The October Monthly Monitor reflects cautious optimism in certain areas of agriculture, marked by export strengths and potential price recoveries, but shadowed by long-term rebuilding challenges, weather dependencies and the impact of the upcoming election.
TYNE MORGAN
In September, 75 percent of ag economists warned of an impending agricultural recession. October brought slight optimism to the Ag Economists’ Monthly Monitor, attributed to rising U.S. corn export demand and forecasts about cattle herd rebuilding. Yet, economists remain cautious about the potential impact of the upcoming election.
Harvest is winding down across the Midwest, and some farmers saw a record harvest pace in 2024. Harvest is typically the time of year the market sets harvest lows, but this year, commodities, like corn and wheat, came to life.
“I think over the last month, we’ve seen a little bit of a rebound or stabilization of prices, if you will. Some of that’s simply been fund short covering that is supported, some of it is a little better long-term picture for wheat and for corn, although for soybeans, it’s still looking somewhat bleak long-term,” said Arlan Suderman, chief commodities economist with StoneX Group.
The latest Ag Economists’ Monthly Monitor, which is a survey of nearly 70 ag economists and conducted by Farm Jounal each month, reflected that with short-term sentiments among economists seeing a slight improvement, but a bigger jump when asked to compare them to last year.
“We could have told you two to three years ago that, after a period of high prices, eventually we were going to have a recovery in production and that was going to suppress prices probably more than input costs. We knew that. I think when you take into account expectations heading into the year, has it deteriorated more than expectations? Probably not. We just know that we’re worse off today than where we were,” said Ben Brown, an agricultural economist with the University of Missouri.
Each month, the Monthly Monitor asks economists to list the factors that could impact crop prices over the next six months. In the latest survey, economists said:
- South American weather
- U.S.-China trade relations
- Election outcomes
- Global geopolitical risks
- Biofuel demand
The Biggest Wildcard: South America
“The biggest thing that will l impact the markets is going to be South American weather. What happens in Brazil and Argentina and what’s the size of the soybean crop they’re going to get? Right now, it is raining. The crop is being planted late. Our people on the ground in Brazil are expecting a big crop if these rains continue,” Suderman said.
While the soybean crop could see suppressed prices if Brazil grows a big crop this year, the later-planted crop could eat into the supplies of corn.
“Even where we’re at today could have an impact on that second-crop corn, given that I anticipate that we’re going to see a very robust corn export picture even without a shrinkage in that second-crop Brazilian corn. I still think there’s an upside potential for the corn market, and it’s going to be based on the size of that second-crop corn in Brazil,” said Brown.
A Recent Surge in Corn Sales
The corn export demand picture has been strong, which is thanks to a surge in sales to Mexico. That’s one significant factor currently fueling corn prices.
“If we didn’t have it, corn prices would be a lot lower today than where they are,” said Brown.
“When we look at the export pace that we’re on right now, it’s stronger than what we normally have at this time of year, and it’s largely been because of Mexico. Mexico has been a very aggressive buyer of U.S. corn here, at what they perceive to be the harvest lows,” Suderman said.
Outlook for Livestock and Dairy
The October Monthly Monitor asked economists to list the factors that could impact livestock and dairy prices over the next six months. Economists said:
- Herd size and tight cattle supplies
- Outcome of the election
- Health of general economy in the U.S. and consumer demand changes
- Disease issues (H5N1, etc.)
- Developments in China and other major importers
- Consumer demand given high meat and dairy prices
- Weather in the Corn Belt and Great Plains
When Will Beef Producers Start to Rebuild Their Herds?
The October survey also asked economists when they think producers will start to rebuild their cow herds:
- 50 percent said in the first half of 2026
- 30 percent think it’ll happen the second half of 2025
- 20 percent said in the first half of next year.
“We’ve seen a slowdown of cow slaughter. That’s step one, but that’s not rebuilding,” said Suderman. “It really comes down to when do we turn this weather pattern around and start getting the pasture, the feed necessary in the West in order to incentivize rebuilding the cowherd? That is the problem right now.”
Other than weather, what else is preventing producers from starting to rebuild? Economists say it’s the average age of producers, replacement costs and heifer prices.
“I also think there is this economic pull on producers of ‘how can I justify retaining these heifers when they’re bringing the prices that they are?’” said Brown.
The Inflation Factor
When you look at what could impact both livestock and row crop producers over the next six months, a major wild card is interest rates. The October survey asked economists how much farm interest rates need to fall to find economic stability for farmers, and 46% said 2%.
But even with the Fed cutting the benchmark interest rate last month, interest rates have actually gone up, not down.
“The two-year break-even inflation rate is what the market trades. It’s expectations of what inflation’s going to average over the next two years. And over the last six weeks or so, we have seen it jump a full percentage point. That is a significant short-term jump, saying that reinflation fears are coming back in a hurry,” Suderman said.
Suderman points out the Fed can influence mid- and longer-term rates, but the agency can’t control them. And it’s concerns about inflation that are pushing those rates back up again.
“That could all change over the next couple of weeks, or it could be reinvigorated. I think longer term, what I’m looking for is a return to the interest rates that we saw in the ‘90s and early 2000. But I think there’s going to be a lot of volatility in getting there,” Suderman said.
