Market Analysis

What USDA Corn and Soybean Acreage Estimates Would Shock the Market On Monday?

Fri, 28 Mar 2025 14:06:53 GMT

Anticipation has been building ahead of USDA’s Prospective Plantings and quarterly Grain Stocks reports on Monday, March 31. Not only is USDA releasing its first survey-based acreage report of the year, but it’s the week President Donald Trump is set to unleash reciprocal tariffs. Market analysts warn it could be an explosive week in the markets, and farmers should prepare.

Pre-report corn acreage estimates by Reuters range from north of 96 million to below 93 million. For soybeans, the range is 82.5 million to 85.5 million.

🇺🇸Analysts see 2025 U.S. #corn plantings at 94.36 million acres and #soybeans at 83.76 million.
▪️Larger-than-normal range of estimates on corn; 3 of 22 analysts above 95.0M
▪️-3.8% predicted drop in soy acres YOY, the largest drop analysts have predicted in March since 2007 pic.twitter.com/itlriMiDGv
— Karen Braun (@kannbwx) March 25, 2025

USDA’s first glimpse at acreage, though it wasn’t survey-based, was during the Ag Outlook Forum in February. At that time, the agency’s corn estimate came in at 94 million acres, which caught the market by surprise. What would shock the market this time? That’s the question U.S. Farm Report’s Tyne Morgan had for market analysts this week.

“I think most people are thinking it’s going to be something closer to 95 [million],” Shawn Hackett, president of Hackett Financial Advisors, told U.S. Farm Report. “If we printed a 96 number that would be a surprise and the market would have to probably trade lower. That’s the working numbers I’m going with as to what the market has already built into the current price of corn.”

As Mike North, Ever.Ag’s principal of risk management, has traveled the country he’s encountered producers embracing more corn.

“[For corn] to come out higher than what the USDA Ag Outlook Forum projected in February would not be a real shock to me. I think even in this last day you’re seeing it’s settling into what could be a larger number,” North says.

For soybeans, USDA projected 84 million acres in February, which was down 3.1 million acres from the previous year’s final estimate. Hackett thinks soybeans’ double digit price gains on Thursday was the market anticipating lower acres.

“I think that the market, if you’re looking at soybeans, has been pulling in. We started to get some upside Thursday,” he says. “I think the market is starting to get a little worried about a low number and maybe having to reprice the soybean market relative to corn to maybe get those numbers back into balance by the time we get to the June acreage report. There’s been very interesting action in soybeans the last few days and how it’s trading relative to corn and wheat.”

Ahead of Monday’s report, AgWeb compiled details of some of the private acreage estimates.

AgMarket.net Pegs Corn Acres North of 95 Million

Co-founder of AgMarket.net Matt Bennett explains their 45-person team surveyed growers for data.

The brokerage firm is pegging corn acres at 95.39 million.

“Every region, quite frankly, had higher corn acres,” Bennett says. “A couple of retailers in central Illinois said this is the biggest spring run they’ve had for corn-on-corn acres in a long time.”

Soybean acres in the AgMarket.net report sit at 82.75 million.

“Growers just keep telling us we can’t make money with sub $10 beans,” Bennett says.

All wheat acres total 47.82 million, according to the AgMarket.net report, despite spring wheat acres holding strong. The firm points to overall wheat profitability affecting acres.

The estimates from the brokerage and consulting group have been fast-developing as Bennett says pre-plant decisions are still evolving thanks to the weather and the markets.

“There were some [planting] changes made, two weeks ago, literally. I think some folks were putting on anhydrous and said, ‘This is going on like a dream, and then they looked up, saw their cash fall bid for soybeans at $9.70 and thought, I don’t want to do that, I want to do this,’” Bennett says.

Allendale Estimate Falls Below 94 Million Corn Acres

Allendale’s annual acreage survey results confirm higher corn acres at the expense of soybeans.

Their survey shows corn planting intentions of 93.981 million acres, which would be up 3.4 million from 2024. Using 91.23% harvested and a 182.3 bu. per acre yield, production lands at a record 15.633 billion bushels, which is 767 million bushels more than 2024. Rich Nelson, chief strategist at Allendale, says that raises corn ending stocks to 2.1 billion bushels versus 1.54 billion bushels for this year.

