Sep 18, 2014
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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.

Favorable Weather Increases Record Corn Crop

Sep 11, 2014

2014 average corn yields are estimated at a record 171.7 bushels per acre, an increase of over four bushels from last month, according to the USDA. Adjusting for corn's 2014/15 record production, the ending stocks-to-use ratio is now estimated at 14.7%, compared to the five year average of 8.8%. Corn exports are estimated higher for the 2014/15 crop season due to favorable U.S. pricing.

Domestic soybean production was also increased to an average yield estimated of 46.6 bushels per acre. The USDA estimates world ending stocks for 2014/15 at a record 90.17 million bushels due to production increases in the U.S. and South America.

Today's report came within analyst's expectations and Steve Kahler, manager for Teucrium trading commented, "the crop is gradually getting bigger and the trade expected that." The September report is the last report before harvest starts and next month's WASDE will reflect a corn crop that should be over 50% harvested.

Corn

For the 2014/15 marketing year, U.S. corn ending stocks were projected up 194 million bushel to 2.002 billion bushels and would be the highest since 2004/05. U.S. exports were increased 25 million bushels to 1.750 billion bushels with total usage of 13.605 billion bushels. Projected total production for 2104 was 14.395 billion bushels, a record if realized. The 2014/15 season-average farm price for corn was estimated at $3.20 to $3.80 per bushel, a decrease of 40 cents at the midpoint.

U.S. Average Yield (Bushels Per Acre) 2014/15

Grain

September 2014

Average Estimates

August 2014

Corn

171.7

170.7

167.4

Soybeans

46.6

46.2

45.4

 

U.S. Ending Stocks (Million Bushels) 2014/15

Grain

September 2014

Average Estimates

August 2014

Corn

2,002

2,004

1,808

Soybeans

452

452

430

Wheat

684

684

663

 

Soybeans

U.S. Soybean exports for 2013/14 were raised 5 million bushels to 1.645 billion bushels bases off July trade reports and expected August shipments. Ending stocks were decreased 10 million bushels to 130 million bushels.

For the 2014/15 marketing year, U.S. soybean ending stocks were projected to be 475 million bushels, a 45 million bushel increase. Exports were estimated at 1.700 billion bushels with total usage of 3.583 billion bushels. Projected soybean yield was increased 1.2 bushels per acre to 46.6 bushels per acre. Total U.S. production was estimated at a record 3.913 billion bushels due to increased yields. The 2014/15 season-average farm price for soybeans was estimated at $9.00 to $11.00 per bushel, a decrease of 35 cents on both end of the range.

Global oil seed production for 2014/15 was estimated at 528.0 million tons, a record if realized. Support for this record crop coming from the U.S. and South America. Brazil's soybean production was raised 3 million tons and Argentina's raised 1 million tons.

Wheat

U.S. wheat ending stocks for 2014/15 were increased to 698 million bushels from 663 million bushels as higher imports are expected from Canada. Exports were decreased 25 million bushels to 900 million bushels due an increase in competition. The 2014/15 all wheat average price was estimated at $5.50 to $6.30 per bushel, a decrease of 40 cents at the midpoint.

Outlook

Analysts continue to be bearish on grain prices in the short term as expectations for both production and carryover volumes domestically and globally remain elevated, leaving little room for price relief. The record breaking production estimates have also raised concern over the logistical issues that it will cause. Rail lines have still not recovered from the back up that occurred last year and the mountain of grain that is about to be harvested off the Corn Belt will only increase the strain created by oil companies competing for rail space.

Long term demand expectations for U.S. grain continue to increase. The Chinese have reported droughts effecting up to 55% of farmland in the agricultural heavy northwest. The drought has only intensified the depletion of aquifers in the region, which have been drained to deliver water to the heavily populated and commercially driven east. Chinese demand for U.S. grain is expected to increase to fill this void. The conflict persisting between Ukraine and Russia has also led many nations to reassess their dependence on grain from eastern Europe.

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

Corn Exports for the 2013/14 Fail to Reach Expectations

Sep 05, 2014

Annual U.S. corn exports for 2013/14 increased 161% year-over-year, but were unable to achieve the projections set by the USDA. China’s refusal to accept the MIR-162 corn trait is one of the main factors that caused corn exports to fall short of their expectations. The Chinese government has refused to accept the MIR-162 trait for the past four years, sending back barge loads of corn if inspections detect the trait. 


