Oct 1, 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.

September Harvest off to a Slow Start

Oct 01, 2014

September marks the beginning of harvest and has been a slow start for the Corn Belt, due to the slow progress of corn maturity. The lack of heat this summer across much of the Midwest has resulted in a slower growing process and higher moisture content in the corn. Farmers have delayed harvesting in hopes of drying the corn in the field rather than paying to have it dried.

Grain prices continued to decline through the month of September due in large part to the estimated record domestic production for corn and soybeans and global production for wheat. Fear of frost impacting yields has subdued as we move into October.

Immature Corn Causes Harvest Delays

Harvest results as of September 29th are behind the five-year average. Corn and soybean harvests are 11% and 7% behind their respective five-year averages, up from 8% and 5% the week before. Most farmers are blaming the delayed harvest on the wet spring, which caused many farmers to postpone planting or replant earlier planted crops. The delay this spring coupled with below average temperatures this summer, that hindered the crops maturation process, has left farmers waiting to harvest what is expected to be a record setting crop.

Record Crop Expectations Weighs Heavily on Grain Prices

December corn prices decreased 11.6% throughout September to close at $3.20 per bushel. Expectations of a record breaking harvest and multiple reports of excellent corn conditions weighed on prices throughout the month. The few price increases seen during September were due mainly to weather concerns; wet weather and the potential for frost were present but never materialized into anything harmful.

The average corn yield or bushel per acre (bpa) estimate was increased by 2.6% percent from August, to 171.7 bpa, according to the September WASDE. The yield increase caused total production estimates for 2014 to increase to 14.395 billion bushels, a record if realized. Ending stocks for 2014/15 were increased as a result of the record production estimate to 2.002 billion bushels from 1.808 billion bushels in August.

November soybean prices decreased 10.8% throughout September to close at $9.13 per bushel. Similar to corn prices, soybean prices could not escape the pressure caused by the USDA’s record breaking production estimates for them. Soybean conditions also remained well above-average throughout the month, causing further downward pressure. The few increases that soybean prices did see in September were due to weather related risk. Weather forecasts early in the month suggested the potential for localized frost in the northern Midwest. Some frost was reported but it caused little to no damage.

The September WASDE report increased both soybean ending stocks and average yield estimates from the August report. The average yield estimate increased 2.6% to 46.6 bpa, increasing the U.S. production estimate to 3.913 billion bushels, a record if realized. The expected rise in production increased ending stock estimates for 2014/15 to 452 million bushels from 430 million bushels in August.

December wheat prices decreased 15.3% throughout September to close at $4.77 per bushel. The record breaking global supply estimates of 906.39 million tons was due to record breaking global production estimates of 719.95 million tons. Increased production from Russia and Ukraine offset decreases in the Canada, France, and the U.S. Expected global use is elevated at 710.01 million tons, but the large amount of wheat coupled with the above average ending stocks from last year did not allow any relief for wheat prices.

Falling Grain Prices Force Farmland Values Down

The Creighton University farmland price index contracted for the third consecutive month moving from 41.4 to 33.7, its lowest level since February. Ernie Goss, Ph.D, Economics Professor at Creighton University, explained the reason for the decline, "Much weaker crop prices are taking the air out of agriculture land prices."

Bankers surveyed for the index were also asked the number of farmland transactions that have been cash sales as opposed to financed sales over the last three months. The majority of respondents reported roughly 25% of sales had been cash sales down from 29% a year ago and 26% last month. "The percent of farmland sales that are financed is growing, but at a very slow pace, according to our surveys. Plummeting grain prices have yet to push farmers into boosting borrowing to support farmland purchases," said Goss.

The fall in grain prices may have a short term effect on land values, but cash rents have not been similarly impacted. The USDA’s National Agricultural Statistics Service (NASS) released its annual cash rent survey results in September. Of the nine counties across the U.S. that averaged $300 per acre cash, eight of them were in the Corn Belt.

U.S. Soybean Stocks at Record Low

The USDA Grain Stocks report estimated old crop corn stocks at 1.24 billion bushels a 50% increase from last year. Old crop soybeans were reported at 92 million bushels a 35% decrease from last year. Wheat stocks were reported at 1.91 billion bushels a 2% increase from last year. The decrease in soybean stocks was significant and well below what analysts were expecting. The decline in soybean stocks decreased the stock-to-use ratio to 2.6%, a record low.