Allendale tallies soybean planting intentions at 84.283 million acres. At 98.79% harvested and 52.7 bu. per acre, production totals 4.391 billion bushels, which is 24 million more than last year.

“On the corn side, there were no real surprises compared to what the trade is talking about,” Nelson says. “On the soybean side, which is about 2.8 million lower than last year, that’s maybe a little trimmer than some other people as far as what we happen to be hearing. The biggest question for ourselves in the survey was actually about the spring wheat numbers. Mind you, the Ag Outlook Forum numbers implied no drop in spring wheat for this year, but we’re seeing clear confirmations of some pretty good drops.”

Wheat acreage is estimated at 45.863 million acres, down 0.2 million from last year. Using 81.82% harvested and a 50.1 bu. per acre yield, production comes in at 1.879 billion bushels, which would be 92 million more than last year.

FBN Sees A Shift Away Soybean Acres

FBN’s survey included almost 1,000 responses from its farmer-member network. Cody Bills, director of U.S. Market Advisory & Brokerage at Farmer’s Business Network, says the company has done this report for five years with only a 1.3% error versus USDA’s numbers.

Compared with 2024 crop acres, FBN’s report shows corn acres up nearly 5 million acres in 2025 to 95.5 million acres.

“For corn, we are on the higher side of analysts’ expectations,” Bills says. “It’s a broad shift out of soybeans into corn — out of beans in Iowa, out of beans in Illinois and out of beans in Indiana.We also saw some notable shifts in North Dakota out of spring wheat into corn, and we saw some broad switching out of cotton into corn.”

The shift from soybeans leads to a 3.6 million acre dip comparing 2024 to prospective 2025 data.

“There’s uncertainty around the demand side of soybeans,” Bills says. “When you look at spring prices, when you think about crop insurance, corn is at $4.70, so 4¢ higher than last year. Soybeans are almost $1 lower. The ratio of bean prices to corn prices have slipped. The ratio of soybeans to corn is 2.2:1 this year compared to last year when we were 2.5:1.”

Adding up acres for corn and soybeans, FBN expects that total to be over 179 million.

“We saw some acres out of sorghum into corn. In general, we felt pretty comfortable being in line with the Ag Outlook Forum, which was somewhere around 178 and we’re sitting right around 179,” BIlls says.

Pro Farmer Expects Total Planted Acres to Jump 1 Million

Results of the annual Pro Farmer/Doane planting intentions survey signal there will be a notable shift from soybeans to corn this year. Total corn and soybean plantings are projected at 178.8 million acres, which would be up 1.11 million acres (0.6%) from last year. Total acres planted to corn, soybeans, wheat and cotton are expected to be down roughly 1 million acres at 233.9 million.

“This year happens to be one of the years with some bigger movement, especially on the corn side,” says Brian Grete with ProFarmer.

Based on Pro Farmer’s analysis of survey responses, producers intend to plant 93.75 million acres of corn this year, up nearly 3.2 million acres (3.5%) from last year. Corn acres are expected to increase in all but one key state, South Dakota, with Iowa, Nebraska and North Dakota acres to jump 4% or more and the cotton states signaling a 3.7% increase.

Producers indicate they intend to plant 85 million acres to soybeans this year, down 2.05 million acres (2.4%) from last year. Of the top nine soybean-producing states, six are projected to decrease plantings. Among states indicating a decline, soybean acres are projected to fall an average of 4%. The states noting higher plantings, which are South Dakota, Ohio and Minnesota in the Midwest, are expecting modest increases.

“About two-thirds of the corn acres that are gained are attributable to soybeans,” Grete says. “Every region except the Northern Plains is expected to see a decline in soybean acres.”

Part of that swing can be attributed to prevent plant acres coming back into production, not necessarily a switch from another crop, he adds. Declines in anticipated soybean acres in cotton states are the greatest at 3.9%.

Total wheat acres are projected at 45.4 million, down 680,000 acres (1.5%) from last year. Spring wheat seedings as a whole are expected to decline 590,000 acres (4.6%) to 12.1 million acres. The Pro Farmer survey shows Northern Plains producers will favor durum over other spring wheat. Other spring wheat acres are projected to decline, which is not overly surprising given current prices, Grete says. Contrary to USDA’s winter wheat seedings estimate in January, winter wheat acres are expected to be down modestly. Acres in historical winter wheat areas dropped while Midwest states signaled an uptick. Relatively longer growing seasons and favorable insurance regulations have encouraged Midwesterners to double crop wheat and soybeans.

