Aug 21, 2014
Home| Tools| Events| Blogs| Discussions Sign UpLogin


September 2011 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.

Corn Stocks Rise Back Above 1 Billion Bushels

Sep 30, 2011

The USDA released their Quarterly Grain Stocks report today which was seen as bearish for grains as stocks data came in higher than analyst expectations for corn and wheat. Soybeans had a slightly bullish tone as stocks were reported less than expected.

 Decreasing demand for corn has been confirmed by the report and rationing is now occurring. USDA reported 1.13 billion bushels on hand for September 1, below last year's 1.17 billion bushels. Analysts estimated 964 million bushels, 164 million bushels less than USDA's findings. Of the total stocks, 315 million bushels are stored on farms, down 35% to last year. Off-farm stocks are at 813 million bushels, down 33% from a year earlier. June-August 2011 disappearance is 2.54 billion bushels, compared to 2.60 billion bushels a year ago. Last year's September stocks were also higher than expected. Analysts speculated early harvested bushels were added to old crop data.
 
Soybean stocks increased 42% compared to last year with 215 million bushels as of September 1, 2011. Stocks stored on farms totaled 48.5 million bushels, a 37% increase from last year. Off-farm stocks increased to 166 million bushels, up 44% from last September. June-August 2011 disappearance is 405 million bushels, down 4% from last year. Due to USDA stock numbers being higher than analyst expectations (225 million bushels), there could be room for demand to slightly increase.
 
Wheat stocks decreased 12% from last year with 2.15 billion bushels being reported on September 1, 2011. On-farm stocks are at 642 million bushels, down 21% from last September. Off-farm stocks are down 8% from last year, coming in at 1.51 billion bushels. The June-August 2011 disappearance is 720 million bushels, down 2% from September of last year. These numbers show a bearish outlook for wheat as increased first quarter demand would have implied more usage but usage was down 2% to last September.
 
Outlook
 
Although we would expect corn and wheat prices to drop due to the higher than expected stocks released by USDA, prices remain historically high at over $6.00 per bushel for each commodity. The short-term outlook for corn may be bearish, but we expect that there could be a slight increase in demand to compensate for the higher old crop stocks over the next few months.
 
- Colvin

 

Visit http://farmlandforecast.colvin-co.com for weekly updates
 

Crop Progress: Corn Harvest Continues

Sep 29, 2011

On Monday, the USDA released its weekly crop progress report. The corn harvest is 15% complete, which is on pace with the 16% five-year historical average. USDA estimated that 52% of the corn crop is in good or excellent condition, up 1% from last week. The estimate for corn in very poor or poor condition decreased to 20%, compared to 21% last week. Last year at this time, 13% of the crop was in very poor or poor condition, while 66% was in good or excellent condition.

 

USDA estimated that 96% of the corn crop was dented, while 99% was last year in the fourth week of September; the five-year historical average is 96%. Out of the entire corn crop, 63% was considered mature by the USDA this week, 46% was mature last week and 83% was mature last year at this point. The five-year historical average is 64% in the fourth week of September.

 

Soybean conditions remained the same as last week. Of the 18 primary soybean-producing states, 18% of the soybean crop is in poor or very poor condition, while 53% is in good or excellent condition, which is well off 2010 estimates of 13% and 63%, respectively, for the fourth week of September. USDA estimated that 58% of soybeans were dropping leaves by this week, which is again lagging the five-year historical average of 68% for the fourth week of September.

 

The spring wheat harvest is slightly ahead of historical averages, with 96% of the harvest complete so far. The five-year historical average is 95% of the spring wheat crop harvested by this week in September.

 

Corn prices decreased by 6.4% over the past week, ending at $6.48 per bushel; soybeans were down 5.8% to $12.59 per bushel; and wheat ended the week down 3.7%, closing at $6.48 per bushel. Year-over-year corn prices are up 26.6%, soybeans are up 11.6% and wheat is down 8.2%.

 

-Colvin

 

For daily updates, visit http://farmlandforecast.colvin-co.com/ 

 

A Day in Agriculture: Combine in WI

Sep 29, 2011

This picture comes from my parent's farm where I grew up in Wisconsin. I was very fortunate to be around agriculture my entire life and learned to appreciate farmers and how food is brought to the table from a very young age.

