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June 2011 Archive for Farmland Forecast

RSS By: Marc Schober,

Marc Schober is the editor of Farmland Forecast an educational blog devoted to investments in agriculture and farmland.

Crop Progress: Corn Crop Continues to Improve, Soybeans Catching Up

Jun 21, 2011

Corn emergence is inching closer to completion according to today’s USDA weekly progress report of the 18 primary producing states. Last week saw, 6% of the entire corn crop emerge; bringing the total emerged crop to 97%. This compares to a 5 year historical average and 2010 estimate of 99% and 100% respectively. Pennsylvania remains the biggest laggard with only 76% of their crop emerged compared to a 5 year average of 92%.

Over the last seven days warm weather and timely rainfall has improved the condition of the corn crop, the percentage of crop rated good or excellent increased one percentage point to 70%. However, the percentage of crop rated poor or very poor increased one percentage point to 7%. For the same time period in 2010 75% of the corn crop was in good or excellent condition, 18% was in fair condition, and 7% was in poor or very poor condition.

Of the 18 primary soybean producing states, 94% of soybeans have been planted and 82% have emerged. The 5 year historical average is 93% planted and 86% emerged. For this week last year, 93% of the soybean crop had been planted and 87% had emerged. The USDA also showed that 68% of the soybean crop was rated good or excellent, up from 67% last week, but still below the 69% registered a year ago.

The planting of the 2011 spring wheat crop increased to 91% this past week, but is still considerably behind the 5 year historical average and 2010 estimate of 100%. Above average precipitation has also placed spring wheat emergence behind schedule. The USDA estimates that 83% of the crop has emerged; compared to a 5 year historical average and 2010 estimate of 99%. The report also showed that 72% of the spring wheat crop was rated good or excellent, up from 68% last week, but still below the 84% registered a year ago.

Lower than expected yields coupled with favorable weather conditions have afforded farmers to harvest winter wheat at a record pace. The USDA reported harvested winter wheat estimates this week at 31% of the total crop, compared to a 5 year average and 2010 estimates of 22% and 17% respectively. There was little improvement in the condition of the winter wheat crop, 36% of the crop is in good or excellent condition, while 41% is in poor or very poor condition. Last year, 65% of the crop was in good or excellent condition while only 9% was in poor or very poor condition. The percent of headed winter wheat for this year’s crop was at 90% this week, which is one percentage point lower than 2010 and four percentage points lower than the 5 year historical average of 94% for the week.

July contracts for corn, soybeans, and wheat all traded lower after last week’s surprising Crop Progress Report. Corn prices decreased 10% over the past week to close at $7.01 per bushel, soybeans also trended lower to close at $13.39 per bushel, and wheat fell 11% to $6.59. However, corn, soybean, and wheat prices are still sharply higher compared to this time last year, 95%, 34%, and 43% respectively.

Next week we will have our first look at the USDA corn crop silking estimates, along with the usual estimates as provided in this report.

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Rural Economy Continues to Improve, But Flooding Constrains Growth

Jun 20, 2011

The rural economy continued to improve in June, although bankers expect the flooding to have negative impacts and the local economy and tourism. Farmland prices remain strong and well above growth neutral, but the farmland price index dropped to its lowest level since October of last year.

The overall Rural Mainstreet Index (RMI) increased to 56.0 from 54.9 in May, according to the survey of bank CEOs in a 10-state region. June’s reading marks the eighth straight month the index is above growth neutral 50.0, but slightly below the reading of 59.4 last May.


“The Rural Mainstreet economy is expanding, I expect flooding and weather related issues to slow growth in the months ahead,” said Creighton University economist Ernie Goss, co-author of the report.


Farmland prices remain above growth neutral for the 17th straight month, but the farmland index continued to slip to 62.0 from May’s 75.0. Bankers are concerned that a large drop in commodity prices could have a negative effect on farmland values and one-third of respondents noted that outsiders were the primary buyers for farmland.

Farmland Forecast   FarmlandPriceIndexColvinSchober1

Bankers also expressed concern regarding the impact of the Missouri River flooding on the economy. Larry Winum, president of Glenwood State Bank, noted, “The current and potential flooding problems will certainly have an adverse economic impact on sectors of agriculture, business, and on our communities along the Missouri River. A sad situation for a lot of people.”

