Jul 31, 2014
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July 2013 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.

Understanding CSR2

Jul 31, 2013

The Iowa Corn Suitability Rating (CSR) system was developed by Iowa State University in the early 1970's as a way to measure potential soil productivity based on soil profile, slope characteristics and weather conditions. CSR is an index ranging from 0 to 100 with values of 100 being the most productive. County assessors use the CSR to determine land values for property taxation. Appraisers, real estate agents and farmland investors use CSR to evaluate land values and analyze comparable sales.

Additionally, farmers use CSR for crop production, lease values, and conservation planning. One issue with this system is that it assumes that soils are 90% to 100% the same throughout a given soil series and researchers have since found this to be an error. Transparency was also an issue for CSR, because users could not tell how the numbers were being calculated. To combat these issues, Iowa State University has developed a new system called CSR2.

CSR2 is an index similar to CSR, but uses a clearly defined and easily calculable formula to determine a soil's productivity. By 2015, CSR2 will completely replace CSR. However for the coming years, CSR2 and CSR will both be listed, so as to ease people into the transition. Because of the ease in which CSR2 is calculated, the goal is to extend CSR2 ratings into different areas of the country, aside from just Iowa.

CSR2 is more consistent with the newer, more data-driven methods the Natural Resources Conservation Service uses compared to the original CSR, which was more experience and judgment based. The new system is more suitable to site-specific soil measurement and precision because instead of assuming that the soil is similar throughout, CSR2 uses all inclusions in the soil series and uses weighted averages of the inclusions to describe the series. Therefore, CSR2 values replace CSR, and are not comparable values.

The new CSR2 formula is: CSR2 = S - M - F - W - D +/- EJ

S - Taxonomic subgroup class of soil series. This is collected online at http://soils.usda.gov/technical/classification/osd/index.html. The USDA gathered data from thousands of different soil series and used statistical analysis to assign values to the soils. The best soil would begin with a 100, and less fertile soil, like extremely sandy soils, would start around 30 or so.

M - Family particle size can be found from the taxonomic group. It gives an explanation of how fine the soil particles are. The finest, silty particles would be 0, and the densest, loamy, particles would be a 12. Very sandy soil can be discounted up to 35 points. This number is then subtracted from the initial equation.

F - Field conditions for a particular soil map unit (SMU), which can be found under the soil map unit. A number such as "9B" may be listed, in which case that soil has a "B" rating. Soils with A ratings are given a 0, B ratings are 5, C ratings 10 and D ratings are 15. This number is then subtracted from the initial equation.

W - Water holding capacity of a particular soil. Field capacity is the amount of water a soil can hold against the force of gravity. This would be the maximum amount of water that a soil can hold before standing water appears on the surface. The wilting point is the point where there is no longer enough water for the plant to remain alive. This happens during droughts when the plants have absorbed all the water from the soil and can no longer survive. Available water hold capacity is the difference between field capacity and wilting point, it is the savings account of water for the soil.

Water holding capacity is measured by observing how many cubic inches of water can be retained in 60 in3 of soil. The more water a soil can retain, the better, with the highest ranking soils holding up to 24 inches of water. Any soil that can retain more than 9 in3 of water is given a 0. Soils that retain between 6 in3and 9 in3are given an 8, between 3 in3and 6 in3is given a 12, and under 3 in3is given 24. These scores are then subtracted from the equation.

D - Soil depth and tolerable rate of erosion. This shows how resilient the soil is to erosion. The unit for measuring this is the called the Tolerable Rate of Erosion which calculates how many tons of soil can be eroded per acre without the crop yield being affected. For example, a soil with a rating of 5T can withstand 5 tons of erosion per acre without losing productivity. 5T soil is the most resilient soil, and 1T would be the least. A 5T soil would equate to 0 in the CSR2 equation, 4T would be 10, 3T would be 20, 2T would be 30, and 1T would be 40. These scores are also subtracted from the equation.