What Impact Will Tariffs Have on Ag Markets and the Broader Economy?

Mon, 02 Dec 2024 17:23:00 GMT

President-elect Trump has threatened to place 25% import tariffs on Mexico and Canada and 10%a additional tariffs on China on day one of his second term.

What will this mean for the agricultural markets?

Jim McCormick with AgMarket.Net says Mexico, Canada and China are the top three export customers of the U.S. and account for 40% of total exports.

Mexico has already threatened retaliation, so another trade fight will be devastating for agricultural markets.

McCormick says during the trade war in 2017-18 prices for agricultural commodities, but especially soybeans, took a tumble due to retaliatory tariffs from China.

He says the agricultural markets have handled the threat well because of the flush of export demand for many ag products that the market is already seeing.

China has been front loading their purchases of U.S. soybeans and Mexico has been buying U.S. corn in anticipation of the tariffs starting after January 20.

Weekly exports on Friday were a marketing year high at 91.5 million bu. and China accounted for 40 million of that total.

Additionally on Friday morning private exporters reported flash soybean sales of 30.9 million bu. to unknown destinations and another 5.6 million bu. to unknown both for 2024-25.

Corn exports were at 41.8 million bu. for the week ending Nov. 21 and 16 million bu. went to Mexico.

Additionally, President-elect Donald Trump’s trade strategy, particularly his proposed tariffs on imports from Mexico, Canada and China, appears to be more of a negotiating tactic than a straightforward economic policy. Analysts interpret this approach as part of Trump’s broader strategy to leverage tariffs as tools for negotiation rather than strictly for trade regulation or economic improvement.

However, if a trade war were to happen McCormick says there could also be negative impacts for the broader economy as prices for all imported goods would rise for consumers.

Additionally, the U.S. imports a large amount of crude oil from Canada and so a 25% tariff could raise gas prices and the U.S. auto industry is reliant on imports of parts and autos from Mexico.

All this could drive inflation back up which is negative for consumers and businessses.

At a time when the FOMC is trying to cut interest rates a return of inflation could force the Fed to change course and maybe even raise interest rates.

USDA is Discontinuing A Major Cattle Report, And it Could Now Spur More Volatility For Cattle Prices

Fri, 12 Apr 2024 19:44:58 GMT

USDA announced this week it’s nixing a major cattle inventory report . The July Cattle Inventory report, which is only one of two inventory reports released each year, will be no more.

The National Agricultural Statistics Service (NASS) announced it’s also canceling all county estimates for crops and livestock starting this year. In the announcement, NASS blamed budget cuts from the most recent appropriations bills.

It now intends to only release one cattle inventory report annually in January.

“It’s going to be something to the livestock market and the grain markets are going to have to get used to,” says Chip Nellinger, co-owner of Blue Reef Agri-Marketing. “It obviously has implications as far as what the herd size and the different classes and weights across our cattle herd are. So that’s going to be a big unknown in the middle of the year.”

Nellinger says the other side is how the report could also impact the grain markets.

“What’s that mean to feed demand? How many head of cattle are on feed,” says Nellinger.

Related News: NASS Discontinues County Estimates For Crops And Livestock and July Cattle Report

At a time when tight cattle supplies generated record-high cattle prices already this year, the timing of no July Cattle Inventory report is also murky. Arlan Suderman of StoneX Group says it will have an impact on the cattle markets.

“It adds to the volatility, it definitely does,” says Suderman. “The frustration in the industry is when they look at some of the things that USDA is spending money on, that don’t seem to be part of the original mission of the agency, and then short change us on issues that really have an economic impact on the development and progress of the economy of this industry. That’s where the frustration is.”

Related News: U.S. Cattle Inventory Reaches 73 Year Low

NASS’ decision to cancel the report is garnering frustration from farm group, including the National Cattlemen’s Beef Association (NCBA). NCBA also thinks this could mean more volatility for the market and make it more difficult for producers to see into the future when it comes to supplies.

USDA tried to cut the July cattle inventory report in 20-16 and ended up reinstating it. NCBA calling on NASS to reverse its decision again.