Wheat exports increased substantially from last week, eclipsing the 10-week average for only the fifth time since May. U.S. sales of corn and soybeans reported reductions, wheat sales decreased from last week.

The 2013/14 Marketing year for corn came to a close last week, U.S. corn exports for the year were reported at 46,867,700 metric tons (MT), a 161% increase from last year. 2013/14 corn exports were 4% below USDA projections of 48,770,000 MT.

Weekly U.S. net corn sales for the week ending August 28th in the 2013/2014 marketing year were a reduction of 7,500 MT, the third reduction in four weeks. Increases were reported from South Korea, Japan, Honduras, and Guatemala. Decreases were reported from unknown destinations, Mexico, the Dominican Republic, and Colombia. Exports were 1,022,600 MT, a 2% increase from the prior week and a 2% increase from the prior 10-week average. The primary destinations were Mexico, Japan, South Korea, Colombia, Spain, Egypt, the Dominican Republic, and Panama.

The 2013/14 marketing year for soybeans came to a close last week, U.S. soybean exports for the year were reported at 44,477,900 MT, a 23% increase from last year. 2013/14 soybean exports 0.3% below USDA projections of 44,630,000 MT.

Weekly net soybean sales in the 2013/2014 marketing year were a reduction of 87,700 MT, the third sales reduction for soybeans in as many weeks. Increases were reported from Mexico, Indonesia, Italy, and Canada. Decreases were reported from China, unknown destinations, Vietnam, and Taiwan. Exports were 36,400 MT, an 82% decrease from the prior week and a 69% decrease from the prior 10-week average. Primary destinations were Mexico, Taiwan, Indonesia, Japan, and Vietnam.

Weekly net wheat sales for the week ending August 28th in the 2014/2015 marketing year were 168,800 MT, a 58% decrease from the previous week and a 61% decrease from the prior 10-week average. Increases were reported from Mexico, the Philippines, Yemen, Brazil, Italy, and Costa Rica. Decreases were reported from unknown destinations, Colombia, and Malaysia. Exports were 747,600 MT, a 60% increase from the prior week and a 62% increase from the prior 10-week average. Primary destinations were Brazil, Mexico, the Philippines, South Korea, Nigeria, Yemen, and Japan.

9 5 14 Sales
 
Source: USDA Foreign Agricultural Service

9 5 14 Exports
Source: USDA Foreign Agricultural Service

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

2014 Farm Bill Decisions for Landowners

Sep 03, 2014

The Farm Bill or the Agricultural Act of 2014 instituted major changes to U.S. agriculture production. A major change in the Farm Bill will require a one-time commodity program decision to be made by the landowner that will stay with the specific property for the life of the Farm Bill, 2014 to 2018. Other changes in the Farm Bill include the opportunity to update Base Acres, Counter-Cyclical Payment yields, and make changes to Conservation Reserve Program contracts.

The three new commodity programs are; Price Loss Coverage (PLC), County Agricultural Risk Coverage (ARC), and Individual ARC, which will replace the Counter-Cyclical and Direct Payments. The commodity program choice will stay with the property even if you change operators or sell your property.

To make the proper decisions for your property, you will need to know what changes in the 2014 Farm Bill will be affecting your farm.

FSA Administered Commodity Programs

The 2014 Farm Bill removed direct payments where farmers received government payments on a per acre basis regardless of crop prices and what crop was produced. Legislators still wanted to provide farmers protection in the event of low grain prices. The Price Loss Coverage (PLC), County Agricultural Risk Coverage (ARC), or Individual ARC will provide farmers with protection from volatility in production.

A deadline has not been made by the USDA for making the commodity program designation. Expectations are that as early as September, all of the USDA agencies will begin training on the intricacies of the new Farm Bill. Following the training, procedures for applying for and making commodity program designations will be made. Early estimates place the time frame for a decision somewhere during the end of November and the beginning of December.

Price Loss Coverage (PLC)

The PLC program provides a commodity price floor to producers and is similar to the former Counter-Cyclical Payment program. The program will reference crop prices set in the 2014 Farm Bill and for a payment to be made, the U.S. crop year average price must fall below the established reference price. The reference price for corn is $3.70, for soybeans is $8.40, and for wheat is $5.50.