EJ - Expert judgment. If the experts that created this system discover a trait about the soil that may affect the soil's production capacity, they may alter the CSR2 rating. For example, a soil may have a trait that is not listed in the CSR2 formula that still may alter the soil's ability to grow corn, such as contrasting textures in the soil. This is the "other" category that soil scientists use so that the formula does not get too complex.

One main difference between CSR and CSR2 is that the climate factor was removed from the formula. Over the past 3 decades, the climate in Iowa has changed in concerns to rainfall and temperatures. Because of these changes, there is no need to include climate in the CSR2 calculation, as it has not had any changes on the soil's productivity. Iowa State University professor Bob Wells believes that the need to change from CSR to CSR2 is long overdue. He sees the long-term benefits of having a transparent rating system because of the ease in which people from other states can calculate soil productivity.

Another difference is the expert judgment component. In the original CSR, most of the calculations were based on EJ, with little transparency into the calculations actually being used. In CSR2, EJ is considered the "other" category. A common criticism of CSR2 is in the EJ factor because some believe that it is too opaque and experts can choose to change the ratings without sound reasons. Dr. Lee Burras at Iowa State University, creator of CSR2, says that this is not the case. The reason the EJ factor was put into the equation was to keep the equation short and concise, instead of listing each possible soil trait into the formula.

There is an overall favorable response to CSR2 within the agriculture community. Just like any new system, people are still waiting to figure out how it works and what its benefits and disadvantages are. There are concerns on how this will affect individual property values, but in general, people are pleased with the transparency of the system. CSR2 can be used in any state to calculate soil values, and is already adopted in the southernmost 100 miles of Minnesota. Although, it is unlikely that other states will officially adopt CSR2 due to differing tax laws around the country, most will probably use it unofficially.

The need for CSR2 was evident, as most of the calculation in CSR were based on expert judgments, and most of the experts are no longer around. With the new transparency of CSR2, people can easily calculate their soil's value and use the number to universally compare it to other soils. The transition to CSR2 will be a gradual learning process, just like getting used to a new phone, and will offer a more accurate, clear, and simple reading of the land.

For daily articles on farmland and agriculture, visit www.farmlandforecaast.com.

Crop Progress: Favorable Weather Supporting Corn Growth

Jul 29, 2013

Corn conditions were unchanged from last week as favorable weather stabilized the crop through the critical growth stages. Crop conditions should improve as the six to ten day forecast calls for cooler temps and increased moisture.

As of July 28, 2013, 11% of the corn crop was in poor or very poor condition, compared to 48% last year. Corn in good or excellent condition was 63%, the same as last week. Corn at the silking growth stage was at 71%, 4% behind the five year average. Corn in the dough stage was 8%, compared to the five year average of 17%.

Soybean condition was 9% of the crop in poor or very poor condition, compared to 37% last year. Soybeans in good or excellent condition were 63%, compared to 29% last year. 65% of the soybean crop was in the blooming growth stage thus far, 22% behind last year at this time. Soybeans setting pods are at 20%, compared to 52% last year at this time. 

Winter wheat was 81% harvested, compared to 86% last year at this time. 6% of the spring wheat crop was in poor or very poor condition, compared to 11% last year. Spring wheat in good or excellent condition was 68%, unchanged from last year at this time. Of the entire spring wheat crop, 94% was headed, compared to the five-year average of 95%.

Corn prices decreased 9.4% over the past week ending at $4.89 per bushel, soybean prices decreased by 10.1% over the past week ending at $13.67 per bushel, and wheat prices ended the week at $6.51 per bushel, a 1.2% decrease from last week. Year to year corn prices are down 40.4%, soybeans are down 20.8% and wheat is down 28.8%.

For daily articles on famrland and agriculture, visit www.farmlandforecast.com.

USDA Weekly Exports: Corn Sales Fall 118%

Jul 25, 2013

Weekly U.S. net corn sales were the lowest in 12 weeks, being reduced by 27,900 MT for the week ending July 18th in the 2012/2013 marketing year. Exports were reported at 239,900 MT, up 41% from last week, going primarily to Japan, Mexico, Venezuela, and Columbia. For the 2013/2014 marketing year, for the week ending July 18th, net corn sales were 515,900 MT, going primarily to unknown destinations, Mexico, and Guatemala. 