Corn and Soybean Prices Tank After USDA Report Makes Surprising Revisions to Yield

Fri, 12 Jan 2024 19:41:03 GMT

USDA’s final look at crop production for 2023 caught the commodity markets by surprise. The agency increased the final yield estimates for both corn and soybeans, and as a result, prices plummeted on Friday.

The big news in the report was the revisions to yield. USDA raised the national corn yield to 177. 3 bu. per acre in the January report, which is a new national record yield. It’s also a big jump from November, when USDA had the national yield penciled at 174.9 bu. per acre.

USDA also cut harvested acreage, but with the big increase in production, USDA pegs the 2023 corn production figure of 15.34 billion bushels.

The increases to yield and production were larger than what the trade expected, which caused corn prices to sink.

“We got a lot of criticism for our estimate all summer long being too high. And we ended up too low,” says Arlan Suderman of StoneX Group. “This crop, I’m just really impressed with, not just the genetics of it, but farmers with their technology, the seed placement, just the management of it. They are getting better and better at withstanding the stresses and it just makes you wonder how good this crop might have been had we not had the stresses we had.”

(Farm Journal)

USDA also increased demand, which helped offset a portion of the increased yield. USDA increased feed use by 25 million bushels. The agency also increased ethanol use by 50 million bushels.

“Those revisions were pretty much in line with what the trade expected,” says Jim McCormmick of AgMarket.net. “And I guess it’s a good thing because without those upward revisions of demand, this carryout would have really exploded to the upside. And I think the market could’ve had an even worse negative reaction than it’s currently having.”

Surprise in Soybeans

USDA also surprised traders with the increase in the soybean yield estimate. USDA raised it’s soybean yield forecast for the 2023 crop to 50.6 bu per acre, which was up from the 49.9 bu. per acre forecast in November. Soybean production is now pegged at 4.16 billion bushels.

Suderman says these yield increases are something farmers should note, especially with the current debate on how much of an impact weather will have on Brazil’s crop that’s currently in the ground.

“The same genetics we plant here we plant in South America as well, essentially, so we need to look at South America in that same light,” Suderman says. “This crop really did well, especially in eastern Midwest. We saw some really good yields from corn and soybeans this year. And some of that may have been some of the benefits from the smoke coming from the Canadian fires. That’s one of the theories now that was sulfur and some other positive effects were coming from that smoke.”

Cuts to Brazil

After drought impacted Brazil’s crop for much of the growing season, USDA cut its soybean forecast in Brazil to 157 million metric tons. That’s down from the 161 million metric tons forecast in the last report. USDA also trimmed its corn estimate for Brazil by 2 million metric tons.

“Traders were looking for bigger cuts,” McCormick says. “The rhetoric I think was even for bigger cuts and what the average straight guess was. So yeah, it was definitely a little bit disappointing. But time will tell where we’re at. Some of the modeling I’ve seen for the weather is that we are going to turn a little bit warmer and drier here in the middle part of January, and with this latest crop that has been planted, that could cause some problems to that crop and still shrink it. And of course, we still haven’t started planting safrinha corn crops. So the size of that crop is yet to be determined.”

Quarterly Grain Stocks

(Farm Journal)

USDA’s revisions to the 2023 crop production numbers pushed the quarterly grain stock estimates higher and above trade expectations.

Corn stocks are forecast up 13% to 12.2 billion bushels. Soybeans were adjusted down 1% from December to 3 billion bushels.

Wheat supplies on December 1 were forecast to be up 8% from a year ago at 1.41 billion bushels.

Better Yields and Improved Crop Prices Propel Ag Economists' Outlooks for 2024

Wed, 22 Nov 2023 20:26:11 GMT

After two months of a waning outlook on the ag economy, economists’ views took a turn in the November Ag Economists’ Monthly Monitor , a survey of nearly 70 ag economists from across the country.

“The biggest takeaway I see out of the Monthly Monitor this month is we’re seeing a lot more positives than we’ve seen for the last couple of months,” says Scott Brown, the interim director for the Rural and Farm Finance Policy Analysis Center (RaFF) at the University of Missouri, who also helps author the Ag Economists’ Monthly Monitor.

