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July 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.

Rural Economy Continues to Expand; But at Slower Pace

Jul 22, 2011

The rural economy improved in July for the ninth straight month, although slower growth in farmland sales and farm equipment, have slowed the rate of expansion. Bankers remain positive on the outlook for the rural economy, as agriculturally dependent areas continue to expand at a positive pace.

The overall Rural Mainstreet Index (RMI) declined slightly to 55.7 from 56.0 in June, according to the survey of bank CEOs in a 10-state region. June’s reading marks the ninth straight month the index is above growth neutral 50.0, but below the reading of 59.4 last May.

Farmland Forecast   Rural Mainstreet index july 2011 farmland

"Even though the Rural Mainstreet economy is expanding, many of our indicators are trending lower," said Creighton University economist Ernie Goss, co-author of the report.

Agriculture

Farmland prices remain above growth neutral for the 18th straight month, but the farmland index continued to slip to 59.4 from June’s 620. "Even though this is the 18th straight month the index was above growth neutral, we are tracking consistent slippage in farmland price growth as the index has declined for three straight months. Consistent with the decline in farmland price growth, the farm equipment sales index sank for the fourth consecutive month to 53.7 from 63.1 in June," said Goss

Farmland Forecast   Farmland Price Index July 2011 farmland

Roughly 68% of bankers supported the removal of blenders’ tax credit for ethanol as a part of the U.S. debt reduction and 35% supported phasing out agriculture support payments over five years. Dan Coup, of First National noted though, "If the government wants to continue with a cheap food policy, payment support needs to remain. Subsidy on crop insurance premiums is a must."

Banking

Loan volumes increased in July to 59.0 from a reading of 59.0 in June and certificate of deposits increased to 43.7 in July from 41.7, although checking deposits declined to 52.8 from 59.7 in June.

After seven straight months of job expansion, the rural economy saw a slight loss in jobs, with the July index at 49.3, down from June’s 51.5. "Supported by continuing strength in the energy and farm sectors, the pace of job growth for the Rural Mainstreet economy remains much stronger than urban areas of the 10-state survey region," commented Goss.

Rural bankers continue to expect sustainable growth over the next six months in the rural economy, although the economic confidence index decreased to 55.0 from June’s reading of 55.3. "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.

Survey

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.

Visit http://farmlandforecast.colvin-co.com for daily articles on agriculture and farmland.

Crop Progress: Excessive Heat Diminishes Crop Conditions

Jul 19, 2011

According to today’s USDA weekly progress report of the 18 primary corn producing states, the percentage of crop rated good or excellent fell by three percentage points to 66% over this past week. The percentage of crop rated poor or very poor increased by two percentage point to 11%, while the percentage of crop rated fair increased to 23% from 22% the previous week. Condition ratings still remain behind the 2010 crop, as 72% of the corn crop was in good or excellent condition, 19% was in fair condition, and 9% was in poor or very poor condition. Challenges continue to mount for the 2011 corn crop as seasonality hot weather and limited amounts of precipitation are anticipated over much of the corn belt for the next 7-10n days.

The USDA estimates that for the week ending July 17th, 35% of the 2011 corn crop has silked compared to estimates of 62% and 47% for the 2010 crop and 5 year historical average respectively. Of the 18 primary producing states, this past week saw the last three remaining states report silking progress. Missouri is the only state whose corn crop is ahead of its five year average and 2010 pace at 74% silked.

For the 18 primary soybean producing states, crop conditions worsen over the past week. The percentage of crop rated good or excellent decreased two percentage points to 64%. The percentage of crop rated fair remained unchanged at 26%, and the percent rated poor or very poor increased two percentage points to 10%. Compared to last year 67% was rated good or excellent, 24% was rated fair, and 9% was rated poor or very poor.

The USDA estimates that 40% of the soybean crop has bloomed, compared to 58% last year, and a 5 year historical average of 52%. For the week ending July 17th, only Missouri and Louisiana are ahead of their five year average and 2010 blooming pace.

Progress in the winter wheat harvest continued over the past week, with harvest concluding in Texas, beginning in Oregon, South Dakota, and Washington, but harvests in Idaho and Montana yet to start. The USDA reports harvested winter wheat estimates for the week ending July 17th, at 68% of the total crop, compared to a 5 year average and 2010 estimate of 72% and 70% respectively.

