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November 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.

Crop Progess: 2013 Harvest Nearly Complete

Nov 18, 2013

The 2013 harvest is coming to an end across the Corn Belt and as of November 17, 2013, 91% of corn has been harvested in the top 18 corn producing states, ahead of the five year average of 86%. A total of 95% of the soybean crop has been harvested, a percentage point behind the five year average.

Winter wheat emerged was 89%, 4% above the five year average. Winter wheat in poor or very poor condition was 7%, a 2% increase from last week. Winter wheat in good or excellent condition decreased by 2% to 63%. Last year at this time, 24% of winter wheat was in poor or very poor condition and only 34% was in good or excellent condition.

December futures for corn ended the week at $4.12 per bushel, a 5.1% decrease from last week. December wheat ended the week at $6.42, a 0.6% decrease from last week. January soybeans closed the week at $12.87, down 1.1% for the week. Year to year corn prices are down 44.2%, soybeans are down 8.3%, and wheat is down 23.7%.

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

Farmland Values Increase 14% Year Over Year

Nov 18, 2013

Crop prices are down double digits from last year's highs, but year over year "good" farmland values increased 14% across the Seventh Federal Reserve District. Indiana led the way with an 18% increase in farmland values over the past year. Third quarter values increased 1%, even though bankers predicted a drop in value. Four out of five states increased in value in the third quarter, Iowa was the only state to post a decrease.

Third Quarter Chicago Fed 2013 Greyson Colvin Marc Schober Patrick Cheney

The increase in farmland values is not expected to continue; 75% of bankers believe prices will stabilize in the fourth quarter. Although farmer income will not be as plentiful due to double digit decreases in year over year crop prices, bankers predict farmer demand for acquiring farmland will increase in the fourth quarter compared to last year. Subsequently, bankers expect nonfarm investor demand to decrease in the coming months. 

Earnings 

Despite an increase in farmland values, crop prices decreased throughout the third quarter. The average corn price was $6.13 per bushel for the quarter, down 12.0% from the second quarter and 15.0% from 2012. Soybean prices averaged $14.23 per bushel in this year's third quarter, down 3.8% on the third quarter and down 7.0% compared to one year prior.

Credit 

Overall, the majority of bankers agreed that agriculture credit conditions in the Seventh District  improved from the last quarter and year over year. 

The average loan-to-deposit ratio was 66.9, slightly lower than last year and 11.0% below the desired level of the surveyed bankers. Year over year demand for non real estate loans decreased but the index of loan demand was 91, a four point increase from last quarter.

Interest rates for operating loans and agriculture real estate loans were, 4.94%, unchanged, and 4.68%, a slight increase. 

Outlook 

Although bankers believe farmer demand for acquiring farmland will increase year over year in the fourth quarter, it is difficult to justify that claim due to the expected decrease in farmer income. Analysts estimate farmer demand for land and equipment will deteriorate throughout the winter months. What does this mean for investors? Time to buy farmland. Land prices are slowly stabilizing, in the near term, and the largest buyers of farmland, farmers, could be sitting on the sideline. Primarily, farmland is typically bought and sold throughout the winter months, when the crops are out of the ground. We are starting to source more fairly priced farmland for sale and investors should prepare for a potentially opportune time to buy farmland this winter.
 
The Federal Reserve Bank of Chicago’s second quarter survey of Farmland Values and Agricultural Credit Conditions Report is a summary of the Seventh District’s value of farmland, farm loan portfolio performance, and on-farm income. The Seventh District consists of the entire state of Iowa, and portions of Illinois, Indiana, Wisconsin, and Michigan. 

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

Crop Progress: Corn Harvest Ahead of Five Year Average

Nov 12, 2013

Favorable weather over the weekend helped push corn harvest to 84% complete, 5% above the five year average. A total of 91% of the soybean crop has been harvested, 4% behind last year at this time.