The Ag Economists’ Monthly Monitor is conducted by the University of Missouri and Farm Journal each month, as it’s a way to gauge not only the state of the ag economy but also explore the impacts of policy and trade. Brown says as commodity prices have seen some momentum, outlooks among economists are also shifting more positively for 2024.

“I think when you look at where we are in terms of our estimates for crop prices, and we’re talking about crop prices for harvest next fall at this point, we saw a number of more positive responses, maybe the most positivity since we started our estimates for 2024/2025. As both corn and soybeans continue to move higher, there’s more positive news this month,” Brown adds.

Spike in 2024 Net Farm Income Forecasts

(Farm Journal)

That positivity also boosted net farm income estimates. The November Monthly Monitor asked ag economists to provide their outlook for net farm income in 2024. The survey found ag economists now expect a big spike in net farm income forecasts for the new year.

“Farm income estimates were raised almost $5 billion for 2024, relative to what they would have said in October,” Brown says. “And I think that just resonates as you look at higher estimates of corn prices and higher estimates of soybean prices, things just look a little better than where we were a couple of months ago.”

(Farm Journal)

What’s driving improved outlooks in the farm economy? Economists say commodity prices, including improved yields and harvest picture for some commodities.

Another major factor is South America. When asked what factors will impact crop prices in the next six months, economists say:

South American crop production (including weather impacts on planted acres) and related export sales.
Global dynamics in general, as well as conditions and production in key regions like the Black Sea and China.
U.S. export demand strength and growing crop supplies.
Final U.S. crop size and weather-related impacts.

Weather Worries in South America

The latest USDA report pegged Brazil’s corn production at 129 million metric tons, but according to the Monthly Monitor, that estimate may be too optimistic.

“Our survey of the economist would have suggested 126.5 mmt right now,” Brown says. We did have some answering very near that 129 mmt and others saying 125 mmt. It’s a combination of weather as well as economics, not all that great. That is leading to some lower estimates.”

When asked what’s driving changes in the crop forecasts for Brazil and Argentina? Economists say it’s all about weather, the impacts of El Nino and delayed planting that could eat into the Safrinha corn crop in Brazil. Economists also say Brazil could be looking at fewer soybean acres.

“Uncertain, volatile weather conditions - either too wet or too dry as Brazil transitions from La Nina to El Nino weather patterns,” says one economist when asked what are the factors driving the change in estimates for the Brazilian soybean crop. “Plus, delayed plantings of the 2024 Brazilian Soybean crop with substantial replantings required is hurting production potential.”

Bullish Views on Cattle Continue

While views on crop prices turned more positive in the latest Monthly Monitor, economists are still bullish longer-term on cattle.

“I think folks are more positive still on the cattle side of the equation, despite what’s been the last few weeks of some lower cattle prices,” Brown says. “We are talking about an industry that continues to talk about record or near record, and perhaps in early 2024, we get back to record prices yet again.”

(Farm Journal)

The outlook for pork prices, as well as dairy, continued to see some pressure, but overall, the factors economists think will impact livestock prices over the next six months include:

Weaker demand domestically and globally.
Global economic health, including slowdown/recession in some geographies.

Health of the Farm Economy by Geography

This month’s survey also asked ag economists to rank the health of the farm economy by geography. The strongest region of the country, according to economists survey, is the Midwest.

“I think we ended up with especially better corn yields than anybody would have thought. Maybe soybean yields are not even as bad as some would have suggested. And then again, cattle still being very positive there, Brown says.

(Farm Journal)

According to economists surveyed, there were a multitude of factors that played into how they ranked each geography, including:

Drought and weather
Government policy impacts upon state and metropolitan economic health.
Commodity /crop mix

“Certainly, crop and livestock mix is important,” says one economist in the anonymous survey. “While corn prices are lower the combination of yields and prices were likely profitable for many. But lower prices have come on the heels of very high prices in the last couple of years. Hog and dairy returns are dragging down financial health in the sector regionally. Cattle prices are boosting overall returns in the Plains. But drought has certainly hurt ranchers, including water in the West.

Impact of Interest Rates (Both Positive and Negative)

Economists are still concerned about how interest rates could negatively impact agriculture over the next 12 months, but for the first time, economists now view it as a possible positive over the next year.

When asked, “What do you view as the most negative aspect regarding the outlook of U.S. agriculture?”, the Monthly Monitor shows:

High interest rates, market volatility and a shortage of working capital create a challenging economic climate.
Production challenges range from weather conditions to commodity prices and policy support.
A need for investment into increasing domestic and demand for U.S. products.