The USDA estimates that 73% of the spring wheat crop was rated good or excellent, unchanged from last week, but still below the 82% registered a year ago. Headed spring wheat, is also lagging its five year average and 2010 performance. The USDA reported that 60% of the crop has headed compared to 84% for the same period in 2010 and a 5 year historical average of 88%.

Bullish trend-lines in both old and new crop contracts appear to be forming in corn, soybeans, and wheat after last week’s WASDE Report. We expect this to continue as weather patterns conducive to high yields appear to be nonexistent across most major growing regions. Corn prices rebounded from two weeks ago and were $0.18 higher over the past week closing at $6.97 per bushel, soybeans increased $0.37 to close at $13.83 per bushel, and wheat jumped $0.49 to $6.88. Corn, soybean, and wheat prices all remain higher year-over-year up, 83%, 37%, and 18% respectively.

Next week we will have our first look at the USDA corn crop dough and soybean pod setting estimates, along with the usual estimates provided in this report.

Visit http://farmlandforecast.colvin-co.com for daily articles on farmland and agriculture.

USDA Mixed To Bullish News for All Commodities

Jul 12, 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 July, U.S. ending stocks for 2011/12 were revised higher for corn, but decreased for soybeans and wheat.

Corn

Mixed news for the U.S. corn market continues after the surprise USDA June 30th Acreage and Grain Stocks report, as the 2011/12 U.S. projections for beginning stocks, production, usage, and ending stocks were all increased from their June estimates.

The USDA raised beginning stocks 150 million bushels reflecting changes made to the 2010/11 usage projections. After the surprising June 30th Acreage report, an additional 1.7 million harvested acres were added in the July estimates. Yield estimates remained flat from June, causing the 2011/12 production estimate to be increased by 270 million bushels to 13,470 million bushels.

Domestic usage for the 2011/12 corn crop was revised to 11,600 million bushels, an increase of 145 million bushels. Feed and residual use for 2011/12 was increased 50 million bushels, caused by larger than expected supplies and lower expected prices. Corn use for ethanol was increased to 5,150 million bushels or 100 million bushels due to larger supplies and an improved outlook for ethanol producer margins. Other domestic uses for corn were decreased by 5 million bushels. Exports were raised in July to 1,900 million bushels or 100 million bushels, reflecting increased demand from China.

Compared to the June WASDE, ending stocks for 2011/12 corn crop are now projected to be 175 million bushels higher at 870 million bushels, but below consensus estimates of 1,000 million bushels. The 2011/12 season-average farm price for corn is projected at a record $5.50 to $6.50 per bushel; however, compared to the June report this represents a 50 cent reduction on both ends of the range.

World corn beginning stocks, production, and imports were all revised slightly higher by 3, 6, and 1 million metric tons respectively. Increases in U.S. beginning stocks and production coupled with increases in Chinese imports accounted for 100% of the increases. Global corn ending stocks were increased by 3% to 116 million metric tons; this is represented by increases in global usage being unable to maintain pace with increases in production.

Soybeans

The USDA raised beginning stock levels by 20 million bushels reflecting changes made to their 2010/11 usage projections. Exports were revised lower reflecting lower than expected imports from China for the remainder of 2010/11. Planted and harvested soybean acres were lowered by 1.4 and 1.6 million acres respectively to 75.2 and 74.3 million acres respectively, while yield estimates remained flat from June. These adjustments resulted in lowering production estimates for 2011/12 by 60 million bushels to 3,225 million bushels.

The USDA also lowered its estimate for exports during the 2011/12 year by 25 million bushels to 1,495 million bushels. Export reductions were the result of lower than anticipated U.S. production, increased production from South America, and an overall reduction in global imports. U.S. soybean ending stocks are projected at 175 million bushels, 15 million bushels lower than the June report, but above consensus estimates of 162 million bushels.

The U.S. season-average soybean price for 2011/12 is projected at $12.00 to $14.00 per bushel, down $1.00 on both ends of the range.

Global soybean supplies and usage were each lowered marginally from the June report, while ending stocks increased by less than 0.4 million metric tons. Offsetting lower U.S. production and export estimates were lower than expected usage and import estimates from China.

