The “FOCUS ON AG” column is sent out weekly via e-mail to all interested parties. The column features timely information on farm management, marketing, farm programs, crop insurance, crop and livestock production, and other timely topics. Previous “FOCUS ON AG columns are available on the MinnStar Bank website at: https://www.minnstarbank.com/category/focus-on-ag/ or the MinnStar Bank Facebook page at: https://www.facebook.com/MinnStarBankNA/ Selected copies of the “FOCUS ON AG” column are also available on “The FARMER” magazine web site at: https://www.farmprogress.com/focus-ag
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he September 12 USDA Crop Report decreased the projected U.S. average corn and soybean yields for 2023, as compared to the August National Ag Statistics Service (NASS) yield estimates; however, that was offset by increases in the expected 2023 harvested acreage for both crops. The latest NASS yield estimates were based on U.S. crop conditions as of September 1st; and were the first 2023 USDA yield estimates that included actual field data, including in some of States with major impacts from this year’s drought. Total U.S. corn and soybean harvested acreage totals were increased in the latest USDA report, compared to the August acreage estimates. The increase in acreage resulted from less-than-expected prevented planted acres in 2023. The end-result was a slight increase in the expected total 2023 corn production and a slight decrease in the estimated 2023 soybean produc-tion. The immediate market response was a price decline for both December corn futures and November soybean futures on the Chicago Board of Trade (CBOT).
The September 12 USDA Report projects the 2023 U.S. average corn yield at 173.8 bushels per acre, which is a decline from 175.1 bushels per acre in the August USDA report. The projected 2023 national corn yield compares to 173.3 bushels per acre in 2022 and the record U.S. corn yield of 177 bushels per acre in 2021, as well as to 171.4 bushels per acre in 2020 and 167.4 bushels per acre in 2019. USDA increased the total 2023 harvested corn acreage in the U.S. by 774,000 acres from earlier estimates, based on crop acreage certification data filed by producers through the USDA Farm Service Agency (FSA) offices. USDA is now estimating total U.S. corn production for 2023 at just over 15.13 billion bushels, which would be an in-crease of 10 percent from the 2022 production level of 13.73 billion bushels and would be similar to the 2021 production of 15.1 billion bushels.
USDA is estimating Minnesota’s 2023 average corn yield at 180 bushels per acre, which was a decrease of 3 bushels per acre from the August esti-mate. The projected 2023 corn yield compares to the 2022 record yield of 195 bushels per acre and the 2021 average yield of 178 bushels per acre. The September 12 report also decreased Iowa’s 2023 average corn yield by 3 bushels per acre compared to the August estimate, lowering the project-ed yield to 200 bushels per acre. Iowa’s projected 2023 statewide corn yield would be the same as the final 2022 yield and compares to 205 bushels per acre in 2021.
The 2023 USDA corn yield estimates for the major corn producing states in the eastern corn belt are Illinois at 198 bushels per acre, compared to 214 bushels per acre in 2022; Indiana at 194 bushels per acre, compared to 190 bushels per acre in 2022; and Ohio at 195 bushels per acre, compared to 187 bushels per acre in 2022. Several western corn belt states showed higher yield estimates for 2023, including Nebraska at 177 bushels per acre, compared to 165 bushels per acre in 2022, South Dakota at 146 bushels per acre, compared to 132 bushels per acre in 2022, and North Dakota at 138 bushels per acre, compared to 131 bushels per acre in 2022. The 2023 yield estimate for Wisconsin is 165 bushels per acre, compared to 180 bushels per acre in 2022. It should be noted that of the states listed, only Ohio, North and South Dakota showed an increase in the corn yield projec-tion on September 1 compared to August 1. All other listed states listed showed a decline in the corn yield estimate.
