Sep 1, 2014
Home| Tools| Events| Blogs| Discussions Sign UpLogin


June 2010 Archive for Farmland Forecast

RSS By: Marc Schober, AgWeb.com

Marc Schober is the editor of Farmland Forecast an educational blog devoted to investments in agriculture and farmland.

Weekly USDA Crop Progress: Corn and Soybean Conditions Decrease Again

Jun 29, 2010

Yesterday afternoon, the USDA released its weekly crop progress report. Progress in soybean planting is wrapping up across the 18 primary producing states. During the last week, 4% of the entire soybean crop was planted; bringing the total planted crop at 97%, which is equivalent to the 5 year historical average in similar time periods. The 2009 estimate at this week was 95%.

 

The condition of the corn crop again fell slightly over the past week. The USDA estimated 73% of the corn crop is in good or excellent condition, while 8% is in poor or very poor condition. Last week 75% was in good or excellent condition while only 7% was in poor or very poor condition. During this week in 2009, 72% of the crop was in good or excellent condition and 7% was in poor or very poor condition. This week, 7% of the corn crop is silking, according to USDA estimates, while only 4% was last year by this week and 5% in 2009.

 

Of the 18 primary soybean producing states, 93% of the soybeans have emerged. The 5 year historical average is also 93%. By this week last year, only 87% of the soybean crop had emerged. This week soybeans again worsened slightly in condition. 9% of the soybean crop was in poor or very poor condition while 67% was in good or excellent condition. Last week only 8% was in poor or very poor condition and 69% of the crop was in good or excellent condition. The USDA included an estimate of soybean blooming this week as well. 9% of the crop is blooming, while the estimate for this week in 2009 was 8%.

 

The winter and spring wheat crops are still in good condition, compared to last year’s crop. In the 18 primary producing states of winter wheat, 64% of the crop is in good or excellent condition while only 10% is in poor or very poor condition. Last year, 45% of the crop was in the good or excellent condition and 28% was in poor or very poor condition. In the 6 primary producing states of spring wheat, 84% of the crop is in good or excellent condition this year compared to only 76% last year. This year 2% of the spring wheat crop is in poor or very poor condition while 6% was last year.

 

Corn prices decreased 4.7% over the past week ending at $3.44 per bushel and soybeans were also down 3.6% to $9.57 per bushel. Year-over-year corn prices are down 11.6% and soybeans are off 25.5%. We will be watching for the USDA Planted Acres report on Wednesday to see if grain prices will react positively.


Remember to visit Farmland Forecast (
farmlandforecast.colvin-co.com) for your daily update on news and research about agriculture and farmland.

Wet Weather in Canada Worst in 40 Years

Jun 28, 2010
Canadian farmers are in a difficult position as record amounts of rain in Western Canada’s crop belt will leave the most unplanted acres in roughly 40 years, according to the Canadian Wheat Board. Heavy rains have flooded farmland in Canada, preventing farmers from planting up to one-fifth of the region’s farmland.

As of June 21, crops in Saskatchewan, the biggest Canadian producer of grain, were only 76% seeded, according to the Ministry of Agriculture. Typically, planting in Canada is completed by now.

Wheat, canola and oats are the crops primarily affected by the wet weather. Futures prices have shot up significantly on the news of reduced production estimates due to the wet weather. Oats have rallied 46% and canola 12% this month.

“The historic wet weather in Canada continues, and the longer it does, the more damage that is done to yields,” says Shawn Hackett, president of Hackett Financial Advisors. “The crop could be one of the worst in recent history.”

Crop quality is a major concern, as excessive moisture will prohibit growth and can lead to disease. The late development of the crop also leaves it vulnerable to frost in the fall. Yields are less of a concern, as crops respond better to excessive moisture than to drought.

Lawmakers in the Canadian government are requesting that the wet situation be considered a “disaster,” which would trigger federal funding. Declaring the situation a disaster would provide farmers money from crop insurance and the federal programs AgriStability and AgriRecovery.

Wet weather is also causing problems in the U.S. in Iowa, Illinois and Missouri. Roughly six times the normal amount of precipitation has occurred in Iowa and Illinois.

Outlook

Everyone knows 2010 is going to be a disaster for Canada, but the question remains how bad the production numbers are going to be. A lot will depend on what the growing conditions are like during the remainder of the summer, so it will probably be a month or two before the industry gets a handle on actual damage.

Remember to visit Farmland Forecast (
farmlandforecast.colvin-co.com) for your daily update on news and research about agriculture and farmland.

Yuan Revaluation Benefits Corn, Soybeans

Jun 23, 2010
In a surprise announcement on June 19, China’s central bank announced it would remove the two-year-old peg to the U.S. dollar and to allow for a more flexible yuan, although it is not a free float and monetary authorities will keep the yuan in a tight trading band. The Chinese central bank also noted there will not be a dramatic revaluation, but rather a gradual adjustment.

The announcement of a stronger Chinese currency is excellent news for U.S. exports, especially the grain complex, as U.S. grains are now more attractive to Chinese buyers. Grain prices rallied intra-day, but gains were muted by a weaker Euro and stock market.

