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May 2024
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Commodity Credit Corporation (CCC) commodity loans on harvested corn, soybeans and wheat were regularly used by farm operators in the 1990’s and early 2000’s as a grain marketing tool. The use of CCC commodity loans dropped off considerably from 2008-2014 and again from 2020-2022, when grain prices reached their highest levels in many years. As farmers finish up the 2023 harvest season, the use of marketing assistance loans (MAL’s), which are the same as CCC commodity loans, has again taken on more significance as an option in setting up post-harvest grain marketing plans for corn and soybeans.
The CCC commodity loans (MAL’s) are originated through county Farm Service Agency (FSA) offices after the grain has been harvested. The MAL’s are 9-month loans from the time the loan is established. A CCC commodity loan can be established both on farm stored grain and on grain in commercial storage with a warehouse receipt. Producers receive the value of the loan at the time the CCC loan is established. The loan can be repaid at any time during the 9-month loan period, by repaying the amount of the loan principal plus the accrued interest. The 2018 Farm Bill established national loan rates for the various commodities that are eligible for the marketing assistance loans. Following are the 2023 national loan rates for common crops in the Upper Midwest: · Corn --------- $2.20 per bushel · Soybeans --- $6.20 per bushel · Wheat ------- $3.38 per bushel · Barley ------- $2.50 per bushel · Oats --------- $2.00 per bushel · Grain Sorghum --- $2.20 per bushel The county loan rates are then adjusted higher or lower than national rates, based on local commodity price differentials compared to national price levels. Following is the range of county corn and soybean loan rates for MAL’s in the Upper Midwest States: · Minnesota -------- Corn = $2.02 to $2.13/bu.; Soybeans = $5.82 to $6.15/bu. · Iowa --------------- Corn = $2.07 to $2.30/bu.; Soybeans = $6.07 to $6.32/bu. · Nebraska ---------- Corn = $2.05 to $2.27/bu.; Soybeans = $5.82 to $6.18/bu. · South Dakota ----- Corn = $2.04 to $2.21/bu.; Soybeans = $5.67 to $6.10/bu. · North Dakota ----- Corn = $1.99 to $2.20/bu.; Soybeans = $5.67 to $5.97/bu. · Wisconsin --------- Corn = $2.03 to $2.20/bu.; Soybeans = $6.10 to $6.29/bu. The MAL loan interest rate is adjusted monthly and is set up at one percent above the CCC borrowing rate from the U.S. Treasury. The interest rate on MAL loans is fixed for the entire term of the 9-month MAL, except for a potential CCC interest rate adjustment on January 1. The current interest rate on marketing assistance loans (as of 11-01-23) was 6.50 percent, which compares to an interest rate of 8 to 9 percent for short-term financing at many commercial ag lending institutions. Producers only pay interest for the time that the MAL is in place. (Example --- $200,000 MAL corn loan at 6.50% interest for 180 days …… ($200,000 x .0675) / 365 x 180 = $6,411 interest payment for 6 months). Farm operators have the flexibility to place grain under a MAL at a local FSA office any time after the grain has been harvested. Producers also have the flexibility to treat the commodity loan as either “income” or as a “loan” when the loan proceeds are received. This can have income tax implications, depending on how and when the loan proceeds are received. It is best to consult with a tax consultant before determining the timing and the preferred method of receiving the loan proceeds. If commodity prices drop to levels that are lower than county loan rates, eligible producers would potentially be eligible to release the grain that is under a marketing assistance loan at a rate that is lower than the county loan rate. FSA issues a “posted county price” (PCP) for commodities that are eligible for MAL’s, which are updated and posted daily at local FSA offices, or available on county FSA websites. If the PCP is lower than the county loan rate, the producer could realize a “marketing loan gain” (MLG), if the grain is released at that lower PCP. (Example --- a producer places corn under a MAL at $2.10 per bushel, a few months later the PCP is $1.90 per bushel, resulting in the potential of a marketing loan gain of $.20 per bushel on the day the corn loan is released.) If the PCP drops below the county MAL loan rate, producers also have the option to collect a loan deficiency payment (LDP) on a commodity, in lieu of putting the grain under a commodity loan. The LDP calculation is similar to the calculation for marketing loan gains. Grain that is already under a commodity loan is not eligible for a LDP, and a LDP can only be utilized once on the same bushels of grain. There has not been significant LDP eligibility for corn and soybeans since the early 2000’s and we do not anticipate any LDP opportunities for the 2023 corn and soybean crop that is being placed in storage. Producers must be eligible for USDA farm program benefits and must have submitted an acreage report at the FSA office for 2023 to be eligible for marketing assistance loans on this year’s crop production. Producers must maintain “beneficial interest” in the grain while it is under a MAL. Beneficial interest means that the producer maintains control and title of the commodity