Winter wheat planted as of November 10, 2013 was 95%, 2% above the five year average. A total of 84% of the winter wheat crop has emerged, a 6% increase from a year ago. Winter wheat in poor or very poor condition was 5%, a 1% decline from last week. Winter wheat in good or excellent condition increased by 2% to 65%.

December futures for corn ended the week at $4.32 per bushel, a 1.6% increase from last week. November soybeans ended the week at $13.19, a 4.8% increase from last week. December wheat ended the week at $6.45, a 1.7% decrease from last week. Year to year corn prices are down 41.2%, soybeans are down 12.3%, and wheat is down 25.5%.

-Colvin

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

WASDE: Yields Increase Due to Favorable Weather

Nov 08, 2013

Average U.S. corn yields increased over five bushels per acre in the November WASDE report from the September WASDE. The average U.S. corn yield is only 4.3 bushels behind the 2009/10 record of 164.7 bushels per acre. Despite a wet spring, late planting, and drought like weather during key growing months, an extended growing season revived the corn crop. The increase in exports for corn and soybeans was not enough for the increased production.

Corn

The USDA forecasted 2013/14 U.S. corn production 146 million bushels higher than the September report to a record 13.989 billion bushels. The corn yield forecast for this year was increased by 5.1 bushels per acre to 160.4 bushels per acre; this more than offset the 1.9 million acre reduction in harvested acres.

Corn supplies for the 2013/14 marketing year are projected at a record 14.837 billion bushels, an increase of 307 million bushels, due to the increase in production. Corn use increased 275 million bushels to fight off some of the supply increase. U.S. corn exports increased 175 million bushels due to a supply glut and low prices.

U.S. ending corn stocks for 2013/14 were increased by 32 million bushels, to 1.887 billion. The season average corn price for 2013/14 was decreased 30 cents at both ends of the range to $4.10 to $4.90. Global course grain supplies for 2013/14 was increased by 20.6 million tons due to higher production and a decrease in consumption.

WASDE Crop Production November 2013

Soybeans 

U.S. average soybean yields in 2013/14 were increased by 1.8 bushels per acre from September's report, to 43.0 bushels. Production for the 2013/14 year was increased by 109 million bushels to 3.258 billion bushels, more than offsetting the reduction in harvested acres of 0.7 million.

Soybean ending stocks for the 2013/14 marketing year were projected up 20 million bushels, to 170 million on increased production. Exports were increased by 80 million bushels to 1.45 billion due to the record pace of sales in October. The projected season average price range for 2013/14 was $11.15 to $13.15 per bushel, a decrease of 30 cents on both ends of the range.

Wheat 

U.S. wheat supplies for 2013/14 were increased by 26 million bushels due to higher than expected production and increased imports. U.S. wheat production was increased 14 million bushels in the September 30th Small Grains report. Imports were estimated 10 million bushels higher due to increased supplies in Canada.

Feed and residual use was increased 30 million bushels from the September 1 stocks report. The season average wheat price for 2013/14 was estimated at $6.70 to $7.30 per bushel, narrowed by 20 cents on each end of the range.

Global wheat supplies for 2013/14 were decreased by 0.8 million tons due to a reduction in global output.

Outlook

Analysts, farmers, investors, and agriculture gurus alike were excited for their beloved WASDE as it came off its one month hiatus due to the government shutdown. This report showcased production vs. exports, and production won this round, but exports are heating up. We will keep a keen eye on exports and the end of harvest in the coming month.

- Colvin 

 

 

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

Excess Moisture Delaying Harvest

Nov 04, 2013

The 2013 corn and soybean harvest is behind historical pace due to the late planting across the Corn Belt this spring, but also in part by the wet and abnormally cool temperatures. Cool temperatures are little help in naturally drying down both corn and soybeans in farm fields. Throughout late October, many areas of the Corn Belt accumulated large amounts of rainfall in excess of two inches and even multiple inches of snowfall in the Dakotas and western Minnesota. The precipitation has greatly delayed the second half of many farmer's harvest, although farmers have been reporting higher than anticipated crop yields. Local grain storage facilities and offtakes increased price basis due to the amount of the record corn crop making its way into the supply chain.

