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August 2012 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.

Crop Progress: Slightly Worse Conditions at Harvest

Aug 27, 2012

Corn and soybean conditions worsened slightly this week. Statistics coming from on the ground research from the Pro Farmer Crop Tour would suggest the USDA's estimate corn yield of 123.4 bushels per acre is a high estimate as crops are looking dismal across much of the Corn Belt.

 

As of August 27, 2012 corn conditions decreased a percent from last week to 22% of the crop in good or excellent condition, a 32% decline from last year at the same time. Harvest has started and 6% of the corn has been harvested at this time. 76% of the corn was dented and only 47% was dented at the same time last year. 26% of the corn crop was mature compared to the five year average of only 8%. Corn prices decreased by 2.6% over the past week ending at $7.94 per bushel and year-over-year prices have increased by 5.6%.

 

As of the first week of September, soybean conditions were at 38% in very poor or poor condition compared to 15% a year earlier. Soybeans in good or excellent condition were at 30%, a 27% decline from one year prior. 96% of soybeans have set pods, and 8% of soybeans have dropped leaves. Soybean prices increased by 1.5% over the past week ending at $17.29 per bushel and year-over-year prices increased by 22.3%.

 

89% of the spring wheat has been harvested as of August 27, 2012. Wheat prices ended the week at $8.62 per bushel, a 1.9% decrease from last week. Year-over-year wheat prices have increased 13.1%.

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

 

Crop Progress--An Uncertain Future

Aug 20, 2012

Corn conditions remained unchanged from last week. Although conditions are less than optimal, commodity prices have already taken into consideration the current conditions and until we get more concrete harvest numbers, prices will remain stagnate.

 

As of August 20, 2012 corn conditions remain at 23% of the crop in good or excellent condition, a 34% decline from last year at the same time. 60% of the corn was dented and only 28% was dented at the same time last year. As of the fourth week of August, 89% of the corn crop was doughing, compared to the five-year average of only 66%. 17% of the corn crop was mature compared to the five year average and last year's maturity of only 4%. Corn prices increased by 4.2% over the past week ending at $8.15 per bushel and year-over-year prices have increased by 14.6%.

 

As of the fourth week of August, soybean conditions were at 37% in very poor or poor condition compared to 14% a year earlier. Soybeans in good or excellent condition were at 31%, a 28% decline from one year prior. 91% of soybeans have set pods, a 12% increase from a year prior. Soybean prices increased by 5.0% over the past week ending at $17.03 per bushel and year-over-year prices increased by 25.3%.

 

79% of the spring wheat has been harvested as of August 20, 2012. Wheat prices ended the week at $8.79 per bushel, a 2.7% increase from last week. Year-over-year wheat prices have increased 20.4%.

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

 

Drought Slows Increases in Farmland Values

Aug 20, 2012

Farmland values rose 15% in the last 12 months, slowing down from last quarter due to concern over drought conditions, according the Federal Reserve Bank of Chicago. The value of "good" farmland increased 1% in the second quarter of 2012 compared to the first quarter of 2012, the smallest quarterly increase in two years. All District states posted year-over-year increases in farmland values and the largest year-over-year land value increase came from Iowa, with a 24% increase.

Chicago Fed Quarterly farmland values second quarter 2012

Although there is concern over the recent drought conditions, a majority of bankers still believe there will be an increase or pause in farmland prices in the third quarter. 22% of bankers surveyed estimated farmland values will rise in the third quarter of 2012, only four percent believe prices will fall. The consensus, over 70%, believe farmland prices will level off through the third quarter.

Even with farmland prices stable to increasing, output is estimated to decrease significantly. The previous drought of this magnitude, in 1988, saw a decrease of 30% to 40% in soybean and corn yields. Due to improved seed traits and better farming practices, corn production should only decline by 22% and soybean production by 19% in the district year over year.

Earnings

According to the USDA's most recent forecasts, average corn prices for the 2012-13 crop year are estimated at $7.50 to $8.90 a bushel, a significant increase from 2011. Soybean average price range is estimated at $15.00 to $17.00 per bushel.

In addition to high prices, crop insurance will also help farmers weather the drought. Only 22% of U.S. corn acres were not insured in 2011. The majority of the district was declared a disaster area, resulting in the federal government releasing additional funds and lowering rates on farm loans.

Credit

The agricultural credit condition avoided a descent in the 7th district in the second quarter of 2012. Year over year funds available has improved as 65% of respondents indicated their banks had more funds available.

The average loan-to-deposit ratios increased to 68.1, below the level one year prior. Banks were more restrictive this quarter requiring more collateral for loans. Nine percent of banks that were surveyed required more collateral, and none required less.

Interest rates for agricultural loans continued to declined in the second quarter of 2012 and set a new record low for the fifth straight quarter. Farm operating loan's average interest rate was 5.27% and real estate loans fell to 4.94%.

3rd Quarter Outlook

The recent drought has left farmers and bankers uncertain as to what the near future holds for farmland values and farm income. Non-real-estate agriculture loans are expected to decrease in the third quarter of 2012 compared to the third quarter of 2011, whereas farm mortgage volume is expected to increase. Farmers will remain on the sideline, for the most part, when purchasing farmland until crop insurance payments are issued and harvest is complete. We feel this may pose as an opportune time for investors to purchase farmland as the agriculture fundamental outlook remains very strong.

The Federal Reserve Bank of Chicago’s second quarter survey of Farmland Values and Agricultural Credit Conditions Report is a summary of the 7th District’s value of farmland, farm loan portfolio performance, and on-farm income. The 7th District consists of the entire state of Iowa, and portions of Illinois, Indiana, Wisconsin, and Michigan.