Weekly net soybean sales were increased 16% from last week to 128,300 MT for the 2012/2013 marketing year, mainly due to increases from unknown destinations, Indonesia, Japan, Taiwan, and Vietnam. Exports were down 39% from the previous 4 week average at 82,200 MT. The primary destination of these exports were Mexico, Indonesia, Japan, Vietnam, and Canada. In the 2013/2014 marketing year ending July 18th, weekly net sales were reported at 665,200 MT, primarily from China and unknown destinations. 

Weekly net sales of wheat were at 661,400 MT for delivery in the 2013/2014 marketing year ending July 18th, mainly due to sales in China, Nigeria, the Philippines, Mexico, and Jamaica.   Exports of 567,900 MT went primarily to Nigeria, China, South Korea, the Philippines, Japan, Mexico, and Chile.

Export GRAPH 7 25

For daily articles on farmland and argiculture, visit www.farmlandforecast.com.

Crop Progress: Corn Condition Continues to Deteriorate

Jul 22, 2013

Corn condition inched lower for the second consecutive week. Favorable weather is expected for the Corn Belt in the next 10 days which will be critical for corns pollination stage. 

As of July 21, 2013, 11% of the corn crop was in poor or very poor condition, compared to 9% last week. Corn in good or excellent condition was 63%, a 3% decline from last week. Corn at the silking growth stage was only at 43%, compared to 84% from a year ago. 
 
Soybean condition was 8% of the crop in poor or very poor condition, compared to 35% last year. Soybeans in good or excellent condition were 64%, compared to 31% last year. Only 46% of the soybean crop was in the blooming growth stage thus far, 32% behind last year at this time. 
 
As of July 21, 2013, winter wheat was 75% harvested, compared to 84% last year at this time. 5% of the spring wheat crop was in poor or very poor condition, compared to 11% last year. Spring wheat in good or excellent condition was 68%, compared to 70% last week. Of the entire spring wheat crop, 85% was headed, compared to the five-year average of 88%.
 
Corn prices increased 0.7% over the past week ending at $5.40 per bushel, soybean prices increased by 4.6% over the past week ending at $15.20 per bushel, and wheat prices ended the week at $6.59 per bushel, a 1.5% decrease from last week. Year to year corn prices are down 30.4%, soybeans are down 6.9% and wheat is down 25.5%.
 
For daily articles on farmland and agriculture, visit www.farmlandforecast.com 
 

Rural Economy Growing at Healthy Pace

Jul 22, 2013

The rural economy continued to grow at a healthy pace in July, although expectations for lower grain prices and farm income slowed the rate of expansion. Rural bankers now expect farm income in 2013 to be 3% below last year’s level. 

Dual Farmland Price and Rural Mainstreet Index July 2013

The Rural Mainstreet Index (RMI) decreased to 57.3 in July, from 60.5 in last month’s survey. Ernie Goss, economist at Creighton University, commented, "Last year at this time, the drought was having a significant negative impact on the Rural Mainstreet economy. This year, ample moisture has boosted the rural economy and the banker’s economic outlook."
 
The farmland price index decreased in July for the seventh time in the last eight months, but remains above growth neutral at 58.2. Goss noted, "Our farmland-price index has been above growth neutral since February 2010. However, lower farm commodity prices and expected declines in farm income are slowing growth in farmland prices."
 
Bankers who were surveyed were asked to project farm income for 2013. The majority, 59.6%, estimated that farm income will decrease compared to 2012. On average, bankers believe income will fall by 3%. Only 19.5% estimated increases and 20.9% expect no change.
 
The loan-volume index drastically increased to 75.7 from 66.7 last month. The checking-deposit index advanced to above growth neutral, 53.7, from June's 48.5.
 
