Commodity challenges

Net farm income forecast, reflecting an over 4% year over year decrease per USDA this month. What's behind the forecast, though? Chief economist Seth Meyer recently conducted a more detailed look at the Agri-pulse AG Outlook Forum in Kansas City. Crop producers are expected to receive 10% less income for their commodities in 2024. Part of the reason that we're seeing softening commodity prices is because we have seen some improvement in some of the commodities in terms of global carryout, a period of a little bit greater global carryout outside of China. There is also increasing downward pressure on some commodities already experiencing low prices. The U.S. corn crop, as an example, is set to be the nation's second biggest on record this year. What are we going to do with that crop? Well, we got to have a combination of a robust livestock market domestically. Got to send some to the ethanol plant, and we'd like to be able to export it, which leads to questions of where corn exports will be going and how competitive exports will be. There is the blue Brazilian corn. That is a demand that China did not have in the past. China has now begun to accept Brazilian corn in the last year, year and a half. And that has really changed the competitive position for US agriculture by way of exporting corn to China. A similar story applies to soybeans. A record crop expected, which in prior years some could be applied as crush for domestic biofuel production. Yet there is competition from a feedstock perspective. Large amounts of imports both canola oil from Canada, which was already coming in to some extent before, and large amounts of growth of used cooking oil from overseas. For the livestock and poultry sectors, net farm income is forecasted to increase over 7% from 2023. That is fueled by rising prices for eggs, cattle, milk and broilers. The chief economist, though, notes that supply constraints are preventing even larger growth in income at a time when livestock commodity prices are strong. Very strong cattle prices. But we're in a contraction phase of the cattle market for eggs, this is a highly inelastic market. In the short run, only 5% fewer birds leads to a huge increase in prices.