CoBank Issues Hopeful Report for U.S. Ag Sector

USAgNet - 10/14/2024

U.S. farmers are harvesting a record-large soybean crop and the third-largest corn crop on top of large carryover stocks from the previous marketing year. The ample harvests coincide with a host of export headwinds including a strong U.S. dollar, stalled rail shipments into Mexico and low water levels on the Mississippi River. However, export demand is showing signs of recovery as droughts in Brazil and Russia send global grain and oilseed buyers back to the U.S.

Fertilizer prices have moderated and ag retailers are anticipating strong farmer spending on inputs this fall. Final 2024 expenses for fertilizer, pesticide, fuel and oil are expected to decline nearly 10% from 2023, mostly due to price reductions. While lower, input costs have not dropped in tandem with crop prices and remain above pre-pandemic levels. Many ag retailers are bolstering their input financing programs as a result.

U.S. ethanol production margins will benefit from lower corn and natural gas costs. Export demand remains strong, but more competition could be on the horizon with Brazil constructing new corn-ethanol plants. Soy oil demand for U.S. biofuel production continues to face headwinds from rising imports of used cooking oil and tallow, which are now estimated to account for 1 of every 6 gallons of biomass-based diesel produced in the U.S.

Despite rising prices, beef demand remained robust throughout the grilling season. Retail prices continued climbing through August, topping more than $8.60/lb. Price-sensitive consumers found relief in ample retail hamburger promotions. The composition of beef coming to market in 2024 has been more fed cattle, with more steers entering the feedlot than last year. Falling feed prices, a changing mix of cattle and tighter availability is contributing to higher cattle weights.

Hog production margins are improving on lower feed costs. Iowa State University estimates farrow-to-finish operators recorded their fifth consecutive month of positive margins in August. However, any expansion in production is unlikely as non-feed operational costs remain elevated. Pork prices should hold steady through the rest of the year as a result. Global pork demand remains robust, and the U.S. will likely overtake Europe as the leader in pork exports this year.

Chicken remains a leading growth segment for animal protein, as consumers seek value at the retail meat case. U.S. per capita chicken consumption is on pace to rise 1.5 lbs. in 2024. Consumer interest in both dark and white meat items is growing as marketers address inflation concerns. Broiler production was moderately higher through summer, with strong revenues for integrators.

Dairy farmers could experience some of the best margins in a decade given the combination of higher milk prices and falling grain costs. In July, milk production margins climbed to $12.33 per cwt., the highest level since May 2022. Forecasts for the remainder of the year expect margins to improve to nearly $16 per cwt. Cheese and butter prices have moved higher due to tighter milk supplies.

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