The USDA Report on September 12 estimated total 2022 U.S. soybean production at just under 4.15 billion bushels, which would be down slightly from the 2022 soybean production of slightly below 4.28 billion bushels. USDA lowered the projected 2023 U.S. average soybean yield to 50.1 bushels per acre from 50.9 bushels per acre in the August report. The 2023 NASS soybean yield estimate compares to final U.S. soybean yields of 49.5 bushels per acre in 2022, 51.4 bushels per acre in 2021, and 50.2 bushels per acre in 2020. The record national average soybean yield was 52 bushels per acre in 2016. The USDA 2023 soybean yield projection was slightly higher than the average yield estimates by many grain trading ana-lysts, which is pressuring soybean prices.
USDA is estimating Minnesota’s 2023 average soybean yield at 48 bushels per acre, which is down one bushel per acre from the August estimate. The 2023 yield projection compares to recent statewide yields of 50 bushels per acre in 2022, 47 bushels per acre in 2021, and 49 bushels per acre in 2020, as well as the record statewide soybean yield of 52.5 bushels per acre in 2016. The estimated 2023 soybean yield for Iowa is at 58 bushels per acre, which is the same as the August projected yield. The 2023 estimated yield compares to 58.5 bushels per acre in 2022, the record statewide soy-bean yield of 62 bushels per acre in 2021, and 53 bushels per acre in 2020.
The projected 2023 yields in major soybean producing eastern corn belt states include Illinois at 61 bushels per acre, compared to 63 bushels per acre in 2022, Indiana at 60 bushels per acre, compared to 57.5 bushels per acre in 2022; and Ohio at 58 bushels per acre, compared to 55.5 bushels per acre in 2022. Similar to corn, soybean yields in Nebraska and South Dakota are expected to increase significantly in 2023, compared to the drought-reduced soybean yields in 2022. The 2023 Nebraska soybean yield is estimated at 55 bushels per acre, compared to 49 bushels per acre in 2022, with South Dakota projected at 43 bushels per acre in 2023, compared to 38 bushels per acre in 2022. The 2023 projected soybean yield of 46 bushels per acre in Wisconsin is considerably lower than the final yield of 54 bushels per acre in 2022, while the 2023 yield of 33 bushels per acre in North Dakota is only slightly below the final yield of 35 bushels per acre in 2022.
SEPTEMBER 12 WASDE REPORT
The USDA World Supply and Demand Estimates (WASDE) that was also released on September 12. The report included the projected decreases in the 2023 U.S. corn yield and corn production that were referenced earlier. The report projects increased corn usage for ethanol and livestock feed dur-ing 2023-24 marketing year, as compared to the 2022-23 corn usage levels. U.S. corn export levels for 2023-2024 are estimated at 2.050 billion bushels, which is up from the estimated export total of 1.665 billion bushels for 2022-23. The 2023-24 corn export level would still trail the strong export totals of 2.472 bushels in 2021-22 and 2.745 billion bushels in 2020-21.
The U.S. corn ending stocks for 2023-24 are projected at 2.22 billion bushels, which would be an increase of 53 percent from the estimated carryover of 1.452 billion bushels for 2022-23. The latest 2023-24 corn ending stocks projection would also be considerably higher than the final corn carryover levels of 1.38 billion bushels in the 2021-22 marketing year, and 1.23 billion bushels in 2020-21.
The higher projected 2023-24 corn ending stocks are putting considerable pressure on corn price projections for the 2023-24 marketing year, which extends from September 1, 2023, through August 31, 2024. USDA is estimating the average on-farm corn price for the 2023-24 marketing year at $4.90 per bushel, which is the same as the August report. The 2022-23 national average corn price, which will be finalized on September 30, 2023, is estimated at $6.55 per bushel, which compares to previous final national average prices of $6.00 per bushel in 2021-22, $4.53 per bushel in 2020-21, $3.56 per bushel in 2019-20, and $3.61 per bushel for 2018-19.