Long-term, we see the “flexible” currency as a big positive for grains. China will gradually appreciate the yuan against the dollar to temper inflation and to stabilize trade balances. China has an insatiable appetite for grains and we see this move by the central bank as a long-term strategy to feed the growing nation.

The last time China revaluated the yuan between 2005 and 2008, the currency appreciated 20% against the dollar. We expect the central bank will implement a similar appreciation over a similar time period as China looks to reduce its dependency on exports.

The decision comes after heavy pressure from the U.S. and other member of the G-20 leading up to the G-20 summit in Toronto this weekend. The U.S. argued the yuan was undervalued, giving Chinese exporters an unfair pricing advantage and deterring the global recovery.

The aggressive stance to appreciate the yuan by the U.S. probably delayed the revaluation decision by the Chinese. The Chinese do not want to be pressured by Western powers, and would have probably made the decision much earlier if they didn’t receive so much political pressure.

This is also a sign of positive strength for the Chinese economy and it is well positioned. The move reduces the risk of inflation and the need to raise interest rates to slow the growth of the Chinese economy.

Overall, the Chinese willingness to have a “flexible” currency will benefit grain prices over the long-term and allow Asian buyers to have access to cheaper U.S. grain exports.

Remember to visit Farmland Forecast (farmlandforecast.colvin-co.com) for your daily update on news and research about agriculture and farmland.

Crop Progress: Corn, Beans Deterioriate Due To Rain

Jun 22, 2010
Yesterday afternoon, the USDA released its weekly crop progress report. Progress in soybean planting is almost complete across the 18 primary producing states. During the last week, 2% of the entire soybean crop was planted; bringing the total planted crop at 93%. This compares to a 5 year historical average of 94% in similar time periods, and 2009’s estimate of 91%.

The condition of the corn crop fell slightly over the past week as roughly six times the normal amounts of precipitation occurred in Iowa and Illinois. The USDA estimated 75% of the corn crop is in good or excellent condition, down from 77% a week earlier. 8% of corn is in poor or very poor condition, up from 5% last week. During this week in 2009, 71% of the crop was in good or excellent condition and 7% was in poor or very poor condition.

Of the 18 primary soybean producing states, 87% of the soybeans have emerged. The 5 year historical average is 88%. By this week last year, only 82% of the soybean crop had emerged. This week soybeans worsened slightly in condition. 8% of the soybean crop was in poor or very poor condition while 69% was in good or excellent condition. Last week only 5% was in poor or very poor condition and 73% of the crop was in good or excellent condition.

The winter and spring wheat crops are in great condition, compared to last year’s crop. In the 18 primary producing states of winter wheat, 65% of the crop is in good or excellent condition while only 9% is in poor or very poor condition. Last year, 45% of the crop was in the good or excellent condition and 28% was in poor or very poor condition. In the 6 primary producing states of spring wheat, 84% of the crop is in good or excellent condition this year compared to only 77% last year. This year 1% of the spring wheat crop is in poor or very poor condition while 4% was last year.

Corn prices increased 3.2% over the past week ending at $3.60 per bushel and soybeans were also up 5.4% to $9.91 per bushel. Year-over-year corn prices are down 11.3% and soybeans are off 17.2%.

Remember to visit Farmland Forecast (
farmlandforecast.colvin-co.com) for your daily update on news and research about agriculture and farmland.

Rural Economy Growing, Lending Contracting

Jun 21, 2010
The rural economy continues to grow and is at the strongest position in the last two years due to higher farmland prices, rising farm equipment sales, improving retail sales, and continued confidence. The improving conditions are partially offset by limited access to capital and concerns about the new financial reform bill.

The Rural Mainstreet Index (RMI) declined in June to 52.6 from May’s 54.3, but this is the first time in more than two years that index was above growth neutral 50.0 for two consecutive months. Creighton University economist Ernie Goss said, “After 26 consecutive months of below growth neutral readings, the overall index has now moved above growth neutral for two consecutive months.”


Farmland


The farmland-price index increased to 54.7 in June from May’s 52.7, which is the fifth straight month above growth neutral and substantially above it March 2009 low of 33.1. “Even as the rising value of the dollar has put downward pressures on estimated 2010 farm income, farmland prices are being bid up significantly in the region,” said Goss.

The Federal Reserve Bank of Chicago also reported strength in farmland values as prices rose 4% in the Corn Belt over the last 12 months. In Iowa, average farmland prices increased 8% since March 2009.

Farm equipment sales continue to increase as the index rose to 53.1 in June from May’s 50.9. Goss noted the improving conditions, “In addition to an expanding rural economy, we are tracking significant improvements in farm and ranch land prices and farm equipment sales. I expect both of these factors to remain healthy in the months ahead.”

Lending

The primary concern in the rural economy continues to be access to capital. This is evident as one-third of the responding banks reduced loan volumes over the past six months. Bankers are also concerned about the new financial reform bill as 60% of respondents expect the new regulations to reduce long-term real estate loans.