When followed up with, what do you view as the most positive aspect regarding the outlook of U.S. agriculture, economists say:

Economic resiliency of the farm operator, including strong financial positions for some operators and farm income forecasts remaining above the long-term average. Some optimism for stabilizing interest rates.
Promising new demand opportunities, including the expansion of biofuel uses, as well as continued consumer demand.
Improvements in technology and the possibility of better production in 2024.

“The news that we seem to be getting right now is, although inflation is still a problem, maybe less so than we would have thought. So perhaps we’re getting near the end of interest rate increases, I even see some out there suggesting we could get lower interest rates as we get into 2024,” Brown says.

Outlook for Crop Mix in 2024

Economists were also asked to shift their focus to 2024. Economists say the most important factors that could affect 2024 crop plantings/acres in the U.S. are:

Spring 2024 weather conditions and drought concerns.
Corn-soybean price ratio affecting decisions, as well as planting prospects for corn/soybeans/cotton and wheat profitability.
Changes in output prices, higher input costs, crop insurance price levels and 2024 futures prices affecting planting decisions.
South American crop production and demand (domestically and globally) impacting prices.

Watch For Slower Wisconsin Milk Production Because of Crop Damage

Fri, 20 Nov 2020 03:00:54 GMT

At the moment, price expectations for 2017 are in a good spot, according to Naomi Blohm, senior market advisor with Stewart-Peterson.

In Wisconsin, dairy producers are slightly nervous after the alfalfa crop experienced winter kill, which could have only a local impact on production.

Hear Blohm talk about the “supportive tones” for milk on AgDay above.

Weak Dollar Could Favor Dairy Farmers, Interest Hike on Horizon

Fri, 20 Nov 2020 03:00:54 GMT

Uncertainty in Washington is sending the dollar on a week of shaky trade. However, the currency found footing Wednesday as the Federal Reserve released meeting notes, signaling a June rate hike is likely.

A weaker U.S. dollar is offering dairy farmers a favor as it makes U.S. milk more attractive on the world market and the milk supply continues to get bigger.

Mike North, president of Commodity Risk Management Group , says the market isn’t seeing any end in sight.

“The reality for us is we haven’t gone low enough to take profitability down far enough to disincentivize the dairymen from keeping cows and adding cows to the herd,” said North.

He said with the ample feed supply and great managers, cow numbers are continuing to grow.

While exports have been impressive, it hasn’t been enough to offset the increase in supply, but North thinks with the changing value of the U.S. dollar, some doors could open.

Watch North discuss his price outlook for the rest of 2017 on AgDay above.

2013 USDA Agricultural Outlook Forum Coverage

Fri, 20 Nov 2020 02:38:21 GMT

The following information is a Web Extra from the pages of Farm Journal. It corresponds with the article “Economic Assessment.” You can find the article in Farm Journal’s 2013 Early Spring issue.

Read AgWeb’s coverage of USDA’s Agricultural Outlook Forum:

Drought Conditions Cease in Eastern Corn Belt
The historic 2012 drought is far from over, but it has at least subsided in parts of the country.

USDA Forecasts Another Tough Year for Dairy
But feed prices are expected to decline as new-crop corn and soybeans are harvested later this year.

U.S. Cattle Herd Continues to Contract
Record-high feed prices will stick around most of this year, which will continue to put the squeeze on an already suffering livestock industry.

Low Prices Hit Farm Belt: Growers Get More Crop, Less Cash
Prices for corn and soybeans will fall this year on record production, easing food inflation while providing less cash for growers recovering from drought.

CME Concerned Over Sequestration Impact on Livestock Futures
The cuts could impact the physical delivery and cash settlement mechanisms of certain CME livestock and dairy products.

Sequestration Imperils Agriculture Programs, Vilsack Warns
The U.S. agriculture secretary delivered that message Thursday at his department’s Agricultural Outlook Forum 2013.

USDA Economist: Sharp Drop in Commodity Prices Coming
Commodity prices will fall “significantly” in 2013 due to strong corn and soybean production in 2013, but the weather remains a wild card.

What's ahead for the U.S. economy?