The recent WASDE report projected 2023-24 soybean ending stocks at 220 million bushels, which is a decrease of 25 million bushels from the August estimate. The 2023-24 estimated soybean ending stocks compare to previous ending stocks of an estimated 250 million bushels for 2022-23, 274 million bushels in 2021-22, and 257 million bushels in 2020-21. Soybean exports for 2023-24 are projected at 1.79 billion bushels, which is down from an estimated 1.99 billion bushels in 2022-23 and 2.15 billion bushels in 2021-22.
USDA is now projecting the average on-farm soybean price for the 2023-24 marketing year at $12.90 per bushel, which is an increase of $.20 per bushel from the August price estimate. The 2022-23 estimated final national average soybean price is estimated at $14.20 per bushel, which compares to national average prices of $13.30 per bushel in 2021-22, $10.80 per bushel for 2020-21, and $8.57 per bushel for 2019-20.
Note - For additional information contact Kent Thiesse, Farm Management Analyst and Sr. Vice President, MinnStar Bank, Lake Crystal, MN. Phone (507) 381-7960. E-mail email@example.com) Web Site - http://www.minnstarbank.com
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Even though Congress has held multiple hearings and listening sessions during the past several months, it does not appear likely that we will have a new Farm bill in place when the current Farm Bill expires. The current Farm Bill, known as the “Agriculture Improvement Act of 2018”, expires on September 30, 2023, and included coverage of the 2023 crop year. At this point, no formal legislation for a new Farm Bill has been proposed in either house of Congress. Once a formalized Farm Bill is proposed and discussed, it will need to be passed by both houses of Congress and signed by President Biden before it can be enacted. Most likely, much of the funding allocated in the current Farm Bill will be extended through pending actions by Congress on the Federal budget.
When most people hear of a “Farm Bill”, they think of the commodity programs and payments that affect crop producers. Some people may be aware that crop insurance and conservation programs are included under the Farm Bill, and some are knowledgeable that Supplemental Nutrition Assistance Program (SNAP) and food stamps are part of the Farm Bill legislation. However, very few people outside of government officials and policy experts are aware that the Farm Bill also covers funding for rural fire trucks and ambulances, export promotion, international food aid, forestry programs, ag research and extension education at land-grant universities, and school lunch programs. The current Farm Bill passed in 2018 was over 1,000 pages in length, and contains 12 separate Titles, which cover a multitude of programs that are administered by USDA.
Farm Bills date back to Great Depression era of the 1930’s, with the first Farm Bill having just two Titles and being only 54 pages in length. The “Agricultural Adjustment Act of 1933” established the crop loan program, which is still in existence today. Under the crop loan program, producers can take out a low interest loan with USDA, using the crop as collateral before it is sold. The producer can either repay the loan principal plus interest when the crop is sold or can forfeit the crop to USDA. Over the past several decades, the crop loan program has been used extensively by farm operators to get needed working capital for purchasing crop inputs for the following crop year. Most national crop loan rates were increased as part of the 2018 Farm Bill, and some groups are pushing for further increases in the commodity loan rates in the next Farm Bill.
Land set aside and conservation programs were added to Farm Bills in the 1950’s, with the establishment of the “Soil Bank Program”. While the Soil Bank Program no longer exists, there have been many other set-aside and conservation programs, including the popular “Conservation Reserve Program” (CRP) that was added in the 1985 Farm Bill. The 2014 Farm Bill reduced the maximum CRP acreage from 32 million acres to 24 million acres, which was the lowest level since the initiation of the CRP program, which was gradually increased back to 27 million acres in the current Farm Bill. There are also several other conservation programs that are part of the current Farm Bill, including the Environmental Quality Incentives Program (EQIP) and the Conservation Stewardship Program (CSP), and the Agricultural Conservation Easement Program (ACEP). There are efforts by some members of Congress, as well as agricultural and environmental organizations, to have Farm Bill programs more directly linked with practices that enhance carbon sequestration efforts.