Wheat

U.S. 2010/11 wheat ending stocks were raised to 861 million bushels from 809 million bushels. This estimate is based on a higher than expected carryout for 2010/11 as reported in the June 30th Grain Stocks report. The USDA again raised forecasts of 2011/12 wheat yields to 44.6 bushels per acre, from 43.1 bushels per acre, but lowered its planted and harvest acres by 1.3 and 0.6 million acres respectively. Estimates for wheat usage and exports for 2011/12 were increased by 7 and 100 million bushels respectively. These estimates project ending stocks to be 17 million bushels lower at 670 million bushels, below consensus estimates of 702 million bushels.

Estimated global wheat supply for the 2011/12 year was increased by 2.96 million metric tons to 978.74 million metric tons. Decreases in global production were offset by higher than previously expected beginning stock levels and import estimates. Compared to June, global wheat usage was raised by 6.75 million metric tons to 923.2 million metric tons. These adjustments resulted in lowering ending stocks by 2.07 million metric tons to 182.19 million metric tons.

The 2011/12 season-average farm price for all wheat is projected at $6.60 to $8.00 per bushel, down 40 cents on both ends of the range, reflecting the decline in projected corn prices this month.

Overview

Even though the USDA raised 2011/12 beginning stock levels for its three major commodities, we are closely monitoring demand and basis levels for all commodities but especially old crop corn. Recent declines in commodity prices could spark buying interest from producers who have not hedged their late summer/early fall production. A large wave of domestic or international purchases could diminish stocks further than the USDA forecasts; this could result in rising commodity prices over the next quarter.

We are also looking forward to the August 11th USDA Production report, which is going to recertify the June 30th Acreage report. Following the initial report the USDA announced they were going to resurvey certain grain producing states because at the time of survey, a large percentage of acres remained unplanted. This could also spark a strong reaction from the market if planted acres change dramatically.

Pay attention to crop conditions during pollination and grain fill, end-user demand, and weather patterns as the summer progresses. As grain prices could regain a tailwind and continue their historical climb higher.


For daily articles on agriculture and farmland, visit http://farmlandforecast.colvin-co.com.

Crop Progress: Corn Silking Slowly Continues, Soybean Condition Better Than Last Year

Jul 12, 2011

According to today’s USDA weekly progress report of the 18 primary corn producing states, the percentage of the corn crop rated good or excellent remained unchanged over this past week. The percentage of crop rated poor or very poor remained the same at 9%, while the percentage of crop rated fair decreased to 22%. Condition ratings remain behind the 2010 crop, as 73% of the corn crop was in good or excellent condition, 18% was in fair condition, and 9% was in poor or very poor condition.

The USDA estimates that for the week ending July 10th, 14% of the 2011 corn crop has silked compared to estimates of 36% and 26% for the 2010 crop and 5 year historical average respectively. In 2010, each of the 18 primary producing states reported silking progress, while only 15 states have reported progress to date. Texas is the only state whose corn crop is ahead of its five year average and 2010 pace at nearly 81% silked.

Of the 18 primary soybean producing states, crop conditions remain unchanged with 66% of the crop rated good or excellent, 26% fair, and 8% poor or very poor. Compared to last year 65% was rated good or excellent, 24% was rated fair, and 11% was rated poor or very poor. The 2011 soybean crop continues to slowly improve, with the percentage of the crop rated excellent increasing one percentage point compared to last week.

The USDA estimates that 21% of the soybean crop has bloomed, compared to 38% last year, and a 5 year historical average of 33%. For the week ending July 10th, each of the primary soybean producing states is behind their five year average and 2010 blooming pace.

Progress in the winter wheat harvest slowed over the past week, with harvest concluding in North Carolina and only beginning in Michigan. The USDA reports harvested winter wheat estimates for the week ending July 10th, at 63% of the total crop, compared to a 5 year average and 2010 estimate of 63% and 62% respectively. Because of the progress of the crop, conditions and heading were removed from this week’s USDA report.

The USDA estimates that 98% of the spring wheat crop has emerged; compared to a 5 year historical average and 2010 estimate of 100%. The report also showed that 73% of the spring wheat crop was rated good or excellent, up from 70% last week, but still below the 83% registered a year ago. Headed spring wheat, is also lagging its five year average and 2010 performance. The USDA reported that only 27% of the crop has headed compared to 68% for the same period in 2010 and a 5 year historical average of 73%. Delays in the spring wheat crop are still linked to the cool/wet spring experienced by the major spring wheat growing areas.