 

Today I work for an agriculture investment management company in Minnesota where we allow investors the opportunity to invest in farmland. Agriculture is the backbone of America and I am proud to still be a part of the industry and hope to be in agriculture my entire life. Each and every person should visit a farm once in their life to learn the unbiased truth behind food production in the U.S. Corn Belt. I tip my hat to all the hard working farmers around the world for producing the food that we all need.

 

For daily articles on farmland and agriculture, please visit http://farmlandforecast.colvin-co.com.

Marc Schober Combine Wisconsin Home Farm Day in Agriculture 2011

 

The Rural Economy Outlook Turns Positive in September

Sep 20, 2011

The Rural Mainstreet Index (RMI) advanced to 52.2 from a 49.3 to move into positive growth for September after falling below growth neutral in August. Farmland values continued to grow as bankers are optimistic about appreciation growth for the next 12 months.

After three months of consecutive declines, the RMI increased to 52.2 and surpassed the neutral mark of 50.0. The index is now at a positive growth and positioned well above the 47.6 it posted 12 months ago.

Farmland Forecast September 2011 RMI

Although the RMI shows a positive trend, some believe the growth is slowing down. Creighton University economist Ernie Goss said, "While our survey results over the past several months do not indicate recessionary economic conditions, they clearly show that Rural Mainstreet economic growth is slowing."

Agriculture

The farmland price index increased to 66.9 from 61.9 in August. This marks the 20th straight month the index has been above growth neutral and the third straight month the gauge has risen. Consistent with the farmland values, farm equipment sales index increased to a 65.4 from August's 56.9. "Although both farming gauges are down from the beginning of the year, they are up significantly from September of last year reflecting very strong farm income growth," said Goss.

Farmland Forecast September 2011 Farmland Price Index

Banking

Bankers were asked several questions regarding infrastructure spending. Regarding support for additional spending on specific infrastructure, 69% were supportive of spending on highways, bridges and roads, 15% were in favor of spending on school buildings and equipment and 10% favored spending on infrastructure to protect against flooding and other weather related factors.

Bankers are hesitant to support more spending. "I do not support any new spending. As bankers, have we ever seen someone borrow their way out of debt?," commented John Nelson, president of First Tier Bank in Holdrege Nebraska. On the other hand John Schmaderer, President of Tri-County Bank in Stuart Nebraska conceded that infrastructure spending is critical to rural development but, "Budget cutting and infrastructure development can be inconsistent."

The loan volume index expanded slightly to 62.5 from 62.1. The check deposit index increased to 60.3 from a 55.4 in August and the certificate of deposit and savings instruments increased to a weak 41.2 from 40.2 last month.

September's job index rose to 54.7 compared to 49.3 in August. "Job growth for Rural Mainstreet communities is between three and four times that of metropolitan areas of the region. Even with the recent strength, Rural Mainstreet communities have lost on average approximately 2.7 percent of their pre-recession levels of employment while urban areas of the region have lost almost 4.3 percent of their pre-recession level of jobs," said Goss.

The economic confidence index rose to a flat 50.0 from 44.0 the month before. “While the index was up for the month, bankers remain less than optimistic about future economic conditions, compared to last year at this time,” said Goss.

Survey

This survey represents an early snapshot of the economy of rural, agriculturally and energy-dependent portions of the nation. The RMI is a unique index covering 10 regional states, focusing on approximately 200 rural communities with an average population of 1,300. It gives the most current real-time analysis of the rural economy.

Visit http://farmlandforecast.colvin-co.com for daily articles on farmland and agriculture.

 

 

Crop Progress: Corn Harvest on Schedule

Sep 20, 2011

This afternoon, the USDA released its weekly crop progress report. The corn harvest is 10% complete which is on pace with the 11% 5-year historical average. The USDA estimated 51% of the corn crop is in good or excellent condition, down 2% from last week. The estimate for corn condition in very poor or poor condition increased to 21%, compared to 20% last week. Last year at this time, 11% of the crop was in very poor or poor condition while 68% was in good or excellent condition.

This week the USDA estimated that 92% of the corn crop was dented while 97% was last year in the third week of September; the 5-year historical average is 91%. Out of the entire corn crop, 46% was considered mature by the USDA this week, 29% was mature last week, 67% was mature last year, and the 5-year historical average is 48% in the third week of September.