Food stamps were added to Farm Bill in 1973, with the program being administered by USDA. Over 80 percent of the proposed funding for the next Farm Bill will go to SNAP related programs, which includes the food stamp program, the women, infants, and children (WIC) program, and the school lunch program. The Federal budget outlay for the SNAP program more than doubled from 2008 to 2013, then declined briefly before increasing again since 2020, due to the economic challenges caused by the COVID pandemic. Some members of Congress and other groups would like to see the Nutrition Title and SNAP programs removed from the Farm Bill. However, the Nutrition Title programs are important to nearly every member of Congress, including those in urban areas, which keeps all members engaged in Farm Bill discussions and the importance of food and agriculture.
About 10-12 percent of the funding in the proposed Farm Bill will be targeted for farm commodity programs and crop insurance programs. The current Farm Bill provides eligible crop producers the choice between the county revenue based “Ag Risk Coverage” (ARC-CO) program, or the price-only “Price Loss Coverage” (PLC) program, for corn, soybeans, wheat, and other eligible commodity crops. The ARC-CO program is based on actual county crop yields and national average crop prices for a given crop year, compared to 5-year average benchmark yields and prices. The PLC program payments are based on national average crop prices for a given year compared to present crop reference prices. Some farm organizations are pushing for higher crop reference prices in the next Farm Bill, given the much higher crop input costs that have occurred in the past couple of years. The current Farm Bill does allow for small gradual increases in the crop reference prices during extended periods of higher commodity prices. The dairy margin protection program and sugar support programs are also included under the commodity title of the Farm Bill.
Most crop producers and ag lenders will highlight a sound working crop insurance program as the “centerpiece” for a solid risk management plan in a farm operation. Over 95 percent of the corn and soybean acres in the Upper Midwest are typically insured by some type of crop insurance coverage. Most crop insurance premiums are subsidized at a rate of 60-65 percent by the federal government, as part of the Farm Bill. Some members of Congress and some organizations are calling for some changes and modifications to the current Federal Crop Insurance program, while most farm organizations are lobbying to keep the current program. Some livestock producer organizations would like to see enhancements to risk management programs for livestock production.
Since the first Farm Bill in 1933, there have been 17 different Farm Bills in the past 90 years, with the next Farm Bill scheduled to be finished in the coming months. New Farm Bills are usually written about every five years, with the longest period between new Farm Bills being nine years from 1956 to 1965, and the shortest period being one year from 1948 to 1949. The “Agricultural Act of 1949”, which is also known as the “permanent farm legislation”, was never repealed or allowed to expire, and becomes the Farm Bill legislation for many commodity programs if a new Farm Bill is not enacted when the previous Farm Bill expires. Many provisions in the 1949 legislation are very outdated and did not include the SNAP program, the current crop insurance program, or many popular ag and conservation programs, including CRP. The existence of the fallback to the 1949 legislation gives Congress extra incentive to complete Farm Bills in a timely manner.
The passage of a new Farm Bill is very complex, with programs ranging from farm commodity programs to food and nutrition programs, from conservation programs to rural development programs, and many more. In many cases, finalizing a Farm Bill in Congress can be quite controversial, and not necessarily by political party lines. The various Farm Bill programs become quite geographical, with members of Congress wanting to protect the farm, food and nutrition, conservation, and economic interests of their State or Congressional district. The very large federal budget deficit in recent years has added a new element to successfully passing a new Farm Bill.
The last Farm Bill was written in 2018, to cover federal fiscal years from 2019-2023; however, Congress has been known to extend Farm Bills beyond the expiration date. Thus far, the discussion has been to have a new Farm Bill completed by the time the current Farm Bill expired on September 30, 2023, or shortly after. Ultimately, there will likely be a compromise reached, and a new 5-year Farm Bill will be passed sometime later this year, or more likely in 2024. Given the current political division that exists in Congress and the other legislative issues, it is appearing likely that a one-year extension of the current Farm Bill is quite possible. From a commodity program standpoint, this would likely extend the current farm program provisions for an additional year in 2024.