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December 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.

Farmland Price Index Reaches Record High

Dec 19, 2011

The rural economy continued to move forward and has remained above growth neutral for nearly two years, reaching its highest level since June of 2007. The farmland price index reached a record high in the month of December and cash rents followed the rising trend.

The Rural Mainstreet Index (RMI) advanced to 59.7 from 58.4 to remain positive for the fourth straight month and well above the 55.4 it posted 12 months ago. This growth is largely due to the areas of the country tied to agriculture and alternative energy.

RMI December 2011

Creighton University economist Ernie Goss said, “Growth in the areas of the region and country tied to agriculture and energy are outpacing urban areas. Our survey is detecting a very healthy Rural Mainstreet economy with the gap between urban and rural widening. Bankers reported that approximately 60 percent of agricultural producers have contracted or sold their 2011 production. Global demand and alternative energy generation are driving the Rural Mainstreet economy higher.”

Agriculture
 
The farmland price index rose to a record high 84.1 in December. This marks the 23rd straight month the index has been above growth neutral. The farm equipment sales index increased to 73.8, its highest level since February of 2008, from November's 68.4.


Farmland Price Index December 2011

Bankers were asked to provide average cash rents per acre in their area. The average cash rent was $191 and 22% of bankers reported average per acre rents above $250.

Don Reynolds, president of Regional Missouri Bank, said, “Land prices appear to continue to rise. But, we noted that a few small tracts that were desired by multiple cash rich buyers appeared to distort people’s thinking.”

Banking
 
The loan volume index increased to 50.8 from 44.2 a month prior. The check deposit index decreased to 68.9 from 81.7 in November and the certificate of deposit and savings instruments decreased to a weak 37.0 from 41.7 last month.

“Tepid loan demand, and healthy checking deposits are consistent with a very strong farm economy across the region,” said Goss.
 
October's job index increased to 54.6 compared to 53.4 in November. “Year over year job growth for Rural Mainstreet communities is approximately 1.4 percent compared to 0.8 percent for urban areas of the region,” said Goss.
 
The economic confidence climbed to 61.8 from November's 57.5. “While the index stood at growth neutral 50.0, bankers remain less than optimistic about future economic conditions, compared to last year at this time,” explained Goss.
 
However, MF Global's bankruptcy and handling of clients capital might have affected the agricultural region. 23% of bankers said the firm's bankruptcy has had a negative impact on agricultural customers. The majority of bankers, 52%, indicated there was no impact to MF Global's bankruptcy.
 
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.

- Colvin

 

For Daily Updates Visit http://farmlandforecast.colvin-co.com 

WASDE Report: World Corn Production Increases, Prices Decrease

Dec 09, 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. No major changes in December’s report, but the USDA did lower expected prices for commodities, including a 30 cent reduction for corn prices in 2011/12.

Corn

Slightly bearish news from the USDA as world corn production increased to 867.5 million tons despite the U.S. production decline of 3.5 million tons year-to-year. The increase in world production was due to an increase in Chinese production by 7.3 million tons. The Chinese increased planted acres, yield estimates increased by 3%, and favorable weather conditions across China helped plant growth. This year's global crop is still on pace to be the third largest on record due to elevated planted acres.

Global corn supplies for 2011/12 are projected 7.4 million tons higher, primarily due to the increase in China’s corn production.

Estimated U.S. ending stocks for 2011/12 were increased by 5 million bushels to 848 million bushels due to a decrease in domestic corn use and an increase in imports of oats. U.S. feed and seed usage was decreased by the 5 million bushels. USDA decreased the forecasted season-average farm price by $0.30 to $5.90 to $6.90 per bushel.

China should continue to import corn as their increased production still will not meet their increasing demand. The Chinese will continue to set the hypothetical price floor for the global grains market.

Soybeans

Domestic soybean exports decreased by 25 million bushels to 1.3 billion bushels due to a slow pace of shipments, outstanding sales through November, and strong export competition from South America. The decrease in exports resulted in higher ending stocks of 230 million bushels, up 35 million bushels from last month. The U.S. season-average price range for 2011/12 was projected at $10.70 to $12.70 per bushel; a $0.90 decrease on both ends of the range.

Global soybean production for 2011/12 increased by 0.3 million tons to 259.2 million tons due to increased production in Canada and India.

Wheat

U.S. wheat ending stocks were projected 50 million bushels higher due to reduced prospects for exports of Hard Red Winter, Soft Red Winter, and White Wheat. The reduction in U.S. exports was due to large supplies in major exporting countries and strong domestic prices. The season-average price is projected at $7.05 to $7.55 per bushel compared with $7.10 to $7.75 last month.

Global wheat supplies for 2011/12 are projected 9.3 million tons higher with larger beginning stocks in Australia and Argentina, and a 5.7 million ton increase in global production.

Overview

The grain markets will be closely watching Chinese imports over the next few months and we believe China will provide a price floor for the global grain markets through strategic purchases. We expect China may also increase 2011/12 imports to above 5 million metric tons.

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

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