The farm equipment sales index declined slightly to 63.1 from 65.9 in May, but still well above growth neutral. “We are beginning to see some of the air exiting the farmland price bubble. In my judgment, this is not a bad outcome. A significant upturn in the value of the dollar stemming from the European debt crisis could drive the dollar higher and agricultural commodity prices lower. This would weaken farm income growth and take even more of the air from the bubbles we have been seeing in farmland and farm equipment sales,” said Goss.


Loan volumes increased in June to 59.0 from a reading of 55.5 in May and checking deposits improved to 59.7 from 58.2 in May, although certificate of deposits decreased to 41.7 in June from 44.6. Bankers also noted they are concerned about farm production, inputs, and land prices, but this is fairly typical at this point in the production cycle.

The rural economy continues to add jobs for the seventh straight month, but the jobs index declined to 51.5 in June from May’s 54.2. “The pace of job growth for the Rural Mainstreet economy is more than double that of the urban areas of the region. While the growth is still less than what you normally see in a recovery, it has been trending up for most of 2011,” said Goss.

Rural bankers continue to expect sustainable growth over the next six months in the rural economy, although the economic confidence index decreased to 55.3 in June from May’s reading of 63.7. “Even though confidence remains fairly robust, flooding and other weather related issues in areas of the region eroded confidence among some of the bankers,” noted Goss.


The Rural Mainstreet Survey is a snapshot of the rural economy covering 10 states, focusing on roughly 200 rural communities with an average population of 1,300. The survey respondents include community bank presidents and CEOs located in Colorado, Illinois, Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, South Dakota and Wyoming.

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USDA Lowers Corn Production Estimates

Jun 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. WASDE reports in the summer are a barometer of overall world demand, forecasted production, and inventory adjustments. In June, U.S. ending stocks for 2011/12 were revised lower for corn and wheat, but increased for soybeans.


Bullish news for the U.S. corn continues midway through 2011, as the 2011/12 U.S. projection for corn production and ending stocks were decreased by 305 and 205 million bushels to 13,200 and 695 million bushels respectively. Current USDA projections rank this corn crop as the largest corn crop in U.S. history, but ending stocks are the lowest since 1995.

The USDA maintained its forecast for corn yields and beginning stocks, at 158.7 bushels per acre and 730 million bushels respectively, but lowered its planted acreage forecast (to 90.7 million acres, from 92.2 million acres), and its harvested acreage forecast (to 83.2 million acres, from 85.1 million acres).

Production revisions were the result of planting delays through early June in the eastern Corn Belt and northern Plains. The USDA believes this reduction in planted area, will more than offset likely gains in the western Corn Belt and central Plains where planting was ahead of schedule by mid-May. Harvested area is lowered 1.9 million acres, to 83.2 million with the additional 400,000 acre reduction reflecting early information about May flooding in the lower Ohio and Mississippi River valleys and June flooding along the Missouri River valley.

Corn ending stocks are projected 35 million bushels lower than beginning stocks indicating a stocks-to-use ratio of 5.2 percent compared with the 2010/11 forecast ratio of 5.4 percent. The 2011/12 season-average farm price for corn is projected at a record $6.00 to $7.00 per bushel, up 50 cents on both ends of the range.

World corn production was slightly lowered to 866 million metric tons from May’s forecast of 868 million metric tons; decreases in U.S. production were offset by increases in Chinese production. Global corn ending stocks however were reduced by 13% to 112 million metric tons; lower usage was forecasted in the U.S., but was off by increases in expected Chinese demand.


The USDA raised its estimate of ending stocks for the 2011/12 crop to 190 million bushels from its May estimate of 160 million bushels. This was the result of, reductions to the estimates of ending stocks for the 2010/11 crop and soybean exports for the 2011/12 crop by 10 and 20 million bushels respectively. Demand erosion for the 2011/12 U.S. crop is anticipated from an increase in the recently harvested Brazilian soybean crop.

The U.S. season-average soybean price for 2011/12 is projected at $13.00 to $15.00 per bushel, up $1.00 on both ends of the range.

Global soybean production and ending stocks were each lowered marginally from the May report. While production and usage levels have remained consistent with estimates, we remain focused on the development of the U.S. soybean crop, which represents 34% of world production and import demand from China.


