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The increased demand for U.S. corn seen in 2023 will likely be short-lived, says Neil Johnke, a corn trading expert with CHS. Global corn production is expected to increase this year, which could cut into U.S. exports. Shrinking profit margins in the livestock and ethanol sectors could also reduce corn demand.
Johnke advises farmers to prepare for a challenging year ahead.
Domestic corn demand likely to fall
Johnke describes 2023 as an unusual year for domestic corn demand. Poor growing conditions in the Southern Plains in 2022 left those states unable to meet corn needs for livestock in 2023 and corn was shipped in from the upper Midwest to fill the gap. That won’t be the case this year, since production rebounded in the Southern Plains in 2023.
Johnke says market fundamentals will also likely curb demand.
“Our livestock margins, dairy margins, swine margins and poultry margins are currently all breakeven at best,” he says. “Ethanol margins to start 2024 are also poor. We’re not growing demand.”
Increased ethanol stocks at the start of year could force plants to slow production, Johnke adds.
Increased global competition
U.S. market share of world corn exports grew in 2023 for the first time in several years. However, Johnke does not expect that to continue.
“One basic reason our exports increased last year was the crop disaster in Argentina. Their crop production was down 30% from the year before, but now it’s doing the opposite. They may try to take every piece of export business they can to get back in the market this year,” Johnke says. “Production in Brazil is also seeing tremendous growth and that country’s exports are set to outpace the U.S. for the first time since 2012.”
Purchase agreements between China and Brazil will also change the U.S. export market.
“In 2020, China purchased about 900 million bushels of corn from the U.S. because the U.S. was one of the two places in the world that they could buy corn from,” explains Johnke. “Now that China has reached agreements with Brazil, it is no longer dependent on the U.S. and that’s showing in our export sales.”
Corn carryout expected to rise sharply
With domestic and global demand slowing, a major jump in corn carryout is a reasonable expectation, Johnke says.
“With the markets expecting about 91 million acres of corn to be planted in the U.S. this year, average trendline yields would put our carryout close to 2.6 billion bushels,” he says. “That would be the largest U.S. carryout in the last 20 years and could leave the U.S. sitting on more corn than any other country.”
