99th annual Ag Outlook Forum

(USDA Chief Economist Dr. Seth Meyer/File Photo)

Will farmers be hit with historical highs in 2023?

February 23, 2023 | Joseph Hopper

How will 2023 compare to recent years? Farmers will still be in the realm of historical highs, according to USDA Chief Economist Dr. Seth Meyer, who helped open the USDA’s 99th annual Ag Outlook Forum earlier today. Meyer explained while recent years have been record breakers, there’s also been a lot of volatility causing headaches for farmers.

“Bean markets are tight, but at the end of the day, we found ourselves in a position where basically, as I've measured it, all four of the major commodities were lower than average at the same time in '22, '23,” Meyer says. “In those situations where stocks are tight, you're going to see volatility. … Big price movements over the last period of time, we've been tight stocks.”

The current expectation for prices are a decline from ’22 based on the strength of the upcoming crop. Projecting soybeans at $12.90/bu. and corn at $5.60/bu. for 2023, the chief economist says prices are still pretty decent.

“For a producer, what's going to matter is how do your input prices follow those output prices down,” says Meyer. “That's going to be key.”

While prices may dip slightly across the board in 2023, input expenditures weren’t expected to follow the same trend.

“We see that growth in input prices not reverse, but the growth is slowing and for some inputs, coming back off those highs, but not all the way back down to where they were,” Meyer says.

Taking a moment to examine the year ahead for soybeans, the chief economist says crush continues to play a major role in driving the soybean market. He explained there’s currently an attitude in the soybean industry expecting a 25% increase in crush capacity “on the horizon.”

“Crush margins in the United States have been very, very good,” Meyer says.  “As crush margins are good, we import less beans and crush more domestically.”

International Trade and South America

The current expectation for trade at the USDA is for ’23 to enter the record books as the second highest export total for U.S. ag exports, with the top three customers being familiar: China, Mexico and Canada. With the U.S. dollar continuing to hold its strength, Meyer explained if the dollar’s value weakens in ’23 it may cause some rebalancing between exports and imports.

“[The strong dollar] does produce some headwinds for us, when we think about exports,” says Meyer.  “Those commodities are priced in dollars, the dollar's expensive, it makes folks wanting to buy commodities from us more expensive. On the other side of that, the strong dollar makes U.S. consumers able to import certain ag products that they like.”

The “triple dip” La Nina weather pattern is expected to end in 2023, causing some change worldwide for agriculture, especially in South America.

“When you think forward and you look at the outlook for this, you're talking about a 204 million metric ton crop out of South America,” says Meyer. “Under normal weather, it'd be like 210 million metric ton crop. Next year, you're looking at 220 million metric tons of production, somewhere in that neighborhood, under normal weather assumption. That's a lot of beans.

He added, “What we've seen is a big rebound in production. This production will come in halfway through our own marketing year of beans. It's coming in right now, in terms of our production and then we will see, again, a larger crop base under normal weather conditions next year.”

How will ’23 stack up to ’22?

Meyer expected record farm rent, farm income and net farm income to pull back from ’22 highs and an overall expectation that high prices may cure high prices.

“Commodity price is falling, input price is rising but slower, government payments pulling back from pandemic payments and yet, we end up with farm income number above average for the last couple decades,” Meyer says.

He added, “So, is it as good as 2022?  No, but the expectation is it will still be an above average year.”