Of the 18 primary soybean producing states, 18% of the soybean crop is in poor or very poor condition while 53% is in good or excellent condition, which is well off 2010 estimates of 12% and 63% for the third week in September. The USDA estimated that 33% of soybeans were dropping leaves by this week, which is again severely lagging the 5-year historical average of 47% for the third week of September.

The spring wheat harvest is slightly ahead of historical averages with 93% of the harvest complete so far. The 5-year historical average is that 92% of the spring wheat crop has been harvested by this week in September.

Corn prices decreased by 6.1% over the past week ending at $6.92 per bushel, soybeans were down 3.8% to $13.36 per bushel, and wheat ended the week down 3.9% closing at $6.73 per bushel. Year-over-year corn prices are up 36.0%, soybeans are up 27.0%, and wheat is up 4.6%.

-Colvin

Visit http://farmlandforecast.colvin-co.com for daily updates on agriculture.

WASDE Report: Let the Corn Rationing Begin

Sep 12, 2011

The USDA updated the U.S. and world balance sheet estimates for major agricultural commodities in the World Agricultural Supply and Demand Estimates (WASDE) report today. Summer heat and excessively dry weather across the U.S. Corn Belt throughout August hurt crop conditions, which led to a reduction in the estimated average corn yield per acre in the U.S. to the lowest since the 2005/06 season.

Corn

Neutral to slightly bullish news from the USDA as estimated average corn yields were decreased by 4.9 bu./acre to 148.1 compared to August's estimate. Although current estimated yields are the lowest since 2005/06, this year's crop is on pace to be the third largest on record. 2011/12 supplies were decreased by 442 million bushels alongside a 20 million bushel decrease in beginning stocks and a 5 million bushel decrease in imports.

U.S. corn usage was decreased by 400 million bushels as supplies became tighter and rationing of the U.S. corn crop began. Feed and residual use was estimated 200 million bushels lower on decreased expected residual use on the smaller U.S. crop. Ethanol usage was also estimated 100 million bushels lower due to the increased price of corn and the Energy Information Administration's decreased forecast of gasoline consumption. U.S. exports were lowered by 100 million bushels on increased supplies and export expectations from Argentina, Brazil and Ukraine.

Ending stocks were decreased by 42 million bushels to 672 million bushels, which puts the all-important stocks-to-use ratio at 5.3%; down from 5.4% in August and well off the five-year historical average of 11.6%. The USDA forecasted the season-average farm price per bushel up $0.30 on each end of the range at $6.50 to $7.50.

World corn supplies were decreased by 4.5 million tons because of the increased beginning stocks that were only able to be partially offset by the decrease in U.S. supplies. Global production was 5.9 million tons lower due to the 10.6 million ton reduction in U.S. production and a 4.8 million ton increase in the rest of the world. Brazil and Argentina had estimated production increases of 4.0 and 1.5 million tons, respectively, on increased area. Ukraine also had an increase in production of 1.5 million tons due to larger-than-expected yields.

Soybeans

The USDA increased soybean production in the U.S. by 29 million bushels on increased yields. The average soybean yield per acre was increased by 1% to 41.8 bu./acre. Total production is pegged at 3.085 billion bushels. Ending stocks increased by 10 million bushels to 165 million bushels as supplies were only partly offset by increased exports and lower food usage due to increased canola and palm oil use. The U.S. season-average soybean price for 2011/12 is projected at $12.65 to $14.65 per bushel, up $0.15 on both ends of the range.

World soybean production was increased by 1.51 million tons to 258.99 million tons due to increased production in the U.S. and a record crop in India. India's 10.5 million tons of soybean production was due to higher harvested area.

Wheat

U.S. wheat ending stocks were increased by 90 million bushels on increased imports and decreased food use and exports. Domestic imports rose by 10 million bushels due to the increased supplies in Canada, and food usage was lowered by 5 million bushels. U.S. exports were estimated 75 million bushels lower on increased exports from Canada and EU-27. The 2011/12 season-average farm price for all wheat is projected at $7.35 to $8.35 per bushel, up from last month’s range of $7.00 to $8.20 per bushel.