Volatility in the nearby contracts for corn, soybeans, and wheat has remained since the USDA’s June 30th stocks and plantings report. We expect this to continue until the USDA reissues their planting report in early August. Corn prices decreased by $0.05 over the past week to close at $6.79 per bushel, soybeans increased $0.21 to close at $13.51 per bushel, and wheat may be finding a base it increased 3% to $6.32. However, corn, soybean, and wheat prices all remain higher than they were this time last year, 87%, 40%, and 30% respectively.

Next week we look forward to the USDA’s continued maturity reports for corn, soybeans, and spring wheat along with estimates of harvest progression for winter wheat.

For daily articles on farmland and agriculture, visit http://farmlandforecast.colvin-co.com.

Irrigation: Yield Enhancer or Farmland Destroyer?

Jul 11, 2011

Irrigation in the United States can be traced back over 4,000 years. Irrigation has evolved from farmers digging ditches by hand along field borders, to fully automated systems that operate on GPS and can be monitored wirelessly via cell phone or computer. In 2008, producers spent $2.1 billion on irrigation equipment, facilities, land improvements, and computer technology. Of those expenses, 50% was for replacement of existing equipment, 35% for new expansion, and 15% for water conservation.

Studies conducted by the USDA have shown irrigation can increase average yields for certain crops by more than 128%, compared to the average yield of the same nonirrigated crop. In research performed by The University of California, improper management of irrigation can lead to infertile soils, depleted water resources, and reduced water quality. Given rising global food demand, the U.S. can ill afford to have agricultural production decrease, while producers need to be aware of potential dangers caused by mismanagement and invest in new technology that allows them to become more efficient and able to conserve natural resources.

Irrigation Overview in the United States

As previously mentioned, irrigation in the U.S. can be traced back over 4,000 years to archaeological excavations near the Santa Cruz River in Tucson, Arizona. Archaeologists have concluded the floodplain of the Santa Cruz River was farmed during the Early Agricultural Period, circa 1200 BC to AD 150. These people constructed irrigation canals and grew corn, beans, and other crops. Irrigation remained simple prior to the middle of the 21st century, with the advent of diesel and electric motors. These inventions led to new and more efficient ways for producers to irrigate their crops. For the first time, irrigation systems could pump water out of aquifers faster than it could be replenished.

In 2008, the USDA’s Farm & Ranch Irrigation Survey (FRIS) reported total U.S. irrigated farmland acres of 54.9 million (excluding institutional, research, and experimental farms and farms with horticulture). This was an increase of 2.4 million acres, or 4.6%, from the last FRIS report in 2003. In 2008, irrigated acres represented 17.7% of the total harvested acres in the U.S.

The five states with the highest amount of irrigated farmland acres are; Nebraska, California, Texas, Arkansas, and Idaho. These states account for 53.4% of the total irrigated acres in the country. Conversely, the five states with the least amount of irrigated farmland only represent 8% of the total irrigated acres.

Types of Irrigation

The two most common methods of distribution are sprinkler systems and gravity flow systems; together they account for 96.3% of U.S. farmland irrigation. Between 2003 and 2008, sprinkler system usage by acre has increased 15% to 30.9 million acres, while gravity usage has declined 5% to 22 million acres. The other most commonly used forms of farmland irrigation in the U.S. include drip or trickle and subirrigation.

There are four different types of sprinkler irrigation, center pivot, mechanical-move, hand move, and solid set. Center pivot irrigation is a form of sprinkler irrigation consisting of several segments of pipe (usually galvanized steel or aluminum) joined together and supported by trusses, mounted on wheeled towers with sprinklers positioned along its length. The system moves in a circular pattern and is fed with water from the pivot point at the center of the arc. Center pivots have evolved to run on GPS, be activated remotely from wireless electronic equipment, and to utilize sprinkler heads that are positioned only a few feet above the crop, all to limit energy usage and evaporative losses.

Mechanical-move systems are classified as linear move, side roll, wheel move, or big gun where the sprinkler device is moved across the field either by self-propelled methods or by tractor. Hand move systems include distribution systems laid out in the spring, moved through the field as needed during the season by hand labor, and removed at the end of the season. Finally, solid set or permanent systems are sprinklers placed in the ground permanently; these are mostly for perennial crops such as alfalfa, mint, and different grasses.