The hiring index declined to 60.7 in July from 61.4 in June. "Readings over the past several months are consistent with an annualized growth rate in jobs of 1%. Businesses linked to agriculture and energy continue to add jobs at this slow, but positive pace," said Goss. 
 
Chart of RMI July 2013
 
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. 
 
For daily articles on farmland and agriculture, visit www.farmlandforecast.com 
 

Crop Progress: Corn Condition Diminished

Jul 15, 2013

Corn conditions declined slightly over the past week but the 10 day weather forecast looks favorable for the top 18 corn producing states. 

As of July 14, 2013, 9% of the corn crop was in poor or very poor condition, compared to 8% last week. Corn in good or excellent condition was 66%, a 2% decline from last week. Corn at the silking growth stage was only at 16%, compared to 67% from a year ago.

Soybean condition was 8% of the crop in poor or very poor condition, compared to 30% last year. Soybeans in good or excellent condition were 65%, compared to 34% last year. Only 26% of the soybean crop was in the blooming growth stage thus far, 37% behind last year at this time. 

As of July 14, 2013, winter wheat was 67% harvested, compared to 81% last year at this time. 5% of the spring wheat crop was in poor or very poor condition, compared to 8% last year. Spring wheat in good or excellent condition was 70%, compared to 72% last week. Of the entire spring wheat crop, 71% was headed this week, compared to the five-year average of 73%.

Year to year corn prices are down 30.9%, soybeans are down 11.0% and wheat is down 24.3%.

For daily articles on farmland and agriculture, visit
www.farmlandforecast.com.

WASDE: Corn and Soybeans Stocks Raised as Use Drops

Jul 11, 2013

The USDA estimates higher corn stocks for 2013/14 season due to lower feed use and exports, partially offset by a reduction in harvested acres due to the wet planting season. Analysts were expecting a reduction of 50 million bushels in ending corn stocks, but the USDA in typical fashion went against the trend.

Corn

U.S. corn production for 2013/14 was estimated 55 million bushels lower to 13.95 billion bushels, due to lower harvested area of 89.1 million acres. 2013/14 corn yields remain unchanged at 156.5 bushels per acre. Although corn production estimate was lowered, 2013/14 production is still 858 million bushels ahead of the record from 2009/10. 

WASDE Ending Stocks July 2013

Corn use for 2013/14 was lowered 100 million bushels, due to a reduction in feed use and exports. Ending stocks for 2013/14 were increased by 10 million bushels to 1.959 billion, reflecting the expected drop in domestic use. The season average corn price for 2013/14 is unchanged at $4.40 to $5.20.

Global course grain supplies for 2013/14 were estimated to decrease by 3.6 million tons, due to a 2.9 million ton decline in U.S. supplies of corn and sorghum. Chinese corn production for 2013/14 is lowered by 1.0 million tons due to lower planted acreage.

Soybeans 

U.S. soybean yields in 2013/14 were unchanged from last month at 44.5 bushels per acre. Harvested acreage was increased 0.7 million acres reflecting the June 28th Acreage Report, resulting in a 30 million bushel increase in production.

Ending stocks for soybeans in the 2013/14 marketing year were raised by 30 million bushels, due to increased production. U.S. supply and use projections for 2012/13 also remain unchanged. The projected season average price range for 2013/14 was $9.75 to $11.75 per bushel, unchanged from last month.

Wheat 

U.S. wheat yields for 2013/14 were raised this month to 46.2 bushels per acre, a 1.6 bushel increase from the June report. Domestic wheat production increased 34.0 million bushels due to the increase in expected yield .

Ending stocks for 2013/14 was lowered from 659 million bushels to 576 million. The season average wheat price for 2013/14 was estimated at $6.45 to $7.75 per bushel, raised 20 cents on both ends.

Outlook

The planting season of the 2013 crop will be remembered as one of the worst seasons on record, yet the USDA estimates we will produce a record corn crop. With a historically late planting season, we will be closely monitoring the crucial pollination season over the next few weeks, which will set the tone for 2013 corn yields.

