USDA's Outlook for 2023

By Lee L. Schulz and Chad Hart

Every February, the US Department of Agriculture (USDA) provides its outlook for the agricultural year ahead at its annual conference, the Ag Outlook Forum. During the forum, USDA brings together industry, academic, and government experts to discuss the major agricultural issues of the day and examine the near-term market outlook for agriculture. This year’s forum follows two of the best years ever for net farm income. Farmers across the nation captured higher prices and returns for most commodities. The markets were supported by strong domestic and international demand. But with concerns about recession and inflation dominating the general economic discussion, the projections for 2023 highlight some challenges for agriculture in the year ahead.

Table 1 outlines some of the basic numbers for cattle/beef. For the cattle sector, producers started shrinking their cattle herds in 2020. That reduction in herd size has continued over the past three years. Within the past two years, the national herd shrank by 4.5 million animals, with most of that reduction occurring in 2022. The drought throughout the western United States over the past few years has forced a significant reshaping of the cattle industry. The lack of high-quality pasture put pressure on cattle producers to shift more heifers into feedlots and speed up the movement of cattle to slaughter plants. The result was an increase in beef production in 2022, even though the cattle herd was declining; however, that combination cannot be sustained in 2023. This year, the smaller herd will translate into fewer cattle on feed and lower beef production. The 1.8 billion pound drop in beef production will be the largest decrease since 2000. With the combination of lower production and relatively strong domestic consumption, beef exports are projected to fall by 400 million pounds while beef imports remain steady. As the herd shrank, steer prices rose significantly over the past couple of years. The outlook for 2023 shows average steer prices reaching nearly $160 per hundredweight.

Much like the national cattle herd, the national swine herd has been shrinking over the past couple of years. Over the past two years, the swine herd fell by 4.2 million head. While the drought did not directly impact the swine industry (as it did cattle), the indirect impact of higher feed costs has limited expansion opportunities. Despite the decline in animal numbers, pork production has remained above 27 billion pounds; and, just as the beef sector has experienced, domestic consumption of pork has held strong while export demand has retreated. For pork, the export decline hit in 2022, and the 2023 projection shows that decline will remain. While pork exports are still at historically high levels, the industry is feeling the retreat from the records set in 2020 and 2021. Hog prices are projected to decline, based on the higher production and smaller exports.

For the crop sector, the 2020 and 2021 marketing years were record setters. The 2020 marketing year set the record for export quantities, as both corn and soybeans saw the largest numbers of bushels shipped outside the United States. The 2021 marketing year set the record for export values. While the number of bushels exported fell, the price those bushels captured increased by more than enough to offset the bushel loss and increase export value. The challenge for the 2022 and 2023 marketing years is that export quantities have continued to fall, but the price changes have also not made up the difference. Combine that with projected increases in production in 2023 and the crop outlook is for lower prices and smaller returns.

For corn, the 2021 marketing year not only set the record for export value, but also for production. While drought did take a bite out of corn production across the western United States, an overall increase in corn plantings nationwide and good yields in the eastern Corn Belt led to record production. Corn prices increased, despite the record production, due to strong domestic and international demand. In 2022, corn plantings decreased due to planting problems—mainly wet conditions during April in the Northern Plains. The continuing drought lowered yields in the Central and Southern Plains and corn production fell by 1.3 billion bushels. Corn usage retreated as well, with feed usage declining as the cattle herd shrank and export sales pulled back. The fall in production exceeded the drop in usage, so corn ending stocks tightened and corn prices rose again. The outlook for 2023 is for an increase in plantings and yield, leading to a projection of record production topping the 2021 level. Corn usage is also expected to rise, but not enough to match production. With ending stocks rising, the projected price for corn in 2023 is set at $5.60 per bushel, over a dollar lower than the average price for the 2022 corn crop.

The general pattern for the soybean market follows that of corn. The 2021 crop was a record crop and saw very strong demand. The 2022 crop was smaller as the drought brought down the national average yield and international sales shrank. Ending stocks for 2022 were lower and soybean prices increased by a dollar. The projections for 2023 show soybean plantings remaining steady at 87.5 million acres, but with soybean yields based on the historical trend, soybean production is expected to reach a record 4.5 billion bushels. Domestic usage of soybeans is expected to increase due to growth in biofuel production. Export sales are projected to increase as well, but by a smaller amount. So, as with corn, 2023 ending stocks grow and prices fall.

The full set of projections show higher production and lower prices for crops and pork, with the opposite for beef, which shows lower production and higher prices. While domestic usage for all of the commodities is still quite strong, the weakness in exports is setting the stage for lower farm revenues in 2023. The past couple of years have been lucrative for farmers as many agricultural products captured their best prices over the past 10 years, if not longer. But that run looks to be at an end.

Suggested citation:

Schulz, L. and C. Hart. 2023. "USDA's Outlook for 2023." Agricultural Policy Review, Winter 2023. Center for Agricultural and Rural Development, Iowa State University. Available at www.card.iastate.edu/ag_policy_review/article/?a=153.