The payment is calculated by finding the difference between the crop year average price and the reference price. That difference is then multiplied by 85% of the base acres for the covered crop. That total is then again multiplied by the program payment yield for the covered commodity.

The program payment yield can either be the existing Counter-Cyclical Payment yields already established on the property, or updated to 90% of the average yields for the commodity over the 2008 to 2012 crop years.

This program can be used alongside county ARC coverage on a crop-by-crop basis.

Agricultural Risk Coverage County Level (ARC)

The county ARC program uses the ARC county guarantee to determine payment, which is calculated by taking 86% of the five year Olympic average (removes highest and lowest values) of county yields times the U.S crop year average prices for the past five years (ARC guarantee price).

If actual county crop revenue is less than the ARC county guarantee, a payment is made. The payment is calculated by taking 85% of the base acres for the covered commodity times the difference between the county guarantee and the actual county crop revenue. Payment may not exceed 10% of the ARC county guarantee.

This program can be used alongside the PLC coverage on a crop-by-crop basis.

Agricultural Risk Coverage Individual Level (ARC)

If a producer elects the individual ARC program, each property that the producer enrolls in individual ARC is viewed as one large farm for purposes of qualifying for a payment and determining the level of payment. All calculations for ARC individual guarantees, guarantee price and benchmark guarantee must reflect all of the producer/operator/farmer/benefit recipients acres covered under individual ARC.

The individual ARC program uses the ARC individual guarantees summed across those covered commodities on the farm to determine a payment. The ARC individual guarantee is calculated by taking 86% of the individual benchmark revenue, which is the U.S crop year average prices for the covered crop over the past five years (ARC guarantee price), and summing across all crops on the farm. When actual farm revenue falls below the ARC individual guarantee, a payment is made.

Payment is equal to 65% of the sum of the base acres of all covered commodities across all acres enrolled in the individual ARC program times the difference between the individual guarantee and the actual individual crop revenue across all commodities planted on the farm. Payment cannot exceed 10% of the individual benchmark revenue.

Individual ARC covers all crops and cannot be used along with any other options.

Base Acres Reallocation

The 2014 Farm Bill will allow landowners to have the opportunity to reallocate base acres. Base acres are the total amount of tillable acres on your field and are used when calculating crop insurance payments for FSA administered programs. They are allocated to each crop depending on their planting frequency, and are calculated by taking the average number of acres that have been dedicated to each crop over the past five years.

Reallocation allows for farmers to update the number of acres that have been allocated to each crop. Areas of the Dakotas and Northern Minnesota may be more apt to reallocation due to the increase in corn grown in those areas. Farmers and land owners may want to reallocate base acres because they have started a new crop rotation.

Yield Updates

Counter-Cyclical Payment yields for covered commodities can be updated as part of the 2014 Farm Bill. Each parcel has a counter-cyclical yield for each crop. The last Farm Bill used counter-cyclical yield values to reimburse farmers during cycles when crop prices fell, which was previously calculated as 93.5% of the average yield over a five year period.

To calculate the updated counter-cyclical yield information, an operator will take 90% of the average yield from 2008 to 2012 for each covered commodity. It may be advantageous for operators or landowners to update their yields if they have had significant yield increases over the past five years due to capital improvements or improved technology. Updating your counter-cyclical yields could be negative if you have seen lower yields over the past couple of years due to poor weather, like the drought in 2012 or mismanagement by an operator. The yield information can be updated on a crop by crop basis.

It is important to make sure the yield and base acre information is most beneficial for your property. The correct values will not only benefit your operator and keep them afloat in the event crop prices fall significantly, but it will also make your property more attractive to other interested renters. Again your insurance decision made this year will stay with the specific property if it is sold or a new operator begins working on it.