Sun, 08 Nov 2020 17:22:55 GMT

This blog has been excerpted from a new white paper I wrote titled “Heads Up: A Futuristic View of American Agriculture and the World, and What You Can Do to Protect Your Prosperity.” If you would like a free copy of the 20-page paper, please request it at www.stewart-peterson.com .

The economic forecasting business is a risky one. Thus, my intention here is not to predict what will happen down the road. Rather, this is a look at the very real potential for dramatic events, how you might be affected by them, and what you can do to protect yourself.

On any given day, you can find some economist or expert forecasting that economic calamity is just around the corner, and just as easily you can find an expert saying that the bottom is in, the trends are up and that better days are immediately ahead. For certain, we live in an uncertain world. The economic leading indicators that I follow indicate that we are on fairly solid footing, and that at least for the next couple years, we should see improvement. In the big picture, though, my fear is if the federal government doesn’t learn to spend less, economic calamity does lie ahead. It may be 10 years off, it may be 25 years off, yet for sure, overspending will catch up with us and lead to high inflation and high interest rates that ultimately are only cured by a severe economic downturn. The only fix for this that I can see is stopping runaway federal spending.

What is highly likely for the next decade or so is a slow recovery with more dips than we’ve typically seen. Some will be deeper than they would have otherwise been had we not had such a devastating blow in 2008. There is evidence that supports the likeliness of this new “roller coaster-like” economy: Unemployment levels are likely to remain high because employers have found that they can do more with less people, and that people are more expensive than equipment.

For example, Caterpillar hired 15,000 people in 2010, half of them overseas. A friend of mine who owns a manufacturing business with 6,000 employees had to lay off 2,500 during the recession and has only rehired at overseas, lower-cost production facilities. The jobs lost were high-paying union jobs. Those who lost their jobs will be hard-pressed to find jobs that pay half as much. These trends in the way companies hire and compensate employees point to less disposable income for American workers than we’ve seen in previous, prosperous decades.

When you combine the most recent economic collapse and the money spent to come out of it, the sluggish recovery, and all the other new spending, one thing seems clear: The U.S. economy is slowly headed toward insolvency.

Our nation’s interest costs are going to consume such a large part of our annual income that, for all practical purposes, we will go broke. The evidence for this is right in front of us: Greece, Ireland, and a long list of other countries that are in the same situation. Under this scenario, it is hard to predict anything other than extremely higher interest rates and potential hyperinflation. I hope these trends change and this forecast proves wrong. Rates may not go up, or may do so only moderately for two or three years, as long as the Fed continues to stimulate the economy. (In fact, rates could go down to almost zero before the bottom is in.) However, once they start to climb, more than likely, the increase in rates will be geometric rather than arithmetic, as was the case in countries such as Brazil, Argentina and Nicaragua. Ten years from now, I suspect rates will be up to 7 or 8 percent. In the window of 10 to 20 years, rates could easily be into the teens, and I wouldn’t rule out rates over 20 percent like we saw in the 1970s. Some extremists would predict much, much higher rates. I’m not taking that extreme of a view. Yet.

Escalating interest rates and inflation ultimately lead to economic collapses. The Institute for Trend Research is predicting an economic collapse that could occur 20 years from now. Most likely that downturn would be deeper than the one we most recently suffered through, and hopefully not as severe as 1929. Admittedly, that is more than just a little scary.

Wild price volatility for commodities, followed by economic collapse—if this occurs, your approach to everything you do may have to change dramatically. My belief is that, in this environment, preservation of wealth will become more important than trying to accumulate wealth. If you have a large asset base in a substantial economic downturn, that asset base can be wiped out and become a small percentage of its previous self. More importantly, if you have debt when interest rates spiral substantially higher, you can be destroyed by that debt.

As a result, one of the most important things Americans need to do in the decade ahead is to get out of debt. I don’t mean reduce it; I mean eliminate it. Borrowing money at 20 percent or 30 percent is insane. Admittedly, if there is 20 percent inflation at the same time, it is like you are borrowing the money for free; however, it’s risky. First, even if your assets are increasing, can you cash-flow the payments? Second, when everything falls apart, you end up owing a lot of money on assets that are nearly worthless. That’s when the banks and the financiers end up with all of the assets.

