US- World Agricultural Supply and Demand Estimates report released by the US Department of Agriculture, Corn and Soybean production is expected to reach a record high in 2023. Early-season crop progress and weather forecasts are supporting these numbers. The USDA's initial projection for the 2023-24 marketing year (for crops harvested in 2023) forecasts that US Corn production will reach an all-time high of 15,265 million bus, which is an 11% increase from 2022. This projection is based on a record-high average yield of 181.5 bus per acre, an increase of 4.7%, as well as a planted area of 92 million acres (up 3.8%) and a harvested area of 84.1 million acres (up 6%).

The USDA has predicted that the Soybean production for 2023 will reach an all-time high of 4,510 million bus, showing a 5% increase from 2022. This is due to the average yield per acre increasing by 5% to 52 bus, while the planted area remained unchanged at 87.5 million acres and harvested area increased by 0.5% to 86.7 million acres. Interestingly, both the Corn and Soybean production forecasts exceeded pre-report trade expectations. While Corn futures ended the day with minimal change, Soybean futures closed lower on May 12.

The USDA's May yield forecasts are projected on trend lines, while the acreage forecasts rely on the March 31 Prospective Plantings report data. It is important to note that the first 2023 Corn and Soybean estimates will be released on August 11, based on farmer surveys and June 30 Acreage report. However, there could be significant changes until then. If the estimates are realized, Corn production in 2023 would surpass the previous record of 15,148 million bus set in 2016 by 0.8%. Since 2016, the production has exceeded 15,000 million bus for the third time. If the Soybean forecast is achieved, it will slightly surpass the previous record of 4,465 million bus established in 2021 by 1%, on the other hand.

Last year, the USDA released their initial projections for the 2022 crop, with 14,460 million bus projected for Corn and 4,460 million bus for Soybeans. However, the final estimates issued in January 2023 revealed a 5% decrease in Corn production, with only 13,730 million bus produced, and a 4% decrease in Soybean production, producing only 4,276 million bus. The decrease in production was largely due to adverse weather conditions, particularly in the western areas of the Corn Belt.

According to the USDA's latest Crop Progress report, Corn planting progress in the 18 major states is ahead of last year's numbers, with 65% already planted as of May 14. The agency's projections for the year are further supported by the anticipated arrival of an El Nino weather system, which typically results in favourable growing conditions in the Midwest. In fact, Iowa, the top-producing state, has already completed 86% of its planting, while Illinois, the second largest Corn-growing state, has completed 84%. Overall, the strong planting progress and weather conditions bode well for this year's Corn harvest.

As of May 14, Soybean planting progress in the 18 major states was at 49%, which is ahead of last year's 27% and the five-year average of 36%. Farmers are anticipated to make fast progress during the latter half of the planting season, owing to the favourable weather conditions from the previous week.

However, the final yield and production numbers will depend on the weather during the rest of the growing season. As per USDA's analysis of the US Drought Monitor on May 9, 29% of corn and 21% of soybeans were in drought-prone regions. The dry conditions were primarily limited to the southern Plains and western Corn Belt, with almost all of Nebraska and Kansas experiencing some level of drought. While areas west of the Missouri River, particularly west of the Mississippi River, had minimal areas of drought.\

The USDA predicts that the increased production of Corn and Soybeans in the US will result in lower prices for farmers. The average price for Corn is expected to drop by 27% to $4.80 per bu in 2023-24, while Soybeans are predicted to decrease by 15% to $12.10 per bu. Brazil's record-large Soybean and Corn crops are also anticipated to create strong export competition for both commodities. Although there will be a rise in Corn exports and the use of Corn for feed, residual, and food/seed/industrial purposes, it won't be enough to offset the massive increase in production. For Soybeans, domestic crush is expected to be higher, but exports will be lower, further increasing stocks.

According to the latest projections, the carryover of Corn in the US on September 1, 2024, is expected to reach 2,222 million bus, which is a significant increase of 57% from the previous year's estimate of 1,417 million bus. Similarly, Soybean carryover is forecasted to be at 335 million bus, up 56% from this year's estimated figure of 215 million bus. In 2024, the predicted corn carryover is set to be the largest since 2017, with the ending stocks-to-use ratio being the highest since 2019.

On the other hand, if the Soybean carryover and stocks-to-use ratio are realized, they would be the highest since 2020. These carryover projections for both Corn and Soybeans far exceeded trade expectations. As a result, larger inventories of these crops should lead to lower prices, providing a buying opportunity for US food manufacturers in the coming year.