Global wheat supplies were increased by 7.6 million tons due to larger beginning stocks and production in Canada, EU-27 and Ukraine. Canada production was increased by 11.6% to 24.0 million tons, while EU-27's increase was 1.7% and Ukraine's increase was 4.8%.

Overview

The reduction in U.S. production for the 2011/12 season has triggered an alarming demand rationing of the corn crop. Feed and residual use of corn decreased, and we feel that end users are looking for alternatives to corn, which could be wheat in many feed circumstances. An average yield of 148.1 bu./acre would be the lowest since the 2005 crop, well off of the 2009/10 record yield of 164.7 bu./acre.

We feel that the decreased condition of the U.S. corn crop should help keep grain prices elevated through the harvest. Remember, all USDA yield estimates are made assuming that conditions remain optimal. In order for the U.S. average yield to be 148.1 bu./acre, pristine weather conditions need to be present throughout the harvest.

Visit http://farmlandforecast.colvin-co.com for daily articles on agriculture and farmland.

Crop Progress: Corn and Soybean Conditions Decrease

Sep 07, 2011

Yesterday, the USDA released its weekly crop progress report. The corn crop condition worsened by two percent over the past week and is significantly lagging behind the historical average. The soybean crop condition decreased by one percent compared to last week’s report as well. The USDA estimated 52% of the corn crop is in good or excellent condition, while 21% is in poor or very poor condition. During this week in 2010, 69% of the crop was in good or excellent condition and only 11% was in poor or very poor condition.

 

This week the USDA estimated that 71% of the corn crop was dented while 84% was last year in the first week of September; the 5-year historical average is 70%. Out of the entire corn crop, 18% was considered mature by the USDA this week, 9% was mature last week, and the 5-year historical average is 20% in the first week in September.

 

Of the 18 primary soybean producing states, 16% of the soybean crop is in poor or very poor condition while 56% is in good or excellent condition, which is well off 2010 estimates of 12% and 64% for the second week in September. The USDA estimated that 6% of soybeans were dropping leaves by this week, which is again severely lagging the 5-year historical average of 13% in the first week of September.

 

The spring wheat harvest is still a little behind historical averages with 71% of the harvest complete so far, while 50% had been harvested by last week. The 5-year historical average is that 81% of the spring wheat crop has been harvested by this week in September.

 

Corn prices decreased by 2.3% over the past week ending at $7.46 per bushel, soybeans were down 2.7% to $14.48 per bushel, and wheat ended the week down 4.8%, closing at $7.16 per bushel. Year-over-year corn prices are up 66.0%, soybeans are up 37.0%, and wheat is up 1.1%.

 

-Colvin

 

Visit http://farmlandforecast.colvin-co.com/ for daily updates

 

Volatile Markets and Poor Crop Conditions Headline in August

Sep 01, 2011

World equity markets became continued the volatility throughout August as the fear of a double dip recession is becoming stronger. In early August, Standard & Poors downgraded the U.S. Government from their AAA debt rating to a AA+ which sent stocks into a downfall as investors moved assets into safer places, like the hard asset, gold.

District Federal Reserve Banks released their quarterly farmland values reports in August which revealed a cropland price increase of 17% and 20% across the Chicago and Kansas City Districts respectively. Nationally, farm real estate, which includes all types of farmland, increased 6.8% over that past twelve months according to the latest USDA estimates. Farmland values should continue to benefit from any global uncertainty.

Grain Prices

Corn prices surged 14.14% in August and closed at $7.59 per bushel due bullish news from both the USDA monthly WASDE Report and weekly Crop Progress Reports. The USDA lowered the estimated national average for corn yields by 3.7%, or 5.3 bushels, to 153.0 bushels per acre which sent prices on a rally. Crop Progress Reports have also continued to reveal a U.S. corn crop in poor condition in comparison to recent years. As of August 28th, 19% of the U.S. corn crop was in poor or very poor condition compared to 10% in 2010 while only 54% was in good or excellent condition compared to 70% in 2010.

Soybean prices increased 6.94% this month to $14.48 per bushel on the Chicago Board of Trade. USDA estimated U.S. average soybean yields lower in the August WASDE Report from 43.4 bushels per acre down to 41.4 bushels per acre; a 4.8% decrease. Soybean prices have also been volatile as Brazil is entering their planting season which could dictate global prices through the upcoming winter months.