U.S. 2010/11 wheat ending stocks were lowered to 809 million bushels from 839 million bushels. This estimate is based on lower U.S. imports and higher than expected exports.

The USDA raised its forecast of 2011/12 wheat yields to 43.1 bushels per acre, from 42.5 bushels per acre, but lowered its planted and harvest acres by 300 and 220 thousand acres respectively. They also left U.S. wheat usage and exports for 2011/12 unchanged from previous estimates. These estimates project ending stocks 15 million bushels lower at 687 million bushels, but remain above the 10-year average.

Total world wheat production was estimated at 645.82 million bushels, down from December’s estimate of 646.51 million bushels. The decrease was due to heavy floods in Australia and difficult production in Kazakhstan, partially offset by increased production in Argentina and Brazil.

The 2011/12 season-average farm price for all wheat is projected at a record $7.00 to $8.40 per bushel, up 20 cents on both ends of the range, reflecting both tighter domestic supplies and higher expected corn prices. The forecast 2010/11 wheat farm price is also raised this month, up 5 cents per bushel to $5.70 per bushel.


As grain stocks continue to decline into the fall; we are closely monitoring demand and basis levels of old crop corn. Post July corn is at $7.90 per bushel and is poised to close at an all time contract high. If demand levels remain consistent, prices of commodities will continue their climb higher towards harvest.

With a poor start to the growing season, the next two months are critical across much of the Midwest, as corn plants are beginning to determine their yield potential. The USDA has set large production goals and producers are going to have to rely on near perfect growing conditions and proper management techniques to assist in them in achieving these levels.

Pay attention to crop conditions, demand, and weather patterns this summer, as grain prices could continue their historical climb higher.

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World Running Out of Farmland

Jun 08, 2011

"The Nation that destroys its soil destroys itself." – President Franklin D. Roosevelt

Grain prices have more than doubled over the last year as the world is starting to realize that the food supply is running out. In 9 of the 10 last years, the global consumption of grain has outpaced production according to the USDA. To meet future demand, experts are predicting that global agriculture will need to produce more food in the next 50 years than what was produced during the previous 10,000 years, putting more and more pressure on future farmers and the land they use to produce our food.

Not only is the world running out of grain, it is also running out of farmland at an alarming rate. Hundreds of thousands of acres across the globe have disappeared due to erosion, urban development, and overuse over the last century. The American Farmland Trust estimates that farmland is disappearing at a rate of 2 acres per minute.

The National Soil Tilth Laboratory highlighted, "Each human on earth lives off the farming equivalent of about a third of a football field today. Population growth and urbanization will shrink that available land base in half by 2050."


Despite soil’s importance to the survival of the human population, soil is eroding faster than it is being replaced. In the last 30 years, roughly 30% of the Earth's arable land has eroded according to David Pimentel, professor at Cornell University. "Soil erosion is second only to population growth as the biggest environmental problem the world faces," said Pimentel.

Over half of the U.S.’s best cropland is experiencing an erosion rate 27 times the natural rate or 11,000 pounds per acre (approximately 1/26 of an inch of soil/year) according to the USDA. The natural, geological erosion rate is about 400 pounds of soil per acre per year. Based on these levels of erosion it would take approximately 26 and over 700 years respectively, for one inch of top soil to erode.

Parts of Iowa, which has some of the best soil is the world, have seen topsoil levels erode from a depth of 18 inches down to 10 inches according to the USDA. Productivity drops off sharply when topsoil reaches 6 inches or less, the average crop root zone depth.

Andres Arnalds of the Icelandic Soil Conservation Service estimates that roughly 38,000 square miles of land (100,000 square kilometers) each year becomes severely degraded or turns into desert due to erosion. "We are overlooking soil as the foundation of all life on Earth," said Arnalds. "Soil and vegetation is being lost at an alarming rate around the globe, which in turn has devastating effects on food production and accelerates climate change."

The economic impact of soil erosion in the U.S. costs the nation approximately $37.6 billion each year in productivity losses and damage from soil erosion according to Cornell University. Worldwide it is estimated to be $400 billion per year.

The primary causes of rapid soil erosion are conventional tillage programs coupled with highly sloped and large amounts of precipitation. In areas prone to erosion, fall tillage and the removal of crop residues after harvest are key drivers of erosion. On sloped land in the spring, there is a window of opportunity for erosion between the start of tillage and when the crop establishes a root system strong enough to hold the surrounding soil. This window typically lasts for four to six weeks and is most susceptible to erosion during hard rain falls.

