U.S. Crop Production Hungering for Growth

Farmers have the important responsibility of producing food for the nations. It’s a tough job, but in the past two years the farming sector saw income increases as high as 49.2% in 2021 and 15.5% in 2022.1 But higher production and labor costs, rising interest rates, geopolitical disruptions, and lower revenues are threatening the sector’s profitability. In the next few years, the United States Department of Agriculture (USDA) predicts net farm income will drop by almost 18.2%.2

Crop cash receipts could fall to almost $277 billion.

Shrinking acreage and unpredictable weather are negatively impacting U.S. crop production. The USDA is predicting reduced nationwide crop cash receipts at nearly $277 billion in 2023.3 Feed crops (36%), oil crops (22%), all other crops (13%), fruits and nuts (11%), food grains (7%), and vegetables and melons (7%) will contribute to overall sales.

Within each category, high cash receipts are expected for some crops, but they won’t be as profitable as previous years. For example, cash receipts for corn, soybeans, and vegetables (except potatoes) and melons will likely decline. But wheat cash receipts will rise by 43%.4

Chart 1

Source: USDA, “Farm Income and Wealth Statistics: Cash Receipts by Commodity,” February 7, 2023

Southeastern growers enrich the country’s crop production.

No matter what the industry serves up, Southeastern growers will play a significant role in helping to feed the population. With its mild climate and long growing season, the region is ideal for crop production. The area is among the top soybean, corn, and wheat growers, and is expected to post significant contributions to U.S. production of these crops.

• Soybeans. Due to low inventories and high prices, some soybean growers did well, but overall last year was hard. Argentina, one of the crop’s leading growers, is suffering drought – although Brazil’s production offset some of the losses. U.S. crop production fell 5% to approximately 4.3 billion bushels.5 Economic uncertainty and reduced demand from China are also affecting pricing. U.S. cash receipts are expected to total $58.6 billion this year, which is 10% less than the previous year.6 But soybean production in some Southeastern states is expected to improve, mainly due to it being a relatively inexpensive crop to grow with lower fertility requirements. There is also a ready market for poultry feed.
  

  Chart 2
  
  Source: USDA, “Farm Income and Wealth Statistics: Cash Receipts by Commodity,” February 7, 2023



• Corn. Although the U.S. is the largest corn producer in the world, farmers have grown less corn over the last 10 years. Last year, total production was 13.7 billion bushels which was around 9% less than the prior year.7 But this year, the USDA expects a 4% increase in corn planting.8 The Russian-Ukrainian war is affecting that country’s production, placing more pressure on the U.S. Mexico, however, is banning genetically modified corn. Both factors will likely affect U.S. corn revenues this year. The state of Georgia, however, expects approximately $6.50 per bushel for their corn based on past performance.9 While the Heartland grows most of the nation’s corn, Georgia, Alabama, Tennessee, Florida, and South Carolina rank 23rd, 26th, 16th, 34th, and 27th in production, respectively. Georgia’s production supplements the state’s poultry feed input demand.
  

  Chart 3
  
  Source: Wisevoter, “Corn Production by State,” 2023



• Wheat. The Russia-Ukraine war is disrupting wheat supplies at the same time drought is cutting into U.S. production. With lower acreage and plantings, crops are only expected to reach 1.65 billion bushels in 2023 which will continue to drive up the price of the grain.10 Wheat commodity prices are expected to increase about 4% to just over $15 billion in 2023.11 Cash receipts in four SE states will benefit.
  

  Chart 4
  
  Source: USDA, “Farm Income and Wealth Statistics: Cash Receipts by Commodity,” February 7, 2023

In addition to corn, wheat and soybeans, Southeastern growers cultivate a variety of grains, fruits, nuts, and vegetables. How have some of these other traditional Southeastern crops fared and what’s on the horizon?

• Peanuts. In 2022, peanut production was approximately 5.57 billion pounds – a drop of around 13% from the previous year.12 Although, the USDA predicts a slight drop in production for the year (4%), peanuts are a major crop in the Southeast due to an extended growing period.13 Four states in the Southeast are leading producers of the popular legume. Georgia grew 50% of the nation’s peanuts — more than any U.S. state — followed by Alabama, Florida, and South Carolina.
  

  Chart 5
  
  Source: USDA, “Crop Production – 2022 Summary,” January 2023

  
  Rising production costs, including labor, and supply shortages are eating into farm profits. Among other considerations in the 2023 Farm Bill, the U.S. Peanut Federation proposed an increase in the Price Loss Coverage reference price to offset expenses.


• Pecans. Pecan production is inching back up. After dipping to around 255 million pounds in 2021, crop production increased 8% to 275 million pounds in 2022. Georgia had the highest in-shell production utilization at 126 million pounds.14 If China re-enters the marketplace and begins to purchase again in 2023, producers will see a much-needed profit margin increase.


• Cotton. Though it’s not a food crop, cotton is important because it provides both fiber for clothing/textile goods and livestock protein sources. As the third largest cotton producer, the U.S. exports about 80% of its cotton harvest. Higher inflation and lower profit margins have shrunk the demand for cotton in recent years. Last year just under 110 million bales was expected (109.63) globally.15 Despite lower global growth, Southeastern U.S. cotton production – Texas, Georgia, Mississippi, and Arkansas – increased 22% to 5.4 million bales.16 The USDA predicts an increase to approximately 116 million bales in 2023, with cash receipts of just over $1 billion.17,18


• Peaches. South Carolina, Georgia, New Jersey, and California are among the top peach producers in the U.S. Uncharacteristic weather conditions caused production declines in the last couple years, which increased prices. That trend could continue in 2023 due to a late freeze in parts of Georgia that diminished more than 70% of the crop. Early harvests were less than expected. Producers are watching to see if mid-season/late season trees will give better results.


• Blueberries. The popularity of this sweet, portable berry continues to grow. The next few years will see the blueberry market increase to about $2.5 billion (6.5%).19 While Mississippi and Florida production dropped last year and is expected to decline this year as well, there is good news in the Southeast. Joseph Vargas, director of business intelligence for the North American Blueberry Council, predicts Georgia could contribute 85 million pounds in 2023, based on last year’s 54- million-pound output. North Carolina may add another 40-45 million pounds.20 Higher volume could drive prices lower, as well as continuing cheap imports from Mexico.

Farmers and other agricultural producers must be prepared to adapt to market fluctuations – whether pricing, supply, or demand. Carefully managing cash flow, as well as timely access to capital, is critical during difficult financial times. Learn more about how Synovus Agriculture Banking can help.