Outlook

Farmers seem anxious to begin harvest to see if what the USDA has estimated is really true. The 30-day forecast looks to be favorable for farmers to close the gap between current harvest progress and the five-year average. The largest threat in the short-term will be the transportation of this mountain of grain. The railways and waterways, that are used to transport grain out of the Midwest, are already stressed and as harvest continues that stress will only compound.

Farmers with the ability to store their grain should be advised to do so and wait for these low prices to improve. Those who can will fare much better than those who will be subjected to long lines at elevators, high basis levels, and low cash prices for their grain during harvest. We will continue to monitor corn harvest throughout October and are anxious for early soybean yield data as well.

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

Soybean Stocks Estimated at a Record Low

Sep 30, 2014

Soybean stocks were reported at their lowest level in modern history at 92 million bushels. Corn stocks were in-line with analyst expectations, though on-farm storage increased significantly from last year. Wheat stocks were also in-line with expectations and on-farm storage was also increased heavily from last year.

Quarterly Stocks (Billion Bushels)

Crop

September 1, 2014

Average Analyst Estimate

September 1, 2013

Corn

1.240

1.181

0.821

Soybean

0.092

0.130

0.141

Wheat

1.910

1.894

1.870

Source: DTN and USDA

USDA reported 1.24 billion bushels of old crop corn on hand for September 1, 2014, a 50% increase from last year. Of the total stocks, 462 million bushels were stored on-farms, a 68% increase from last year. Off-farm stocks were at 774 million bushels, a 42% increase from last year. June-August 2014 disappearance was 2.62 billion bushels, compared to 1.95 billion bushels a year ago.

Old crop soybean stocks were reported at 92.0 million bushels, a decrease 35% from last year. Stocks stored on-farms totaled 21.3 million bushels, a 46% decrease from last year. Off-farm stocks were 70.6 million bushels, a 30% decrease from last year. June-August 2014 disappearance was 313 million bushels, a 6% decrease from last year.

The USDA reported changes to 2013 soybean production data:

"Based on an analysis of end-of-marketing year stock estimates, disappearance data for exports and crushings, and farm program administrative data, the 2013 soybean production is revised to 3.36 billion bushels, up 69.2 million bushels from the previous estimate. Planted area is revised up 307,000 acres to 76.8 million acres, and harvested area is revised up 384,000 acres to 76.3 million acres. The 2013 yield, at 44.0 bushels per acre, is up 0.7 bushel from the previous estimate."

Wheat stocks were reported at 1.91 billion bushels a 2% increase from last year. Stocks stored on-farm totaled 722 million bushels, a 30% increase from last year. Off-farm stocks were reported at 1.19 billion bushels, a 9% decrease from last year. The June-August 2014 disappearance was 711 million bushels a 28% decrease from last year.

Outlook

As a percentage of total stocks, on-farm corn and wheat stocks increased 4% and 9% from last year. The fall in corn and wheat prices this summer persuaded farmers to hold on to their grain. If prices remain low expect the trend in on-farm storage to continue to increase as farmers attempt to wait out the low prices.

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

 

Harvest Progresses Slowly in the Corn Belt

Sep 29, 2014

Corn and soybean harvests fell further behind, despite reports of more farmers getting into fields. The USDA reports that the U.S. corn and soybean harvests are 11% and 7% behind their respective five-year average. Farmers are more concerned about the delay in maturity, which is also behind. As colder fall temperatures are forecasted in the next six to ten days the threat of an early frost may be realized. 

Corn conditions were estimated by the USDA at 74% in "Good" or "Excellent" condition, unchanged for the past four weeks, but a 19% increase from last year. 19% was considered "Fair," unchanged 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 34%, followed by Indiana and Iowa both at 24%.

Corn harvested was reported at 12%, a 5% increase from last week, but 11% behind the five-year average. The harvest in the Corn Belt is still lagging behind. Indiana, Minnesota, and Nebraska are all roughly 10% behind, while Iowa and Illinois are 13% and 20% behind their respective five-year averages. Farmers have blamed the delay in maturity, a result of late planting and below average temperatures this summer.