Gravity fed irrigation is a very simple system, consisting of an elevated reservoir with a pipe coming out the bottom that feeds water to crops and is controlled either by hand or a battery powered timer that controls the rate at which the crop is watered. The limiting factor for gravity irrigation is the climate in which crops are being irrigated. Gravity irrigation requires enough precipitation to consistently keep reservoirs full.

Drip or trickle irrigation is a slow, precise application of water and nutrients directly to the plants' root zones in a predetermined pattern. A drip irrigation design can be customized to meet specific needs while maintaining an optimum moisture level within the root zones. This assists farmers in conserving water that might otherwise be lost to non-growth areas, runoff, sun or wind, and providing the proper balance of water and air needed for successful plant growth. Drip irrigation is most commonly used in arid and drought-plagued regions.

Subirrigation or seepage irrigation is mostly used in areas with high water tables, the process artificially raises the water table to allow the soil to be moistened below the plants' root zone. Often these systems are located on permanent grasslands in lowlands or river valleys and combined with drainage infrastructure. A system of pumping stations, canals, weirs and gates allows it to increase or decrease the water level in a network of ditches and thereby control the water table. Advantages are water and nutrient conservation, and labor-saving through lowered system maintenance and automation.

Water Usage

In 2008, the FRIS estimated, 91.2 million acre-feet of water was applied via farmland irrigation compared to only 109 thousand acre-feet of water to horticulture operations. This is an increase of 4.4 million acre-feet of water, or 5.1%, from 2003. In 2008, each irrigated farmland acre received an average of 1.7 acre-feet of water, compared to 2.5 acre-feet for every horticulture acre. An acre-foot of water is the quantity of water required to cover one acre to a depth of one foot. This is equivalent to 43,560 cubic feet or 325,851 gallons.

The FRIS also reported during this same time period, subirrigation systems were the most efficient form of irrigation. The average amount of water per acre applied through subirrigation decreased from 1.2 to 0.7 acre-feet. Water usage for sprinkler systems also decreased from 1.3 to 1.2 acre-feet per acre. Compared to gravity fed and drip systems, which increased their average water usage by 0.2 and 0.4 acre-feet respectively to 2.2 acre feet per acre.

Irrigation provides producers with the availability to apply water to their crops when they need it most. In 2008, (Exhibit 1) average yields for all agricultural crops increased dramatically with the availability of irrigation. Compared to vegetables and other nontraditional agriculture crops, corn, soybeans, and wheat require less acre-feet of water on average to produce maximum yields (Exhibit 2).

Farmland Forecast   Irrigated nonirrigated yield comparison by crop

Farmland Forecast   Quantity of water applied by crop and method irrigation colvin

Irrigation Uses in the United States

If not mandated by the government, deciding when to irrigate can be a very difficult for producers. According to the FRIS (respondents could select more than one answer), 78% of respondents irrigate based on crop condition, 53% irrigate based on soil characteristics, 25% use their personal calendar, and 20% have their scheduling controlled by the government.

Irrigation is an efficient way to apply specific forms of fertilizer in a safe and controlled manner. Producers use this application method because timely nutrient uptake by the plant is crucial when striving for maximum yields. Furthermore, this allows producers to avoid the risk of nutrients moving through the soil profile faster than the plant can absorb it, also called leaching. Soil pH is also extremely important when producing high yielding crops. Producers will irrigate soils with elevated levels of salt in an attempt to push salt through the soil profile and away from plant roots.

Citrus and other fruit producers will irrigate their crops prior and during prolonged periods of cold weather to form an ice barrier on the exterior of their product, which acts as insulation for the crop during cold temperatures. Conversely, during extended periods of heat, producers will irrigate their crops to reduce heat stress and attempt to delay early budding or blooming.

Food processors and livestock producers also use irrigation as a means to dispose of waste producers. This not only provides them with a source of disposal, but provides valuable nutrients to growing crops. Though not as common in areas with excess water, producers will use irrigation to pump water away from fields to create wildlife habitats.

As in all of agriculture, there is clearly no perfect strategy for crop irrigation. Producers have to make decisions based on not wanting to waste money by over irrigating crops; however they also remain conscience about losing yield if they do not provide their crops with timely applications of water and nutrients.