For daily articles on farmland and agriculture, visit
www.farmlandforecast.com.


Crop Progress: Maturity Severely Behind

Jul 08, 2013

Unpredictable weather throughout the Corn Belt will continue to cause crop price volatility throughout the rest of the growing season.

As of July 7, 2013, 8% of the corn crop was in poor or very poor condition, compared to 30% last year. Corn in good or excellent condition was 68%, compared to 40% last year. Corn at the silking growth stage was only at 6% as of July 7, 2013, compared to 46% from a year ago.

95% of the U.S. soybean crop has emerged, compared to the five-year average of 97%. 7% of the soybean crop was in poor or very poor condition, compared to 27% last year. Soybeans in good or excellent condition were 67%, compared to 40% last year. Only 10% of the soybean crop was in the blooming growth stage thus far, 32% behind last year at this time. 

Winter wheat conditions remained unchanged from last week with 42% of the crop in poor or very poor condition and 34% in good or excellent condition. As of July 7, 2013, winter wheat was 57% harvested, compared to the 78% last year at this time.

5% of the spring wheat crop was in poor or very poor condition, compared to 7% last year. Spring wheat in good or excellent condition was 72%, compared to 66% last year. Of the entire spring wheat crop, 45% was headed this week, compared to the five-year average of 53%.

The July corn contract increased 5.5% over the past week ending at $6.91 per bushel, soybean prices increased by 2.5% over the past week ending at $16.09 per bushel, and wheat prices ended the week at $6.60 per bushel, a 2.3% increase from last week. Year to year corn prices are down 5.6%, soybeans are down 3.4% and wheat is down 20.3%.

For daily articles on farmland and agriculture, visit www.farmlandforecast.com.
 

Crop Progress: Conditions Improve Despite Wetness

Jul 01, 2013

Most farmers have finished planting the 2013 crop and are turning their attention to weed and pest control. Although crop conditions are better than last year at this time, historically late planting may have an adverse affect on crop yields. 

 

Corn conditions were 8% of the crop in poor or very poor condition, compared to 22% last year. Corn in good or excellent condition was 67%, compared to 48% last year. Corn silking was at 3% as of June 30, 2013, compared to 22% from last year.

Soybeans planted were at 96%, slightly behind the five year average of 98%. Last year at this time, 99% of soybeans had emerged, but only 91% have emerged as of June 30, 2013. Soybean conditions were 7% of the crop in poor or very poor condition, compared to 22% last year. Soybeans in good excellent condition was 67%, compared to 45% last year.

Winter wheat conditions were 42% of the crop in poor or very poor condition. Winter wheat in good or excellent condition was 32%, the same as last week. Harvesting began last week and 43% of the winter wheat has been harvested, compared to 73% last year at the same time.

Spring wheat has all been planted and 93% has emerged, compared to the five year average of 99%. Spring wheat conditions were 5% of the crop in poor or very poor condition, the same as last year at this time. Spring wheat in good or excellent condition was 68%, compared to 71% last year.

 

The July corn contract increased 0.3% over the past week ending at $6.55 per bushel, soybean prices increased by 3.8% over the past week ending at $15.70 per bushel, and wheat prices ended the week at $6.45 per bushel, a 5.0% decrease from last week. Year to year corn prices are down 5.4%, soybeans are up 2.5% and wheat is down 14.5%.

 

For daily articles on farmland and agriculture, visit www.farmlandforecast.com.

 

 

Grain Price Volatility In Soggy June

Jul 01, 2013

The Corn Belt continued to experience record setting rainfall totals throughout June, resulting in the worst planting season in over 20 years. Areas of southern Minnesota, Iowa, Wisconsin, and Illinois have monthly rainfall totals in excess of double the respective averages, with single day rainfall totals over seven inches. The U.S. corn crop was officially fully planted as of the fourth week of the month and the U.S. soybean crop was nearly finished as of the end of the month, according to the USDA.