Corn dented was reported at 96%, a 6% increase from last week, but 1% behind the five-year average. Mature corn was reported at 60%, an 18% increase from last week, but 10% behind the five-year average. Of the five largest corn producing states, Illinois reported the most mature corn at 80%, followed by Indiana at 66%.

Soybean conditions were reported at 72% of the crop in "Good" or "Excellent" condition, a 1% increase from last week and a 19% increase from last year. 22% was reported in "Fair" condition, unchanged from last week, while only 6% was reported as "Poor" or "Very Poor." Of the five largest soybean producing states, Illinois had the most crop rated "Excellent" with 27%, followed by Iowa with 22%.

Soybean harvest was reported at 10%, a 7% increase from last week, but 7% behind the five-year average. Of the five largest soybean growing states, Iowa is the furthest behind the five-year average harvest at 14% behind followed by Minnesota at 12%, and Nebraska at 12%.

Soybeans dropping leaves were reported at 69%, a 14% increase from last week, but 2% behind the five-year average. Of the five largest soybean producing states, Indiana and Nebraska had the most soybeans dropping leaves at 76%, followed by Minnesota at 73%. The wet planting season that caused farmers to delay planting is now impacting soybean maturity and harvest.

Spring wheat harvest was reported at 94% complete, an 8% increase from the previous week, but 2% behind the five-year average. Winter wheat planting progress was at 43% this week, an 18% increase from last week and 7% ahead of the five-year average. Winter wheat emergence was reported for the first time this week. 14% was reported emerged, a 3% increase from last year and a 2% increase from the five-year average.

December futures for corn closed the week at $3.25 per bushel, a 1.5% decrease from last week. November soybeans ended the week at $9.23, a 1.6% decrease from last week. December wheat ended the week at $4.81, a 1.1% increase from last week. Year-to-year corn prices are down 26.3%, soybeans are down 28%, and wheat is down 29.1%.

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

Corn and Soybeans Sales Continue to Rally in September

Sep 25, 2014

Corn and soybean sales topped respective six and 12-month highs, according to this week’s USDA report. Wheat sales also improved from last week, but the volume was nominal in comparison to corn and soybeans. Corn and soybean exports also progressed significantly from last week. Corn exports were reported at their highest level since July of this year, and soybean exports at their highest since April of this year. 


Analysts speculated that the rise in sales is due to domestic corn and soybean prices being historically low. The mountain of grain expected to come off of U.S. farm fields this year has caused prices to reach four-year lows. The argued reason for the increase in exports is due to the abnormally low stocks-to-use ratios reported by the USDA throughout 2014. Above average exports in the first half of the 2013/14 marketing year caused a rapid depletion of domestic soybeans, forcing the USDA to curtail exports later in the season to protect domestic supply.

Weekly U.S. net corn sales for the week ending September 18th in the 2014/2015 marketing year were 836,400 MT, a 27% increase from last week and 260% increase from the prior 10-week average. Increases were reported from Mexico, Japan, Peru, and the Dominican Republic. Decreases were reported from South Korea, Ireland, and unknown destinations. Exports were 1,038,600 MT, a 44% increase from last week and a 14% increase from the prior 10-week average. The primary destinations were Mexico, Japan, Egypt, and Peru.

Weekly net soybean sales were 2,565,600 MT, a 75% increase from last week and a significant increase from the prior 10-week average. Increases were reported from China, Egypt, and the Netherlands. Decreases were reported from unknown destinations. Exports were 415,500 MT, a 103% increase from last week and a 254% increase from the prior 10-week average. Primary destinations were China, Egypt, the Netherlands, and Mexico.

Weekly net wheat sales were 396,300 MT, a 26% increase from last week, but a 7% decrease from the prior 10-week average. Increases were reported from Brazil, Mexico, Japan, and unknown destinations. Decreases were reported from Honduras. Exports were 474,400 MT, a 39% decrease from last week and a 12% decrease from the prior 10-week average. Primary destinations were Nigeria, the Philippines, Mexico, Malaysia, and Thailand.

9 25 14 Sales
Source: USDA Foreign Agricultural Service

9 25 14 Exports
Source: USDA Foreign Agricultural Service

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

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 

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