Ideal crop weather continued in the month of August, supporting expectations for a record corn crop on weighing on commodity prices. July ended dry for some farmers across the Corn Belt, but August rainfall was at or above average for many regions, helping progress the corn and soybean crops. Outside of localized pest or disease issues, the last major risk appears to be an early frost. The 2014 corn crop in particular is behind schedule maturing, which positions the risk of frost higher than normal. On average, the first major frost occurs in early October across much of the Corn Belt.
Farmer income is expected to decrease by 13.8% in 2014, the lowest since 2010 due to the second straight bumper corn crop, according to the USDA. The August estimate is less harsh than the 27% decrease the USDA expected back in February, 2014. Livestock producers have been the primary beneficiary of low commodity prices and are expected to see increased 2014 revenues.
The December corn contract increased by 1.6% in August and closed the month at $3.72 per bushel. Corn exports increased towards the end of the month and finished 6% ahead of the 4-week average. While China is slowing their imports of U.S. corn, other countries including Colombia are increasing. It is estimated that the U.S. is on track to capture 95% of Colombia's 141 million bushel corn market; an increase of 82% from 2013.
Ending stocks of corn in 2013/14 were estimated at 1.181 billion bushels, down 65 million bushels from July, due to increased ethanol production and exports, according to the August WASDE Report. The 2014/15 ending stocks were increased to 1.808 billion bushels, up 7 million bushels from July, though well below analyst expectations of 2.000 billion bushels.
November soybeans closed at $10.24 per bushel, down 4.9% for the month, primarily due to higher expected supplies in 2014/15. The August WASDE reported 2014/15 production up 16 million bushels to a record 3.816 billion bushels due to a slight increase in the average yield now at 45.4 bushels per acre. The old crop soybean stocks to use ratio is at an alarmingly tight 4.2%, but the 2014/15 stocks to use ratio is at 12.1%. The favorable weather conditions continued to weigh on soybean prices throughout the month as well.
December wheat prices increased by 6.2% this month and closed at $5.63 per bushel. World demand is growing for U.S. wheat as deteriorating wheat conditions worsened in the EU's two largest wheat producing countries, France and Germany, due to high moisture. The growing conflict between Russia and Ukraine also led to higher wheat prices as analysts are concerned the fighting will not allow for a normal harvest.
U.S. wheat exports for 2013/14 were raised 164 million bushels from July's estimate, according to the August WASDE Report. Although drought ravaged the wheat crop in the southern and central U.S. plains, favorable weather in the northern Wheat Belt helped increase projected average yield from 43.1 bushels per acre in July to 43.9 bushels per acre in August. Total U.S. production for 2014/15 was increased from 1.992 billion bushels to 2.030 billion bushels.
As of the last week in August, the U.S. corn crop continues to hold well above average historical condition, but is maturing slower than normal. The USDA estimated corn conditions at 73% in "Good" or "Excellent," a 14% increase from last year. Only 7% was considered "Poor" or "Very Poor." Of the Corn Belt states, Illinois had the most corn rated "Excellent" at 30%, followed by Iowa and Indiana with 24% and 22% respectively. Corn dented was reported at 35%, a 13% increase from the previous week, but 8% behind the five-year average.
Soybean conditions were reported with 70% of the crop in "Good" or "Excellent," a 1% decrease from the third week in August, but a 12% increase from last year. Of the five largest soybean producing states, Illinois and Iowa had the most crop rated "Excellent," at 23% and 22% respectively.
Spring wheat harvest is also running behind historical schedule with only 27% of the crop harvested compared to 37% by the last week in August, based on a five-year historical average.
The value of, "good" farmland increased by 2% in the second quarter of 2014 compared to the first quarter of 2014, and year over year prices have increased 3% in the Federal Reserve Bank's Seventh District which includes Iowa, Illinois, and Indiana.
In the Tenth Federal District, irrigated farmland values increased 6.3% year-over-year and non-irrigated farmland values increased 6.9%. Compared to the first quarter of 2014, irrigated farmland values increased 0.5% over the quarter, and non-irrigated farmland values increased 1%. Nebraska, Kansas, and Colorado are included in the Tenth District.
Both Federal Reserves stated that farmer debt levels are in stable condition and higher farmer income led to the increase in farmland values.
The U.S. corn and soybean crops are in great condition heading into the end of the growing season. At this point in the growth stage, an early frost is the largest, and nearly last, major risk to the crops. Late maturing crops typically carry higher moisture at maturity which demands more drying costs by the farmer and may weigh on farm income. After the severe shortage in LP gas throughout last winter in the Corn Belt, farmers should have forward purchased much of their fuel and might need to even order more if the crops are abnormally wet.
New end users of grain are emerging as low prices have sparked interest. An ethanol plant reopened in South Dakota due to favorable price margins which could spark increased demand on a broader scale.
Outside of the monthly USDA reports, on September 30, 2014, the USDA will release its quarterly Grain Stocks Report which will provide an update regarding on and off farm storage inventories.
For more articles on farmland and agriculture, visit http://www.farmlandforecast.com