Government Oversight

States such as Nebraska, which has more ground water than any other state in the country, have setup regulatory bodies to govern the states’ natural resources. In 1972, Nebraska Legislature enacted laws to consolidate 154 special purpose entities into 23 Natural Resource District’s (NRD’s). NRD’s are local government entities and are unique to Nebraska; they are charged under state law with 12 areas of oversight and responsibility:

• Erosion prevention and control
• Prevention of damages from flood water and sediment
• Flood prevention and control
• Soil conservation
• Water supply for any beneficial uses
• Development, management, utilization, and conservation of groundwater and surface water
• Pollution control
• Solid waste disposal and drainage
• Drainage improvement and channel rectification
• Development and management of fish and wildlife habitat
• Development and management of recreational and park facilities
• Forestry and range management

Many NRD projects have permanent results such as dams, terraces, drainage ditches, windbreaks, reservoirs, and recreational trails. However, NRD’s also have local responsibility to actively protect ground water from overuse and pollution. NRD’s can mandate that producers not irrigate crops during prolonged dry periods, which can dramatically reduce yields. However, most districts try to be proactive and encourage stewardship by providing financial assistance to landowners for irrigation water management and best-management practices to apply water more efficiently.

For example, in 2002, the Lower Loup Natural Resources District's Ground Water Management Area (GWMA) became effective. Early phases required permitting for new construction of wells that pump more than 50 gallons of water per minute and required expanded educational programs for producers. Under the most recent phase, producers are required to pass a nitrogen certification class and monitor water applications to better manage fertilizer applications and control leaching of nitrates. This district also mandates the timeframe, the type and quantity of fertilizer that can be applied via irrigation, and requires producers to submit annual water and deep soils analysis for nitrogen content.

Spending on Irrigation Infrastructure

According to FRIS, between 2003 and 2008 producers improved over 30.8 million of the 54.9 million irrigated farmland acres. The number one reason producers listed for improving their existing systems was to increase yield potential, while the largest issue for doing nothing was simply investing in improvements was not a priority. However, there are many other reasons why producers chose to or not to upgrade their existing irrigation infrastructure, (Exhibits 3 & 4).

Farmland Forecast   Reasons for improving irrigation equipment 2003 2008

Farmland Forecast   Reasons for not improving irrigation equipment 2003 2008

Discontinued Irrigation Acres

The USDA estimates each year approximately 0.5% of all irrigated acres cease production. The two largest known reasons producers remove irrigation from their farmland are, soils develop sufficient moisture capacity 23% and irrigation becomes uneconomical 7%. Discontinuances caused by irrigation account for only 4.6% of the total acres taken out of irrigation, (Exhibit 5).

Farmland Forecast   Discontinuance of irrigation on farmland 2003 2008

Public Concerns over Irrigation

There is no federal governing body that oversees farmland irrigation. The Clean Water Act of 1977 explicitly preserves the authority of each state to allocate water among users; water use and water quality issues remain inextricably linked. Farmland irrigation is a substantial user of surface and ground water resources in the United States. During periods of limited precipitation, agriculture producers rely on irrigation to sustain crop yields thereby intensifying the struggle for the remaining water resources among competing users. Because of this, crop producers continue to be challenged to improve irrigation efficiency and to conserve as much water as possible.

The main environmental concerns related to farmland irrigation include:

• Build-up of soil salinity
• Depletion of water sources
• Soil erosion caused by over-application
• Runoff and leaching of chemicals and fertilizer

Build-up of salinity refers to the excess amount of salt in the soil or water. Under-irrigation or irrigation that provides just enough water to the plant (i.e. drip irrigation) offers poor soil salinity control. This can lead to increased soil salinity with consequent build up of toxic salts on the soils surface in areas with high evaporation. Excessive soil salinity reduces the crops ability to absorb water, which has a negative effect on yield. The inability to absorb water can also lead to wilting, which makes the crop more vulnerable to pests.

Most water used for irrigation is of good to excellent quality, but does contain a mixture of naturally occurring salts. Soils irrigated with this water will contain a similar mix but usually at higher concentrations. Salt accumulation is dependent on the irrigation water quality, irrigation management, evaporation, and the adequacy of drainage. To prevent yield loss, salt levels in the soil must be controlled to concentrations below tolerance levels of growing crops. One management technique to help combat soil salinity is to irrigate crops at night when evaporation risk is at its minimum.

Salinity control becomes more difficult as water quality becomes poorer. As water salinity increases, greater care must be taken to leach salts out of the root zone before their accumulation reaches a concentration that affects yields. Alternatively, steps can be taken to manage around high levels of salinity. Producers can plant crops that have tolerances to high levels of root zone salinity or slightly over-irrigate crops to leach salts below a plants root zone.