Conservation Reserve Program Early Termination Option

The 2014 Farm Bill provides certain properties that have acres in the Conservation Reserve Program (CRP) to terminate their contract prior to its completion. To be eligible for early termination, the contract must have been in effect for a minimum of five years and have none of the following characteristics:

·         Filterstrips, waterways, strips adjacent to riparian areas, windbreaks, and shelterbelts;

·         Land with an erodibility index of more than 15;

·         Land devoted to hardwood trees;

·         Wildlife habitat, duck nesting habitat, pollinator habitat, upland bird habitat buffer, wildlife food plots, state acres for wildlife enhancement, shallow water areas for wildlife, and rare and declining habitat;

·         Farmable wetland and restored wetland;

·         Land that contains diversions, erosion control structures, flood control structures, contour grass strips, living snow fences, salinity reducing vegetation, cross wind trap strips, and sediment retention structures;

·         Land located within a federally designated well-head area;

·         Land that is covered by an easement under CRP;

·         Land located within an average width according to the applicable Natural Resource Conservation Service field office technical guide, of a perennial stream or permanent water body; and

·         Land enrolled under the Conservation Reserve Enhancement Program (CREP).

The USDA has not set a timeline to apply for early termination, but they will release that information when it had been decided.

Conclusion

The purpose of this update is to provide you with an idea of how the Farm Bill affects landowners. By only allowing a one-time registration and holding the FSA administered insurance program to the property for the life of this Farm Bill, the government has made this crop insurance decision more important than it has been in the past. In the past, operators were the only ones making a decision, now everyone with an interest in the property needs to be involved in the process.

There is still much more information to be released and many questions to be answered by the USDA as they begin to roll the programs out.

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

Crop Conditions End August at 20-Year Highs

Sep 02, 2014

Fall frost remains the final major threat to corn and soybean crops whose conditions remain at 20-year highs. Farmers at the Farm Progress show noted excellent growing conditions present this farming season, but some were not as confident in the forecasts of record production as the USDA.

Many farmers raised concern over the interior of their plots, as airplane and drone views have shown trouble spots not visible from the road. Others were concerned over soybean Sudden Death Syndrome (SDS), which is common when temperatures are below average as they have been throughout this year.

Corn conditions were estimated by the USDA at 74% in "Good" or "Excellent" condition, a 1% increase from last week and an 8% increase from last year. 19% was considered "Fair", a 1% decrease from last week, while 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 25% and 22% respectively.

Corn doughing was reported at 90%, a 7% increase from last week and 1% ahead of the five-year average. Corn dented was reported at 53%, an 18% increase from the previous week, but 6% behind the five-year average. Mature corn was estimated by the USDA for the first time this week. 8% of the corn was deemed mature, 4% ahead of this time last year, but 8% behind the five year average. Of the five largest corn producing states, Indiana and Nebraska reported the most mature corn both with 8%, Minnesota was the least with 0% mature.

Soybean conditions were reported as 72% of the crop in "Good" or "Excellent" condition, a 2% increase from last week and an 18% increase from last year. 22% was reported in "Fair" condition, a 1% decrease from last week, while only 6% was reported as "Poor" or "Very Poor." Of the five largest soybean producing states, Illinois and Iowa had the most crop rated "Excellent," both at 23%.

Soybeans setting pods were reported at 95%, a 5% increase from last week and even with the five-year average. Nebraska had the most soybeans setting pods at 95% and Minnesota had the least at 92%. The USDA reported soybeans dropping leaves for the first time this week. 5% of the U.S. soybean crop was reported at the leaf dropping stage, 2% ahead of this time last year, but 2% behind the five-year average. Of the five largest soybean producing states, Indiana had the most soybeans dropping leaves with 10%, both Iowa and Minnesota reported 0%.

Spring wheat conditions were estimated with 63% of the crop in "Good" or "Excellent" condition, a 3% decrease from last week and a 7% decrease from last year. 29% was reported in "Fair" condition, a 1% increase from last week, while only 8% was reported as "Poor" or "Very Poor." Spring wheat harvest was reported at 38% complete, an 11% increase from the previous week, but 27% behind the five-year average.

September futures for corn closed the week at $3.55 per bushel, a 1.4% decrease from last week. August soybeans ended the week at $10.97, a 2.5% decrease from last week. September wheat ended the week at $5.43, a 0.2% increase from last week. Year-to-year corn prices are down 28.7%, soybeans are down 23.6%, and wheat is down 14.6%.

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

Jack Frost; Last Major Risk to Record Crops

Sep 02, 2014

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.

Grain Prices

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.

Crop Progress

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.

Farmland Values

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.

Outlook

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 

 

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