Economist Offers Gloomy Forecast for Corn, Beans
Published: Friday, January 24, 2025
Joe Janzen, University of Illinois ag economist, predicts that 2025 corn and soybean prices will average at or below 2024 levels. He made the prediction during a recent webinar that dove into current fundamentals influencing the markets.
USDA's final crop production report for 2024, released in January, pictured a lower-than-expected average yield of 179 bushel per acre for corn, down four bushels from the predicted yield of 183 bushels per acre.
"That is a massive move and really changed the nature of what we thought was the total available supply," Janzen said. "The thought for corn was that the market was well supplied, but it wasn't as supplied as previously thought," Janzen said.
Demand for corn has been strong, current stocks are being used, and supply and demand is calling for corn to enter the market.
The lowered yield and inventory rallied price by 25 to 50 cents per bushel, but Janzen believes that price will erode.
A typical, annual U.S. corn crop is utilized in three main categories—37% for ethanol, 38% for feed and 16% for export markets. The soybean market is divided between four primary categories, with 46% being used for meal, 43% in export markets, 5% in bio oils and 6% in food oil.
Exports in both corn and soybeans tend to be a shock absorber and pick up the slack when other categories are not meeting expectations, there is a bumper crop or world geo-political events rearrange the normal supply and demand set up.
Janzen graphed the gradual decline of grain prices throughout the summer and fall of 2024 with a season's average price of $4.25 per bushel on corn and $10.20 per bushel on soybeans.
For 2025, USDA predicts an average corn price of $3.90 per bushel, 92 million planted acres with a yield of 182 bushel per acre. Janzen is a bit more optimistic, predicting a $4 price per bushel on 94 million planted acres and 183 bushel per acre average yield. His assessment includes the market favoring more corn acreage this year.
For soybeans, USDA predicts that 85 million acres planted and sold at an average price of $10.80 per bushel. Janzen's prediction comes in below USDA at 85 million acres fetching an average price of $10.40 per bushel. Both estimate yield to average 52.5 bushels per acre.
Trade conflicts and tariff uncertainty could be the wildcard that sends prices on a roller coaster of highs and lows. One possibility is for tariffs to gradually increase until some policy goals are achieved. Canada and Mexico are large buyers of American corn; China is a critical destination for U.S. soy. The United States exports more than $30 billion in ag exports to these countries annually and is a significant portion of all U.S. goods traded. Retaliatory tariffs would be directed at ag goods if the U.S. were to be embroiled in a larger trade war, adding a bullish component to future demand picture.
Janzen said that news of some dry weather in Brazil and Argentina could impact South American production estimates a little but says that Brazil corn production is relatively stable year over year. However, Brazil's Ministry of Agriculture reports a significant building year over year in soybean acreage, and an increase of 700 million bushels of Brazilian soybeans from the 2023 to the 2024 growing season. This growth is pushing the Brazilian soybean industry to increase exports.
Coupled with a strong U.S. dollar, Brazil has acquired a dominant place in the world soybean market, and Chinese importers have made a conscious decision to steer toward Brazilian soybeans at the expense of U.S. product.
U.S. ethanol production has returned to pre-COVID levels of 1.4 billion gallons per month and remains a big player in domestic corn use. Because of the federal mandate, ethanol demand and production will see little change, and have little impact on corn markets. Other biofuels such as renewable diesel and aviation fuel will only have small impacts in the short term but could change the long-term landscape for demand.
Janzen says that risk adjusted return outlook for 2025 is poor and predicts a negative margin.
"The overall story is that crop marketing is a difficult game to win consistently," Janzen said. "Some farmers seem to always market grain at the right time, so one thing you can do is have a marketing plan that commits you to consistent action, not controversial or novel advice."
"The wins are small so something like this recent rally in the corn market is a win for farmers. Taking advantage of that doesn't necessarily mean the use of sophisticated marketing tools or a crazy futures and options strategy."
Janzen's best recommendation is a marketing plan that commits a person to making real sales that realize gains, while calculating the gains in terms of full net cost including two to three cents per bushel per month of storage and delayed sales timing.
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