Depletion of water sources occurs when more water is removed from the source (i.e. aquifers, the water table, or other bodies of water) than replaced. Depletion is critical in parts of the world such as Africa. In the United States, new methods of groundwater management such as artificial recharge and injection of surface waters during seasonal wet periods have extended the lives of many freshwater sources.

Two examples of aquifer depletion in the United States are the Ogallala and Edwards Aquifers. The Ogallala Aquifer underlies portions of eight states and contains primarily fossil water from the last glaciers. Water levels in the Ogallala continue to be depleted because of growing municipal use and continuing agricultural use. It is estimated that annual recharge in arid regions of the aquifer are only 10% of annual withdrawals. On the other hand, the Edwards Aquifer in central Texas is labeled as a significant and sustainable aquifer. Even though the aquifer provides water to nearly 2 million people, it remains completely full because of tremendous recharge from a number of area streams, rivers and lakes.

The majority of irrigated farmland in the U.S. occurs in arid climates where rainfall is limited, on ground that is generally flat, or on soils with poor water holding characteristics, leaving soil erosion a non issue. However, producers who irrigate farmland that is more prone to soil erosion need to recognize the dangers to soil erosion and take preventative measures to protect their soil.

Over-irrigation on soils that cannot fully absorb the amount of water being applied to it can experience pooling or run-off problems. Producers can easily combat this problem by studying their soil types to better understand the amount of water it can handle. With a general knowledge of their soil structure, producers can invest in precision irrigation systems that will preserve their time, money, and soil fertility. In fields with undulating terrain, producers can utilize lower pressure sprinkler heads to provide soils an opportunity to fully absorb water before it can erode soil.

Runoff and leaching of fertilizer and chemicals is a serious issue not only on irrigated land, but in all of agriculture. There is no standardized plan to deal with fertilizer runoff. Compared to most forms of nitrogen, fertilizers such as potassium and phosphorous move slow through the soil structure and remain available for plant uptake for many years, making them less prone to runoff and leaching.

Producers are aware of nitrogen’s tendencies to move through the soil with moisture and will apply the majority of their nitrogen via irrigation. Applying fertilizer through irrigation provides efficient and timely application of valuable nutrients, and limits the amount of nitrogen lost through runoff or leaching. Timely application of nutrients not only saves producers money, but helps sustain the environment by limiting contamination of underground resources.

Summary

Irrigation has been around of thousands for years and can be directly attributed to helping produce the quantities of food necessary to feed the worlds growing population. Irrigated agriculture (farmland & horticulture) is responsible for approximately 70% of all the freshwater withdrawn in the world. It is estimated this number will continue to grow while tillable acres will continue to decline, as food demand continues to expand. The challenge presenting itself to the agricultural industry is to produce more food with fewer resources.

There are environmental and sustainability concerns tied to farmland irrigation. However, farmland irrigation is not the only reason for these concerns; municipalities, businesses, and individuals are also responsible for these problems. Producers still need to act responsible and adhere to proper management techniques to help reduce and prevent these problems from occurring.

The following are management practices to assist producers in properly irrigating their farmland:

• Minimize Water Use – Apply only enough water to meet crop needs. This can be determined through
regular soil moisture monitoring or through a "checkbook" system to monitor water applied and crop
needs.
• Irrigation Equipment Efficiency – Use efficient irrigation systems such as sprinkler style irrigation, GPS,
and automatic timers to minimize runoff, leaching, and evaporation.
• Apply Water at Rates the Soil can Absorb – Runoff due to excess irrigation can cause soil erosion.
• Uniform Irrigation – Make sure water is applied uniformly. This makes water availability more efficient,
reduces operating costs, and reduces the chance of runoff and leaching in certain areas where water
may be over-applied.
• Provide Adequate Drainage – High levels of salinity in areas of low rainfall can be minimized by
providing good drainage along with the irrigation, to leach salts down through the soil profile.

We expect irrigation to continue to be a driving force in the world's quest to produce more food and improve food security; however, producers will have to evolve their operations to incorporate more efficient, cleaner, and integrated uses of irrigated water.

For daily articles on farmland and agriculture, visit http://farmlandforecast.colvin-co.com.

