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February 2013 Archive for Farmland Forecast

RSS By: Marc Schober,

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

Fed Says Midwest Farmland Increased 16% in 2012

Feb 19, 2013

Midwestern farmland values increased 16% in 2012, the third largest gain in the last 35 years, according a survey from the Federal Reserve Bank of Chicago. Despite the worst drought in over 55 years, high commodity prices and record farm incomes drove demand for agricultural land. Survey respondents expect the momentum to continue the next twelve months based on the record income expectations for 2013.

Chicago Fed Quarterly Farmland values fourth quarter 2012

In the fourth quarter of 2012, farmland values climbed 7% compared the fourth quarter of 2011. An unusually large amount of sales occurred in the end of year due to uncertainty surrounding the fiscal cliff and potential tax changes.

“2012 marked the third consecutive year of significant jumps in agricultural land values,” David B. Oppedahl, a business economist at the Chicago Fed, said in the report. “Recovery from the drought will remain a key factor in 2013, as the movements of drought-influenced crop prices will affect both crop farmers and livestock producers.”

Iowa, Illinois, and Michigan had the largest gains in the fourth quarter, increasing 20%, 18%, and 18%, respectively. Wisconsin and Indiana experienced more modest gains of 11% and 10%, respectively.

28% of respondents expect farmland values to increase in the first quarter of 2013, while the remaining 71% expect values to remain stable. “With the USDA predicting net farm income to rise 14% from 2012 to $128.2 billion in 2013, there would seem to be at least another leg to be run,” said Oppedahl.

Credit conditions improved in the fourth quarter of 2012, although loan demand was lower than a year ago. Average interest rates reached new lows in the fourth quarter. As of Jan. 1, borrowing costs for farm operating loans were 5.03% and the rate for agricultural real-estate loans was 4.7%.

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Record Farm Income and Production Expected in 2013

Feb 12, 2013

U.S. net farm income is expected to set a new record high in 2013, driven by a record corn crop and high commodity prices, according to the USDA. Crop reserves are anticipated to rise in 2013 after supplies were depleted from the worst drought in over 55 years in 2012.

Farmers are expected to plant 254 million acres, the second highest acreage on record, of the eight major U.S. crops, wheat, rice, corn, sorghum, barley, oats, soybeans and upland cotton this year, forecasted the USDA.

Net farm income is expected to increase to $128.2 billion in 2013, from $112.8 billion last year and $117.9 billion in 2011. The 2013 income estimate would be an all-time nominal and inflation adjusted high.

Colvin Farmland Forecast Net Income 2013

Production expenses are also expected to rise in 2013 to $249.8 billion, up 5.7% from 2012. U.S. farm exports are also expected to reach a record $145 billion in 2013, up $10 billion from the previous year. The USDA said the record "largely reflects high commodity prices."

The USDA expects U.S. farmers to plant 96 million acres of corn in 2013, down 1% from 2012 and is below other analysts’ estimates of 97 to 99 million acres. Corn production for 2013 is expected to be a record 14.4 billion bushels of corn, a 34% increase from 2012, based on a trend line corn yield of 163.5 bushels per acre. Soybean production in 2013 is expected to be the second largest crop on record at 3.335 billion bushels.

The increase in production in 2013 will result in a drop in market prices this fall. The USDA projected corn would sell for an average of $5.40 a bushel and soybeans at $14.30 a bushel. "Nonetheless, U.S. prices for corn, wheat, and soybeans are projected to remain historically high, above pre-2007 levels," the USDA said.


Commodity prices will react negatively to the expected increase in production up to planting season in mid-April. Potential record crops in South American and the U.S. have the potential to loosen up supplies by the end of 2013.

Despite the USDA’s rosy outlook, we see their production estimates as very unlikely. We find it hard to believe the U.S. will produce the largest corn crop on record when 57% of the U.S. is in a moderate to worse drought. We recommend monitoring planting expectations closely, but watch the weather even closer.

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WASDE: Brazil to Produce Record Soybean Crop

Feb 08, 2013

The key player in today's WASDE report is South America, specifically Brazil. Domestic corn exports continue to decrease due to stiff competition from Brazil. As weather improves, Brazil is estimated to produce a record soybean crop of 83.5 million tons, surpassing the U.S. as the world's largest producer of soybeans.


U.S. corn ending stocks were increased by 30 million bushels to 632 million bushels due to decreases in exports, partially offset by a 20 million bushels increase in demand from industrial use. The USDA projected a 50 million bushel decrease in corn exports due to a slow pace of shipments and expected competition from Brazil. The season average price range was lowered 20 cents at the midpoint to $6.75 to $7.65 per bushel.
Global coarse grain supplies in 2012/13 were estimated to increase 2.1 million tons due to increases in production. Global corn production for 2012/13 was increased by 2.1 million tons with increases in Brazil, Mexico, India, and Ukraine.
U.S. 2012/13 ending stocks were decreased by 10 million bushels to 125 million bushels because of an increase in crush production. The 2012/13 average soybean price was increased five cents on both ends of the range to $13.55 to $15.05 per bushel.
Global soybean production was increased to 269.5 million tons as Brazil's production prospects more than offset Argentina's depleting weather and production conditions. Brazil's production estimate has been increased by 1.0 million tons to a record 83.5 million tons.
We will continue to follow South American weather and production estimates as we see these as key indicators of price movement.

2012/13 U.S. wheat ending stocks were decreased by 25 million bushels to 691 million. U.S. wheat feed and residual use for 2012/13 was increased by 25 million bushels due to the competitive price of wheat over corn. The season average wheat price for 2012/13 was narrowed five cents on both ends of the range to $7.70 to $8.10 per bushel.

The February WASDE report has historically had minimal impact on the markets and this report confirms it. The majority of this data was already taken into consideration and was in line with analysts' expectations.
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