US corn farmers are coping with drought that is nearly as bad as the dismal conditions of 2012. Unlike in that earlier year, however, farmers today have to contend with a record Brazilian corn crop that has kept a lid on corn prices.
In 2012, drought drove US corn yields to 20% below the preceding five-year average, while production was 14% below average. As a result, December corn futures prices that year jumped by 40% between June 1 and mid-December as global supplies tightened.
This year, drought is once again hitting the Corn Belt, as seen in this Gro display. Gro’s US Corn Yield Forecast Model is currently predicting yield will be more than 5% below the five-year average and more than 10% lower than last year. Corn crop conditions, although slightly higher in the latest week, are also well below average levels in most corn growing states, especially in top producers Illinois and Iowa.
A rally in corn futures in early June was held back by concerns about large Brazilian supplies. The December 2023 contract price is currently 7% below its June 1 level.
Gro expects the US dry conditions will prompt the USDA to reduce its own 2023 corn yield estimate when it releases the July WASDE report next week.
The combination of weak corn prospects and lower prices threatens farm earnings for 2023, as Gro wrote about here. Gro’s US Farmer Profitability Application currently indicates that operating profit per acre of corn will be down by double-digits compared with 2022. The Gro app, which provides farm profit forecasts for corn and soybeans at the national and sub-national levels, updates daily with the latest local producer prices provided by DTN and with Gro’s machine-learning yield model forecasts.
US farmers increasingly must compete with Brazil’s corn and soybean production, which has expanded dramatically over the past decade. Brazil, despite corn yields that are only half those in the US, is today the world’s No. 3 corn producer and the largest exporter.
Brazil is on track to produce a record 132 million tonnes in 2023/24 — that’s 35% above the five-year average and 81% higher than what the country produced in 2012, as seen in this display of the Gro Brazil Corn Monitor. Brazil’s domestic corn prices have fallen precipitously since March, making Brazil’s corn significantly cheaper than the US on export markets, as this Gro display shows.
Brazil’s growing corn exports are shifting global trade flows. China, whose total imports of corn and other grains have jumped more than 20-fold since 2010, as seen in this Gro display, has purchased record amounts of Brazilian corn since finalizing an agreement on phytosanitary requirements for corn trade last year, as Gro highlighted here.