By Nikki Chamberlain, Vice President of Lending Strategies
When I last wrote, planting season had just begun and here we are starting to think about harvest. As of August 11, crop conditions across the state were at the highest levels they have been in the last five years with 80% of the corn and soybean crops rated to be in Good and Excellent condition. Only 10% of Missouri corn and soybeans have been rated in Poor or Very Poor condition.
The August World Agricultural Supply and Demand Estimates (WASDE) Report released on August 12, 2024, indicated that the U.S. has the potential for some very large grain and oil seed crops. The projected corn yield is 183.1 bu/ac which is 2.1 bu above the 20-year trend line. Although corn acres are down almost 1% from last year, the new corn crop is estimated to be the third largest on record. This has provided the market with little reason to increase corn prices.
Soybean production is also expected to increase this year. Projected yields are a record 53.2 bu/ac with an additional million planted acres. The 2023 ending stocks were projected to be 62% higher than they were at the beginning of this year which pushed soybean prices under $10 for the first time since September 2020.
CattleFax writer Troy Applehans sums up the current cattle situation well: “Cattle fundamentals have not changed regarding a continued tighter supply forecast, slow restocking rate, and an overall fundamentally healthy margin scenario by cattle segments.” Cattle producers must watch for a slowdown in demand due to recessionary fears. Customers can and will substitute proteins if the pinch to their pocket gets strong enough.
Some logistical concerns on our radar include a possible Canadian rail worker strike, low Mississippi River levels and a potential strike of longshoremen across the U.S. East and Gulf Coast ports. The Canadian Industrial Relations Board (CIRB) gave 10,000 rail workers approval to move forward with a strike beginning August 22. This should not have a large impact on U.S. and Mexico rail movement, but considering we import a large amount of fertilizer components including potash from Canada, the U.S. could see some disruption in the supply line of fertilizer.
The Mississippi River is expected to be about four feet below normal level by Labor Day. While this is not as dramatic as last year when the river set a record low of -11.5 feet in October, this will be the third straight year of low river levels. The basis on crop prices is starting to soften in some areas.
The third transportation hotspot is along our East and Gulf coasts. The International Longshoremen’s Association (ILA) has been negotiating their contract with the U.S. Maritime Alliance (USMX) without much success. They will meet in early September to ward off a possible strike on October 2. Associate professor and director for the University of Houston’s supply chain and logistics program, Margaret Kidd, was quoted saying “Estimates on the port side indicate a one-week strike would take four to six weeks to clean up – you can do the math and see that a prolonged strike would take us into 2025 to play catch up.” If the ILA was to strike at the same time as the Canadian rail workers, North America would feel those impacts for months after.
These are just a few of the current topics on our radar at FCS Financial. Agriculture is not immune to economic downturns, and we remain vigilant in understanding the way the economy will impact our member-owners. I closed my last essay saying 2024 was going to be all about monitoring farm margins, and I will double down on that—success in 2024 will come from knowing and understanding your margins.
Nikki Chamberlain is the Vice President of Lending Strategies for the FCS Financial Credit department. She has more than 20 years of credit experience at FCS Financial and Capital Farm Credit in Texas.