 

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

 

Crop Progress: Conditions Remain Dismal

Aug 13, 2012

Corn conditions continue to be in a dire situation, but remained unchanged week to week. With harvest approaching, we look forward to actual yields as the USDA estimated an average corn yield of 123.4 bushels per acre last week.

 

As of August 13, 2012 corn conditions remain at 23% of the crop in good or excellent condition, a 37% decline from last year at the same time. 42% of the corn was dented and only 14% was dented at the same time last year. As of the third week of August, 78% of the corn crop has doughing, compared to the five-year average of only 49%. Corn prices decreased by 2.6% over the past week ending at $7.82 per bushel and year-over-year prices have increased by 11.6%.

 

As of the third week of August, soybean conditions were at 38% in very poor or poor condition compared to 13% a year earlier. Soybeans in good or excellent condition were at 30%, a 29% decline from a year prior. 83% of soybeans have set pods, a 19% increase from a year prior. Soybean prices increased by 3.0% over the past week ending at $16.56 per bushel and year-over-year prices increased by 23.9%.

 

Spring wheat conditions were at 61% in good or excellent condition and only 11% in poor or very poor condition. 65% of the spring wheat has been harvested as of August 13, 2012. Wheat prices ended the week at $8.56 per bushel, a 4.1% decrease from last week. Year-over-year wheat prices have increased 21.9%.

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

 

WASDE: Drought Reduces Corn Yields to 17 Year Low

Aug 10, 2012

The USDA projected corn yields in 2012 have dropped more than 15% month-to-month, after a 12% reduction last month, due to the worst drought in the Midwest since 1956. U.S. corn supplies are estimated at a nine year low and U.S. corn and soybean prices reach record levels.

Corn

 

Average corn yield in the U.S. has declined by over 40 bushels per acre in the last two months including a 22.6 bushel reduction this month. At the beginning of the year there were record estimates of average corn yields north of 160 bushels per acre; this average has been reduced to 123.4 bushels per acre and the lowest since 1995/96.

 

U.S. 2012/13 corn production was forecasted at its lowest level since 2006/07, at 10.8 billion bushels, compared to 13.0 billion bushels last month.

 

2012/13 U.S. corn usage was reduced by 1.5 billion bushels to 11.2 billion, the lowest usage in the last six years, due to demand destruction from high prices. Corn imports in 2012/13 were increased 45 million bushels due to competitively priced foreign supplies, and increased domestic corn prices. The 2012/13 projected range for season-average corn prices was increased to a record $7.50 to $8.90 per bushel.

 

2011/12 ending stocks were estimated 118 million bushels higher due to reduced exports, declined corn use for ethanol, and an increase in imports.

 

Global coarse grain supplies in 2012/13 were estimated to decrease 56.5 million tons, mostly due to the reduction in the U.S. corn crop. Offsetting lower supplies was larger beginning stocks in the U.S. and Brazil

 

We will be keeping a close eye on weather patterns and the upcoming harvest season to see how accurate these predictions are.

Soybeans

2012/13 U.S. soybean production has been projected down 358 million bushels to 2.7  million bushels due to decreased yields and lower harvested acres. Average soybean yield was projected at 36.1 bushels per acre, 4.4 bushels lower than last month's projection.        

 

2012/13 U.S. soybean supplies were projected 12% lower than last month to a nine year low. U.S. exports were reduced 260 million bushels to 1.11 billion bushels. The 2012/13 average soybean price was increased to record levels of $15.00 to $17.00 per bushel, a $2.00 increase on both ends of the range.

Wheat

 

2012/13 U.S. wheat supplies were increased this month by 54 million bushels due to increased production and imports. Production in 2012/13 has been increased by 44 million bushels due to increased yields for winter wheat, durum, and other spring wheat.

 

2012/13 U.S. wheat ending stocks have been projected 34 million bushels higher. The season average wheat price for 2012/13 was projected at $7.60 to $9.00 per bushel.

 

Global wheat supplies for 2012/13 were decreased by 2.1 million tons. This reduction was due to lower production in the FSU-12.

Outlook

 

Drought has been the main focus in this year's growing season. Going forward, commodity markets will closely watch the harvest data to see actually how bad the crop will be.

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

Crop Progress: Irreversible Corn Conditions

Aug 06, 2012

Corn conditions remain in a dismal state and at this point in the growing season, there is little chance of improvement. Farmers across the Corn Belt will have to accept lower yields and/or insurance payments due to the prolonged drought.

 

As of August 6, 2012 corn conditions have declined to 23% of the crop in good or excellent condition, a 1% drop from last week and a 37% decline from last year at the same time. 26% of the corn was dented and only 6% was dented at the same time last year. As of the second week of August, 61% of the corn crop is doughing, compared to the five-year average of only 30%. Corn prices decreased by 2.1% over the past week ending at $8.03 per bushel and year-over-year prices have increased by 15.9%.

 

As of the second week of August, soybean conditions were at 39% in very poor or poor condition compared to 13% a year earlier. Soybeans in good or excellent condition remained unchanged from last week at 29%. 71% of soybeans have set pods, a 25% increase from a year prior. Soybean prices decreased by 6.8% over the past week ending at $16.07 per bushel and year-over-year prices increased by 20.7%.

 

Spring wheat conditions are at 63% in good or excellent condition and only 11% in poor or very poor condition, unchanged from last week. 47% of the spring wheat has been harvested as of August 6, 2012. Wheat prices ended the week at $8.93 per bushel, a 2.3% decrease from last week. Year-over-year wheat prices have increased 31.5%.

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

 

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