Don Reynolds, president of Regional Missouri Bank said, “The financial reform bill also may significantly lower our lending limit to one borrower, increase an already heavy regulatory burden, and take away card interchange income.” Goss also noted, “As a result, many of the bankers expect the impact to fall more heavily on community banks.”

Outlook

Overall, we see the continued strength in the rural economy as a sign that conditions are improving for agriculture, despite significant headwinds such as a stronger dollar, lower commodity prices, sovereign debt concerns in Europe, and a cooling Asian economy. The continued rise in the farmland-price index shows that farmers are expanding the operations and are re-investing in agriculture.

The Rural Mainstreet Indexes are compiled from a survey of small community bank CEOs from Colorado, Illinois, Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, South Dakota and Wyoming.

Remember to visit Farmland Forecast (farmlandforecast.colvin-co.com) for your daily update on news and research about agriculture and farmland.

USDA: Lower Corn Stocks Due to Higher Ethanol Use

Jun 11, 2010

The USDA updated the U.S. and World 2009/10 balance sheet estimates for major agricultural commodities in the World Agricultural Supply and Demand Estimates (WASDE) report on Thursday. The USDA lowered ending stocks for corn in both 2009 and 2010 due to a very surprising increase in ethanol use. 2010 ending corn stocks are expected to be the smallest since 2007.

We see June’s WASDE as bullish for corn as ending stocks were lower than analysts’ estimates and as a pleasant surprise as corn prices have been facing considerable headwinds lately. The increase in bushels needed for ethanol may be a result of the light lest weights of the old-crop, which means refiners need more bushels to extract the same amount of fuel. Ending stock estimates for soybeans and wheat came in roughly in line with consensus expectations and see June’s report as neutral for prices.

Corn

Over the last month, corn prices have declined to $3.36 from $3.64 on May 11 due to an early planting season and a favorable weather outlook for the Corn Belt this summer. The beginning of the corn season has gone relatively well with 94% of the crop emerged and 76% of the crop rated good/excellent. Corn prices rose 6 cents on Thursday, the largest increase in six weeks, due to the unexpected news.

"The drop in corn supplies is a major surprise and introduces a new demand element for the market," said Peter Meyer from JPMorgan Chase. "Shrinking U.S. inventories means there is little room for any production problems."

U.S. corn ending stocks for 2009/110 were lowered by 135 million bushels to 1.603 billion bushels. The decrease in ending stocks was primarily due a 150 million bushels increase in ethanol use. Ending stocks for 2010/11 were projected at 1.573 billion bushels, down from 1.818 billion bushels in May, again due with ethanol use increased a 100 million bushels to 4.700 billion bushels. Production estimates for 2010 were left unchanged.

"It doesn't imply there is a tight situation projected (in corn stocks) as long as we've got the production," said Jack Scoville, analyst at The Price Futures Group. "It does mean that we are getting to the point where we're going to have to make sure we have the production. At minimum it should stabilize things."

The USDA increased its 2010/11 farm price for corn by 10 cents to $3.30 to $3.90 per bushel.

World ending stocks for corn in 2010/11 were decreased by 4.5% or 6.89 million tons due to the decrease in U.S. ending stocks and higher imports.

Wheat

U.S. wheat ending stocks for 2010/11 were decreased slightly by 6 million bushels to 991 million bushels. The small decline in ending stocks was due to adjustments in demand for old-crop stocks partially offset by higher production and lower feed and exports. Wheat’s 2010/11 marketing year estimated price was narrowed by the USDA to $4.00 to $4.80.

World wheat supplies for 2010/11 were lowered by 4.1 million tons due to slightly higher exports and lower production.

Soybeans

Changes to U.S. soybean estimates were relatively quite as ending stocks for the 2010/11 crop was lowered by 5 million bushels due to an increase in crush in the old-crop estimates. The farm price for the 2010/11 soybean crop was unchanged at $8.00 to $9.50 per bushel.

World soybean market continues its bearish outlook as ending stocks for 2010/11 increased by roughly 67 million tons to another new record high, which puts ending stocks to use at 27.2%. The large size of the Brazilian and Argentine soybean production, combined with the prospect of a record large U.S. harvest in 2010, leave the world well supplied with soybeans and we continue to maintain a bearish outlook for the remainder of 2010.

Outlook

We will now turn our attention to the production numbers for the 2010 corn crop, which we see as very optimistic. We expect the USDA to begin to update production estimates in July or August, If the market begins to see a sign that these estimates are not sustainable, corn prices could see a rally as the ending stock to use ratio could reach uncomfortably low levels. We are also keeping an eye on China as they are currently facing dry weather and we expect to hear more about imports.

Click on the link for the full WASDE report: http://www.usda.gov/oce/commodity/wasde

Remember to visit Farmland Forecast (farmlandforecast.colvin-co.com) for your daily update on news and research about agriculture and farmland.

Log In or Sign Up to comment

COMMENTS

 
 
 
The Home Page of Agriculture
© 2014 Farm Journal, Inc. All Rights Reserved|Web site design and development by AmericanEagle.com|Site Map|Privacy Policy|Terms & Conditions