Sloped land also has waterways, which are natural occurring drainage pathways that rainwater follows. Farmers maintain these waterways by planting the area with grass to provide an outlet for water to flow through without removing topsoil.

Row crops, such as corn and soybeans, result in roughly 50 times more soil erosion than faster growing, densely populated crops such as wheat, alfalfa, and grasses. Farmers in areas prone to erosion will plant a cover crop (rye, clover, and vetch) in the fall when they intend to plant row crops the following spring. The farmer can then choose to plant directly into the cover crop or plow them under. The latter provides the farmer with many valuable nutrients that they would otherwise have to apply to the land in the form of commercial fertilizer.

In addition to the solutions listed above, in areas prone to erosion farmers can reduce soil erosion by using strip or no-till farming methods. The main difference in the two methods is strip-tilling bands fertilizer in a 4 inch trench approximately 6-8 inches below the surface of the soil and seed is then planted directly above the band of fertilizer making the fertilizer available to the plant that year. While no-till operations spread the majority of fertilizer over the top of the ground making it less accessible to the crop in the first two years following application and plant directly into the un-tilled soil. With both options crop residue is left on the surface of the soil and breakdown over time, providing nutrition, water retention, and soil carbon. Currently, only 20% of corn in the U.S. is grown using no-till.

Iceland is a prime example of the dangers of soil erosion. Since the country was settled in the ninth century, over half of the vegetative cover has been destroyed and 40% of its soil has eroded according to a national survey completed in 1997. Now desert covers 45,000 square kilometers, or 40% of the country.

Despite spending the last 100 years trying to improve its soil, Iceland needs to import a large portion of its food supply and is continually battling the degraded soil. Arnalds noted that Iceland should serve as a warning to other countries. "It is far better to preserve than restore," he said.

Soil stores carbon as it is one of the key ingredients for plant growth. The amount of carbon stored in soil is roughly twice the amount of carbon found in the atmosphere and three times the amount in vegetation. Across the U.S., agricultural methods have removed approximately 20% to 50% of the Earth's original soil carbon, and up to 70% in some regions according to the USDA.

Land degradation may account for up to 30% of the world's green house gas releases according to Ohio State University. While tillage of crop residue still locks carbon into the ground for a short period of time before it is released into the atmosphere, no-till methods lock carbon into the crop residue for a longer period of time, delaying the release into the atmosphere.

Soil erosion also limits one of the best natural water filters. Topsoil filters out many of the impurities and the next sandy gravel layer will further filter the substance before it enters an aquifer. Surface water sifts through soil and by the time it reaches an aquifer, it is some of the purest, cleanest water on Earth.


Farmland has also been disappearing in the U.S. due to urban development. Farmland has been used to create new highways, industrial parks, and housing developments. The American Farmland Trust estimates that between 1992 and 1997, more than six million acres of agricultural land, an area the size of Maryland, was used for urban development.

There has been a 5% decrease in farmland in the tri-state area of Alabama, Tennessee, and Georgia from 1987 to 2007. Wisconsin's farmland has decreased by 19% from 1978 to 2008. Virginia lost 521,000 acres of farmland from 2002 to 2007.

The decline in farmland has lead to the U.S.'s food supply being grown in smaller areas with a higher concentration. The high concentration of crops is dangerous because of the risk of: drought, floods, insects, disease among crops, and depleting quality of soils. The U.S. food supply could be at risk as any unexpected interruption in the food chain could wipe out a significant portion of food production.

The loss of farmland to soil erosion and development is a growing concern across the globe. The increasing demand for farmland and food production is already outpacing supply. Development and erosion will need to be kept at a minimal to limit the loss of potential food production.

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Spring Planting Progresses

Jun 01, 2011

High levels of rain across much of the Corn Belt continued to delay planting this month, although farmers have been working around the clock trying to make up for lost time. As of Monday, May 23rd, 79% of the entire U.S. corn crop had been planted, compared to 92% in 2010 and the 5-year historical average of 87%.