Volatile June for Agriculture

Jul 05, 2011

Rain continued to delay farmers planting corn and soybeans throughout June, but hard work and long hours have lead to crop progress almost entirely catching up to historical averages. As of June 20th, 97% of the U.S. corn crop had emerged while the 5-year historical average is 99%. 92% of the U.S. soybean crop had emerged by June 27th; on par with the historical average.

The big news of the months was the highly anticipated Planted Acreage Report from the USDA on June 30th, and to analysts' surprise, increased corn planted acres to 92.3 million in 2011. Corn prices were limit down as the increased acreage will produce an estimated 273 million bushels at the current USDA yield estimate. The USDA also reported quarterly stocks of corn increased due to decreased feed and residual demand.

In mid-June, the U.S. Senate passed a bill by commanding margin to remove the 45 cent ethanol tax credit. The 45 cent tax credit is set to expire on December 31, 2011 and it is unlikely that the current bill will pass into law before the set expiration. An immediate cut to the tax credit would certainly help corn balance sheets, but the cut cannot completely ease the pressure of potential yield loss and a delayed 2011 corn harvest due to the difficult planting season.

Analysts would like to see attention turned to the expansion of the newly approved E15 gasoline, rather than continuing the blender tax credit. Tax credits to help build gas station infrastructure to handle E15 gasoline would likely replace any lost gap in corn demand from the 45 cent tax credit cut as higher amounts of ethanol would be required to blend into the E15 gasoline.

Grain Prices

Corn prices decreased by 18.8% this month and closed at $6.29 per bushel during another volatile month of trading. July corn increased as much as 4.8% in early June due to a bullish WASDE Report, but favorable weather and an extremely bearish USDA Planted Acreage Report at the end of the month drove prices lower. Corn crop conditions are rated 68% Good/Excellent as of June 27th, slightly below last year’s rating of 73%

Soybean prices decreased by 5.4% in June to $13.06 per bushel due to favorable planting and growing conditions throughout the month. The strength of the U.S. Dollar and growing debt concerns in Greece have put downward pressure on soybean prices. The planted area of the 2011 U.S. soybean crop is the smallest since 2008, according to the USDA, which may give support to weakening prices.

Wheat prices decreased this month to $5.84 per bushel, a 33.9% decrease due to the continued bearish price outlook since Russia announced its lifting of its export ban back in May. Favorable weather conditions in the U.S. have lead analysts to almost entirely write off the crop condition concerns of earlier in the year. The progress of the U.S. winter wheat harvest is also ahead of historical pace thus weakening prices.

WASDE

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 mid-month. 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 due to a decrease in estimated planted area which now includes the flooded acres of the Ohio and Mississippi valleys.

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.

We will look forward to the July WASDE Report which should make an adjustment for the recently increased planted acres which will likely drive production and ending stocks higher.

Planted Acreage Report

A bearish surprise for the grain markets on June 30th, as estimated acreage for planted corn and quarterly stocks for soybeans were significantly higher than consensus expectations in the USDA Planted Acreage Report. Analysts expected planted corn acreage to decrease, but instead increased along with quarterly soybean stocks.

The USDA raised estimated planted corn acres to 92.3 million, up from their March estimate of 92.2 million acres. This also represents a 5% increase in planted acres compared to 2010 and highest planted acreage in the United States since 1944, behind only the 93.5 million acres planted in 2007.

The USDA released its estimate of quarterly corn stocks of 3.67 billion bushels, significantly below 2010 estimates of 4.3 billion bushels. However, usage of 2.85 billion bushels for the three-months ending, May 31, 2011, was significantly lower than the 3.38 billion bushels consumed over the same period in 2010.

Farmland

Farmland prices remain above growth neutral for the 17th straight month according to the Creighton University Rural Main Street Index, but the farmland index continued to decline 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.

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."

Outlook

Farmland values have been continuing to rise throughout this "offseason" of buying due to the ongoing support of high grain prices. If the December 2011 corn can remain above $6.00, farmers will be confident for 2012 and continue to reinvest in farmland. We have observed impressively high cash rent offers across the Midwest within the last few weeks proving that farmer demand to add property to their operation is as strong as ever.

We still are bullish on farmland values throughout 2011 due to the constraints on the U.S. corn crop and global demand. Perfect weather conditions would yield 158.7 bushels per acre, but any unexpected weather patterns could change the yield outlook significantly over the next 12 weeks.

Visit http://farmlandforecast.colvin-co.com for daily articles on agriculture and farmland.

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