while it is under a commodity loan. Producers should contact their local FSA office to release any grain that is under a marketing assistance loan before it is delivered to market (“call before you haul”). Following are some reasons that farm operators may want to consider utilizing marketing assistance loans (MAL’s) as part of their grain marketing strategies: · Provides short-term credit at relatively low and stable interest rates. · Loan funds can be used to pay post-harvest expenses and land rental payments for the current year or for prepaid crop inputs (seed, fertilizer, etc.) for the following crop year. · Loan funds can also provide the necessary funds to make year-end or January principal and interest payments on term loans and real estate loans. · Allows a producer to receive partial compensation for corn and soybeans during or following the Fall harvest season, when commodity prices are traditionally lower than average. · Allows a producer the flexibility to market the grain in future months after the grain has been placed under a MAL, including forward pricing the grain for future delivery (remember that the commodity loan must be satisfied at the FSA office before the grain is delivered.) · Commodity loans can also be used by livestock producers that plan to feed the corn or other grain, which is followed by just releasing the grain that is under loan as it is fed to livestock. · If commodity prices decline below the county CCC loan rates, the grain that is under loan can be released at the lower price, or producers can collect a loan deficiency payment (LDP). For further information on USDA marketing assistance loans (MAL’s) and county loan rates for various commodities, farm operators should contact their local FSA office, or go to the following website: https://www.fsa.usda.gov/programs-and-services/price-support/Index 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 - kent.thiesse@minnstarbank.com) Web Site - http://www.minnstarbank.com/
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The monthly USDA World Supply and Demand Estimates (WASDE) Report that was released on October 12 will likely impact corn and soybean markets in the coming months. The WASDE Report decreased the estimated 2023 corn and soybean yield and the corresponding 2023 production estimates. There was a slight decrease in the expected U.S. corn ending stocks by the end of the 2023-24 marketing year, as compared to the September estimate; however, the projected soybean ending stocks for 2023-24 remained the same as a month earlier.
The latest WASDE report showed an increase in total demand levels for corn during the 2023-24 marketing year, as compared to 2022-23 levels. Total corn usage for 2023-24 is now estimated at 14.34 billion bushels, which is down slightly from the September estimate and compares to total corn usage of nearly 13.77 billion bushels for 2022-23. The increased corn usage estimates are mainly due to a projected increase in corn export levels and corn used for ethanol production in the coming year. The total 2023-24 soybean usage is estimated at 4.18 billion bushels which is down from 2022-23 levels, mainly due to a projected decrease in export levels. The October WASDE Report showed a slight decrease the estimated U.S. corn ending stocks for the 2023-24 marketing year, as compared to the September report. The 2023-24 corn ending stocks are now estimated at 2.11 billion bushels which compares to 1.36 billion bushels for 2022-23. It also compares to previous year-end corn carryout levels of 1.38 billion bushels in 2021-22, 1.23 billion bushels in 2020-21, and 1.99 billion bushels in 2019-20. The 2023-24 U.S. corn ending stocks-to-use ratio is now estimated at 14.7 percent, compared to the much tighter ratios of ratios of 9.9 percent in 2022-23, 9.2 percent in 2021-22, and 8.3 percent for 2020-21. The projected 2023-24 ratio is comparable to the ratios of 14.4 percent in 2019-20 and 15.5 percent for 2018-19. The wider stocks-to-use ratio may limit the potential for rallies in the cash corn market in the coming months. The 2023-24 U.S. soybean ending stocks in the latest WASDE Report were estimated at 220 million bushels, which is the same as the September USDA report. The projected 2023-24 carryover level is lower than the estimated final ending stocks of 268 million bushels in 2022-23 and 274 million bushels in 2021-22, as well as considerably below some other recent carryover levels of 523 million bushels in 2019-20 and 909 million bushels in 2018-19. The U.S. soybean ending stocks-to-use ratio for 2023-24 is estimated at 5.3 percent, which remains at a fairly tight level. The 2023-24 projected ending stocks ratio compares to 6.2 percent for 2022-23, 6.1 percent for 2021-22 and 5.7 percent for 2020-21; however, the 2023-24 ratio would be well below the ratios 13.2 percent ratio for 2019-20 and nearly 23 percent for 2018-19. The expected tight degree of projected soybean ending stocks for 2023-24 will likely help support short-term soybean prices in the coming months; however, continued market strength may depend on 2024 South American soybean production and continued solid export markets. USDA is estimating the U.S farm-level cash corn price for 2023-24 at an average of $4.95 per bushel, which was up $.05 per bushel from the September estimate. The 2023-24 USDA