On June 28th, the USDA surprised analysts with an increase in corn acreage in their annual acreage report. Corn planted acres for 2013 were estimated at 97.4 million acres, more than 2.0 million acres higher than analyst expectations. We have seen many farmers who were unable to plant corn due to the very wet weather and in turn, elected to plant soybeans or filed a prevent plant insurance claim. Soybean planted acres were estimated at 77.7 million acres, the highest planted acreage on record and an increase of 1% from last year.


Grain Prices


Front month corn prices increased by 2.6% this month, closing at $6.79 per bushel on the July contract. The new crop December corn contract decreased this month to $5.11 per bushel due to the bearish USDA acreage report. Throughout June, corn prices were volatile and paralleled weather patterns across the Corn Belt during planting. In the June WASDE Report, the USDA estimated U.S. corn production 135.0 million bushels less than the previous month at 14.0 billion bushels, due to delayed planting. Increased world corn production will help offset the decreased U.S. production, with the primary increase coming from Brazil.

Soybean prices increased by 3.6% this month to close at $15.64 per bushel. New crop soybeans are currently at $13.03 per bushel due to the record amount of acres planted in the U.S. this year. In early June, soybean prices increased due to the severely delayed pace of planting. USDA held U.S. ending soybean stocks constant from last month at 265 million bushels in the June WASDE Report. As with corn, soybean prices were volatile throughout June, trending with moisture patterns in the Corn Belt.

Wheat prices decreased by 8.1% this month, closing at $6.48 per bushel. Winter wheat production was estimated slightly higher in this month's WASDE at 1.486 billion bushels, although total U.S. wheat production was estimated 8.3% lower than last year at 2.08 billion bushels, due to a decrease of 1.7 bushels per acre on average yield. Additionally, the U.S. Dollar strengthened in June, hurting the competitiveness of U.S. wheat versus other production areas in the world.


Farmland Values


The Creighton University farmland price index decreased in June for the sixth time in the last seven months, but remains above growth neutral at 58.4. There are concerns from bankers that farmland prices could be tapering. Ernie Goss, Chair in Regional Economics at Creighton University, commented, "Our farmland price index has been above growth neutral since February 2010. However, we are tracking a clear downward trend in farmland price growth."


The summer months are the typical lull in the farmland buying season and thus comparable sales greatly diminish. We have still seen a fair amount of farmland sales throughout June and feel that the farmland market is still in an upward trend. Additionally, the amount of outlier sales on the high end have been slowing.


Planting Progress


As of June 23, 2013 corn that has emerged was at 96%, down 3% from the five year average and down 4% from the previous year, according to the USDA, with 65% of the corn crop being classified as in good or excellent condition compared to only 56% at this point in 2012. Soybeans planted were at 92%, behind the five year average of 95%. Last year at this time, 98% of soybeans had emerged, but only 81% have emerged as of the fourth week in June.

Having traveled in the Dakotas, Minnesota, Iowa, Wisconsin, Illinois, and Indiana throughout June, we do not understand how the USDA is classifying 65% of the current corn crop in good or excellent condition. Many corn fields show severe flood damage of the corn that has survived the enormous amount of rainfall thus far this spring. The maturity of the U.S. corn crop is at least two to three weeks behind on average, according to our first hand experience.


Outlook 

Old crop corn prices increased by 12 cents on June 28th, due to the USDA acreage and stocks reports, which will continue to support farmers who have been patient enough to hold 2012 corn this long. Many local elevators have been paying well over $1.00 for old crop corn due to the severely low supply. Although 2013 is the opposite weather phenomena compared to the drought of 2012, corn supplies may become dangerously low again. The U.S. corn crop is in below average condition, according to the farmers we work with on a daily basis. We will continue to monitor the weather and amount of heat units the current corn crop is now finally absorbing. Our key concern of the late maturing corn crop is a late pollination period. Hot and stressful weather can cause major yield damage if present during pollination.

 

For daily articles on farmland and agriculture, visit www.farmlandforecast.com.

 

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