Other ramifications of this inflationary environment would be a substantially weaker U.S. dollar. However, “weaker” is a term that is relative to other currencies in the world. The European economies are likely to continue to be weaker than the U.S. economy under almost every scenario. More importantly, the U.S. dollar will likely be weak against key trading partners such as China and India, and possibly emerging South American and Asian economies.

Remember, though, a forecast is not necessarily our destiny. Hopefully, clearer heads and smarter minds will prevail and change our government spending to derail the disastrous path we are on. We need to remember that the principles of individual liberty and capitalism are what made America strong, and will continue to provide strength.

What do you think about the path our country is on, and do you ever wonder how you could be affected? I welcome your comments.

Scott Stewart is president and CEO of Stewart-Peterson, a commodity marketing consulting firm based in West Bend, Wis. You may reach Scott at 800-334-9779, email him at scotts@stewart-peterson.com .
The data contained herein is believed to be drawn from reliable sources but cannot be guaranteed. Neither the information presented, nor any opinions expressed constitute a solicitation of the purchase or sale of any commodity. Those individuals acting on this information are responsible for their own actions. Commodity trading may not be suitable for all recipients of this report. Futures trading involves risk of loss and should be carefully considered before investing. Past performance may not be indicative of future results. Any reproduction, republication or other use of the information and thoughts expressed herein, without the express written permission of Stewart-Peterson Inc., is strictly prohibited. Copyright 2011 Stewart-Peterson Inc. All rights reserved.

Trusteed IRAs: why they are popular, who should consider them, what benefits they offer

Fri, 23 Sep 2022 20:01:45 GMT

Q: I’ve heard a lot about trusteed IRAs. How do they differ from traditional IRAs?

A: Simply put, trusteed IRAs offer potential tax benefits of traditional or Roth IRAs with the protection and control of a trust. They provide tax advantages that stretch into the future and offer the ability to control how, when and in what amounts assets are distributed. Trusteed IRAs have become more popular given some of the inherent limits of traditional IRAs and the growing prevalence of self-directed retirement accounts combined with the decline of pension plans. They also are more cost-effective than setting up a trust and are generally more compliant with tax laws.

Q: Who should consider a trusteed IRA?

A: There are several reasons why someone should consider a trusteed IRA, the most consequential of which is if an owner has an interest in controlling assets and realizing tax benefits beyond their lifetime. This can mean an owner is concerned with the financial discipline or sophistication of heirs.

Other reasons include if an owner remarries and wants to provide for a current spouse as well as children from a previous relationship and/or is concerned about IRA management in the event of incapacitation.

Q: I’m in the middle of estate planning. How can a trusteed IRA help with the process?

A: They can help process if only to preserve the potential tax-advantaged accumulation of IRA benefits to pass on to heirs. Under traditional or custodial IRAs, a beneficiary is required to withdraw at least the Required Minimum Distribution (RMD) each year. However, a beneficiary may withdraw additional amounts, for any reason, at any time—and incur possible fees or tax penalties.

Additionally, owners can restrict payouts to a beneficiary to the RMD, enabling it to operate as a spendthrift trust. At the owner’s death, the trusteed IRA would be automatically split into separate accounts for individual beneficiaries, with distribution terms defined for each account.

Another benefit is that estate plans don’t need to be rewritten or updated; trusteed IRAs can be added independent of an estate plan to protect IRA assets which legally pass outside of wills.

Q: Is a trusteed IRA better suited to farmers or owners of farm assets?

A: Not expressly, but a trusteed IRA can play an important role in legacy planning and preservation of farm assets over multiple generations. Given the growing generation gap among farming families, trusteed IRAs could be a way help preserve farm family values over generations from beyond the grave. Moreover, as farm economics continues to change, farmers may find value in the highly customizable nature of trusteed IRAs. In the event of a divorce in the family, for example, assets can be made to not leave the family’s bloodlines.

Q: Are there any downsides to trusteed IRAs?

A: Given that a trusteed IRA requires a corporate trustee, it’s harder to change ownership and family members cannot be named as trustees. Not all financial institutions offer trusteed IRAs so they may not be widely available to interested clients. Additionally, while they offer greater customization and more control, trusteed IRAs carry some limits. To have the highest level of customization and control, a trust would need to be created.

Please send questions, comments or requests to address a topic or issue to Rees Mason at rees.mason@ml.com.