Federal Reserve Banks in the Midwest released their quarterly farmland value reports which confirmed the steady increase of farmland values across the entire Midwest over the past 12 months. Farmland values increased 16% over the past 12 months, and 5% in the first quarter of 2011.

Grain Prices

Corn prices decreased by 0.9% this month and closed at $7.47 per bushel during a volatile month of trading. Corn for July delivery was down as much as 9.3% earlier in the month on the favorable planting weather, but increased global demand and concerns over yield loss associated with a delayed planting season helped rally prices in the latter half of the month.

Soybean prices decreased by 1.2% in May, to $13.76 per bushel due to favorable planting conditions early in the month. Soybeans for July delivery significantly increased in price in mid-May due to the concern over excess moisture during the planting season. We continue to monitor the planting progress of corn to see if the acres allotted to soybeans will increase or decrease depending on if farmers choose to not plant late corn.

Wheat prices increased this month to $7.82 per bushel, a 1.7% increase. In early May, wheat prices decreased alongside corn and soybeans on favorable weather conditions in the southern plains, but wheat prices rallied towards the end of the month due to adverse weather and crop conditions across all wheat producing areas of the world. On the last trading day of the month, prices fell 4.6% due to the announcement by Russia that the Russian wheat export ban will be lifted on July 1, 2011. Watch the crop conditions of winter wheat from the USDA as crucial plant development stages are starting to occur.


The USDA’s May update of balance sheet estimates for major agricultural commodities in the World Agricultural Supply and Demand Estimates (WASDE) report was viewed as bearish for grains due to the USDA’s increase in old crop corn and soybean ending stocks. Wheat ending stocks went unchanged.

Estimated U.S. corn yields were decreased to 158.7 bushels per acre, which is 3.0 bushels below the USDA trend line, due to the slow start to planting. The estimated 2011/12 corn stocks to use ratio was projected at 6.7% which is still extremely low, but above the current 2010/11 5.4%.

The USDA estimated the average U.S. soybean yield at 43.4 bushels per acre, down 0.1 bushels from 2010, but at the USDA trend line for 2011. Reduced soybean exports have led to the increase in ending stocks.

Planting Progress

Farmers have been busy planting corn when the weather has allows for field work. Corn planting progress is only 8% behind historical averages at this point which will ease concerns over soybean planting progress. Farmers will move on to plant their soybeans as soon as corn planting is complete. The amount of corn emerged from the ground is 14% behind the historical average.

Soybean planting progress is only 10% behind both the historical average and 2010 statistics for this time of year with 41% of the total U.S. crop already planted. Analysts have been speculating that more soybeans will be planted this year due to the delayed planting of corn. Now that corn and soybeans have caught back up to near historical planting levels, we will monitor the growth progress in the weekly USDA Crop Progress Reports.


Farmland values in the Midwest increased 16% over the past 12 months, matching the largest increase since 2007 and last exceeded in 1979 according to the Seventh Federal Reserve District. In the first quarter of 2011, farmland values rose 5%. Farmers have been encouraged to take advantage of high commodity prices by purchasing additional land and expanding operations.

The survey by the Federal Reserve Bank of Chicago found that there was more demand for farmland in the last six months ending March 2011 compared to the same period ending in March 2010. Farmers made up the majority of farmland buyers over the last six months, which is the typical farmland buying season. The number of farms sold, acreage sold, and the amount of farmland for sale all increased as well.

Illinois, Indiana, and Iowa had farmland value increases of 17%, 19%, and 20% respectively, over the past 12 months. Michigan and Wisconsin also had strong increases of farmland values of 11% and 9% respectively. Illinois and Indiana both had quarterly increases of farmland values of a lofty 8% in the first quarter of 2011.


Farmland values have continued their strong rally into the second quarter of 2011 thanks in part to the elevated commodity prices and bright outlook for long-term commodity prices fueled by foreign demand. Typically farmland selling slows down in April and May due to planting, but this season an abnormal amount of farmland is still coming to the market. The delayed planting season has given landowners an opportunity to sell unworked land for a longer period than historically normal.

We expect farmland values to continue their rally through 2011 due to elevated crop prices and dangerously low supplies. The USDA yield estimates are made based on a best case scenario and any unexpected weather patterns could have an adverse effect on yields. If the southern plains or European drought worsens, we expect grain prices to immediately increase and will continue to energize the rally in farmland values.

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