where you want to start selling."
His view is that the "market is going to fix all problems." By that, he means low corn prices will create an acreage shift from corn to beans and make U.S. exports more affordable on the world market.
Barring a major drought, the U.S. faces a glut of corn in 2024. Prices are expected to head lower.
As he said, "Markets can't go down forever, but they can sure try."
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