Wheat prices were driven 10.57% higher during August to $7.43 per bushel due to the increase in corn prices. As corn prices increase, wheat prices will follow because wheat is the direct substitute to corn in major livestock feed. Until corn reaches $8.00 per bushel, expect wheat prices to continue to rise in line with corn.

WASDE

The USDA updated the U.S. and World balance sheet estimates for major agricultural commodities in the World Agricultural Supply and Demand Estimates (WASDE) report in mid-August. WASDE reports in the summer are a barometer of overall world demand, forecasted production, and inventory adjustments. In August, U.S. ending stocks for 2011/12 were revised lower for corn and soybeans, but increased for wheat.

After the surprising June 30th Acreage report, the USDA resurveyed producers in Minnesota, Montana, North Dakota, and South Dakota and confirmed previous estimates for planted acres but decreased estimates harvested acres. The USDA reduced harvested acres to 84.4 million acres, a reduction of 0.5 million acres. Reductions were based on flood damage caused in the Mississippi and Missouri River basins.

The national average corn yield was revised to 153.0 bushels per acre, down 5.7 bushels from July’s projection as unusually high temperatures and below average precipitation during July across much of the Corn Belt sharply reduced yield prospects. Harvested acreage and yield reductions resulted in the USDA lowering production estimates for 2011/12 to 12.914 million bushels, a reduction of 556 million bushels, or 4%.

Even though the USDA lowered its 2011/12 ending stock levels for corn and soybeans, we are closely monitoring demand levels for both commodities. Recent escalations in commodity prices have caused some demand softening and end-users will look towards alternatives if margins cannot be sustained. If end-users begin to transition to alternatives or go out of business due to higher commodity costs, the entire demand picture may shift drastically and force stocks to increase resulting in lower prices.

Farmland

The United States Department of Agriculture released its biannual report for farm real estate, cropland, and pasture values on August 4th. Compared to 2010, average values for farm real estate, cropland, and pastures across the United States were up 6.8%, 9.4%, and 1.9% respectively.

During the second quarter, The Kansas City Federal Reserve Bank District's farmland values rose further, although the pace of gain slowed. Compared to first quarter gains, the value of nonirrigated and irrigated cropland in the District climbed 2.3% and 3.9%, respectively, to remain 20% above year-ago levels. District ranchland values grew 1% from the first to second quarter and year-over-year values are up 11%.

During the second quarter, farmland values in the 7th Federal Reserve District rose 17% over the last twelve months according to the Federal Reserve Bank of Chicago’s second quarter survey of Farmland Values and Agricultural Credit Conditions Report. Across the District, the value of “good” farmland increased 4% in the second quarter compared to the first quarter of 2011. Among the District states, only Wisconsin had a smaller year-over-year increase in farmland values in the second quarter of 2011 than in the first quarter of 2011. Year-over-year, land values in Indiana and Iowa climbed 21% and 20%, respectively, while values in Wisconsin climbed a modest 8%.

Colvin & Co. in the News

On August 10th, Bloomberg published an article on investing in farmland in the United States that featured top farmland fund managers including Greyson Colvin, founder of Colvin & Co. The article touched on the possible bubble being created in the farmland sector:

Colvin, a former analyst at UBS AG and Credit Suisse Group AG, says U.S. farmers aren’t carrying as much debt as they did during the 1980s crisis, which contributed to the downfall of banks as agriculture loans defaulted. The farm debt-to-asset ratio, which peaked in 1985 at 23 percent, is expected to fall to 10.7 percent in 2011, according to Agriculture Department estimates.

Outlook

August was an eventful month for agriculture with strengthening commodity prices and impressive farmland value reports from multiple Federal Reserve Districts. We feel that the ongoing uncertainty among investors will continue to drive farmland values higher moving into the upcoming harvest season in the Corn Belt.

Late summer is historically a time when elevators and other offtakes are paying a premium for old crop corn. Difficult weather this summer is driving new crop corn prices to historic levels as well. Many farmers will be selling their stored grain in the upcoming weeks to take advantage of high prices as well as contracting out large amounts of their new crop corn for 2012. Farmers with cash on hand will undoubtedly reinvest in land which should help support increasing farmland values moving forward.


Visit http://farmlandforecast.colvin-co.com/ for daily articles on farmland and agriculture

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