price estimate is the expected average farm-level price for the 2023 crop from September 1, 2023, through August 31, 2024; however, this does not represent estimated prices for either the 2023 or 2024 calendar year. The projected 2023-24 average corn price compares to final market-year average corn prices of $6.54 per bushel for 2022-23, $6.00 per bushel for 2021-22, $4.53 per bushel for 2020-21, $3.56 per bushel for 2019-20, and $3.61 per bushel for 2018-19. USDA is projecting the U.S. average farm-level soybean price for the 2023-2024 marketing year at $12.90 per bushel, which is the same as the September estimate. The 2023-24 soybean price estimate compares to the estimated 2022-23 average price of $14.20 per bushel, would was the highest average price in several years. Other final market-year average soybean prices were $13.30 per bushel for 2021-22, $10.80 per bushel for 2020-21, $8.57 per bushel for 2019-20 and $8.48 per bushel in 2018-19. USDA Lowers 2023 Corn and Soybean Yield Estimates The monthly USDA Crop Production Report was also released on October 12. USDA reduced the expected 2023 national average corn yield by eight-tenths of a bushel and decreased the projected 2023 U.S. average soybean yield by five-tenths of a bushel per acre as compared to the September report. The latest estimated 2023 national corn yield is only four-tenths of a bushel per acre lower than the final 2022 average yield, while the projected U.S. average soybean yield for 2023 is the same as the final 2022 national soybean yield. USDA is estimating the 2023 national average corn yield at 173 bushels per acre, which compares to 173.4 bushels per acre in 2022. The projected 2023 U.S. corn yield also compares to the record U.S. corn yield of 176.7 bushels per acre in 2021, 171.4 bushels per acre in 2020, and 168 bushels per acre in 2019. The estimated 2023 U.S. harvested corn acreage is 87.1 million acres, which is well above the 79.1 million acres that were harvested last year. The latest USDA Report estimated the total U.S. corn production for 2023 at just over 15 billion bushels, which is almost 10 percent above the production level of 13.71 billion bushels in 2022. The anticipated 2023 corn production would be the third highest on record and compares to levels of 15.1 billion bushels in 2021, 14.1 billion bushels in 2020, and the record U.S. production of 15.15 billion bushels in 2016. USDA is estimating 2032 U.S. soybean yield at 49.6 bushels per acre, which compares to 50.1 bushels per acre in 2022, 51.7 bushels per acre in 2021, 51 bushels per acre in 2020, 47.4 bushels per acre in 2019, and the record U.S. soybean yield of 52.0 bushels per acre in 2016. The harvested soybean acreage for 2023 is estimated at 82.8 million acres, which is down from 86.2 million acres in 2022 and 86.3 million acres in 2021; however, it is similar to the 82.6 million harvested acres in 2020. The USDA Report estimated 2023 U.S. soybean production at just over 4.1 billion bushels, which trails the production levels of 4.27 billion bushels in 2022, 4.46 billion bushels in 2021, and 4.22 billion bushels in 2020. The October USDA Report increased the expected 2023 corn yield in some States and lowered yield expectations in other States, compared to the September Report. Minnesota is projected to have a 2023 corn yield of 179 bushels, which compares to the state record yield of 195 bushels per acre in 2022, 177 bushels per acre in 2021, and 191 bushels per acre in 2020. USDA is estimating the 2023 Iowa corn yield at 199 bushels per acre, which compares to 200 bushels per acre in 2022 and the state record yield of 204 bushels per acre in 2021. States with projected strong average corn yields for 2023 include Illinois at 200 bushels per acre, which compares to record corn yield of 214 bushels per acre in 2022; Indiana at 197 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. States with more modest corn yield estimates for 2023 include Nebraska at 174 bushels per acre, compared to 165 bushels per acre in 2022; South Dakota at 147 bushels per acre, compared to 132 bushels per acre in 2022; North Dakota at 136 bushels per acre, compared to 131 bushels per acre in 2022; and Wisconsin at 165 bushels per acre, compared to 180 bushels per acre in 2022. USDA is estimating the 2023 Minnesota soybean yield at 48 bushels per acre, which compares to 50 bushels per acre in 2022, 47 bushels per acre in 2021, and the record yield of 52.5 bushels per acre in 2016. Iowa is projected to have a 2023 soybean yield of 58 bushels per acre, compared to 58.5 bushels per acre in 2022 and the record yield of 63 bushels per acre in 2021. Other States with solid projected soybean yields for 2023 include Illinois at 61 bushels per acre, compared to 63 bushels per acre in 2022 and the record yield of 65 bushels per acre in 2021; Indiana at 61 bushels per acre, compared to 57.5 bushels per acre in 2022; Ohio at 57 bushels per acre, compared to 55.5 bushels per acre in 2022; and Nebraska at 54 bushels per acre, compared to 49 bushels per acre in 2022. Projected 2023 soybean yields in other upper Midwest States include South Dakota at 43 bushels per acre, compared to 38 bushels per acre in 2022; North Dakota at 33 bushels per acre, compared to 35 bushels per acre in 2022, and Wisconsin at 44 bushels per acre, compared to 54 bushels per acre in 2022. |