A South Minneapolis gas station became the first gas station in Minnesota to start carrying the EPA approved E15 gasoline. E15 is priced 15 cents cheaper than standard E10 gasoline. Besides being cheaper per gallon, E15 is higher in engine thriving octane. The Minnesota Corn Growers Association is helping gas stations make the switch to E15 by providing additional funding for the necessary infrastructural upgrades at the pump.

Grain Prices

December corn prices decreased slightly by 3% throughout the month to close at $4.28 per bushel. Due to the U.S. Government shutdown, USDA reports and historical research were unavailable. The monthly World Agricultural Supply and Demand Estimates Report (WASDE) was also cancelled. Farmers reported higher than anticipated corn yields throughout the Corn Belt which combated any price rally in October. Local elevators have been slowly nearing capacity as well. The Chinese were active buyers of U.S. corn in October with one purchase of over 400,000 mmt for 2014 delivery due to attractive U.S. prices comparative to Chinese prices. Conab also estimated Brazil's upcoming corn crop between 78.4 mmt and 79.6 mmt, well below last year's 81.3 mmt.

December soybean prices were nearly unchanged this month, closing at $12.80 per bushel. Delayed maturity risk in early October led to higher prices, but the weather outlook improved mid month and the U.S. Dollar strengthened. Domestic demand remains very strong and tight short-term supplies are still a major concern in the marketplace.

The December wheat declined by 2% in October, closing at $6.67 per bushel. Globally, wheat prices have upside support as Russian farmers have continued to be reluctant to sell at current prices which has created supply woes throughout the world market. Argentina's wheat crop was in serious risk of multiple frost warnings, but no severe damage was reported yet. U.S. winter wheat was 70% emerged as of October 27, 2013 compared to the historical average of 79%.

Harvest Update

As of October 27, 2013, 59% of the U.S. corn crop had been harvested, although the five-year historical average is 62%. During the fourth week in October, farmers capitalized on favorable weather harvesting 20% of the entire corn crop. Soybean harvest had been trailing the historical average, but is now caught up at 77% harvested.

Despite the rapid advancement of the harvest in October, farmers have been dealing with very wet grain. Ideally, corn should be stored at near 15% moisture content. Throughout the Corn Belt, farmers have been reporting moisture as high as 20% to 25% which calls for LP gas drying. Typically, drying requires 0.02 gallons of LP to dry corn 1%, according to South Dakota State research. If LP costs $1.50 per gallon, drying corn down 5% would cost $0.15 per bushel in a typical year. LP costs have been reported nearing $4.00 per gallon in supply stricken areas of the Corn Belt resulting in very high drying costs.

Farmland Values

The Creighton University farmland price index decreased for the 10th time in the last 11 months, but remains above growth neutral at 50.9. Professor Ernie Goss said, "Weaker agriculture commodity prices and poor weather conditions in some parts of the region lowered the farmland price index. Clearly, farmland price growth and cash rent expansions in the months ahead will not be as healthy as has been experienced in the past couple of years."

Bankers were asked this month by Creighton University how much they expect cash rents to increase over the next year. On average, bankers believe rents will increase 2.5%, far from six months ago when bankers estimated rents would increase 9.3%.

The typical farmland buying season commences once crops have been harvested. Although commodity prices have declined throughout the summer months, the limited amount of farmland sales have still been at strong prices. We expect the upcoming few months to offer many attractively priced properties with continued high demand. Farmland buyers monitor future corn and soybean prices, not simply the upcoming December contract, because farmland values are a function of future cash flows.

Outlook

Once harvest is complete, we expect a high amount of farmland sales that will provide an accurate interpretation of farmland values. If harvest further delays, farmland sales may not occur in high numbers for a few more weeks or months.

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

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